U.S. Department of Health and Human Services 
Office of Inspector General 
Some Skin Substitute 
Manufacturers Did Not 
Comply with New ASP 
Reporting Requirements
Ann Maxwell  
Deputy Inspector General 
 for Evaluation and Inspections 
March 2023, OEI-BL-23-00010  U.S. Department of Health and Human Services 
 U.S. Department of Health and Human Services 
Office of Inspector General 
 Office of Inspector General 
 
Data Brief 
Data Brief 
 
M Maarrcchh 2 022032, O3E, IO-BEL-I-2B3-L0-020310- 00010 
Some Skin Substitute Manufacturers Did Not Comply with New ASP 
Reporting Requirements  
Why OIG Did This Review 
Key Results 
Ensuring the appropriate reporting of average sales prices (ASPs) is 
o CMS calculated ASP-based vital because the Centers for Medicare & Medicaid Services (CMS) 
payment amounts for 38 of uses them to directly calculate payments under Medicare Part B.  
the 68 skin substitutes Federal law requires manufacturers to provide CMS with the ASP for 
included in our review. each of their Part B drugs and biologicals on a quarterly basis.1, 2  
o CMS was unable to calculate Prior to 2022, ASP reporting requirements did not generally apply to 
ASP-based payment manufacturers of certain Part B drugs and biologicals, including skin 
amounts for the remaining substitutes, although some manufacturers voluntarily reported these 
30 skin substitutes because
data.  Congress addressed the reporting gap through the 
manufacturers did not report
Consolidation Appropriations Act, 2021 (CAA), which required 
the required ASP data.
manufacturers of skin substitutes (and the other Part B-covered 
o These 30 skin substitutes products referenced above) to begin reporting ASPs to CMS for the 
represent a disproportionate first quarter of 2022.3    
share of Part B spending.
What OIG Found 
o  Transitioning skin substitutes 
to ASP-based payments has  Despite the new legislative requirements, CMS was unable to 
the potential to substantially  calculate ASP-based payment amounts in the first quarter of 2023  
reduce Part B expenditures.  for 30 of 68 skin substitute billing codes because their manufacturers 
o  CMS faces hurdles in setting  did not report the required ASP data.  According to our analysis, 
ASP-based payments for  Part B payment amounts would be reduced substantially if ASPs were 
skin substitutes.    consistently reported and used, potentially leading to tens of millions 
of dollars in savings each quarter.  However, CMS faces several 
unique hurdles in implementing ASP-based reimbursement for skin substitutes.  For example, because 
skin substitutes are not actually prescription drugs, CMS cannot employ its usual methods and data 
sources to corroborate manufacturer-reported data on pricing and packaging.  CMS is actively 
considering changes to the payment methodology for skin substitutes and, in January 2023, conducted 
a skin substitutes Town Hall to address stakeholder concerns and discuss potential payment 
approaches.4 
What OIG Concludes 
OIG appreciates that CMS is carefully considering its options regarding the potential impacts of 
different payment approaches for skin substitutes.  Further, we also recognize that CMSs current 
processes for collecting and validating ASP data are less effective for these products.  However, every 
quarter in which wholesale acquisition costs/invoices are used as the payment basis for some skin 
substitutes potentially leads to tens of millions of dollars in higher payments for Medicare and its 
enrollees.  Therefore, we encourage CMS to quickly address the issues identified in this report.  This 
might include establishing interim approaches while working on a more systemic solution.    
 
RESULTS 
 
 
Despite the new legislative requirements, manufacturers are not 
consistently reporting the ASPs needed to set payment amounts 
for skin substitutes 
In the third quarter of 2022 (i.e., the initial quarter in which payment amounts would 
have been affected by CAA reporting requirements), Medicare Part B and its enrollees 
paid almost $400 million for 68 unique skin substitute billing codes.5  CMS used ASPs 
to set payment for only 16 of the 68.  Prior to the new legislative requirements, 
manufacturers already had been voluntarily reporting ASPs for each of these 
16 products and CMS had subsequently calculated the appropriate payment amounts 
using those ASP data.  In other words, no additional skin substitutes (i.e., those 
beyond the 16 products for which manufacturers had previously reported on a 
voluntary basis) were paid for on the basis of ASPs in the quarter in which the new 
requirements took effect.  CMS informed OIG that it did not add additional skin 
substitutes to the payment file (even in the case of several codes for which 
manufacturers reported ASPs) as CMS was closely evaluating the impact of doing so 
and determining the appropriate next steps relative to the CAA requirements. 
As of the first quarter of 2023, approximately half of skin 
substitutes (38 of 68 billing codes) are being paid for on the basis 
of manufacturer-reported ASPs 
The number of skin substitutes for which CMS published an ASP-based payment 
amount increased dramatically in the first quarter of 2023.  In total, 24 manufacturers 
(6 more than in the initial quarter) reported the required pricing data for 38 of the 
68 codes included in our review, and CMS subsequently published an ASP-based 
payment amount for each of them.  
Manufacturers did not report ASPs for the remaining 30 skin 
substitute billing codes 
CMS was unable to calculate ASP-based payment amounts in the first quarter of 2023  
for the remaining 30 skin substitute billing codes because their manufacturers (26 in 
total) did not report the required ASP data.  These 30 codes represent a 
disproportionate share of Part B spending.  For example, Medicare and its enrollees 
spent $256 million for these 30 skin substitutes in the third quarter of 2022, 
accounting for nearly two-thirds of all payments for skin substitutes (see Figure 1).   
 
