Medicare Monday: Why Average Sales Price works

With proposed changes to Medicare Part B and claims about how the program works, let’s take a look at what ASP is and how it works for Medicare providers and patients alike.

What is Average Sales Price (ASP)?

ASP is a market-based price that reflects the average of almost all manufacturer sales prices and includes rebates and discounts privately negotiated between manufacturers and purchasers (with the exception of certain federal and Medicaid discounts and rebates).

ASP+6 is the reimbursement methodology for almost all Part B drugs administered in physician offices, hospital outpatient departments and pharmacies  (right now it is effectively ASP+4 due to sequestration). The add on is intended to cover geographic and purchasing variability, shipping fees, complex administration and overhead for storing and handling requirements.  

Why ASP Works

Research released last fall found from 2006 to 2014, volume-weighted ASP for all Part B drugs remained steady year over year and price growth for Part B medicines remained below medical inflation. In fact, in its January 2016 update, the Centers for Medicare & Medicaid Services (CMS) report, “comparing the second quarter 2016 payment amounts with previous quarters reveals that, for the most part, average drug prices in the market remain relatively stable.”

And CMS acknowledges there are “a number of competitive market factors at work” including “multiple manufacturers, alternative therapies, new products, recent generic entrants, or market shifts to lower priced products.”

Part B prescription medicine costs are influenced and kept stable by competitive market forces; dramatic changes to this system could limit patient access and provider choice in treatments. Learn more at PhRMA.org/PartB.