The HHS Office of Inspector General (OIG) and the Government Accountability Office (GAO) recently issued several reports on various Medicare Part B drug reimbursement issues. In a report entitled “Medicare Part B: Data on Coupon Discounts Needed to Evaluate Methodology for Setting Drug Payment Rates,” the GAO assessed the impact of manufacturer coupon programs on Medicare payment rates for high-expenditure Medicare Part B drugs. The GAO observed that while coupon programs are prohibited in the Medicare program, they are generally available to privately insured patients, and the Part B drug payment methodology, which is based on reported average sales price (ASP), does not take into account coupon discounts that reduce the effective market price. The GAO estimated that for 18 high-expenditure drugs for which it obtained coupon discount data, the ASP exceeded the effective market price by an estimated 0.7% in 2013. According to the GAO, Part B spending for these drugs could have been reduced by an estimated $69 million “if ASP equaled the effective market price.” The GAO suggested that “[u]pward trends in coupon program use and drug prices suggest that these programs could cause the methodology for setting Part B drug payment rates to become less suitable over time for drugs with coupon programs.” The GAO therefore recommended that Congress consider (1) giving CMS authority to collect data from drug manufacturers on coupon discounts for Part B drugs paid based on ASP; and (2) requiring CMS to periodically collect these data and report on the implications of coupon programs for this methodology.

Another GAO report, “Physician-administered Drugs: Comparison of Payer Payment Methodologies,” compares Medicare’s payments for Part B drugs with those of other payers (Medicaid, Department of Veterans Affairs, and two large private payers). The GAO determined that other federal payers generally paid rates that were the same or lower than Medicare, but it observed that its information on Medicaid is not generalizable to all states. Payment rates for the two private payers GAO interviewed were often higher than Medicare’s rate, but that information also is not generalizable to all private payers.

A recent OIG report again focused on Medicare payment for drugs infused through durable medical equipment, which is based on 95% of the average wholesale prices (AWP). In the report, “CMS Should Address Medicare’s Flawed Payment System for DME Infusion Drugs,” the OIG reiterated previous concerns that such payments “continued to be misaligned with drug costs.” For instance, the OIG estimates that Medicare paid suppliers 65% less than their cost for pump-administered insulin in the fourth quarter of 2015, while paying suppliers 20 times the cost of milrinone lactate, a congestive heart failure treatment drug. The OIG recommends that CMS seek a legislative change to base payments for DME infusion drugs on ASP; alternatively, CMS could use its existing authority to include DME infusion drugs in the competitive bidding program.