Negative and Zero ASP Proposals in the Recently Issued PFS Proposed Rule

Background: On January 3, 2023, the Department of Health and Human Services Office of Inspector General (OIG) publicly released two reports with respect to Medicare Part B ASP (available here and here, and which we reported on here). The reports followed from a directive to OIG from Congress, as part of the Consolidated Appropriations Act of 2021 (CAA), to “assess and submit to Congress” a report on the accuracy of ASP information submitted by manufacturers. OIG requested information from the 20 manufacturers who marketed the 30 Medicare Part B highest-expenditure drugs to complete its analysis. In one of the two reports, titled “Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices,” OIG encouraged CMS to “actively review current [ASP] guidance” in relation to several topics, for which manufacturers had requested additional guidance in their survey responses, to determine if additional guidance would ensure more accurate and consistent ASP calculations.

One of those topics for additional guidance was the reporting of negative ASPs for a National Drug Code (NDC) and how that might impact the calculation of the payment amount under Section 1847A of the Social Security Act (SSA). In CMS’s response to the concurrently-published OIG report titled “CMS Should Bolster Its Oversight of Manufacturer-Submitted Average Sales Price Data To Ensure Accurate Part B Drug Payments,” CMS explained that zero and negative ASP data should be reported but that CMS does not include such data in the volume weighted reimbursement rate calculations because doing so “may lead to skewed results.”

2025 PFS Proposals: CMS is now using the CY 2025 PFS proposed rule to amend 42 C.F.R. § 414.904(i) to formally address the treatment of zero and negative ASP in regulation (available here), including the following proposals:

• Only positive ASPs will be used to calculate the payment amount for a billing and payment code, for both single source and multiple source drugs. A negative or zero ASP for an NDC will be treated as if that reported ASP is unavailable.

  • This is consistent with the policy CMS articulated previously, in response to the OIG reports published in 2023.

  • CMS is also proposing to retain its existing policy, first articulated in its 2011 PFS Rule, for calculating the billing and payment amount for multiple source drugs where the limited availability of ASP results in a significant change (i.e., greater than or equal to 10 percent) in the published payment amount for the billing and payment code as compared to the previous quarter. Under this rule, CMS uses the most recent available (i.e., positive) ASP data for an NDC to calculate the payment amount for the current quarter, subject to certain adjustments.

• Where there are only zero or negative ASPs reported for a billing and payment code for a particular quarter, CMS will modify its approach to the calculation of the payment amount. The methodology for doing so will vary by whether the drug is a multiple source drug, single source drug, or biosimilar product, because, by statute, the calculation of the payment amount is distinct for each of these categories of drugs.

  • Multiple source drugs: CMS will carry forward the positive ASP data from the most recently available previous quarter where at least one NDC ASP was positive.

  • Single source drugs: CMS will use the lesser of the most recent available positive payment amount from a previous quarter (which could be ASP or wholesale acquisition cost (WAC) based) or 106 percent of WAC for the current quarter.

  • Biosimilars:

    • The payment amount will be calculated as the volume-weighted average of reported positive ASPs of all other biosimilars sharing the same reference biological product with the biosimilar for which there are no positive ASPs, plus the appropriate add-on payment (i.e., 6 percent (or 8 percent for a qualifying biosimilar biological product) of the payment amount of the reference biological product). Effectively, CMS is proposing to treat biosimilars with no positive reported ASPs as multiple source drugs, even though they have their own billing and payment code.

    • Where there are no other biosimilars sharing the same reference biological product with positive ASP data, the payment amount will be calculated based on the most recent positive ASP data from a previous quarter plus the appropriate add-on payment.

    • CMS considered, but decided against proposing, two alternatives to calculating the payment amount for the biosimilar: (1) using reported positive ASPs of the reference biological product in addition to the reported positive ASPs for the biosimilars that share that reference product, plus the appropriate add-on payment; or (2) carrying forward the most recent positive ASP-based payment amount from a previous quarter plus the appropriate add-on payment.

• Where an NDC is discontinued, and there are only negative or zero reported ASPs, CMS will not establish a published payment rate for the drug. Instead, the payment amount will be set by Medicare Administrative Contractors (MACs) according to existing guidance in chapter 17 of the Medicare Claims Processing Manual (available here) (i.e., the lesser of WAC or the invoice price). This appears to be a new policy.

