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What Drugs Really Cost: GAO Wants CMS to Find Out

Posted 02 August 2016 | By Zachary Brennan 

What Drugs Really Cost: GAO Wants CMS to Find Out

In order to help ensure the accuracy of Medicare Part B drug payment rates, the US Government Accountability Office (GAO) on Monday urged Congress to require all manufacturers of Part B drugs paid at average sales price (ASP) to submit sales price data to the Centers for Medicare & Medicaid Services (CMS).

What’s more, GAO is calling on Congress to ensure that CMS has the authority to request source documentation to periodically validate drug companies’ pricing data, which will likely be a sore issue for pharmaceutical companies as only manufacturers with Medicaid drug rebate agreements are currently required to submit sales price data to CMS.


Each fiscal quarter, CMS performs several electronic data checks on the sales price data reported by drug manufacturers, including checking for missing data or incorrect product information.

However, CMS does not routinely verify the underlying data, which GAO says is “inconsistent with federal internal control standards that call for management to use quality information to achieve its objectives.

“Without additional verification of the ASP data received from manufacturers, it is possible for the data to be inaccurate, which could result in inaccurate Medicare payment rates. In addition, CMS is unable to use or assess the accuracy of all sales price data because, as directed by statute, only manufacturers with Medicaid drug rebate agreements are required to submit sales price data to CMS. Unless all manufacturers without rebate agreements choose to voluntarily submit sales price data, the payment rates for some drugs will be based on incomplete ASP data or will not be set based on ASP,” GAO says.

This incomplete data could mean CMS is losing significant amounts of money because it is not seeing the full gamut of data. For instance, in 2014, the most recent year for which data were available, Medicare and its beneficiaries spent about $21 billion on approximately 46 million administrations of 551 Part B drugs paid based on ASP. And more than 9 million Medicare beneficiaries (43%) received at least one Part B ASP drug during 2014, and were responsible for 20% of Medicare’s payment for these drugs via cost-sharing requirements, or about $4 billion in 2014.

And these high costs are concentrated in a small number of drugs. Six drugs (Roche’s Rituxan (rituximab) and Lucentis (ranibizumab) and Avastin (bevacizumab), Regeneron’s Eylea (aflibercept), J&J’s Remicade (infliximab) and Amgen’s Neulasta (pegfilgrastim)) exceeded $1 billion in expenditures and accounted for 36% of all expenditures on Part B ASP drugs, while 10 other drugs, each administered over one million times, accounted for 37% of all administrations.

Meanwhile, biologics, drugs without generic versions, and drugs made by a single manufacturer were associated with the vast majority of expenditures on Part B ASP drugs, whereas drugs with generic versions available, and those with multiple manufacturers were linked to the vast majority of administrations, according to GAO.

GAO Recommendations

Drug manufacturers currently submit two forms to CMS: an ASP Data Collection Form, which is an Excel document in which manufacturers insert relevant sales data, and an ASP Certification Form signed by the manufacturer’s CEO or CFO to affirm the accuracy of the data.

“Where there is no specific guidance in federal statute or regulations regarding how to calculate ASP, CMS has indicated that it allows manufacturers to make reasonable assumptions in their calculations of ASP and to submit these assumptions with the required data,” GAO notes.

But a report from the Department of Health and Human Services’ Office of Inspector General (OIG) from 2014 found that at least one-third of the more than 200 manufacturers of Part B drugs studied did not submit ASPs for some of their drugs in the third quarter of 2012, despite the requirements. And an additional 45 manufacturers of Part B drugs were not required to report ASPs that quarter.

However, GAO notes that CMS officials believe that the steps the agency takes to validate manufacturer-reported sales price data are sufficient, even if the agency does not verify that the reported data reflect actual sales prices.

In fact, CMS officials noted that since 2009, only one drug manufacturer has incurred civil monetary penalties as a result of OIG’s review of manufacturer reporting discrepancies, and of the other issues with drug manufacturers’ ASP submissions over the past couple of years, any issues that did arise were minor, CMS said

But GAO adds that officials from CMS said they do not routinely verify the underlying data from manufacturers by tracing the data to and from source documents, such as sales invoices, or through CMS’s referrals to OIG. And although the Social Security Act authorizes CMS to survey manufacturers that have Medicaid drug rebate agreements when necessary to verify ASP, CMS officials said this authority does not allow them to conduct blanket surveys to routinely collect information on manufacturers’ ASP data.

Officials from CMS also told GAO that they are developing an automated ASP submission system for drug manufacturers, though even that new system will not help to ensure the accuracy of the underlying sales price data.

In order to ensure the accuracy of the manufacturers' data, GAO recommends: “CMS should periodically verify the sales price data submitted by a sample of drug manufacturers by requesting source documentation from manufacturers to corroborate the reported data, either directly or by working with OIG as necessary.

“Without complete data from all manufacturers that have been assessed for accuracy by CMS, the agency risks setting payment rates based on inaccurate information.”

GAO Report

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