These reports follow from a directive to OIG from Congress, as part of the Consolidated Appropriations Act, 2021, to “assess and submit to Congress” a report on the accuracy of ASP information submitted by manufacturers, “including the extent to which manufacturers provide false information, misclassify drug products, or misreport information,” by January 1, 2023, which we reported on here. OIG requested information from the 20 manufacturers who market the 30 Medicare Part B highest-expenditure drugs to complete its analysis. All of these manufacturers responded to the OIG’s request. We have addressed each of these reports in detail below.

Report # OEI-BL-21-00330: Manufacturers May Need Additional Guidance To Ensure Consistent Average Sales Price Calculations

In this report, OIG encourages CMS to determine whether issuing additional ASP guidance on a number of specified topics would ensure more accurate and consistent ASP calculations. OIG starts its report by noting that its “ability to identify noncompliance in price reporting is limited because of broad regulations that allow manufacturers to make reasonable assumptions in the absence of specific guidance.” As a result, OIG undertook its review of ASP accuracy by comparing those submissions to benchmark data (i.e., average manufacturer price or AMP and wholesale acquisition cost or WAC data) and, as noted previously, by reference to manufacturer information about ASP reporting methodologies.

• Benchmark data. OIG noted that benchmark comparisons did not help it identify inaccuracies in ASP, because of wide variability between ASPs and WACs among the top 30 Medicare Part B highest-expenditure drugs and an inability to identify patterns in the comparison of ASP and AMP.

• Manufacturer surveys. With respect to manufacturer surveys, OIG noted that manufacturers generally agree as to what types of sales and discounts should be included in ASP with the primary exception that “[a]s many as 30 percent of manufacturers included certain TRICARE-related drug sales in their ASP calculations.” There were also a range of inconsistencies in how manufacturers determined whether certain fees qualify as bona fide services fees (BFSFs), in particular with respect to “what constitutes sufficient evidence of knowledge that a fee is passed through for purposes of the four-part [BFSF] test.”

The OIG published tables that show, in aggregate, the responses to its survey questions on treatment of sales and discounts in ASP in Appendices B and C of the report.

Manufacturers also requested additional guidance in the following nine areas all of which OIG recommended that CMS “actively review current guidance … and determine whether additional guidance would ensure more accurate and consistent ASP calculations”:

• TRICARE Retail Pharmacy Sales.

• Sales in U.S. territories.

• Value-based purchasing arrangements.

• “Bundled sales price concessions.” In particular, OIG noted that manufacturers sought guidance on: “[w]hether unbundling a bundled arrangement should include just the discounts contingent on purchase or performance requirements or all discounts that may be part of the underlying arrangement;” “[w]hether unbundling a bundled arrangement should include just the discounts contingent on purchase or performance requirements or all discounts that may be part of the underlying arrangement;” and “[h]ow manufacturers should identify and reallocate discounts associated with sales that may be considered bundled across time periods.”

• BFSFs. In particular, OIG noted that one manufacturer sought guidance on the definition of fair market value with respect to the BFSF definition and “what constitutes sufficient evidence of knowledge that a fee is passed through for purposes of the four-part [BFSF] test.”

• “[W]hether rebates related to discarded drugs from single-use vials should be included in ASP calculations.”

• “The circumstances under which manufacturers should or must refile ASP data or the historical period for which such refiling should be considered.”

• “The reporting of potential negative ASPs (e.g., an ASP for which the amount of the discounts exceeds total sales in a quarter) as well as the lack of any guidance from CMS regarding how a negative ASP would be used in Medicare reimbursement rate calculations.”

• “Whether or how to use information in the NDC-HCPCS Crosswalk to identify the insulin products for which they should report ASPs.”

CMS agreed with these recommendations and stated that it would review current guidance in the above nine areas “and determine whether additional guidance would help ensure more accurate and consistent ASP calculations,” which could be offered through regulation or sub-regulatory guidance.