Some Skin Substitute Manufacturers Did Not Comply with New ASP Reporting Requirements  
OEI-BL-23-00010  Results | 1   
Figure 1.  Skin substitutes for which manufacturers did not report ASPs 
represented a disproportionate share of payments. 
 
Source: OIG analysis of Third-Quarter 2022 Part B Expenditures and First-Quarter 2023 ASP Payment Amount Files.  
Transitioning all skin substitutes to ASP-based payments has the 
potential to substantially reduce Medicare expenditures 
If CMS does not publish an ASP-based payment amount for a skin substitute billing 
code in a given quarter, the agency instructs its contractors to determine payment 
using either Wholesale Acquisition Costs (WACs) or actual invoices.6  Because WACs 
represent manufacturers list prices and do not include any discounts, they are 
generally higher than ASPs.  Similarly, to the extent invoices do not reflect post-
purchase rebates that may be offered for skin substitutes, the resulting Medicare 
payments are likely to exceed ASPs as well if providers do not account for these 
discounts when submitting their claims. 
In 2021, prior to the new requirements, Medicare payment 
amounts for four skin substitutes decreased dramatically when 
ASPs were voluntarily reported and used to set payment 
To gain a sense of how WAC- or invoice-based payment amounts compared to ASP-
based payments, OIG identified four skin substitutes for which Part B payments were 
determined using WAC/invoice prices in the first quarter of 2021 and then set using 
ASPs in a subsequent quarter later that year.  (These are skin substitutes for which 
manufacturers had voluntarily reported ASPs and CMS had used those ASPs to set 
payments in 2021, before the new requirements took effect in 2022.)  Once ASPs were 
used to set payment for these four drugs, average Medicare payment amounts fell 
between 21 percent and 73 percent (see Figure 2). 
For two of these skin substitutes, CMS reverted to WAC/invoice pricing in the quarter 
immediately after the payment reductionin one case because the manufacturer 
stopped reporting ASPs.  The average Medicare payment amount dramatically 
increased to prior levels for both products once ASPs were no longer used. 
Some Skin Substitute Manufacturers Did Not Comply with New ASP Reporting Requirements  
OEI-BL-23-00010  Results | 2   
Figure 2.  Payment amounts were substantially lower when set on the basis of ASPs. 
 
