DEPARTMENT OF HEALTH & HUMAN SERVICES 	 Office of Inspector General 
Washington. D.C.  20201 
JAN 26 2010 

TO: 	 Charlene Frizzera 

Acting Administrator 

Centers for Medicare & Medicaid Services 

FROM:  Siuart Wright 
Deputy Inspector General 
for Evaluation and Inspections 
SUBJECT: 	 Memorandum Report:  Comparison o/Second-Quarter 2009 Average Sales 
Prices and Average Manufacturer Prices:  Impact on Medicare Reimbursement 
for Fourth Quarter 2009, OEI-03-09-00640 
This review was conducted in accordance with the statutory mandate for the Office of Inspector 
General (OIG) to review average sales prices (ASP) and average manufacturer prices (AMP) for 
Medicare Part B prescription drugs and identify ASPs that exceed AMPs by at least 
5 percent.  The review also determined the impact of lowering reimbursement amounts for drugs 
that meet the 5-percent threshold. 
Since the advent of the ASP reimbursement methodology in 2005, OIG has issued 13 reports 
comparing ASPs to AMPs. This latest pricing comparison examines drugs that met the 5-percent 
threshold based on either complete or partial AMP data in the second quarter of 2009.  Ofthe 
377 drugs with complete AMP data in that quarter, 13 met the 5-percent threshold.  Eight of 
these thirteen drugs were also eligible for price adjustments in one or more ofthe previous four 
quarters, with one drug meeting the 5-percent threshold in all five quarters under review.  If 
reimbursement amounts for all 13 drugs had been based on 103 percent ofthe AMPs, we 
estimate that Medicare expenditures would have been reduced by $1.4 million in the fourth 
quarter of2009.  Ofthe 83 drugs with only partial AMP data in the second quarter of2009, 
11 had ASPs that exceeded the AMPs by at least 5 percent.  Seven ofthese eleven drugs also met 
the 5-percent threshold in at least one ofthe previous four quarters.  We estimate that Medicare 
expenditures would have been reduced by $1.7 million during the fourth quarter of2009 if 
reimbursement amounts for all 11 drugs had been based on 103 percent ofthe AMPs.  We could 
not perform pricing comparisons for an additional 51 drugs because none ofthe drug products 
used to establish Medicare reimbursement had corresponding AMP data.  Manufacturers for 
10 percent ofthose drug products had Medicaid drug rebate agreements and were therefore 
generally required to submit AMPs.  OIG will continue to work with the Centers for Medicare & 
Medicaid Services (CMS) to evaluate and pursue appropriate actions against those manufacturers 
that fail to submit required data. 
OEI-03-09-00640 	 Comparison of Second-Quarter 2009 ASPs and AMPs  Page 2  Charlene Frizzera 
 
 
BACKGROUND 
 
Section 1847A(d)(2)(B) of the Social Security Act (the Act) mandates that OIG compare ASPs 
to AMPs.  If OIG finds that the ASP for a drug exceeds the AMP by a certain percentage 
(currently 5 percent), section 1847A(d)(3)(A) of the Act states that the Secretary of the 
Department of Health and Human Services (the Secretary) may disregard the ASP for the drug 
when setting reimbursement amounts.1  Section 1847A(d)(3)(C) of the Act goes on to state that   
. . . the Inspector General shall inform the Secretary (at such times as the Secretary may specify 
to carry out this subparagraph) and the Secretary shall, effective as of the next quarter, substitute 
for the amount of payment . . . the lesser of (i) the widely available market price . . . (if any); or 
(ii) 103 percent of the average manufacturer price. . . .   
 
Medicare Part B Coverage of Prescription Drugs 
Medicare Part B covers only a limited number of outpatient prescription drugs.  Covered drugs 
include injectable drugs administered by a physician; certain self-administered drugs, such as 
oral anticancer drugs and immunosuppressive drugs; drugs used in conjunction with durable 
medical equipment; and some vaccines.  
 