OEI-03-21-00390: CMS Should Bolster Its Oversight of Manufacturer-Submitted Average Sales Price Data To Ensure Accurate Part B Drug Payments

This report analyzed CMS’s standard operating procedures for oversight of ASP reporting and reviewed five years of drug payment data from Q1 2016 to Q4 2020, and suggested there is room for CMS to bolster its oversight of ASP submissions. OIG found that while CMS has in place some oversight procedures for reviewing ASP data, significant gaps exist that have enabled inaccurate data to negatively impact Medicare Part B payment amounts.

• Gaps in CMS’s oversight of ASP data. OIG found that CMS’s internal controls do not provide for appropriate checks on the manual processes utilized by CMS staff for reviewing ASP data. OIG explained that CMS relies on “manual processes to select NDCs that populate certain data filed in its drug files including the ASP, sales volumes, and status indicator values,” but that CMS has not implemented a quality assurance procedure to ensure adequate oversight of this system.

OIG also found that CMS does not adequately utilize its online ASP data collection system to monitor ASP data quality and make the most of its oversight capabilities. OIG noted that CMS tracks manufacturers' data submissions by selecting a small number of reports to review within its ASP data collection system, which “enable CMS to review only data completeness in a single quarter rather than identify trends of problematic data and associated manufacturers over time.”

OIG asserted that such gaps in CMS’s oversight led to the agency failing to accurately implement price reductions for Part B payment amounts, resulting in a loss of $2.8 million in savings to the Medicare program.

• Reporting zero or negative ASP vales. CMS explicitly stated in its comments to the report that zero and negative ASP values can be “valid” (e.g., because of sales adjustments from a prior quarter), but noted that it does not consider such values when calculating the volume-weighted ASP-based reimbursement rates “because there is no impact of including zeros in volume weight calculations and including that data can also cause ‘divide by zero’ errors.” OIG found that CMS does not require manufacturers to explain why they reported a zero or negative value, noting that manufacturers instead may contact CMS by email to provide an explanation or document this in a reasonable assumption. As a result, “CMS does not have a single location that includes manufacturer explanations of potentially problematic data.” 

• Challenges with invalid, missing, or untimely reported ASP data. OIG found that for eight percent of the drug codes it reviewed, CMS was unable to calculate an ASP-based payment amount in at least one quarter within the five-year period in question due to a lack of valid ASP data. OIG also identified that close to one quarter of all drug codes reviewed were missing some ASP data in at least one quarter. OIG explained that while “there may be valid reasons for some NDCs with missing ASP data—e.g., the manufacturer did not produce the drug that quarter, or there may be problems with the manufacturer’s supply or distribution,” CMS does not distinguish the reasons for missing data in its missing status indicator.

CMS reported to OIG that the most significant challenge it faces to ensuring the accuracy of ASP data is manufacturers’ failure to report their data on time. OIG agreed that “late and inaccurate data may hinder CMS’s ability to ensure complete and accurate quarterly calculations of Part B payment amounts.” CMS also reported its “lack of authority to compel manufacturers to respond to questions about inaccurate data as a challenge, but noted that it was not as a significant as late date submissions.”  CMS clarified in its comments to the report that while OIG defined “invalid ASP data” to include ASP data that is equal to or less than zero, CMS does believe zero and negative sales data may be valid.

OIG recommended that CMS strengthen its internal controls for ensuring the accuracy of ASP data and to address the other issues identified in the report, which CMS concurred with. While CMS believed its ASP reporting “is consistent with statutory requirements,” it acknowledged “OIG’s concerns about the potential impact that missing or inaccurate ASP data could have on Medicare Part B payment amounts” and committed to “proactively looking for ways to strengthen [its] internal controls.” 

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As always, it is important that you carefully review this information in light of considerations that may be relevant to your organization and specific drugs and monitor for any additional guidance that CMS may issue that may impact your ASP reporting obligations.

Authored by Alice Valder Curran, Ken Choe, Kathleen A. Peterson, Samantha D. Marshall, Ashley Ifeadike, and Mahmud Brifkani.