February 27, 2019
Prior to the enactment of the Medicare Prescription Drug and Modernization Act of 2003 (MMA), the Balanced Budget Act of 1997 had set reimbursement for drugs and biologics provided incident to physician services under Part B of the Medicare Program at 95% of Average Wholesale Price (AWP). AWP as a benchmark was subject to a variety of criticisms and reports indicating that in most cases it significantly exceeded providers’ costs. As a result, the Congress created Average Sales Price (ASP) as a benchmark intended to more accurately reflect the cost to physicians and hospitals of furnishing Part B drugs. The shift from AWP based reimbursement to ASP reimbursement created significant savings for Medicare and its beneficiaries beginning January 1, 2005 and continuing under current law. The Moran Company was asked by PhRMA to analyze the impact the switch to the ASP system had on Part B medicine spending relative to the prior AWP reimbursement methodology.