Medicare Part B Payments for Prescription Drugs 
CMS contracts with private companies, known as Medicare Administrative Contractors (MAC), 
to process and pay Medicare Part B claims, including those for prescription drugs.  To obtain 
reimbursement for covered outpatient prescription drugs, health care providers submit claims to 
their MACs using procedure codes.  CMS established the Healthcare Common Procedure 
Coding System (HCPCS) to provide a standardized coding system for describing the specific 
items and services provided in the delivery of health care.  In the case of prescription drugs, each 
HCPCS code defines the drug name and the amount of drug represented by the HCPCS code but 
does not specify manufacturer or package size information.   
 
Medicare and its beneficiaries spent over $11 billion for Part B drugs in 2008.2  Although 
Medicare paid for more than 700 outpatient prescription drug HCPCS codes that year, most of 
the spending for Part B drugs was concentrated on a relatively small subset of those codes.  In 
2008, 60 codes accounted for 90 percent of the expenditures for Part B drugs, with only 12 of 
these drugs representing the majority (51 percent) of total Part B drug expenditures. 
 
Reimbursement Methodology for Part B Drugs and Biologicals  
Medicare Part B pays for most covered drugs using a reimbursement methodology based on 
ASPs.3  Section 1847A(c) of the Act, as added by the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003, P.L. No. 108-173, defines an ASP as a manufacturers sales of a 
                                                 
1Section 1847A(d)(3)(B)(ii) of the Act provides the Secretary with authority to adjust the applicable threshold 
percentage in 2006 and subsequent years; however, the threshold percentage has been maintained at 5 percent. 
2 Medicare expenditures for Part B drugs in 2008 were calculated using CMSs Part B Analytics and Reports 
(PBAR).  The PBAR data were downloaded on July 8, 2009. 
3 Several Part B drugs, including certain vaccines and blood products, are not paid under the ASP methodology.  
OEI-03-09-00640                                                               Comparison of Second-Quarter 2009 ASPs and AMPs  
  Page 3  Charlene Frizzera 
 
 
drug to all purchasers in the United States in a calendar quarter divided by the total number of 
units of the drug sold by the manufacturer in that same quarter.  The ASP is net of any price 
concessions, such as volume discounts, prompt pay discounts, cash discounts, free goods 
contingent on purchase requirements, chargebacks, and rebates other than those obtained through 
the Medicaid drug rebate program.4  Sales that are nominal in amount are exempted from the 
ASP calculation, as are sales excluded from the determination of best price in the Medicaid 
drug rebate program.5, 6 
 
Manufacturers report ASPs by national drug codes (NDC), which are 11-digit identifiers that 
indicate the manufacturer, product dosage form, and package size of the drug.  Manufacturers 
must provide CMS with the ASP and volume of sales for each NDC on a quarterly basis, with 
submissions due 30 days after the close of each quarter.7 
 
Because Medicare Part B reimbursement for outpatient drugs is based on HCPCS codes rather 
than NDCs and more than one NDC may meet the definition of a particular HCPCS code, CMS 
has developed a file that crosswalks manufacturers NDCs to HCPCS codes.  CMS uses 
information in this crosswalk file to calculate volume-weighted ASPs for covered HCPCS codes.   
 
Calculation of Volume-Weighted Average Sales Prices 
Fourth-quarter 2009 Medicare payments for most covered drug codes were based on                 
second-quarter 2009 ASP submissions from manufacturers, which were volume-weighted using 
an equation that involves the following variables:  the ASP for the 11-digit NDC as reported by 
the manufacturer, the volume of sales for the NDC as reported by the manufacturer, and the 
number of billing units in the NDC as determined by CMS.8  The amount of the drug contained 
in an NDC may differ from the amount of the drug specified by the HCPCS code that providers 
use to bill Medicare.  Therefore, the number of billing units in an NDC describes the number of 
HCPCS code units that are in that NDC.  For instance, an NDC may contain a total of                          
10 milliliters of Drug A, but the corresponding HCPCS code may be defined as only 5 milliliters 
of Drug A.  In this case, there are two billing units in the NDC.  CMS calculates the number of 
billing units in each NDC when developing its crosswalk files.   
 