  Source: OIG analysis of ASP Payment Amount Files from 2021.   
Some Skin Substitute Manufacturers Did Not Comply with New ASP Reporting Requirements  
OEI-BL-23-00010  Results | 3  ASP-based payment amounts for skin substitutes were one-third 
below their WACs 
For the 38 skin substitutes with payments set using ASPs in the third quarter of 2022, 
their ASP-based payment amounts (i.e., ASP plus 6 percent) were 33 percent below 
published WACs (i.e., one of the potential benchmarks contractors may use to set 
payment in the absence of ASPs) at the median.  If we use this median difference to 
estimate potential savings, we find that Medicare Part B and its enrollees could save 
$84 million per quarter if all such products are paid for on the basis of ASPs.  
Twenty percent of that total (almost $17 million) would stem from reductions in the 
amounts owed through enrollee coinsurance.  Actual savings may be higher or lower 
than this estimate, given the specific differences between ASP and WAC or actual 
invoices for each product. 
The inconsistent reporting and use of ASPs for skin substitutes 
has implications in addition to higher payments 
Current reimbursement practices could create incentives for providers to prefer skin 
substitutes that are paid for on the basis of WACs/invoices rather than those paid for 
using ASPs, exacerbating the missed savings for Medicare and its enrollees.  Because 
ASPs are calculated using actual sales data (including discounts), they presumably 
reflect provider acquisition costs.  However, as described earlier, WACs/invoices for 
skin substitutes often significantly exceed their ASPs.  As a result, providers can 
typically capture a much larger spread (i.e., the difference between what they pay for 
a product and the amount they are reimbursed by Medicare) when payment is set 
using WACs/invoices.  This effectively penalizes manufacturers who comply with the 
law by potentially making their products less attractive to providers.  The overall 
dynamic could therefore unintentionally discourage all manufacturers of skin 
substitutes from complying with ASP reporting requirements, further increasing the 
risks of higher payments by the program and enrollees. 
CMS faces numerous hurdles in implementing ASP-based 
payments for skin substitutes 
Skin substitutes present unique challenges for CMS to overcome when implementing 
the new reporting requirements, as these products differ significantly from most items 
covered under the Part B prescription drug benefit.  For example, in its written 
response to OIG questions, CMS noted that: 
 there is not a single database that lists all manufacturers of skin substitutes;
 many of these products are regulated as Human Cellular and Tissue-Based
products for which the manufacturer is registered but the products do not
receive individual FDA approval; and
Some Skin Substitute Manufacturers Did Not Comply with New ASP Reporting Requirements 
OEI-BL-23-00010  Results | 4   
  there is not a single database or drug compendium that CMS can use to verify 
the descriptive data associated with skin substitutes (e.g., package size). 
In other words, the current methods CMS uses to collect and validate ASP data for 
other Part B drugs do not necessarily apply to skin substitutes.  Therefore, CMS 
cannot readily determine which manufacturers should be submitting ASPs, nor can it 
consistently corroborate manufacturer-reported data on pricing and packaging by 
checking against FDA or private industry sources. 
CMS is actively considering other changes to the payment 
methodology for skin substitutes under Medicare Part B 
In the Calendar Year 2023 Physician Fee Schedule Proposed Rule, CMS proposed to 
package all skin substitute products as part of the related administration procedure 
beginning January 1, 2024 (i.e., they would no longer be separately paid for on a claim 
but instead would be included as part of the physician service payment).7  According 
to the Final Rule, CMS is not moving forward with the proposed changes at this time.  
Rather, the agency is continuing to evaluate the comments received through the 
rulemaking process to determine appropriate next steps for skin substitute products 
relative to the CAA requirements.8  To that end, CMS conducted a Town Hall in 
January 2023 to address commenters concerns and discuss potential payment 
approaches. 
Some Skin Substitute Manufacturers Did Not Comply with New ASP Reporting Requirements  
OEI-BL-23-00010  Results | 5   
 
CONCLUSION 
 
 
OIG appreciates that CMS is carefully considering its options and engaging with 
stakeholders regarding the potential impacts of different payment approaches for 
skin substitutes.  Further, we also recognize that the number of skin substitutes that 
are being paid for on the basis of ASPs has increased dramatically over the initial 
6-month implementation period, despite the fact that current processes for collecting 
and validating ASP data are much less effective for these nondrug products. 
However, the current system, which uses ASPs as the payment basis for many skin 
substitutes and WACs/invoices for numerous others, could potentially incentivize 
providers to prefer products without ASP-based payments to capture the larger 
spread between reimbursement and their cost.  In turn, this dynamic (1) leads to 
higher payments for Medicare and its enrollees and (2) effectively penalizes 
manufacturers who comply with the law by making their products less attractive from 
a payment standpoint. 
Every quarter in which the current practices remain in place will likely cost Medicare 
and its enrollees tens of millions of dollars.  Therefore, we encourage CMS to address 
the issues identified in this report as quickly as possible.  This might include 
establishing interim approaches to enforce manufacturer compliance with reporting 
requirements while working on a more systemic solution for how best to reimburse 
for skin substitutes.  In the end, it is vital that manufacturers comply with Federal law 
and that the Medicare program pay appropriately for these high-cost products.   
Some Skin Substitute Manufacturers Did Not Comply with New ASP Reporting Requirements  
OEI-BL-23-00010  Conclusion | 6   
 
METHODOLOGY 
 
 
Analysis of CMS Payment Data 
Identifying Skin Substitutes For Which Part B Made Payments   
For all billing codes associated with skin substitutes, we obtained Part B expenditure 
data for each quarter of 2021 and the third quarter of 2022 from CMSs Part B 
Analytics Reporting (PBAR) System.  Using these claims summary data, we developed 
a list of all skin substitute billing codes for which Medicare Part B made payments in 
the third quarter of 2022 (the most recent data available).   
Determining Whether Manufacturers Reported ASPs 
For the selected billing codes, we used CMSs nonpublic background file to determine 
whether manufacturers reported ASPs in the third quarter of 2022.   
Determining Whether CMS Calculated ASP-Based Payment 
Amounts 
We examined CMSs ASP Pricing File from the first quarter of 2023 (i.e., the quarter for 
which third-quarter 2022 ASPs would be used to set payment) to determine whether 
the agency calculated and published ASP-based pricing for the selected billing codes. 
Estimating the Effect on Payment Amounts and Medicare 
Spending 
To estimate the change in payment amounts and total spending that could have been 
achieved had reimbursement for all skin substitutes been set on the basis of ASP: 
1)  We identified 38 billing codes for which CMS set ASP-based payment amounts in 
the first quarter of 2023.  For these drugs, we determined the median difference 
between their payment amount and the WAC from that same quarter.  To 
estimate potential savings, we multiplied the median difference by the amount 
spent on drugs without ASP-based payments in the third quarter of 2022.   
2)  We identified four billing codes that were subject to WAC/invoice-based pricing 
in the first quarter of 2021 but ASP-based pricing in subsequent quarters.  For 
these codes, we examined how Medicare payment changed once ASPs were used 
as the basis for Part B payment. 
 
