Average Sales Price Fraud: Concessions That Never Reach Medicare Part B

Average sales price fraud occurs when a manufacturer knowingly leaves required price concessions out of its reported ASP, inflating the benchmark Medicare Part B uses to pay for drugs. The concession can sit outside the drug invoice: a payment to a distributor, a customer discount funded through service fees, or a credit-card processing charge someone else absorbs. If you reconcile sales to government price reports, the important difference may be between what the invoice says and what the customer actually received. The manufacturer can fund the benefit while reporting a price that leaves it out.

What Goes Into Average Sales Price?

Average sales price starts with a manufacturer’s U.S. sales for a National Drug Code in a calendar quarter, divided by the units sold. Required concessions reduce that price. Volume discounts, prompt-pay discounts, cash discounts, free goods tied to a purchase requirement, chargebacks and qualifying rebates all belong in the calculation.

That makes the sales total and the unit count equally important. Free goods contingent on a purchase affect what the buyer receives for its money. A chargeback or rebate can change the net price after the original sale. An analyst comparing only invoice prices can miss both the additional product and the later reduction.

Some sales stay out of ASP, including nominal-charge sales and certain sales excluded from Medicaid Best Price. Bona fide service fees are excluded from price concessions, making the fee’s actual purpose central to the calculation.

In The Association Between Drug Rebates and List Prices, the USC Schaeffer Center found a positive relationship between rebates and list prices. Its 2020 study used estimated net prices for branded drugs and treated the gap between list and net broadly, including manufacturer payments and discounts to wholesalers and pharmacies.

That finding helps explain why a list price can tell so little about the money moving through the distribution system. For an ASP inquiry, we need the particular concessions behind the net figure: who funded them, who received them and how they reached the reported price.

Regeneron’s Credit-Card Fees and the Price Concession

For ASP, credit card processing fees can be a price concession when the manufacturer pays them for a drug customer. In April 2024, the Justice Department alleged that Regeneron omitted these payments from reported ASP for Eylea, causing hundreds of millions of dollars in inflated Medicare reimbursements. The department put Medicare payments for Eylea at more than $25 billion between 2012 and 2023.

According to the department, Regeneron paid processing fees so distributors would let physicians buy Eylea by credit card at the lower cash price. Retina and ophthalmic practices could avoid an added fee while earning cash back and other card rewards. The government alleged that Regeneron tried to classify the payments as bona fide service fees even though it knew they did not qualify.

The whistleblowers’ complaint describes how Besse Medical allegedly passed manufacturer-funded discounts to customers while presenting them as the distributor’s own discounts:

The complaint alleged that Regeneron funded Besse Medical’s discounts through its distribution service agreement. The alleged bargain gave practices the benefit of the fee payment while Medicare paid as though that concession did not exist.

The complaint also points to a 2015 ASP spreadsheet that allegedly listed an “Amex rebate” of 1.5% and another rebate of approximately 1%, for payments made or planned but allegedly excluded from ASP. That is a concrete comparison an insider can recognize: an internal pricing spreadsheet identified benefits that the complaint said were missing from the government price report.

Another alleged inducement reached beyond the price of an individual purchase. The complaint describes manufacturer-subsidized inventory equipment offered free to practices that switched both drugs and distributors, with Besse Medical becoming their exclusive distributor for injectable inventories. The offer connected a product choice to a distribution relationship.

The department said a whistleblower’s False Claims Act lawsuit prompted its investigation.

Medicare Part B Payment Depends on the Billing Unit

Medicare Part B drug payment generally uses the lower of the actual charge or 106% of ASP. Medicare’s average sales price payment rule ties payment to the labeled drug quantity and excludes extra product beyond that amount.

The manufacturer’s National Drug Code identifies the product being reported. The HCPCS billing code identifies the drug and quantity used for payment. The Centers for Medicare & Medicaid Services combines prices and sales volumes for the products assigned to a billing code. The manufacturer’s sale unit and Medicare’s billing unit therefore have to be connected before a missing concession can be translated into a payment effect.

For health care providers buying and administering the drug, the difference between the allowed payment and acquisition cost contributes to their margin. A hidden concession can lower that cost while leaving the reported benchmark high. Taxpayers fund the resulting excess healthcare spending, and patients’ coinsurance rises with the allowed amount.

ASP Reporting Has More Than One Clock

ASP reporting has a lag between the underlying sales and the Medicare payment quarter. The agency’s payment limits for the quarter beginning July 1, 2026 used first-quarter sales data, a two-quarter lag. Comparing a customer’s current acquisition cost with the payment rate in effect that day can therefore put different sales periods beside each other.

