CMS has posted the draft February 2013 FULs and Draft February 2013 Three-Month Rolling Average FULs. CMS will continue to accept comments on the draft average manufacturer price-based FULs and the draft three-month rolling average FULs, along with the methodologies used to calculate them.
For the 29th time, the OIG has issued a report comparing Medicare Part B drug average sales prices (ASP) and average manufacturer prices (AMP), this report covering all of 2011. The OIG again concludes that the Medicare would realize savings if it exercised its authority to lower reimbursement for Part B drugs when the drugs ASP exceeds its drug's AMP or widely available market price (WAMP) by a threshold, currently set at 5%. Although CMS has finalized regulations specifying the circumstances under which AMP-based price substitutions could occur, no such substitutions have been made to date. The OIG estimates that if CMS’s price substitution policy had been in effect, Medicare would have saved about $7 million in 2011; this amount would have been doubled if the substitution policy were applied to all codes that exceeded the 5% threshold in one or more quarters of 2011 when complete AMP data were used. CMS concurred with an OIG recommendation to finalize its substitution policy, but it did not support OIG recommendations to expand the substitution policy to include all codes with complete AMP data and certain codes with partial AMP data. CMS also rejected an OIG recommendation to seek a legislative change to require manufacturers of Part B-covered drugs to submit both ASPs and AMPs.
CMS has posted the September 2012 draft average manufacturer price (AMP)-based Medicaid federal upper limit (FUL) files, along with updated three-month rolling average FUL file consisting of the weighted average of the current and two previous monthly draft AMP-based FULs. CMS continues to accept comments on the monthly and three-month rolling average draft AMP-based FULs and the methodologies used to calculate them.
The OIG has released the most recent in a series of reports comparing Part B drug average sales prices (ASP) and average manufacturer prices (AMP). The latest report (the 28th in the series) compares second quarter 2012 ASPs and AMPs and their impact on Medicare reimbursement for the fourth quarter of 2012. By way of background, the Social Security Act requires the OIG to notify the HHS Secretary if the ASP for a drug exceeds the drug's AMP or widely available market price (WAMP) by a threshold, currently set at 5%. If that threshold is met, the Secretary may disregard the drug’s ASP and substitute the lesser of the WAMP or 103% of AMP. The 2012 final Medicare physician fee schedule (MPFS) rule specified the circumstances under which AMP-based price substitutions could occur beginning January 2012 (although CMS has not announced any such substitutions to date), and the final 2013 MPFS updated this policy. The new OIG report announces the OIG’s findings that for 29 drug codes exceeded AMPs by at least 5% in the second quarter of 2012, of which 19 had complete AMP data. If reimbursement for these 19 codes had been based on 103% of AMPs in the fourth quarter of 2012, Medicare would have saved an estimated $553,000 in that quarter. According to the OIG’s calculations, under CMS’s adopted policy, reimbursement for 6 of the 19 drugs would have been reduced, saving about $477,000 in that quarter, and the agency suggests that greater savings could be achieved if the price substitution policy was applied to codes with partial AMP data. The OIG also addresses CMS’s prior comments questioning the utility of OIG’s quarterly pricing comparisons, and OIG chastises the agency for its inaction on prior recommendations. Specifically, the OIG acknowledges that while savings identified in any single report “may be modest relative to total expenditures for Part B drugs, significant savings would have accrued had CMS taken action immediately after OIG issued its first pricing comparison.” Moreover, the OIG argues that over the long term, “savings achieved through price substitution could reduce waste and conserve taxpayer funds at a time when increased focus has been placed on rising health care costs and fiscal responsibility.”
The OIG has released its latest report comparing Part B drug average sales prices (ASP) and average manufacturer prices, this one comparing first quarter 2012 ASPs and AMPs and their impact on Medicare reimbursement for the third quarter of 2012. By way of background, the Social Security Act requires the OIG to notify the HHS Secretary if the ASP for a particular drug exceeds the drug's AMP or widely available market price (WAMP) by a threshold, currently set at 5%. If that threshold is met, the Secretary is authorized to disregard the drug’s ASP and substitute the lesser of the WAMP or 103% of AMP. CMS’s 2012 Medicare physician fee schedule (MPFS) rule specified the circumstances under which AMP-based price substitutions could occur beginning January 2012 (although CMS has not announced any such substitutions to date), and the final 2013 MPFS updated this policy. According to the recent OIG report, ASPs for 28 drug codes exceeded AMPs by at least 5% in the first quarter of 2012, of which 22 had complete AMP data. If reimbursement for these 22 codes had been based on 103% of AMPs in the third quarter of 2012, Medicare would have saved an estimated $739,000 in that quarter.
