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Medicare Part B drug payments: impact of price substitutions based on 2016 average sales prices
Medicare Part B drug payments: impact of price substitutions based on 2016 average sales prices
- Collection:
- Health Policy and Services Research
- Series Title(s):
- Reports-in-brief (Promoting Women in Development (Project))
- Contributor(s):
- United States. Department of Health and Human Services. Office of Inspector General. Office of Evaluation and Inspections, issuing body.
- Publication:
- [Washington, D.C.] : U.S. Department of Health and Human Services, Office of Inspector General, August 2018
- Language(s):
- English
- Format:
- Text
- Subject(s):
- Drug Costs
Insurance, Health, Reimbursement
Medicare Part B -- economics
United States
United States. Department of Health and Human Services
Centers for Medicare & Medicaid Services (U.S.) - Genre(s):
- Technical Report
- Abstract:
- Why OIG Did This Review. When Congress established average sales price (ASP) as the basis for Medicare Part B drug reimbursement, it also provided a mechanism for monitoring market prices and limiting potentially excessive payment amounts. The Social Security Act mandates that the Office of Inspector General (OIG) compare ASPs with average manufacturer prices (AMPs). If OIG finds that the ASP for a drug exceeds the AMP by a certain percentage (currently 5 percent), the Act directs the Secretary of Health and Human Services to substitute the ASP-based payment amount with a lower calculated rate. Through regulation, CMS outlined that it would make this substitution only if the ASP for a drug exceeds the AMP by 5 percent in the previous 2 quarters or 3 of the previous 4 quarters. Over the last decade, OIG has produced annual reports aggregating the results of our mandated quarterly ASP-to-AMP comparisons. This annual report quantifies the savings to Medicare and its beneficiaries that are a direct result of CMS's price-substitution policy based on 2016 ASPs, and this report also offers recommendations for achieving additional savings. How OIG Did This Review To determine the effects of the price-substitution policy, we calculated the difference between ASP-based payment and AMP-based payment for each drug with a price substitution. We then applied this difference to the Medicare utilization for each of these drugs. To account for a 3-quarter lag between the reporting of pricing data and the application of price substitutions, we used drug utilization data for the fourth quarter of 2016 through the third quarter of 2017 to calculate the savings based on 2016 data. What OIG Found. (1) The Centers for Medicare & Medicaid Services (CMS) lowered Part B reimbursement for 16 drugs on the basis of 2016 data. (2) CMS's price-substitution policy saved Medicare and its beneficiaries $13.1 million over 1 year. (3) Medicare and its beneficiaries could have saved up to an additional $2.7 million over 1 year if CMS implemented a more expansive price-substitution policy that, for example, allowed substitution for drugs that exceeded the 5-percent threshold in a single quarter. What OIG Recommends. Because of the potential for savings to Medicare beneficiaries and the program, OIG recommends that CMS expand the price-substitution policy. CMS did not concur with the recommendation, instead stating that as additional data become available and as it continues to gain experience with the price-substitution policy, it will consider further changes as necessary. OIG recognizes that CMS, in setting policy for payment substitution, needs to balance safeguarding access to drugs and ensuring that Medicare and its beneficiaries do not overpay for drugs. To provide greater flexibility and achieve this continued balance, any future expansion of the payment-substitution policy could contain a provision that would prevent a price substitution when there are indications that the substitution amount is below the provider acquisition costs.
- Copyright:
- The National Library of Medicine believes this item to be in the public domain. (More information)
- Extent:
- 1 online resource (1 PDF file (12 pages))
- Illustrations:
- Illustrations
- NLM Unique ID:
- 101738128 (See catalog record)
- Permanent Link:
- http://resource.nlm.nih.gov/101738128