The Office of the Inspector General (OIG) has issued a report (see attached) entitled, “Medicare Could Collect Billions if Pharmaceutical Manufacturers were Required to Pay Rebates for Part B Drugs”. In this report the OIG recommends that CMS, “examine the additional potential impacts of establishing a prescription drug rebate program under Medicare Part B and, if appropriate, seek legislative change.” The OIG advises that Medicare could have accumulated $3.1 billion in 2011 if pharmaceutical manufacturers had been required to pay AMP-based rebates for 60 high-cost Part B drugs.
CMS did not concur with the OIGs recommendations. In response CMS stated that although the OIG has demonstrated significant savings, “a legislative change would be necessary to establish a Part B rebate program and that the annual President’s Budget does not include such a proposal. In addition, CMS stated that a comprehensive examination of the impact of a Part B rebate program would require significant resources. CMS stated that given current priorities, it is unable to devote these resources for a proposal that neither is a provision of current law nor is actively under consideration. OIG recognizes the challenges of assessing a rebate program. However, because of the potential to collect billions of dollars, we (the OIG) believe that a rebate program warrants further deliberation”.
Department of Health and Human Services – Office of the Inspector General
September 2013
OEI-12-12-00260
WHY WE DID THIS STUDY
Statutorily mandated rebates enabled Medicaid to recoup a substantial percentage of the $28 billion spent on prescription drugs in 2011. That same year, Medicare Part B expenditures exceeded $16 billion on prescription drugs; however, no similar rebate authority exists for Part B to reduce the costs of drugs to the program. In response to a congressional request, the Office of Inspector General (OIG) estimated in 2011 that if pharmaceutical manufacturers had been required to pay rebates similar to those under Medicaid for 20 high-expenditure Part B brand-name drugs, Medicare could have collected up to $2.4 billion in rebates, representing as much as 26 percent of expenditures for those drugs in 2010. Whereas our original analysis was limited to 20 brand-name drugs, this current study provides a more thorough examination of the potential collections associated with Part B rebates, as well as implementation issues.
HOW WE DID THIS STUDY
For each of the 60 Healthcare Common Procedure Coding System codes that represented 85 percent ($13.9 billion) of total 2011 Part B drug expenditures, we calculated how much manufacturers would have owed in rebates based on average manufacturer prices (AMP-based rebates) and average sales prices (ASP-based rebates). We reviewed previous OIG work and documented the methodological challenges we encountered in this study to identify issues that would need to be addressed before implementing a rebate program under Medicare Part B.
WHAT WE FOUND
Medicare could have collected $3.1 billion if pharmaceutical manufacturers had been required in 2011 to pay AMP-based rebates for 60 high-expenditure Part B drugs, representing 22 percent of spending for those drugs. Requiring manufacturers to pay ASP-based rebates for the same 60 drugs could have garnered Medicare $2.7 billion in rebate payments, representing 20 percent of spending. However, several implementation issues related to claims and data would need to be addressed if such a rebate program were implemented.
WHAT WE RECOMMEND
We recommend that the Centers for Medicare & Medicaid Services (CMS) examine the additional potential impacts of establishing a prescription drug rebate program under Medicare Part B and, if appropriate, seek legislative change. As part of its consideration, CMS should address administrative issues that may hinder rebate collections. CMS did not concur with our recommendation.
AGENCY COMMENTS AND OIG RESPONSE
In its comments on the draft report, CMS stated that although it appreciates our analysis of a potential Part B rebate program, a legislative change would be necessary to establish a Part B rebate program and that the annual President’s Budget does not include such a proposal. In addition, CMS stated that a comprehensive examination of the impact of a Part B rebate program would require significant resources. CMS stated that given current priorities, it is unable to devote these resources for a proposal that neither is a provision of current law nor is actively under consideration. OIG recognizes the challenges of assessing a rebate program. However, because of the potential to collect billions of dollars, we believe that a rebate program warrants further deliberation.