Wednesday, August 01, 2007

The ASP Future is Here

I've stated before that Average Manufacturer Price (AMP) will become a new benchmark for pharmacy reimbursement.

Both AMP skeptics and die-hard AWP fans should consider a must-read article called The Arrival of Average Sales Price from Biotechnology Healthcare. It describes how private health plans are now using Medicare’s average sales price (ASP) data to reimburse oncologists and other specialists for office-administered drugs.

I predict that CMS’ publication of AMP data will have a similar effect on retail pharmacy channels. List minus pricing models for pharmacy reimbursement based on AWP or WAC will not be sustainable once there is confidence in the published AMP data, which I predict will occur no later than mid-2008. Expect the retail pharmacy revolution to be in full swing by 2009.

ASP Adoption

The Arrival of Average Sales Price describes how many health plans have already adopted ASP models for oncology reimbursement. A survey of 102 plans found:
  • List Minus: 52% of plans (68% of covered lives) used AWP

  • Cost Plus: 36% of plans (30% of covered lives) used ASP
Half of the plans using ASP are paying at Medicare’s ASP+6% rate, while the rest paid at ASP markups ranging from 9% to 18%. The larger plans have been most successful at getting providers to accept because they can leverage their market share power.

Physicians are making predictable changes in their practices –collecting co-payments, looking for bigger rebates from manufacturers, getting out of the injection/infusion business, etc.

Ironically, Judge Saris chastised third-party payers for not adopting cost-plus reimbursement models once Medicare devised the ASP model for Part B. (See my Comments on the AWP Decision from June.)

Looks like she was right about the outcome, but wrong about the timing.

FYI, CMS issued an updated AMP timeline. The regulation now takes effect on October 1, 2007.

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