Medicare Part B Drug Payment: Where Acquisition Cost, ASP and the Claim Separate

Medicare Part B drug reimbursement generally uses ASP, the manufacturer’s average sales price, to set payment for covered physician-administered drugs. The practice buys the drug at one price, the manufacturer reports an average, and Medicare pays against a billing-code allowance. A discount can reach the practice without reaching the reported average. That is where someone who knows the contract can see something the claim itself never shows. Inflating the average raises the bill for Medicare, taxpayers and patients whose coinsurance follows that price.

This is the Part B side of drug pricing fraud. The useful comparison follows the money from the sale through the concessions and price report to the government’s payment.

Medicare Part B Drug Reimbursement Starts With the Covered Service

Part B covers specified drug categories, including drugs furnished as part of a physician’s service that patients do not usually administer themselves. Physicians and hospital outpatient departments commonly buy the drug, furnish it to the patient and bill Medicare. This is buy and bill: the provider makes the purchase and receives the reimbursement.

Other categories bring in blood clotting factors, immunosuppressants after a Medicare-covered transplant, qualifying oral anticancer and antiemetic drugs, and infusion drugs furnished through durable medical equipment. Certain vaccines have their own coverage provisions. The same drug can fall under Part B for one beneficiary and Part D for another.

For drugs paid under the ordinary ASP method, the allowance is generally the lower of the actual charge and 106% of ASP. The provider’s margin depends on what it actually paid to acquire the drug.

Sequestration changes the payment again. A Department of Health and Human Services payment analysis explains that a 2% sequester reduces the federal payment while leaving beneficiary coinsurance unchanged. Under that reduction, it describes the effective combined payment as ASP plus 4.3%.

Billing Units and the ASP Lag in Medicare Part B Drug Payment

The Medicare Part B drug payment billing unit connects the product to the claim, while the ASP lag connects that payment to an earlier sales quarter. Both matter when a purchase record and a reimbursement amount appear to disagree.

Manufacturers report quarterly ASP by National Drug Code, including package size. Medicare’s billing codes can group several products together. The manufacturer’s package, the quantity administered and the billing unit therefore have to be connected before their prices can be compared. A count of packages and a count of claim units can describe the same drug without describing the same quantity.

The payment file identifies a dosage unit alongside the code and allowance. The Centers for Medicare & Medicaid Services also bases the ASP payment limit on the labeled amount of product. Extra product in a vial does not increase that limit. For pricing and practice staff, the link between the package record and the claim’s units is part of the payment story.

The published limit also runs behind the sale. The agency’s payment file for the quarter beginning July 1, 2026 used first-quarter 2026 ASP data, a two-quarter lag. Comparing a current invoice with that allowance compares prices from different periods.

Late concessions create a second timing problem. Where rebate and chargeback information arrives too late for adequate reporting, the manufacturer uses a 12-month rolling average to estimate those costs. The original sale, the later concession and the payment quarter can sit in different files. We connect those periods when examining whether the reported price captured the customer’s actual terms.

What Goes Into Average Sales Price?

Average sales price is a volume-weighted average: the manufacturer’s eligible U.S. sales dollars divided by the corresponding units sold during the quarter. The calculation reflects volume discounts, prompt-pay discounts, cash discounts, purchase-contingent free goods, chargebacks and qualifying rebates. Medicaid rebates and Medicare inflation rebates have separate treatment and are excluded from those ASP deductions.

The adjustment can sit outside the invoice. A later rebate changes the manufacturer’s net proceeds. A chargeback changes the economics of a sale through a distributor. A cost paid on the customer’s behalf can give the customer a benefit without changing the amount printed next to the drug.

ASP also excludes specified sales, including nominal-price sales and sales excluded from Medicaid Best Price. Those exclusions reach 340B ceiling-price purchases and federal purchasing channels such as the Department of Veterans Affairs and the Department of Defense. A hospital buying through 340B can therefore acquire a drug at a price excluded from the ASP benchmark used for its reimbursement.

Wholesale acquisition cost is a different measure: the manufacturer’s list price before discounts. Average manufacturer price serves the Medicaid rebate system and follows a different sales channel. Average wholesale price is another published benchmark.

The USC Schaeffer Center’s 2020 paper, The Association Between Drug Rebates and List Prices, found that estimated rebates and list prices rose together in its branded-drug sample. Its rebate measure included other distribution-system concessions. That finding helps explain why a list-price increase tells an insider only part of the commercial story.

Why a Service-Fee Label Can Change Medicare Payment

A bona fide service fee stays outside ASP price concessions. To qualify, it must pay fair market value for an itemized service actually performed for the manufacturer, cover work the manufacturer would otherwise do or buy, and stay with the recipient rather than pass through to its customer.

Those are facts about the work and the money. The contract’s label supplies only the company’s description. A service agreement, the work performed, the valuation and the customer’s benefit can tell different parts of the story.

