Hi Dr. Fife,
I’m sure you’re receiving plenty of feedback on this topic, but regarding your question about whether providers can receive discounts on ASP products, I’ve consistently been told the answer is yes… at least, I hope it’s yes—otherwise, we’re all in trouble! When calculating the ASP for future quarters, the new ASP is supposed to account for any discounts offered. This process helps Medicare save money over time.
Naturally, when an ASP drops, it creates challenges for the sales teams since they have to work harder to maintain the same level of sales from a dollar standpoint. [And the physicians’ profit decreases when the ASP falls. CF] Many wound care companies, having seen their ASPs drop consistently due to discounts, have started introducing new products with higher ASPs and encouraging doctors to switch to the “new technology.”
However, there are numerous products for which the ASP doesn’t seem to adjust, despite the discounts offered to doctors. [My question here is whether the lack of downward adjustment in the ASP indicates that the discounts are not reported to CMS by the companies. CF] Additionally, there doesn’t seem to be a solid rationale behind the starting ASP price for many products. I understand why a four-layer amnion might be more expensive than a single layer, but as I see it, it’s more of a “name your own price” situation.
The general consensus that I’ve heard is anything under 40% off ASP is in bounds (it’s definitely a gray area). If an ASP is $1,000 per sq cm the physician will pay the manufacturer $600 per square centimeter and Medicare will pay $800 per square centimeter minus sequestration. So, the dollars back to the practice are around $200 to $400 per square cm depending on the patient’s secondary situation. If Medicare’s intention was for physicians to only get ASP+6% for the product, then the physicians are really only getting ASP+4% because of sequestration and with patients that don’t have secondaries that gets tricky.
A factor impacting the discount is that one company might feel like they need to give 40% off their ASP so they can compete with a product for which the ASP is higher. A deeper discount on the less expensive product enables the practitioner to keep the same profit.
If we’re talking about rebates with ASP products, I think attorneys could have a field day with that. What’s also frustrating is the wholesale acquisition cost (WAC) is just a number published in Red Book. The WAC is not the actual price these companies are charging physicians.
Regards,
[Name withheld]
I appreciate the candid letter. I don’t expect to get a free legal opinion on my blog, but I wish I could get a legal perspective. I am going to say the quiet part out loud:
- The system set up by CMS in the office-based setting (ASP+6% with manufacturers required to report discounts) was designed to provide “fair” compensation for the actual price paid for a product. It was never designed to enable practitioners to make large profits off the cost of a device.
- Unfortunately, due to sequestration and many other problems with physician payment, physicians are likely to lose money if they only receive ASP +6%.
- The lack of any market controls on either the WAC or the ASP pricing, and the fact that CMS provides a new HCPCS code for virtually identical amniotic products means that there is no limit to the price per cm2 that a manufacturer can name.
- Manufacture discounts on high priced products drive sales based on the potential profit to the practitioner.
- This system enables physicians to realize huge profits off the cost of the product itself.
- These huge profit margins enable physicians to waive patient copays for patients who are without secondary insurance (so the physician can avoid the moral dilemma of passing on to the patient the high cost of a product which was selected purely on profit motivations when cheaper and equally effective products are available).
- Cheaper and equally effective products are not chosen by doctors because the profit on cheaper products is less.
- The result is that Medicare is paying billions of dollars for “skin substitutes”.
As far as anyone can tell me so far, all of this is legal.
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.
