FDAnews Drug Daily Bulletin
Pharmaceuticals / Commercial Operations

By Following OIG Recommendation, Medicare Would Have Saved Millions

April 29, 2015

The Medicare program would have saved $251 million on DME infusion drugs over an 18-month period if the Centers for Medicare & Medicaid Services had stopped paying wholesale prices set more than a decade ago, the HHS Office of Inspector General says.

In a report released last week, OIG says the agency cost Medicare millions by ignoring a 2013 recommendation to issue payments based on average sales prices over the previous half year rather than on average wholesale prices in effect Oct. 1, 2003.

While CMS agreed these drugs should be paid for using ASP, it didn’t pursue the necessary legislation to make the change, OIG says. The agency also refused to include DME infusion drugs in competitive bidding until at least 2017, even though doing so could save millions, the report notes.

As a result, in 2013 and 2014, at least 42 percent of DME infusion drugs received Medicare payments that more than doubled costs. Only one-quarter of these drugs had payment amounts below costs. 

Had CMS followed OIG’s recommendation, spending on some drugs still would have increased because their ASP was higher than the existing AWP, the report notes. Specifically, over the six quarters evaluated between 2013 and 2014, spending would have increased by $31 million for nine drugs.

However, costs for 21 other drugs would have dropped $282 million — resulting in a net decline of $251 million. Of the overall cost decline, $267 million would have been saved just by lowering the price on two of the three most costly drugs, milrinone lactate and Hizentra (immune globulin), OIG says.

Such payment discrepancies could have a significant impact on drug utilization, OIG warns. For example, higher-than-cost payments could motivate providers to overprescribe particular drugs, while lower-than-cost payments could lead to unwillingness to prescribe others.

Read the complete report at www.fdanews.com/04-23-15-IOG.pdf. — Jessica Grinspan