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FOR IMMEDIATE RELEASE
Contact: Carolyn Hickey
Phone: 703-243-9262

Arlington, VA (June 16, 2004) – The Health Industry Group Purchasing Association (HIGPA) submitted comments to the Department of Health and Human Services’ Centers for Medicare and Medicaid Services (CMS) on June 7th regarding Question and Answer 16 accompanying the interim final rule titled, Medicare Program; Manufacturer Submission of Manufacturer’s Average Sales Price (ASP) Data for Medicare Part B Drugs and Biologicals, File Code CMS-1380-IFC. HIGPA pointed out that Q and A 16 should not include group purchasing organization (GPO) administrative fees in pharmaceutical manufacturers’ calculation of the “average sales price.” HIGPA asserted that administrative fees do not affect the price to the purchaser. The GPO industry’s message is that “manufacturer administrative fees to GPOs for outpatient drugs are for the functions or services that GPOs perform. They are not price reductions that adjust the prices actually realized by the manufacturers,” HIGPA’s June 7th letter to CMS stated.

In passing the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA), “Congress expressly listed the deductions [volume discounts, prompt pay discounts, cash discounts, free goods that are contingent on any purchase requirement, and chargebacks and rebates] that should be taken by manufacturers in calculating ASP. Congress also provided that the list of price concessions that should be included in the ASP calculation could be expanded after 2004 based upon the recommendation of the Office of Inspector General of HHS (“OIG”) that such concessions would be a reduction of the cost to the purchaser. Based upon the express direction of Congress, CMS cannot expand the items or transactions included as price concessions in 2004. Thereafter, CMS cannot expand the list without a recommendation from the OIG that the price concession results in a reduction of the cost to the purchasers. Accordingly, Question and Answer 16 should be interpreted to be redundant and therefore consistent with the Medicare Prescription Drug, Improvement and Modernization Act ("MMA") statute,” HIGPA’s President and CEO Robert Betz, Ph.D., stated in the comment letter.

HIGPA’s comments detailed background information regarding the GPO business model’s protection under the Medicare Anti-Kickback Act. Specifically, HIGPA’s comments stated, “GPOs receive vendor fees that are often a percentage of the purchases that the GPO members make under GPO contracts. In fact, the GPO Anti-Kickback statutory exception and regulatory safe harbor expressly covers fees that are a fixed percentage of the value of purchases made from the vendor by the GPOs members… As a result, it is clear that neither Congress, nor the OIG, views administrative fees to GPOs as reductions to the prices realized by manufacturers. If that had been the case, the GPO exception or safe harbor would have been unnecessary. CMS should carefully consider this issue and provide clarification, if necessary, in the Medicaid rebate program, as well as in the context of the ASP calculations.”

HIGPA recommended that CMS issue an additional Question and Answer to the Questions and Answers that were issued by CMS in conjunction with the Regulation as follows:

Q. Are administrative fees paid to group purchasing organizations (GPOs) included in the ASP calculation?

A. No. Group purchasing organizations (GPOs) are not buyers, and administrative fees paid to these entities are not price reductions and are not included in the ASP calculation.

“Additionally, in promulgating the final regulation, HIGPA urges CMS to avoid any Questions and Answers or other statements that risks creating concern among manufacturers that administrative fees paid to GPOs must be included in the ASP calculation,” HIGPA’s comments stated.

A copy of CMS’ interim final rule can be found at http://frwebgate1.access.gpo.gov/cgi-bin/waisgate.cgi?WAISdocID=41631951794+47+0+0&WAISaction=retrieve. A copy of the question and answers are at http://www.cms.hhs.gov/providers/drugs/aspqa_web_042204.pdf.

Questions regarding HIGPA’s comments can be directed to the Association’s Director of Communications, Carolyn Hickey at (703) 243-9262 or chickey@higpa.org.

HIGPA is a chartered trade association of over 150 health care purchasing and supply chain organizations. HIGPA's Industry Members include purchasing groups, associations, and health care provider alliances. HIGPA's Trading Partner members include many of the world's leading health care product manufacturers, distributors, wholesalers and related suppliers. According to a recent study conducted by a former principal analyst at the Congressional Budget Office, hospitals save patients over $30 billion each year by purchasing products through group contracts.

To learn more about HIGPA or the group purchasing industry, visit www.higpa.org or call 703-243-9262.

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