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OIG calls out CMS for ignoring advice, overpaying $251M for DME infusion drugs

Using sale prices, not wholesale prices, would reap substantial savings

Medicare spent $251 million more than it needed to on durable medical equipment (DME) infusion drugs from April 2013 to September 2014, according to a report from the Office of Inspector General (OIG)--which had spelled out in a February 2013 report exactly how the Centers for Medicare & Medicaid Services (CMS) could avoid overpaying for such drugs.

Most Medicare payments for Part B prescription drugs equal 106 percent of the volume-weighted average sale prices (ASPs) of those drugs, OIG said. Payments for DME infusion drugs, on the other hand, equal 95 percent of the average wholesale prices (AWPs) that were in effect Oct. 1, 2003. These 12-year-old prices do not take into account the introduction of less expensive generic drugs or market changes in drug pricing, the Washington Times reported.

"Prior OIG work found that AWP was a fundamentally flawed basis for reimbursing for drugs under Medicare Part B," the report said. In February 2013, OIG reported that Medicare Part B payments for DME infusion drugs exceeded their acquisition costs by 54 percent to 122 percent. Had CMS based its payments on sale and not wholesale prices, the agency could have saved $334 million between 2005 and 2011, OIG said.

Two years ago, OIG recommended that CMS either seek legislation to tie DME infusion drug payments to ASPs or include the drugs in the next round of competitive bidding. CMS concurred with the recommendations but has yet to recommend legislation and won't include DME infusion drugs in competitive bids until at least 2017, OIG said.

That stalling has proven costly. OIG compared ASP- and AWP-based payment amounts for DME infusion drugs from April 2013 to September 2014 and found that CMS could have cut Medicare Part B spending on these drugs from $712 million to $461 million had payments been based on sale and not wholesale prices.

"Our findings again illustrate that Medicare's payment methodology for DME infusion drugs, which relies on AWPs published in 2003, has resulted in payments that bear little or no resemblance to provider acquisition costs," OIG concluded. "Under this methodology, providers are being reimbursed for many drugs at double their costs, while recouping only half of their costs for other drugs."

Last month, OIG took CMS to task for not doing enough to prevent fraud, waste and abuse, specifically citing skilled nursing facilities, home health agencies and ineligible beneficiaries. CMS has also been criticized for its lack of oversight into Medicare Part C and Medicare Part D, FierceHealthPayer: AntiFraud previously reported.

For more:
- read the OIG report (.pdf)
- here's the Washington Times article

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