Average sales price calculations for Medicare Part B-covered drugs should exclude the standard 2% "prompt pay" discounts manufacturers pay drug wholesalers, the Biotechnology Industry Organization said.

"Many manufacturers offer a prompt payment discount to wholesalers for net 30-day payment. We believe this should be excluded from the calculation of ASP and would like CMS' concurrence," BIO Director-Government Affairs Libby Solon said during a Centers for Medicare & Medicaid Services open door forum on ASP in Baltimore March 3.

Manufacturers will be required to submit quarterly average sales price reports to CMS beginning April 30 in preparation for the change to ASP-based reimbursement for Part B-covered drugs in 2005 (¹ Also see "Average Sales Price Reports To Medicare From Rx Manufacturers Due April 30" - Pink Sheet, 19 January, 2004., p. 6). Physicians will be reimbursed for drugs at ASP plus 6%.

CMS held the forum to hear comments that will help in developing the proposed rule on ASP calculation.

The agency provided a preview for how it will define ASP in a December ² notice regarding product exemptions to the 2004 reimbursement formula (³ Also see "J&J Procrit Medicare Reimbursement Will Be 87% Of AWP Under Final Rule" - Pink Sheet, 5 January, 2004., p. 10). The exemptions process instructed manufacturers to account for prompt pay discounts in their ASP calculations.

BIO also requested that fees paid for wholesaler services not count toward ASP. "In many cases fees are paid to wholesalers as part of their contracts for services provided that are not linked to sales quantities," Solon said. "They are paid as a percentage of sales."

"For example, these include data services and special handling services. I would suggest clarification that these types of payments for services are excluded from the ASP calculation," she said.

Speaking on behalf of several drug manufacturer clients, Reed Smith (Washington, D.C.) partner Joseph Metro urged CMS to consider that some drug discounts are not reflected in physicians' acquisition costs.

Drug prices to managed care and hospitals "are not necessarily pricing concessions that are going to be available to the physician market," Metro said. "Where possible, we would urge the agency to recognize that there are issues and to be wary of this."

He also recommended allowing manufacturers "flexibility" in applying the 12-month rolling price average they will use to calculate ASP.

"You can have anomalies if a high volume of rebates is being applied to a low volume of sales in a given calendar quarter, which can happen for a number of reasons," Metro maintained.

"In that situation...if prices are held constant over time, mere variations in sales volume can lead to fairly substantial differences in ASP, which obviously in turn could lead to spikes upward or downward in terms of the reimbursement to physicians."

Metro recommended a method in which manufacturers "would look back and determine a ratio of rebates to gross sales; they would multiply that ratio by the quarterly gross sales during the calendar quarter period that's in question; and then they would subtract that product from the quarterly revenue....You're smoothing out the effect of rebates over time."

He also asked that manufacturers be allowed more than 30 days to submit quarterly data, since "manufacturers currently have a number of reporting streams going on at that point." Companies need "perhaps an additional 7 to 15 days for the actual submission of the ASP report," he said.

Other commenters requested clarity on NDC information manufacturers are expected to provide, the exemption of vaccines from the ASP requirement and whether negative ASP values need to be reported.

CMS Ambulatory Services Division Director Don Thompson said calculating ASP will be no more difficult than calculating Average Manufacturer Price.

"To the extent that manufacturers are computing the AMP for the Medicaid program, I don't expect it's going to be a great leap to get to the ASP," he said. "Obviously, there are some statutory differences between the two, but if you have been able to calculate the AMP, we don't anticipate that you will be unable to calculate the ASP."

ASP Calculations Should Exclude Wholesaler Prompt Pay Discounts, BIO Says

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