The Centers for Medicare & Medicaid Services is advising pharmaceutical manufacturers to look at Medicaid "best price" reporting requirements for guidance when calculating "average sales price" for Medicare Part B drugs.

In calculating ASP, manufacturers should make "reasonable assumptions" consistent with Medicaid requirements, CMS Ambulatory Services Division Director Don Thompson said during an April 20 "open door forum" on the ASP interim final rule.

Under the Medicare Rx law, manufacturers must submit quarterly ASP data to CMS beginning April 30 in preparation for a shift to an ASP-based reimbursement system. Physicians will be reimbursed at ASP plus 6% in 2005.

CMS issued an interim final rule April 6 defining ASP calculations (¹ Also see "“Average Sales Price” Rule Issued; Definition Mirrors Medicare Rx Law" - Pink Sheet, 5 April, 2004., p. 13).

The agency held a forum in March to solicit comments in developing the ASP rule (² Also see "ASP Calculations Should Exclude Wholesaler Prompt Pay Discounts, BIO Says" - Pink Sheet, 8 March, 2004., p. 12).

Thompson said CMS recognizes that manufacturers may need to make certain assumptions to meet the April 30 deadline.

"If there is no guidance, either in the law or in the regulation, and you're up against this April 30 deadline, look at your business practices...under the Medicaid rebate program and if you feel you need to make an assumption with respect to some aspect of the calculation, make the assumption," Thompson said.

CMS interpretations or guidance provided to a company with regard to Medicaid reporting can be similarly applied to ASP calculations.

"The exemptions that are referenced in the [Medicare] statute...go right to the heart of the Medicaid best price exemptions," Thompson said. "So to the extent you've gotten guidance on the Medicaid best price exemptions from CMS, I think that's a reasonable approach to take when calculating the ASP."

"The only thing we ask is that when you give us the submission on April 30, provide us with the list of assumptions that you've made."

Assumptions behind a manufacturer's calculations would be covered by the confidentiality protections accorded to the ASP data, Thompson said.

Comments submitted by the Pharmaceutical Research & Manufacturers of America said CMS regulations should state that manufacturers may use reasonable assumptions in calculating ASP (see ³ Also see "Average Sales Price Formula Could Lead To Negative ASP – PhRMA" - Pink Sheet, 26 April, 2004. ).

Providing ASP assumptions to CMS gives manufacturers an opportunity to communicate with the agency about submission requirements, attorney Carolyn McElroy (Mintz Levin, Washington D.C.) said at an American Conference Institute seminar April 20 in Washington, D.C.

"Disclosure is one way to say to CMS, 'this is what I'm doing [to calculate ASP] - please tell me if I'm wrong,'" she said.

"I wouldn't recommend it in all instances because you might find that you don't get answers from CMS as quickly as you need them, but it is one way to sort of open the lines of communication," McElroy said.

At the open door forum, Thompson agreed that manufacturers' assumptions could serve as another avenue for input on the ASP calculation process.

Such information gives CMS "an opportunity to kind of harvest those assumptions and see maybe where we need to make additional guidance available," he said.

Thompson noted the agency is working to make a Q&A document on ASP calculations and submissions available on the CMS website "in the very near future."

That document is expected to address a number of issues raised by participants at the open door forum, including who is responsible for reporting ASP data when a product is manufactured by one company but sold by another.

In addition, CMS' web site will offer guidance on whether sales at nominal prices should be part of the ASP submission.

The agency is also hoping to post a list of drugs that are excluded from Part B coverage under the "usually self-administered" determination, Thompson said.

ASP data submissions should be in the form of a CD or diskette.

"We are exploring...some mechanism for a more direct electronic submission," Thompson said. "There are some hurdles there with respect to security that we need to overcome, but we are looking to do that in order to streamline this process."

Speakers at the ACI conference suggested that enforcement actions based upon ASP submissions will not take place until reporting requirements are more thoroughly defined and manufacturers gain experience under the new system.

House Energy & Commerce Committee Republican Counsel Chuck Clapton said federal enforcers understand the uncertainties manufacturers face as they begin reporting ASP.

"I can tell you that in my communications, at least on a federal level with those who have been in charge of enforcing this, I think there's a great deal of understanding - I'd even go as far as sympathy - for the obligations of manufacturers," he said.

Federal officers, including the HHS inspector general, will have an educational role at the outset of the program, Clapton stated.

"They want to see ASP work. They're not coming into this with the perspective of playing a 'gotcha' game to be able to hammer somebody as soon as they report an erroneous number," Clapton said.

"If anything, the IG is going to be very active in making sure people understand what those requirements are, at least up front."

"I don't think anybody had the view that we're going to set this up as a system to try to get manufacturers into a situation where they're facing problems immediately. We know this is difficult," Clapton said.

[Editor's Note: A version of this story first appeared in ⁴ "The Pink Sheet" DAILY April 20. Visit our website, www.ThePinkSheetDAILY.com, to sign up for a free trial.]

Medicaid “Best Price” Should Guide Medicare ASP Calculations, CMS Says

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