Some Skin Substitute Manufacturers Did Not Comply with New ASP Reporting Requirements  
OEI-BL-23-00010  Methodology | 7   
Written Questions Submitted to CMS Staff 
We sent CMS staff a list of questions regarding the implementation of the new 
reporting requirements applicable to skin substitutes covered under Part B. 
Standards 
We conducted this study in accordance with the Quality Standards for Inspection and 
Evaluation issued by the Council of the Inspectors General on Integrity and Efficiency. 
Some Skin Substitute Manufacturers Did Not Comply with New ASP Reporting Requirements  
OEI-BL-23-00010  Methodology | 8   
 
ACKNOWLEDGMENTS AND CONTACT 
 
Acknowledgments 
Dave Tawes served as the team leader for this study.  Others in the Office of 
Evaluation and Inspections Baltimore Regional Office who conducted the study 
include Bahar Adili and Brian Tomblin.  Office of Evaluation and Inspections 
headquarters staff who provided support include Melissa Baker, Robert Gibbons, 
Christine Moritz, and Sarah Swisher.  
We would also like to acknowledge the contributions of other Office of Inspector 
General staff, including Jessica Swanstrom.   
This report was prepared under the direction of Dave Tawes, Regional Inspector 
General for Evaluation and Inspections in the Baltimore Regional Office; Heather 
Barton, Deputy Regional Inspector General; and Louise Schoggen, Assistant Regional 
Inspector General. 
 
Contact 
To obtain additional information concerning this report, contact the Office of Public 
Affairs at Public.Affairs@oig.hhs.gov.  OIG reports and other information can be found 
on the OIG website at oig.hhs.gov. 
Office of Inspector General 
U.S. Department of Health and Human Services 
330 Independence Avenue, SW 
Washington, DC 20201 
   
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OEI-BL-23-00010  Acknowledgments and Contact | 9   
EENNDDNNOOTTEESS  
 
1 Section 1847A of the Social Security Act (the Act). 
2 Pursuant to sections 1927(b)(3)(C)(i) and 1847A(d)(4)(B) of the Act, manufacturers may face civil monetary penalties for failure 
to report ASP data within the required timeframe. 
3 Prior to 2022, ASP reporting requirements applied only to manufacturers subject to Medicaid drug rebate agreements.  
Division CC, Title IV, Section 401, of the CAA, P.L. No. 116-260 (Dec. 27, 2020), amended section 1847A of the Act to add new 
section 1847A(f)(2), which requires manufacturers without a Medicaid drug rebate agreement to report ASP information to 
CMS for calendar quarters beginning on January 1, 2022, for drugs or biologicals payable under Medicare Part B and described 
in section 1842(o)(1)(C), (E), or (G) or 1881(b)(14)(B) of the Act, including items, services, supplies, and products that are 
payable under Part B as a drug or biological. 
4 A full recording and transcript of the CMS Skin Substitutes Town Hall is available at 
https://www.cms.gov/medicare/physician-fee-schedule/skin-substitutes. 
5 We limited our review to biological skin substitute Healthcare Common Procedure Coding System (HCPCS) codes Q4101
Q4258.  We further limited our review to the 68 skin substitute billing codes with Part B expenditures in the third quarter of 
2022.  CMS also calculated ASP-based payment amounts in the first quarter of 2023 for additional billing codes not included in 
our review, as these codes did not have Medicare expenditures in the baseline quarter. 
6 Medicare Claims Processing Manual, CMS Pub. 100-04, ch. 17,  20.1.3. 
7 Calendar Year 2023 Physician Fee Schedule Proposed Rule, 87 Fed. Reg. 45860, 46029 (July 29, 2022). 
8 Calendar Year 2023 Physician Fee Schedule Final Rule, 87 Fed. Reg. 69404, 69655 (Nov. 18, 2022). 
Some Skin Substitute Manufacturers Did Not Comply with New ASP Reporting Requirements 
OEI-BL-23-00010  Endnotes | 10