Last week the Department of Health and Human Services Office of Inspector General (OIG) published a report titled “Reasonable Assumptions in Manufacturer Reporting of AMP and Best Prices” (Report) that reviewed the use of assumptions made by a sample of drug manufacturers participating in the Medicaid Drug Rebate Program (MDRP) in calculating best prices (BP) and average manufacturer prices (AMP) following the publication of the MDRP Final Rule on February 1, 2016. The MDRP allows a manufacturer to make “reasonable assumptions” consistent with the statute, its intent and the regulations if there is no available guidance for a manufacturer to determine how to treat certain sales practices in its pricing calculations and if such assumptions are documented and maintained. This Report is the outcome of a multi-year review conducted by the OIG’s Office of Evaluation and Inspections (OEI), in part as a response to a Congressional request, and examines the use of assumptions in BP and AMP calculations by manufacturers; the areas that manufacturers may need additional CMS guidance or instruction; and the CMS oversight process of the manufacturer assumptions.

The OIG found that it is a common practice for manufacturers of all sizes to use reasonable assumptions in pricing calculations. The study also identified that many manufacturers seek additional guidance from CMS in a number of topics including: value based purchasing arrangements, bona fide service fees, rebates paid to PBMs, and the treatment of oral specialty drugs. Further, the OIG reported that CMS has not exercised significant, formal oversight on the reasonable assumption process used by manufacturers except in limited circumstances. CMS reported limited authority for such oversight. The Report includes several recommendation including additional CMS guidance in the specific areas identified by the OIG and the potential implementation by CMS of an efficient process for reviewing certain practices. It is also recommended that CMS consider implementing a system to share the technical assistance it provides to manufacturers.

The Report includes important findings and recommendations for consideration by all stakeholders in light of the attention on drug pricing and the many legislative proposals circulating.