The OIG has issued a report on Medicaid pharmacy reimbursement that compares FUL amounts based on published prices to FUL amounts based on AMP and pharmacy acquisition costs. According to the OIG, FUL amounts based on published prices (from the fourth-quarter 2011 Redbook file) were more than four times greater than sampled pharmacy acquisition costs. Moreover, FUL amounts based on AMPs were 61 percent lower than FUL amounts based on published prices, at the median, but still exceeded sampled pharmacy acquisition costs by 43 percent in the aggregate. Notably, however, the study was subject to a number of limitations, including use of AMP-based FULs that have not been published by CMS (data for November 2010 was used, whereas CMS began releasing draft FULs in September 2011). While CMS has been issuing draft AMP-based FUL amounts for review and comment, the OIG recommends that CMS complete implementation of AMP-based FUL amounts, in conformance with the ACA. CMS concurred, and stated that it plans to implement FUL amounts based on AMPs “in the near future.”
CMS has posted the August 2012 draft average manufacturer price (AMP)-based Medicaid federal upper limit (FUL) files, along with updated three-month rolling average FUL file consisting of the weighted average of the current and two previous monthly draft AMP-based FULs. CMS continues to accept comments on the monthly and three-month rolling average draft AMP-based FULs and the methodologies used to calculate them.
On October 5, 2012, CMS released a number of draft Medicaid drug pricing files and related documents for review and comment. Among other things, CMS has posted the June 2012 and July 2012 draft average manufacturer price (AMP)-based Medicaid federal upper limit (FUL) files. Based on comments that month-to-month fluctuations in the AMP-based FULs “may create problems for pharmacies because they will be unable to predict resulting state reimbursement rates,” CMS has developed a draft three-month rolling average FUL file consisting of the weighted average of the current and two previous monthly draft AMP-based FULs. CMS is posting these draft files, and the draft methodology used to calculate the draft three-month rolling average FUL, for review and comment only. While CMS expects three-month rolling average FULs to fluctuate less than monthly FULs, CMS observes that “the draft three-month rolling average FULs incorporates pricing data older than the current monthly pricing that may be less reflective of pharmacies’ current purchase prices.” CMS is accepting comments on the monthly and three-month rolling average draft AMP-based FULs and the methodologies used to calculate them.
CMS also released for comment draft National Average Retail Price (NARP) data, which reflects prices paid for drugs to retail community pharmacies for individuals with Medicaid, cash paying customers, and those with certain third party insurance. CMS expects the reference pricing to assist states in comparing their current pricing policies to that reflected in the draft NARP. In addition, CMS has posted for comment draft National Average Drug Acquisition Cost (NADAC) data, which is based on a voluntary survey of pharmacy invoices, and a draft Monthly New Drug Report that shows newly marketed single source drugs that are currently generally available through wholesalers. CMS states that after it considers comments on all of these files (a comment deadline is not specified), the agency plans to release these data files in final form, with updated files posted on at least a monthly basis. States can use the monthly AMP-based FUL, or the three-month rolling average FUL, once finalized, to develop a pharmacy reimbursement methodology that will allow their pharmacy payments to remain within the FUL in the aggregate. CMS points out that any state that wants to change its pharmacy reimbursement methodology must submit a state plan amendment to CMS for review and approval.
CMS has posted updated draft Medicaid drug federal upper limit (FUL) files, reflecting May 2012 average manufacturer price data. CMS invites comments on the draft FUL files, but a comment deadline is not specified.
CMS has posted updated draft Medicaid drug federal upper limit (FUL) files, reflecting April 2012 average manufacturer price (AMP) data. CMS continues to invite comments on the draft FUL files; a comment deadline is not specified.
CMS has posted updated draft Medicaid drug federal upper limit (FUL) files, reflecting March 2012 average manufacturer price (AMP) data. CMS continues to invite comments on the draft FUL files.
CMS has posted the December 2011 and January 2012 draft Medicaid drug federal upper limit (FUL) files. Comments are invited but a comment deadline is not specified. This informal comment opportunity is separate from the formal comment period associated with CMS’s February 2, 2012 proposed rule implementing ACA provisions relating to Medicaid drug payment policy; comments on the proposed rule are due April 2, 2012.
