July 28, 2014
On July 22, 2014, the U.S. Department of Health and Human Services Office of Inspector General (OIG) released a report critical of manufacturers’ Average Sales Price (ASP) data reporting accuracy and equally critical of the Centers for Medicare & Medicaid Services’ (CMS’s) ability to effectively collect such data and calculate national payment limits.
Most Medicare Part B drug national payment limits are based on manufacturer-reported ASP. However, not all manufacturers are required to report their ASP to CMS. Only those manufacturers with Medicaid Rebate Agreements pursuant to Section 1927(b)(3) of the Social Security Act are legally obligated to report their sales data. Manufacturers of certain products approved as devices by the U.S. Food and Drug Administration but treated as if they were Part B drugs by Medicare, such as hyaluronans and certain skin substitutes, would not have Medicaid Rebate Agreements and therefore are not legally obligated to submit sales price data to CMS. CMS and the OIG have authority to impose Civil Monetary Penalties on manufacturers that submit false ASP data or fail to report data within the required timeframe.
The OIG found that a number of manufacturers failed to properly submit ASP data despite having Medicaid Rebate Agreements and being required to do so. Because failure to report ASP data results in an incomplete data set upon which CMS bases its pricing decisions, the OIG found that failure to report data can result in inaccurate national ASP-based payment limits and inaccurate payments to providers.
The OIG sampled 87 high-cost health care common procedure coding system (HCPCS) codes to determine the extent to which manufacturers are accurately reporting ASP data. While the results of the OIG analysis are not applicable to the entirety of the Part B drug pricing process, the OIG did find several weaknesses.
The OIG report asserts that, in the third quarter of 2012, 35 percent (74 out of 207) of manufacturers in its sample were operating under a Medicaid Rebate Agreement yet failed to report ASP data for one or more National Drug Codes (NDCs). In addition, the OIG found that 10 percent of the manufacturers in its sample (21 out of 207) should have reported ASP data for NDCs but had never reported this information to CMS. The OIG also found a number of manufacturers that are not obligated to report but that do so anyway. Because ASP is meant to be a market-based payment model, the OIG is concerned that these reporting issues affect CMS’s ability to gauge sales throughout the entire drug marketplace.
The OIG also criticized CMS for its continued reliance on manual review and validation of manufacturer-submitted data. For a number of years, the OIG has recommended that CMS develop an online data portal that would be used to automate data submission, validation and calculations. Such a portal would minimize the number of errors that occur from manual intervention.
The findings show that a combination of incomplete reporting and data collection errors could have had an effect, albeit a small one, on payment rates for a number of codes. Despite the relatively small size of the OIG’s findings, the OIG recommended that CMS take steps to ensure complete and accurate reporting by continuing to identify and penalize inaccurate reporting, requiring all manufacturers of Part B drugs to report ASP data, and improving the accuracy of data collection and review by implementing an automated data collection system.
The accuracy of Medicare ASP payment limits is directly related to the accuracy and completeness of data submitted by manufacturers. To the extent that CMS can improve the completeness and accuracy of its payment rates, manufacturers should expect increased scrutiny of submissions and a heightened awareness of reporting requirements. Manufacturers should be diligent in reviewing their data submissions for accuracy and completeness.