Under the ASP pricing methodology, the Medicare allowance for most Part B drugs is equal to 
106 percent of the volume-weighted ASP for the HCPCS code.  Medicare beneficiaries are 
responsible for 20 percent of this amount in the form of coinsurance.   
                                                 
4 Section 1847A(c)(3) of the Act.  
5 Pursuant to section 1927(c)(1)(C)(i) of the Act, best price is the lowest price available from the manufacturer 
during the rebate period to any wholesaler, retailer, provider, health maintenance organization, nonprofit entity, or 
governmental entity within the United States, with certain exceptions. 
6 Section 1847A(c)(2) of the Act.  
7 Section 1927(b)(3) of the Act.  
8 The equation that CMS currently uses to calculate volume-weighted ASPs is described in section 1847A(b)(6) of 
the Act.  It is also provided in Appendix A.   
 
OEI-03-09-00640                                                               Comparison of Second-Quarter 2009 ASPs and AMPs  
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The Medicaid Drug Rebate Program and Average Manufacturer Prices 
For Federal payment to be available for covered outpatient drugs provided under Medicaid, 
sections 1927(a)(1) and (b)(1) of the Act mandate that drug manufacturers enter into rebate 
agreements with the Secretary and pay quarterly rebates to State Medicaid agencies.  Under these 
rebate agreements and pursuant to section 1927(b)(3) of the Act, manufacturers must provide 
CMS with the AMP for each of their NDCs on a quarterly basis, with submissions due 30 days 
after the close of each quarter.9    
 
As generally defined in section 1927(k)(1) of the Act, the AMP is the average price paid to the 
manufacturer for the drug in the United States by wholesalers for drugs distributed to the retail 
pharmacy class of trade.  Before the passage of the DRA, manufacturers were required to deduct 
customary prompt pay discounts when calculating AMPs.  However, section 6001(c)(1) of the 
DRA amended section 1927(k)(1) of the Act, such that AMPs must be determined without 
regard to customary prompt pay discounts, effective January 2007.10  In July 2007, CMS 
published a final rule at 72 Fed. Reg. 39142 (July 17, 2007) that, among other things, 
implements section 6001(c)(1) of the DRA and clarifies the way in which the AMP must be 
calculated.  Specifically, 42 CFR  447.504 of the final regulation clarifies the manner in which 
the AMP is to be determined.11 
 
The AMP is generally calculated as a weighted average of prices for all of a manufacturers 
package sizes of a drug sold during a given quarter and is reported for the lowest identifiable 
quantity of the drug (e.g., 1 milliliter, 1 tablet, 1 capsule).   
 
If a manufacturer fails to provide AMP data in a timely manner, civil monetary penalties may be 
imposed.12  In addition, pursuant to section 1927(b)(4)(B)(i) of the Act, the Secretary may 
terminate a rebate agreement for violation of the requirements of the agreement or other good 
cause shown.  CMS has terminated rebate agreements with a number of manufacturers for 
failure to report drug-pricing data as required by section 1927 of the Act.  For the purposes of 
evaluating potential civil monetary penalty actions, CMS has also provided OIG with 
information about manufacturers that failed to submit drug-pricing data.  
 
