Knowledge base

False Average Sales Price (ASP)

ASP is the weighted average of all non-Federal sales to wholesalers and is the net of chargebacks, discounts, rebates, and other benefits tied to the purchase of the drug product, whether it is paid to the wholesaler or the retailer. This relatively new payment system requires manufacturers to report the ASP each quarter for the vast majority of Medicare Part B covered outpatient drugs and biologicals not paid on a cost or prospective payment system basis. Some pharmaceutical companies report false average sales prices, typically by failing to include certain transactions and/or kickbacks in the calculation. Some manufacturers targeted physicians and other healthcare providers with an off-invoice discount. The off-invoice discount lasts for a part of the year, such as the first half. The manufacturer does this to allow ASP to catch up with the new price so that there remains a spread between the physician acquisition cost of Drug X and the Medicare reimbursement amount for Drug X. Manufacturers also give “wholesaler prompt pay discounts.” Upon information and belief, these discounts are off-invoice and not taken into account when a given manufacturer calculates its Average Sales Price (ASP). As a result, the weighted average sales price calculated by CMS becomes artificially inflated, resulting in millions of dollars in overpayment in Medicare reimbursement. See Pharmaceutical Fraud in this Glossary.

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