There is also a lag within the manufacturer’s own calculation. When adequate rebate and chargeback information arrives too late, the calculation uses a methodology based on a 12-month rolling average to estimate those costs. The sale, the estimated concession and the eventual payment can occupy different parts of the accounting trail.

Why Do Pharma Rebates and Chargebacks Seem Like a Mess?

Rebates and chargebacks can arrive after the sale, leaving an estimate in the ASP calculation until the actual amounts are known. We connect the contract, transaction and reported price for the same product and sales period: what benefit was promised, what was estimated and what was paid. For an analyst, the consequential question is where the concession went.

What the ASP/AMP Comparison Can Reveal

The ASP/AMP comparison screens for potentially excessive Part B payments by comparing ASP with average manufacturer price, the benchmark used in Medicaid. The agency’s substitution rule applies when ASP exceeds AMP by 5% or more in two consecutive quarters or three of the previous four quarters.

The replacement payment is 103% of AMP when it is lower than the ordinary ASP-based amount. The comparison must use matching sets of National Drug Codes, and the drug and dosage form must not be on the FDA’s shortage list when the calculations are finalized. Incomplete or inaccurate AMP data can prevent the comparison from identifying drugs that qualify for a lower payment.

The HHS Office of Inspector General’s 2022 review of ASP calculations found that comparisons with other benchmark prices provided little insight into potential inaccuracies. Manufacturer surveys exposed differences in the treatment of TRICARE sales and fees paid to third parties.

That is why we examine the transactions behind the reported averages. A benchmark comparison shows the relationship between reported numbers. The distribution agreement, fee payment and customer benefit show how one of those numbers was built.

What Evidence Is Needed to Prove Fraud?

Contracts, payment records and ASP workpapers can show a concession that never reached the reported price. We connect that omission to the Medicare payment and what the manufacturer knew.

In the Regeneron allegations, the useful records crossed departments: distribution service agreements, customer discounts, credit-card fee arrangements, sales instructions and an ASP spreadsheet. We examine how the financial arrangement moved from the commercial agreement into the calculation submitted to CMS.

The unit mapping and payment data supply the next connection. A concession assigned to a particular National Drug Code has to be followed into the appropriate billing code and reimbursement period. Communications about classifying the payment help explain who understood its purpose and why the report treated it as it did.

A pricing analyst sees the calculation. A distribution employee sees the commercial agreement. A practice’s purchasing staff sees the terms actually offered. We connect those perspectives to the payment records and reporting decisions, including the explanations inside the business for treating a benefit as a service.

What Are Red Flags for Pharmacists?

For pharmacists reviewing drug purchases, waived credit-card fees, distributor-branded discounts and free inventory equipment can point to benefits funded by the manufacturer. The Eylea allegations show why the offer’s source matters: the distributor’s name on a discount may conceal who paid for it and how it was treated in ASP.

Service Fees Can Move Medicare and Medicaid in Opposite Directions

A bona fide service fee pays fair market value for an itemized service actually performed for the manufacturer, which the manufacturer would otherwise perform or buy. It also must not pass through, in whole or in part, to the recipient’s customer.

For Part B, excluding a true price concession as a service fee leaves ASP too high. In Medicaid, improperly deducting a genuine service fee can leave AMP too low and reduce the rebates the manufacturer owes. The classification question is similar, but the direction of the alleged reporting error changes with the program.

Bristol-Myers Squibb agreed to pay $75 million in 2021 to resolve allegations that it underpaid Medicaid rebates. The allegations included improperly deducting wholesaler service fees and leaving out additional value received under contracts when inventory prices rose.

What Changed in CMS’s Service-Fee Documentation?

The Centers for Medicare & Medicaid Services’ guidance requires manufacturers to document how they value bona fide services and submit certification from fee recipients that the fees do not pass through to customers. The policy took effect January 1, 2026, with those submission requirements waived for the first sales quarter.

The guidance calls for summaries of current bona fide service contracts and accepts detailed summaries of valuation methods, including their data sources and assumptions. If a service provider refuses certification, the agency says the fee cannot be treated as a bona fide service fee.

When You Can See the Missing Concession

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. If your work in pricing, finance or distribution shows a customer benefit disappearing from the ASP calculation, speak with our whistleblower experts about the payment behind it. We work beside you to build your strongest average sales price fraud case and bring in pharmaceutical pricing whistleblower lawyers who understand ASP reporting.