CMS has posted the November 2011 draft Medicaid drug federal upper payment limit files. CMS continues to invite comments on the draft FUL files, although a comment deadline is not specified. Note that this feedback opportunity is separate from the formal comment period associated with CMS’s February 2, 2012 proposed rule implementing ACA provisions relating to pharmaceutical manufacturer payment of Medicaid rebates on covered outpatient drugs and limits on Medicaid reimbursement to pharmacies. Comments on the proposed rule are due April 2, 2012.
This post was written by Joseph W. Metro, Robert J. Hill, and Vicky G. Gormanly.
On Friday, January 27, 2012, the Centers for Medicare & Medicaid Services (“CMS”) released its long-awaited proposed rule to implement the provisions of the Affordable Care Act (“ACA”) relating to pharmaceutical manufacturer payment of Medicaid rebates and limits on Medicaid reimbursement to pharmacies. The proposed rule addresses a number of important policy issues relevant to pharmaceutical manufacturers, pharmacies, and other providers, and also would pose significant operational challenges for pharmaceutical manufacturers with respect to the Medicaid Drug Rebate Program (“MDRP”).
The official version of the proposed rule, titled “Medicaid Program; Covered Outpatient Drugs” (the “Proposed Rule”), will be published in the Federal Register on February 2, 2012. Comments on the Proposed Rule are due no later than 5:00 PM EST on April 2, 2012. Notably, the CMS Press Release indicates that CMS plans to issue a final rule in 2013.
We have identified below some of the key items addressed in the Proposed Rule, and we will be issuing a more detailed health care client bulletin in the near future.
MDRP Related Items
The Proposed Rule also addresses a myriad of other MDRP related items not discussed above, e.g. authorized generics, nominal pricing, bundling, best price, pricing recalculations, penalties for non-compliance, 340B issues as they relate to the MDRP, etc.
State Pharmacy Reimbursement Related Issues
Notably, CMS did not provide any information as to when the AMP-based FULs would be effective. CMS noted that four draft FUL files as well as comments and responses had been posted, yet the agency failed to address most of the important issues that have been raised in publicly available comments submitted to the agency regarding the draft FUL methodology and files.
A number of other items not noted above were also discussed in the Proposed Rule, such as the federal offset of rebates for states, and rebates and utilization relating to Medicaid managed care organizations.
CMS invites comments on many of the issues discussed above. Reed Smith is in the process of conducting a full review of the Proposed Rule and will release shortly a client bulletin providing a detailed analysis of the proposal. In the meantime, please contact Joe Metro (202-414-9284 or jmetro@reedsmith.com), Bob Hill (202-414-9402 or rhill@reedsmith.com), Vicky Gormanly (202-414-9277 or vgormanly@reedsmith.com), or any other member of the Reed Smith Health Care Group with whom you work, if you would like additional information or if you have any questions.
As previously reported, the ACA modified the statutory federal upper limit (FUL) provisions for Medicaid reimbursement for multiple source drugs. While CMS has not yet promulgated regulations to implement this policy, the agency has issued several sets of draft FUL reimbursement files, including the draft methodology used to calculate the FULs in accordance with the ACA and the weighted average of monthly average manufacturer prices (AMP) in a FUL group. The most recent draft FUL prices – which are for review and comment only -- are based on the manufacturer reported and certified October 2011 monthly AMP and AMP unit data. CMS also has posted a modified FUL methodology and data guide. Following a period of releasing the FULs in draft format, CMS plans to publish the final ACA FULs. No timeline has been announced for the final FULs, although CMS sent the proposed rule to the Office of Management and Budget for regulatory clearance in June 2011.
The Social Security Act requires the OIG to notify the HHS Secretary if the average sales price (ASP) for a particular drug exceeds the drug's AMP or widely available market price (WAMP) by a threshold, currently set at 5%. If that threshold is met, the Secretary is authorized to disregard the drug’s ASP and substitute the lesser of the WAMP or 103% of AMP. The OIG has released a series of reports comparing Medicare Part B drug ASPs with AMPs. While CMS has made no price adjustments in response to these reports to date, CMS’s 2012 Medicare physician fee schedule rule specifies the circumstances under which AMP-based price substitutions will occur beginning January 2012 (CMS is not implementing a price substitution policy based on the comparison of WAMP to ASP for 2012 in light of complicated operational issues). According to a recent OIG report comparing second quarter 2011 ASPs and AMPs, under CMS’s price substitution policy, reimbursement for 7 drugs would have been reduced in the fourth quarter of 2011, saving an estimated $696,000 (the savings would have been higher if additional drugs with partial AMP data were included). Separately, the OIG has issued a report comparing ASPs to WAMPs for 14 drugs that have been identified in previous OIG reports as repeatedly exceeding the 5% ASP-AMP threshold. According to the OIG, “limitations and irregularities in the sales data provided by the distributors and manufacturers of the 14 drugs called into question the data's accuracy and reliability, and prevented us from measuring AMPs against the threshold.” For instance, some sales data did not reflect discounts and rebates passed on to providers, and the reported total number of units sold differed substantially from the number reported through quarterly ASP submissions. To fulfill its statutory mandate, the OIG will consider alternative methodologies to conduct pricing comparisons, including directly surveying providers.
