Medicare Part B annually spends billions to cover a limited number of outpatient prescription drugs. Generally, Part B-covered drugs are those that are injected or infused in physicians’ offices or outpatient settings. When Congress established average sales prices (ASPs) as the basis for reimbursement for Medicare Part B drugs, it also provided a mechanism for monitoring market prices and limiting potentially excessive payment amounts for these drugs. The Social Security Act (the Act) mandates that the Office of Inspector General (OIG) compare ASPs with average manufacturer prices (AMPs). If OIG finds that the ASP for a drug exceeds the AMP by 5 percent, the Act directs the Secretary of Health and Human Services to substitute the ASP-based payment amount with a lower calculated rate. Through regulation, the Centers for Medicare & Medicaid Services (CMS) stated that it would make this reduction only if the ASP for a drug exceeds the AMP by 5 percent in the two previous consecutive quarters or three of the previous four quarters. This data snapshot is one in a series of annual reports - produced since CMS implemented the price-substitution policy in 2013 - that quantifies the savings to Medicare and its beneficiaries that result from CMS’s price-substitution policy.
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