OIG: CMS needs to help drugmakers in calculating best Medicare Part B prices

Drugmakers need more guidance from the Centers for Medicare & Medicaid Services (CMS) on how to calculate the best price for drugs sold on Medicare Part B, a key federal watchdog said. 

The review, released Tuesday by the Department of Health and Human Services (PDF) Office of Inspector General (OIG), comes amid concerns from physicians that reimbursements for Part B drugs are too low. A survey conducted by OIG of drugmakers listed concerns that they have less guidance from CMS on calculating best practices compared to other programs such as Medicaid. 

“CMS should review current guidance and determine whether additional clarification may prove beneficial, prioritizing issues that may have greater effects on pricing and payments (e.g., value-based arrangements),” the analysis said. 

CMS reimburses physicians for the average sales price (ASP) for Medicare Part B drugs and a 4% add-on to cover handling and storage costs. OIG attempted to explore the accuracy of ASPs by comparing the 30 highest-cost drugs in Part B to different benchmark prices in 2020.

OIG compared the ASPs to the wholesale acquisition cost for the same product, which is the estimated list price that wholesalers or other direct purchasers pay, not including any discounts or rebates. The watchdog didn’t find any inaccuracies when comparing the ASP price to the wholesale price, as the wholesale cost exceeded the ASP for all 30 high-spending drugs. 

OIG also compared prices between the ASP and the average manufacturer price that Medicaid pays. While the analysis found the ASP exceeded Medicaid’s prices by more than 5%, it may not be an apples-to-apples comparison as Medicaid allows discounts to be applied. 

The watchdog also interviewed 20 manufacturers of the 30 products to explore what factors they consider when calculating an ASP. Manufacturers cited the need for guidance on the treatment of value-based purchasing arrangements and how to calculate them into the sale price. 

“Without clear guidance, manufacturers argue that they will need to adopt varying reasonable assumptions that could create distortions among reported [average sales prices],” the analysis said. 

CMS also has not defined the term “bundled sale” for calculating ASP.

The agency has never sufficiently detailed how to treat sales to TRICARE retail pharmacies, which dispense drugs as part of the military healthcare programs. Without such guidance, drugmakers are required to make a reasonable assumption on which amounts should be included in the calculation of the ASP, which can cause inconsistencies, OIG said. 

CMS told OIG that it will look at the current guidance and investigate whether an update is needed. 

The analysis touches on a persistent issue of reimbursement for physicians, who have experienced a cut in the add-on payment from 6% down to 4%. For example, the Community Oncology Alliance has repeatedly said that the pay cuts have led to the closures of community cancer practices.