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From Health Law Daily, March 2, 2015

Medicare could have saved $6M with expanded Part B drug price substitutions

By Bryant Storm, J.D.

The CMS price substitution policy for Medicare Part B drugs with average sales prices (ASPs) that exceed average manufacturer prices (AMPs) could have been altered to save Medicare almost $6 million between 2013 and 2014, according to a report from the HHS Office of Inspector General (OIG). The OIG report suggests that CMS could expand its criteria for price substitution and create drug cost savings for beneficiaries while not impeding access to drugs (OIG Report, No. OEI-03-14-00520, February 26, 2015).

Substitution. The ASP serves as the primary basis for Part B drug reimbursement. However, when Part B drugs have an ASP that exceeds its AMP by more than 5 percent, CMS substitutes the payment amounts for those drugs in order to reduce spending. Currently, CMS only practices its substitution policies for certain drug codes for drugs with ASPs exceeding AMPs by more than 5 percent. CMS also limits price substitution to when the drugs exceed the threshold in two consecutive quarters or three of four quarters. For those drugs, CMS substitutes 103 percent of the AMP for the ASP-based reimbursement amount.

Objectives. The OIG conducted its review to determine the financial impact of the current CMS policy on price substitution for Part B drugs with ASPs that exceed AMPs by more than five percent. The OIG also evaluated the financial impact of a potential expansion of the CMS substitution criteria. To conduct the review, the OIG evaluated “ASP data, AMP data, and wholesale acquisition cost (WAC) data from CMS for the first through fourth quarters of 2013.” The review also evaluated ASP reimbursement amounts, when price substitution occurred, between 2013 and 2014.

Findings. The review identified that under the current price substitution policy, 15 Healthcare Common Procedure Coding System (HCPCS) were subject to price reductions because those codes exceeded the 5 percent threshold in two consecutive quarters or three of four quarters using complete AMP data. The OIG estimated that the price substitutions saved Medicare and beneficiaries a combined $13 million over the one year period from fourth quarter of 2013 through the third quarter of 2014. The review revealed that if CMS developed a less cautious approach to substitution, by adding more Part B drugs to the substitution list, the savings could have been $5.9 million higher over the one year period. Additionally, the data revealed that twenty HCPCS codes corresponded to drugs with complete AMP data that exceeded the 5-percent threshold in at least one quarter of 2013. If CMS expanded its substitution criteria to include those drugs that exceeded the 5 percent threshold for a single quarter, the OIG estimated that Medicare would see an additional $3.6 million in savings.

Recommendations. The OIG characterizes the CMS price substation policy as “narrow in scope.” The report recommends that CMS expand its policy to accommodate price substitution for drugs with less complete AMP data. The OIG recommends that CMS expand the price substitution criteria “to include at least some additional HCPCS codes.” Specifically, the OIG recommended including codes with complete AMP data that “exceed the 5-percent threshold in two of six quarters.” CMS responded to the OIG recommendations by asserting that more experience with price substitution policy is needed before CMS can expand the policy. CMS welcomed additional information from the OIG regarding the potential expansion of the price substitution criteria but did not give a definitive position whether it concurred with or rejected the OIG’s recommendation.

MainStory: TopStory PaymentNews PartBNews MedicaidPaymentNews EmploymentNews CMSNews BillingNews

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