CMS missed $2.8M in savings due to price substitution error, OIG audit finds

Medicare lost out on $2.8 million in savings in 2020 by incorrectly implementing price reductions on Medicare Part B drugs, an HHS Office of Inspector General audit found. 

Medicare Part B covers drugs administered in an outpatient setting, costing billions of dollars annually, according to the OIG's audit. CMS will lower payment rates for Part B drugs if their average sales price exceeds the average manufacturer price of the drug by 5 percent. 

CMS incorrectly calculated these rates for seven drugs in 2020, resulting in millions of lost savings, the OIG said. 

According to the audit, CMS corrected the error but will not retroactively reduce payments already made for these drugs. 

OIG also identified an additional $5.4 million in savings if CMS expanded criteria for lowering payment rates. Currently CMS only reduces payment rates if sale prices exceed manufacturer prices for two of the previous three quarters, or three of the last four quarters. 

"We continue to believe that to more effectively limit excessive payment amounts based on [average sale prices] and to generate greater savings for Medicare and its beneficiaries, CMS should expand its price-substitution criteria to include drugs that exceeded the 5 percent threshold in just a single quarter," OIG wrote in the audit.

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