On September 18, 2019, OIG released a report assessing a sample of drug manufacturers participating in the Medicaid Drug Rebate Program to identify the primary areas in which they make assumptions when calculating average manufacturer princes (AMP) and best prices (BP). Among other recommendations, OIG suggested that CMS issue additional guidance and consider a process to review certain assumptions that affect price calculations.

In the absence of guidance to the contrary, CMS permits drug manufacturers to make “reasonable assumptions” that are consistent with statutes and regulations when they calculate the AMPs and BPs for Medicaid-covered drugs. AMPs and BPs impact the amount of rebates that manufacturers pay to Medicaid, and are also used to establish the prices paid by healthcare organizations in connection with the 340B Drug Discount Program.

The OIG report notes that historically, CMS has provided little formalized oversight of the reasonable assumptions process. OIG surveyed a sample of drug manufacturers to identify the key areas in which they make assumptions when calculating AMPs and BPs. OIG determined that the majority of manufacturers reported making reasonable assumptions related to bona fide service fees, bundled sales, and stacked price concessions. OIG also asked manufacturers to identify the areas in which they would like greater guidance from CMS.

In the report, OIG issued the following recommendations for CMS:

• Issue guidance related to specific areas identified in the report including value-based purchasing agreements;
• Assess the costs and benefits of implementing a targeted process to review certain assumptions; and
• Implement a system to share responses to manufacturer inquiries for technical assistance.

The OIG report is available here.