A federal watchdog group found that Medicare lost millions of dollars on potential savings due to lackluster oversight of the average medication price, impacting how much Medicare Part B beneficiaries pay for coverage.
The Centers for Medicare & Medicaid Services (CMS) requires drug manufacturers to submit quarterly average sales price (ASP) for medications, which is determined by dividing the amount of sales dollars by the volume of medication sold.
This information and additional drug data must be submitted so that Medicare B payments are set. Without this data, the CMS uses the wholesale acquisition cost for the specific drug, which the manufacturer specifies for direct sales without rebates or discounts.
The Office of Inspector General (OIG), working for the Department of Health and Human Services, found in two reports released Tuesday that CMS lacks a process to review the manual analysis which could potentially solve its problem.
A limited amount of outpatient drugs are covered under Medicare Part B. The payment for covered medications gets determined after CMS calculates a drug's average price per volume, as seen in Medicare Part B payments.
According to OIG, regardless of whether or not these values are appropriate, CMS does not include the values in its calculation for Part B payments.
"CMS did not accurately implement all price reductions, which are an important tool to lower prescription drug costs. Gaps in CMS's oversight processes prevented the program and its enrollees from realizing millions in savings," the OIG said.
Also, according to the OIG, the incorrect calculations have led to a loss of $2.8 million in savings — which concluded after reviewing drug payment data from 2016-20.
Edward Burley, the OIG's Deputy Regional Inspector General, told The Hill the deficit came from CMS setting Medicare payment amounts at a higher number for two specific drugs.
"By virtue of making that mistake, they lost out on $2.8 million in savings. So that was a specific issue about essentially CMS taking our recommendations and just incorrectly inputting the payment amounts and making an error on that front, which resulted in the lost savings," said Burley.
The OIG advised CMS to develop a strategy of internal controls to ensure the accuracy of payments.
CMS acknowledged "legitimate reasons" for not calculating payment amounts for certain drugs, saying its current system fell within "statutory requirements."
Regarding Part B payments, CMS responded by saying, "We are proactively looking for ways to strengthen our internal controls and are actively working on enhancements to the current ASP system and internal processes. We will take OIG's suggestions into considerations as we continue to make enhancements in this area."
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