The methodology for estimating drug price concessions when submitting average sales prices for Medicare Part B will follow a proposal made by drug manufacturers in comments to the interim final rule.

In the ¹ ASP final rule, published in the Sept. 16 Federal Register, the Centers for Medicare & Medicaid Services adopts a methodology "based on a rolling average percentage of price concessions divided by total sales in dollars."

In its April 6 interim final rule, CMS proposed that when pricing data is available on a "lagged basis," manufacturers should add all discounts and rebates for the most recent 12-month period and divide by four to estimate ASP for the quarter being submitted (² Also see "“Average Sales Price” Rule Issued; Definition Mirrors Medicare Rx Law" - Pink Sheet, 5 April, 2004., p. 13).

In comments to CMS, manufacturers said the methodology "could result in excessive quarter-to-quarter variability in the reported ASP," the final rule notes.

"We agree with these commenters and are adopting the alternative methodology they recommended."

The Pharmaceutical Research & Manufacturers of America suggested a methodology based on the ratio between rebates and sales revenue over a 12-month period that would "smooth out extreme fluctuations in ASP" (³ Also see "Average Sales Price Formula Could Lead To Negative ASP – PhRMA" - Pink Sheet, 26 April, 2004., p. 28).

Under the final rule, manufacturers calculate ASP by adding all discounts and rebates for the most recent 12-month period available and dividing the amount by total sales for that period, which provides a "12-month rolling average price concession percentage."

The percentage is applied to the total dollar sales for the quarter being submitted to determine the price concession amount for the quarter. The concession amount is deducted from the total sales amount, and that result is divided by number of units sold to calculate the ASP per unit.

The final rule applies immediately upon publication. Under the Medicare Modernization Act, providers will be reimbursed for Part B drugs at ASP plus 6% beginning Jan. 1, which will require ASP data to be reported accurately by October, the rule says.

The final rule discusses only the estimation methodology for ASP. Other issues in the interim final rule "will be addressed at a future time," CMS said.

Average Sales Price Final Rule Includes PhRMA’s Estimation Method

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