I am genuinely trying to understand what is “allowed” and what isn’t when it comes to Cellular Tissue Products (CTPs) / skin substitutes in the office-based setting – and that includes the “mobile” practice (which may include skilled nursing and care in the patient’s home). Everyone has heard about what happened to the owners of a CTP/skin sub company in Arizona.
I am trying to understand the scenario if a practitioner is using a CTP/skin subs with a published Average Sales Price (ASP):
No matter what the physician charges, the “Medicare allowable rate” – meaning, the physician reimbursement rate– is the published ASP +6%. However, some practitioners are getting huge discounts – as much as 40% – off the ASP. The practitioner will still get reimbursed “ASP +6%” by Medicare, but because they actually paid far less than the ASP, they will make a profit off the cost of the product itself. When that product is $>2000/cm2, the profit can be tens of thousands of dollars (even hundreds of thousands) per application.
That’s how “selling the spread” works. Manufacturers advertise the discounts they will offer and thus the profit that the physician will make. I am told that selling the spread is illegal, but apparently there’s no enforcement of the law because the manufacturers do it blatantly. I could post a new ad or email every week.
It is my understanding that the manufacturers or “private label” distributors of CPTs are required to report the ASP of all product sizes – regardless of whether the product(s) are used on inpatients or outpatients. Theoretically, that means the manufacturer/distributor is supposed to report those discounts to CMS, and if they do, over time, the ASP will decrease. For now, let’s ignore the fact that the manufacturers are probably not reporting those discounts to CMS. I’m focused on the payment to the practitioner.
I am worried because I think that those discounts are what the Department of Justice (DOJ) called “kickbacks” in the Arizona case. Accepting those kickbacks is the reason that at least two nurse practitioners could go to jail. I actually talked at length to one of those NPs a few months before he was charged by the DOJ. I told him that I thought it all sounded shady, but he said that the company had assured him it was all legal…
I am trying to understand, when there is a reported ASP, is it legal for practitioners to pocket a huge profit off the cost of a CTP/skin sub? Lots of people have told me that this is all legal. I hope someone out there can tell me if it is.
Dr. Fife is a world renowned wound care physician dedicated to improving patient outcomes through quality driven care. Please visit my blog at CarolineFifeMD.com and my Youtube channel at https://www.youtube.com/c/carolinefifemd/videos
The opinions, comments, and content expressed or implied in my statements are solely my own and do not necessarily reflect the position or views of Intellicure or any of the boards on which I serve.
Thanks for a very understandable explanation. So what I need to ask the Rep is NOT if you are list on the ASP but what is it listed at. Then x by 0.6 to keep myself out of jail.
Even better, ask them how LONG they’ve been on the ASP, what their change on the ASP has been over the past 8 quarters if that data is available, and if they’ve been offering their “discount” that entire time. If their ASP isn’t dropping dramatically quarter to quarter by offering a 40-50% discount, you know they’re not reporting these discounts and what they’re doing is highly illegal.
That’s why some companies were trying hard to launch “new” products every 2-3 years so they can keep charging more. the 361 HCT/Ps regulatory rules make it very easy.
Sure sounds illegal to me. Don’t see how it is not a kickback if it is just a rebate.
Thanks, Dr. Fife! This is definitely a scam.
Even worse, to maintain their profit, companies are trying to launch “new” skin substitute products every 2-3 years so they have a “new” price and avoid decreasing the price. That’s why we see all these supposedly “new” amniotic products, with different perforations, layers, and packaging, just so they can list them at higher prices and offer higher percentages to healthcare providers (HCPs) to sell more.
This is the reason I had to quit my previous R&D job at a device manufacturer. It is very sad to see that what I was doing is not helping the patients and doctors at all. Only the companies and some doctors made $$$
The ASP model was created for pharmaceutical pricing. One needs to look at that industry first before making accusations and judgements about how its application to skin substitutes has manifested in Biologics. Remembering that all price controls throughout history when governments impose them while also assuming the role of sole relevant purchaser have caused distortions. Have any of the readers seen both ample supply and steadily declining new drug prices since 2008? I think not. ASP was imposed on 361 approved products in January 2022. Prior to that, products were commonly sold with the rebates of which the author speaks. Those rebates were arguably part of a “safe harbor” provision that l
Med-legal attorneys stipulated were legal as long as they were reported by the PHYSICIAN, which all the MACS required by supplemental claim adjustment which required cancelling the claim and then rebooking the claim net of the rebate or discount. This process was not followed by many partly due to lack of awareness and largely because it was onerous and poorly defined. Placing ASP as the price controlling mechanism on to the manufacturer was one accomplishment of ASP. However, 361 approval requires only that the products meet standards of minimal manipulation and homologous use rather than EXTENSIVE clinical studies before marketing like drugs do (PMA). Thus, with manufacturers able to set their own price and not face the burned of 5-8 years and $20MM in clinical trial costs, they responded to the much stronger incentive to continually launch new products at higher prices. Clearly some manufactures are not reporting or reporting accurately (see OIG reports from January and March 2023) what they sell their products to providers for, but the prices they charge are not “discounts” or “rebates” under ASP. They are just prices. There are legal pathways for maintaining price stability for manufacturers also. Those require extensive legal framework, careful cost planning and are subject to audit. Not all hospitals or places of service require the manufacturers to report, either. In summary, it’s not helpful to pontificate about physicians in any care setting as illegally profiting without understanding the context above. It’s also not helpful not to look at the non-compliance of the MACs themselves at requiring ASP by simply allowing manufacturers to set WAC pricing anywhere they want, paying those prices, and thereby allowing hundreds of manufacturers to repeatedly push new products with escalating ASP prices onto the market. What this has caused is a classic “melt up” in pricing as manufacturers fear they will not be able to sell ANY product if they don’t raise prices.