Drug Pricing and Reimbursement
This webpage pulls together the Office of Inspector General's (OIG) body of work since 2010 plus several older relevant items that relate to drug pricing and reimbursement in HHS programs. It features planned work, completed reports, industry guidance, and enforcement actions. It does not cover OIG's body of work focused on questionable or fraudulent billing for prescription drugs. The webpage on drug pricing and reimbursement will be updated periodically.
Drug Pricing and Reimbursement
According to data from the Centers for Medicare & Medicaid Services (CMS), U.S. prescription drug expenditures totaled $325 billion in 2015. Spending through Department of Health and Human Services (HHS) programs accounted for 39 percent ($127 billion) of this total. These HHS programs include Medicaid, Medicare Part B (largely for physician-administered drugs), and Medicare Part D (for most outpatient drugs). HHS also administers the 340B Drug Pricing Program (340B program), which enables safety net health care providers to purchase outpatient drugs at discounted prices.
The Office of Inspector General (OIG) has a long history of assessing reimbursement policy for prescription drugs, including a prominent role in highlighting vulnerabilities in the prior reimbursement methodology for most drugs under Medicare Part B. OIG's reports and enforcement work helped pave the way for legislative changes in the reimbursement methodology for most drugs under Medicare Part B and the resulting programmatic changes that saved the Federal Government billions of dollars.
Today, OIG continues its commitment to promoting economy and efficiency in HHS drug programs. OIG's portfolio on drug pricing and reimbursement focuses on the following areas:
OIG work reviewing the accuracy of the data used in determining Federal drug reimbursement and rebate amounts as well as CMS's oversight and management of that data. For example, OIG identified that some manufacturers may improperly report brand-name drugs as generic drugs and, consequently, pay lower Medicaid rebates. OIG has also looked at how manufacturers report the average sales price (ASP) data used to set Medicare Part B payment rates and at how CMS validates this data.
OIG work examining whether drug manufacturers, State Medicaid agencies, and other entities are complying with statutory and program requirements. Examples include looking at the effectiveness of Medicaid's rebate-collection efforts and whether all parties are adhering to 340B program requirements.
OIG work examining the financial impact of drug reimbursement and rebate policies on Federal spending. Examples include reviewing the potential savings from extending inflation-adjusted rebates to generic drugs in HHS programs; examining the effect of "bundling" payments on costs for drugs to treat end-stage renal disease (ESRD); and comparing the impact of different payment methodologies across the Medicare, Medicaid and 340B programs. Through our congressionally mandated work on ASPs and AMPs, OIG plays a role in examining reimbursement rates for Part B drugs every quarter.
OIG work describing how market prices impact Federal spending for prescription drugs in such diverse areas as compounded drugs, brand-name drugs in Medicare Part D, and Medicare Part D catastrophic coverage.
OIG work exploring situations in which entities involved with HHS programs may have incentives not aligned with HHS program goals, adversely affecting those programs and their beneficiaries. Examples include examinations of Medicare Part D plan sponsors' insights into the services and information provided by pharmacy benefit managers (PBMs) and of conflicts of interest on pharmacy and therapeutics (P&T) committees.
Page last updated: February 17, 2017
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