The direction of the incentive changes between programs. Treating a real service fee as a concession can lower average manufacturer price and reduce Medicaid rebates. Treating a real Part B concession as a service fee can keep ASP higher and raise Medicare reimbursement. The same accounting label can serve opposite purposes.

Regeneron’s Alleged Credit-Card Concession

Regeneron allegedly paid distributors’ credit-card processing fees so physician customers could buy Eylea at the lower cash price while earning card rewards. In its April 2024 complaint announcement, the Justice Department alleged that Regeneron omitted those payments from ASP concessions and tried to characterize them internally as bona fide service fees. A whistleblower’s lawsuit prompted the government’s investigation.

The government alleged that retina and ophthalmic practices could put purchases on a card without paying the additional fee, and that omitting the concession caused hundreds of millions of dollars in inflated Medicare reimbursements. Under the alleged arrangement, the invoice price could remain unchanged while the manufacturer paid a cost for the customer.

The whistleblower complaint also alleged that Regeneron funded discounts presented to customers as Besse Medical discounts. It explained why the distributor’s name mattered:

The allegation connects the distributor’s customer offer to the manufacturer’s payment. Someone who understands both sides of that arrangement can explain who funded the benefit and why it disappeared from the price calculation.

Part B Payment Exceptions Change the Comparison

The drug category, site of care and payment period determine which benchmark applies. A comparison with acquisition cost has to use the payment method for that product at that time.

New Drugs and Missing ASP Data

The Medicare Payment Advisory Commission’s November 2025 payment guide describes new products receiving wholesale acquisition cost plus 3% for their first two to three quarters on the market. The new-product add-on had been 6% before 2019.

For an established drug without ASP data, the commission describes several possible methods: 106% of wholesale acquisition cost, 95% of average wholesale price or invoice pricing. A missing manufacturer sales quarter can therefore change the payment basis without changing the drug being furnished.

Vaccines, Blood Products and Radiopharmaceuticals

The Centers for Medicare & Medicaid Services’ July 2026 payment file still uses 95% of average wholesale price for specified vaccine and blood-product codes. The old benchmark survives in particular categories even though ASP dominates the general explanation of Part B reimbursement.

Radiopharmaceuticals furnished outside hospital outpatient departments can use contractor methods that include invoice pricing. A practice’s location in the payment system matters alongside the product’s name.

Biosimilars Use the Reference Product’s Add-On

A biosimilar’s ordinary payment combines its own ASP with an add-on equal to 6% of the reference product’s ASP. Qualifying biosimilars receive an 8% reference-product add-on during an applicable five-year period. Qualification includes having an ASP no higher than the reference product’s.

The add-on therefore uses another product’s price.

Average Manufacturer Price Can Replace the ASP-Based Limit

The Centers for Medicare & Medicaid Services can substitute a payment based on average manufacturer price when ASP repeatedly exceeds it by the required threshold. The statutory substitute is the lower of the widely available market price and 103% of average manufacturer price. A claim can therefore use a different benchmark even when the manufacturer has reported ASP.

Negotiated Prices and Reclassified Products

The first negotiated-price cycle open to Part B drugs takes effect January 1, 2028. During the applicable period, the selected-drug payment formula uses 106% of the maximum fair price.

As the Medicare Payment Advisory Commission’s July 2026 Data Book explains, skin substitutes that are not drugs or biologicals moved away from ASP-based payment in 2026 to payment as supplies associated with a procedure.

What Evidence Is Needed to Prove Fraud?

For a Part B pricing case, we connect the transaction, the reported ASP, the resulting payment and the people who understood the reporting choice. A customer contract or distributor payment can explain a benefit missing from the price report.

The Centers for Medicare & Medicaid Services’ 2026 reporting rule calls for reasonable assumptions, the service-fee valuation methodology and a recipient certification addressing whether the fee passed through to customers. We examine that explanation beside the work actually performed and the money paid.

Internal pricing instructions and calculation workpapers can show why a concession was included or left out. The person who prepared the customer offer may understand a benefit that the person preparing the price report never saw.

Older pharmaceutical pricing cases show how the gap can become a selling point. Dey agreed to a $280 million civil settlement in 2010 over allegations that it reported inflated drug prices and used the difference from actual selling prices to induce purchases. The whistleblower was a home-infusion company. A business buying the drugs could see the difference between the market price and the reported benchmark.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. For someone in pricing, distribution or practice finance, the starting point may be knowing exactly which customer benefit the reported number left behind.

When You Know What the Price Report Left Out

If you know why a customer concession, distributor payment or free unit disappeared between the commercial records and the Medicare bill, speak with our whistleblower experts about the Part B payment. We stay beside you through the whole case and bring in pharmaceutical pricing whistleblower lawyers who understand ASP reporting and medical-benefit claims.