As previously reported, the ACA modified the statutory FUL provisions for Medicaid reimbursement for multiple source drugs. In short, the ACA directs the Secretary to calculate FULs as no less than 175% of the weighted average (determined on the basis of utilization) of the most recently reported monthly average manufacturer prices (AMP), effective October 1, 2010. CMS has not yet promulgated regulations to implement this policy (although the agency sent the proposed rule to OMB for regulatory clearance in June 2011). In the meantime,CMS has issued three sets of draft FUL reimbursement files, including the draft methodology used to calculate the FULs in accordance with the ACA and the weighted average of monthly AMPs in a FUL group. The most recent draft FUL prices are based on the manufacturer reported and certified September 2011 monthly AMP and AMP unit data. The draft files are being released for review and comment only; while no comment deadline is specified, CMS has urged comments to be submitted as soon as possible to be considered in the final ACA FULs. CMS also has released some of the comments received to date on the previous draft FULs, along with the agency’s response to these comments.
The OIG has released another report comparing Medicare average sales prices (ASPs) for Part B drugs with AMPs, this one summarizing data from 2010. The OIG identified 32 drug Healthcare Common Procedure Coding System (HCPCS) codes with complete AMP data for which the ASP exceeded the AMP by at least 5% in one or more quarters of 2010. If reimbursement for these codes had been lowered to 103% of the AMPs for the applicable quarters (as is authorized by the statute), Medicare spending would have been reduced by approximately $13.2 million from the third quarter of 2010 through the second quarter of 2011. The OIG excluded at least 9% of HCPCS codes from its comparisons because AMPs were missing or unavailable for all of the associated drug products. While CMS has made no price adjustments to date as a result of 24 OIG reports comparing ASP and AMPs, the OIG cites CMS’s proposed physician fee schedule rule (which subsequently was adopted) that specifies the circumstances under which AMP-based price substitutions would occur. Under the final rule, CMS will apply its AMP substitution policy only when the ASP exceeds the AMP by 5% in two consecutive quarters immediately prior to the current pricing quarter, or three of the previous four quarters immediately prior to the current quarter, and only when AMP and ASP comparisons are based on the same set of NDCs for a billing code. According to the OIG, if CMS's proposed price substitution policy had been in effect during 2010, reimbursement for 10 of the 32 HCPCS codes with complete AMP data would have been lowered to 103% of the AMPs, saving an estimated $2.3 million. CMS did not concur with an OIG recommendation to seek legislation requiring all manufacturers of Part B-covered drugs to submit both ASPs and AMPs, and CMS did not address an OIG recommendation to use its price substitution policy when only partial AMP data is available.
Medicare physician fee schedule (MPFS) payments are scheduled to be cut by 27.4% in 2012 under the Centers for Medicare & Medicaid Services’ (CMS) final rule to be published November 28, 2011. The steep reduction is a result of the statutory Sustainable Growth Rate (SGR) formula. While Congress is widely expected to take action to mitigate the SGR cuts, the scope and timing of any such “fix” is uncertain at this time. If the final rule goes into effect as written, however, the conversion factor for 2012 would be $24.6712, down from the current $33.9764. In addition to updating MPFS rates, the sweeping final rule includes numerous policy provisions impacting many types of providers, including the following:
Note that CMS will accept comments on a limited number of provisions in the rule, including the interim final relative value units for new, revised, potentially misvalued codes and the physician self-referral designated health services codes, until January 3, 2012.
The OIG has created a “spotlight page” on its website to highlight its reports and findings involving the Medicaid drug rebate program. The page features comparisons of drug spending under Medicaid and Medicare Part D, manufacturer compliance with Average Manufacturer Price reporting requirements, manufacturer development of new versions of existing brand-name drugs to minimize rebate obligations, and state collection of drug rebates, among other issues. Another new spotlight page concentrates on OIG investigations involving the IHS program. Previous OIG spotlight pages have focused on independent diagnostic testing facilities, hospice care, power wheelchairs, and Medicaid personal care services.
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