ASP Reporting for Radiopharmaceuticals Guidance in the PFS Proposed Rule

In the preamble to the 2025 PFS proposed rule, CMS states: “[a]s previously mentioned, radiopharmaceuticals are not required to report ASP under 1847A, and as such, there are very few manufacturers reporting ASP for their products currently.” This statement appears to refer back to the following discussion in CMS’s December 2023 Part B Inflation Rebate Final Guidance (available here): “Consistent with section 303(h) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, radiopharmaceuticals are not paid under section 1847A of the Act. Manufacturers of radiopharmaceuticals are therefore not required to report ASP under section 1927(b)(3) of the Act and are not otherwise required to report ASP data to CMS for separately payable radiopharmaceuticals.” This statement does not acknowledge the CAA’s expansion of the ASP reporting requirement beginning with the first quarter of 2022 for “items, services, supplies, and products” that are “payable” under Medicare Part B as a drug or biological, without regard to whether the product is approved by Food and Drug Administration (FDA) as a drug or biological or whether the manufacturer participates in the Medicaid Drug Rebate Program (MDRP).

New Guidance on ASP Corrections & Restatements

The OIG report titled: “Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices” also identified as a topic for additional CMS guidance: “[t]he circumstances under which manufacturers should or must refile ASP data or the historical period for which such refiling should be considered.” And the OIG report titled: “CMS Should Bolster Its Oversight of Manufacturer-Submitted Average Sales Price Data To Ensure Accurate Part B Drug Payments” recommended additional procedures that CMS could implement to ensure the accuracy of ASP, including “processes to correct errors in the data files.” In another apparent response to those OIG reports, CMS recently released two guidance documents—a “Manufacturers’ Guide to Correcting Average Sales Price (ASP) Data Errors” and an “Average Sales Price (ASP) Restatement Policy Overview”—addressing ASP error identification and correction, as well as when CMS may revise the Part B payment amount based on corrected or restated ASP data (available here and here).

In these documents, CMS appears to consider corrections and restatements of ASP data as mandatory, notwithstanding the fact that CMS issued the documents as sub-regulatory guidance (and at the same time as it had a rulemaking vehicle available), and there is no statutory provision explicitly addressing such an obligation. Specifically, CMS states that: “Manufacturers must submit corrected data in the ASP Data Collection System as soon as they identify, or are notified by CMS of, an error.” This statement is similar to separate guidance regarding restatements that CMS published earlier this year, within a March 14, 2024 ASP Submitter User Guide, in which it asserted the expectation that manufacturers “must” restate ASP data, provided step-by-step instructions on how manufacturers should restate ASP data (available at § 3.4 here), and touched briefly on how those restatements might impact payment. CMS’s latest guidance documents reinforce that position and expand on the agency’s policy regarding when CMS will revise payment amounts in relation to ASP restatements. Under the new guidance, there are three scenarios under which CMS might choose to revise a previously calculated or published payment amount:

1. Pre-publishing timeframe. Where a manufacturer submits revised ASP data before the 10^th day of the month before the effective date of the applicable payment amount (referred to by CMS as a “correction”), CMS “may” revise the soon to be published ASP to account for the corrected data.

2. Current quarter post-published timeframe. CMS states that it “may identify an incorrect payment limit mid-[payment amount] quarter, after the files are published, and has the discretion to immediately restate it before the next [payment amount] quarter’s files are published.” Given the administrative burden such mid-quarter restatements impose on MACs, CMS indicates that it revises a current quarter payment amount if three of four of the following criteria are met:

   • “The revised ASP payment limit would result in a dollar change ≥ ± $1.00 per billing unit.”
   • “The revised ASP payment limit would result in a percent change ≥ ±10.00 percent.”
   • “The number of services billed under the Healthcare Common Procedure Coding System (HCPCS) code in the 12 months preceding the current quarter ≥ 100,000 HCPCS billing units.”
   • “The estimated impact of change in the ASP payment limit should all affected claims be reprocessed with the corrected payment limit ≥ ±$100,000 in total allowed payments.”

If a manufacturer submits a restated ASP during the current payment amount quarter, but that restatement does not meet the above criteria, that restatement nevertheless would satisfy the deadline described below for the restatement of prior quarter payment amounts.

3. Limited prior quarter restatement timeframe. For data corrections involving prior payment amount quarters, CMS may issue restatement payment amounts for up to four previous quarters. Manufacturers must submit the corrected data by the 30^th day of the month after the end of the previous payment amount quarter for CMS to consider restating the payment amount. If a manufacturer does not meet this deadline, or if the restatement requires further data investigation, CMS may delay the restatement of the payment amount by up to one quarter. CMS will only initiate a prior quarter restatement if the corrected data meet two or more of the following criteria:
   • “The revised ASP payment limit would result in a dollar change ≥ ± $.050 per billing unit.”
   • “The revised ASP payment limit would result in a percent change ≥ ± 5.00 percent.”
   • “The number of services billed under the HCPCS code in the 12 months preceding the current quarter ≥ 50,000 HCPCS billing units.”
   • “The estimated impact of change in the ASP payment limit should all affected claims be reprocessed with the corrected payment limit ≥ ±$50,000 in total allowed payments.”

