Medicare adopts revised ASP calculation

Sunday, October 31, 2004

WASHINGTON - In a Federal Register notice posted September 10, CMS revised the procedure for manufacturers submitting average sales price data.

CMS made the revision after considering comments on the interim final rule issued April 6. That rule required manufacturers of the Part B drugs albuterol and ipratropium bromide to submit their ASP calculations quarterly, including data on all volume discounts, prompt pay discounts, cash discounts, rebates and free goods.

Several respondents to the initial interim rule, however, said that method could result in excessive quarter-to-quarter variability in the reported ASP, and CMS agreed.

The alternative methodology that CMS adopted now requires calculations using a yearly (rather than quarterly) average of price concessions.

Effective immediately, manufacturers must determine their rebates and discounts for a 12-month period to calculate their Total Price Concessions. This figure is then used to determine the drug’s ASP, resulting in a more stable ASP, according to CMS

The new methodology also eases concerns in the industry about a sudden switch to brand drugs when the ASP takes effect in January 2005 and how that would affect their ASP calculations in the following quarters, according to the Letco Companies’ Respiratory Update.

“This would prevent CMS from, say, paying $2.12 for a product this quarter and then $.87 for the product during the next quarter,” Mickey Letson wrote in the update. “The reimbursement drop would take a full year minimum to reach its low point from the time that pricing was lowered.”