Tag: CMS

CMS Proposes New Rules for Calculating Average Sales Price for Medicare Part B Drug Reimbursement


Merle M. DeLancey, Jr. ●

The Centers for Medicare & Medicaid Services (“CMS”) released the Calendar Year 2026 Medicare Physician Fee Schedule (“PFS”) proposed rule on July 16, 2025. (See cms.gov/newsroom/fact-sheets/calendar-year-cy-2026-medicare-physician-fee-schedule-pfs-proposed-rule-cms-1832-p). The proposed rule includes potentially significant changes to what is considered a bona fide service fee (“BFSF”) when calculating average sales price (“ASP”) under Medicare Part B.[*]

Under Medicare Part B, most drugs are reimbursed based on ASP plus six percent. Manufacturers report ASPs to CMS quarterly. With certain exceptions, ASP is defined as a weighted average price to commercial customers in the United States. Drug manufacturer price concessions are deducted when calculating ASP but BFSFs are not. To support a higher ASP, which increases a drug’s reimbursement, manufacturers seek to avoid price concessions and instead classify programs as BFSFs. Improperly classifying a price concession as a BFSF increases a manufacturer’s ASP, which results in Medicare overpayments and higher coinsurance amounts for Medicare beneficiaries.

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The Medicaid Drug Rebate Program and Value-Based Purchasing

Merle M. DeLancey Jr.

On March 23, 2022, the Centers for Medicare and Medicaid Services (“CMS”) issued long-awaited guidance regarding how drug manufacturers are to report multiple best prices (“BPs”) to the Medicaid Drug Rebate Program (“MDRP”) under value-based purchasing (“VBP”) arrangements. See Manufacturer Release 116 (medicaid.gov/prescription-drugs/downloads/mfr-rel-116.pdf). CMS delayed issuing the guidance to allow states, payers, and manufacturers to administratively prepare for multiple BP reporting in connection with VBP arrangements. The regulatory amendments are effective July 1, 2022.

VBP Arrangements and Medicaid’s Best Price Rule

VBP arrangements consist of additional rebates or price concessions that states may be able to earn based on a drug’s clinical outcomes in Medicaid beneficiaries. CMS’ challenge was reconciling Medicaid’s long-standing BP reporting rule used to calculate manufacturer rebate payments to states with anticipated low prices available under VBP arrangements. Since 1991, the MDRP agreed to cover every drug a manufacturer sells regardless of price. In exchange for this unprecedented access, manufacturers agreed to pay rebates ensuring that Medicaid programs paid no more than the “best prices” paid by manufacturers’ commercial customers. Many argued that Medicaid’s BP rule prevented states from accessing innovative manufacturer programs involving cutting-edge therapies.

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New Medicaid Rebate Agreement

Merle M. DeLancey Jr.

On March 23, 2018, the Centers for Medicare & Medicaid Services (“CMS”) announced the introduction of a new Medicaid National Drug Rebate Agreement. The new Agreement incorporates legislative and regulatory changes, including, for example, the Affordable Care Act, which have occurred since the original Agreement was published in 1991.

Manufacturers currently participating in the Medicaid Program have until October 1, 2018, to sign the new Agreement. Failure to enter into a new Agreement by October 1, will result in termination of a manufacturer’s existing Agreement.

While the new Agreement does not contain significant changes from the existing Agreement, several changes are worth noting and repeating: Continue reading “New Medicaid Rebate Agreement”