ASP Reporting for Skin Substitutes

On July 16 and 18, 2024, CMS delivered webinar presentations regarding the reporting of ASP information for skin substitutes. CMS appears to have utilized the same slide deck for both presentations (available here), and published the recording for the July 18 presentation on its website (available here). Below, we provide background on the ASP reporting requirement for skin substitutes and highlight the key takeaways from these presentations.

Background: As previously mentioned, the CAA expanded the universe of products subject to the ASP reporting requirement to include “items, services, supplies, and products” that are “payable” under Medicare Part B as a drug or biological, without regard to whether the product is approved by FDA as a drug or biological or whether the manufacturer participates in the MDRP. With this change, all manufacturers of skin substitutes payable under Medicare Part B were required to begin reporting ASP to CMS beginning with the first quarter of 2022. We previously published a client alert on this change from the CAA (available here).  

A 2023 OIG report alleged that many manufacturers are not complying with the requirement to report ASP for their skin substitutes (available here), and CMS and OIG have both acknowledged inconsistency in ASP reporting of skin substitutes. On January 31, 2024, CMS published a one-page guidance document titled, “Keys to Submitting Skin Substitute Product Data,” (available here) addressing certain nuances associated with manufacturer reporting of ASP for skin substitutes, including the use of alternate IDs and ensuring that product data is up-to-date. CMS stated in that January guidance that skin substitute product data reported to CMS in the ASP Data Collection System must match product information on the manufacturer’s publicly available website. The website publication requirement had not been previously articulated in public guidance and is not included in the statute.

Highlights from the webinar presentations: The webinar presentations shed additional light on CMS’s expectations with respect to ASP reporting for skin substitutes, including the following key topics:

• Ensuring ASP product data alignment with manufacturer website information. CMS reiterated its position from the January 2024 guidance that reported ASP product data for skin substitutes “must match” product information on the manufacturer’s publicly available website.
  • CMS asserted that it has statutory authority to impose such a requirement, which it asserted is rooted in Section 1847A of the SSA. Specifically, CMS stated that the statute gives it authority to verify data for accuracy, and noted that it believes the website publication is necessary to do this. The agency stated that it can obtain product data regarding NDC products via third party resources such as DailyMed, but there is no collective source of information for skin substitute products that use alternate IDs.
  • CMS was clear that it expects manufacturers to accurately list skin substitute product information on their websites, adding that if it is unable to validate an entire product data set, CMS reserves the right to calculate the ASP using only verifiable data. While not addressed during the presentations, CMS’s practice, on certain occasions, has been to not include products in the quarterly ASP payment limit file where it is unable to verify data.
  • CMS’s presentation slide deck lists the following data elements as “[r]equired to match information on the website”: Manufacturer Name; Alternate ID; Alternate ID Website URL; Brand and/or Generic Name; Number of Items per Alternate ID; and Strength and Volume Data.

  • CMS will not accept e-mailed product catalogs or the posting of product information on third-party websites as substitutes for complying with the manufacturer website verification requirement.

• Determining the entity responsible for reporting. Several attendees asked CMS to provide clarity regarding the entity responsible for reporting the ASP for skin substitutes, including in the case of a product acquisition. CMS responded by noting various factors as significant, including which company is actively marketing and selling the product, which company “owns” the product, and which company has license to the alternate ID. CMS further noted that if a manufacturer of a skin substitute sells the product through a wholesaler or distributor, the manufacturer would be required to report the ASP.

• Product omissions from the ASP pricing files. CMS noted that a product may not be listed in the ASP pricing files if product data was submitted after the deadline, some or all of the product data was unverifiable, or there were significant changes in the pricing data reported through the ASP Data Collection System. CMS clarified that the absence of a HCPCS code or NDC does not indicate whether Medicare covers a product. If a product is not listed in the ASP pricing files, it may still be paid by the MAC if it is reasonable and necessary and other Medicare reimbursement requirements are satisfied. This is consistent with CMS’s recently published Frequently Asked Questions (FAQs) on ASP reporting (available here).

• Examples of product data reporting scenarios. CMS also offered specific hypothetical examples of how manufacturers should report certain product data fields for skin substitutes into the ASP Data Collection System, accounting for differences where the product is prepared as a sheet, disc, liquid, or powder, and other considerations. Details on these examples can be found in the presentation slide deck.