                                                 
9 Section 6001(b)(1)(A) of the Deficit Reduction Act of 2005 (DRA), P.L. No. 109-171, changed section 1927(b) of 
the Act to require that manufacturers also report AMPs on a monthly basis, effective January 2007.  Drug 
manufacturers will continue to report quarterly AMP data in addition to their monthly submissions.  
10 CMSs Bulletin for Participating Drug Manufacturers, Release No. 76 (December 15, 2006), instructed 
manufacturers to exclude customary prompt pay discounts from their AMP calculations as of January 2007.   
11 In December 2007, the U.S. District Court for the District of Columbia preliminarily enjoined the implementation 
of the regulation for certain purposes not relevant to this report.  Section 203 of the Medicare Improvements for 
Patients and Providers Act of 2008 also delayed the implementation of certain aspects of the regulation and the DRA 
requirements.  Again, those aspects are not relevant for the purposes of this report. 
12 Pursuant to section 1927(b)(3)(C) of the Act. 
OEI-03-09-00640                                                               Comparison of Second-Quarter 2009 ASPs and AMPs  
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Office of Inspector Generals Monitoring of Average Sales Prices and Average 
Manufacturer Prices 
In accordance with its statutory mandate, OIG has issued 12 quarterly pricing comparisons since 
the ASP reimbursement methodology for Part B drugs was implemented in January 2005.  In 
addition, OIG completed an annual overview of ASPs and AMPs, which examined data across 
all four quarters of 2007.13  A list of all 13 reports is provided in Appendix B.   
 
Although CMS has acknowledged the Secretarys authority to adjust ASP payment limits based 
on the findings of OIGs pricing comparisons, CMS has yet to make any changes to Part B drug 
reimbursement as a result of these studies.  Rather, CMS has emphasized both the complexity of 
substituting payment amounts and the importance of proceeding cautiously to avoid unintended 
consequences.14  In commenting on OIGs reports, CMS has expressed a desire to both better 
understand fluctuating differences between ASPs and AMPs and engage stakeholders, with the 
intent of developing a process for making price substitutions.15  However, CMS has not specified 
what, if any, steps it will take to adjust Medicare reimbursement amounts for drugs that meet the 
5-percent threshold specified in section 1847A(d)(3) of the Act.   
 
OIG will continue to meet its statutory mandate by issuing reports based on quarterly pricing 
comparisons, along with annual overviews to summarize findings across each calendar year. 
 
METHODOLOGY 
 
We obtained a file from CMS containing NDC-level ASP data from the second quarter of 2009, 
which were used to establish Part B drug reimbursement amounts for the fourth quarter of 2009.  
This file also includes information that crosswalks NDCs to their corresponding HCPCS codes.  
Both the ASP data and the crosswalk data were current as of October 7, 2009.  We also obtained 
AMP data from CMS for the second quarter of 2009, which were current as of                            
September 22, 2009. 
 
Analysis of Average Sales Price Data From the Second Quarter of 2009 
As mentioned previously, Medicare does not base reimbursement for covered drugs on NDCs; 
instead, it uses HCPCS codes.  Therefore, CMS uses ASP information submitted by 
manufacturers for each NDC to calculate a volume-weighted ASP for each covered HCPCS 
code.  When calculating these volume-weighted ASPs, CMS includes only NDCs with ASP 
submissions that are deemed valid.   
 
As of October 2009, CMS had established prices for 519 HCPCS codes based on the ASP 
reimbursement methodology mandated by section 1847A(b)(6) of the Act.  Reimbursement 
amounts for the 519 HCPCS codes were based on ASP data for 3,224 NDCs.   
                                                 
13 In addition, OIG is currently preparing a second annual overview, which examines ASPs and AMPs across all 
four quarters of 2008. 
14 OEI-03-08-00450, December 2008. 
15 OEI-03-07-00140, July 2007, and OEI-03-08-00450, December 2008. 
OEI-03-09-00640                                                               Comparison of Second-Quarter 2009 ASPs and AMPs  
  Page 6  Charlene Frizzera 
 
 
Analysis of Average Manufacturer Price Data From the Second Quarter of 2009 
To ensure that the broadest range of drug codes is subject to OIGs pricing comparisons, we 
divided HCPCS codes into the following three groups:                       
 
(1) HCPCS codes with complete AMP datai.e., HCPCS codes with AMP data for 
every NDC that CMS used in its calculation of volume-weighted ASPs; 
 
(2) HCPCS codes with partial AMP datai.e., HCPCS codes with AMP data for only 
some of the NDCs that CMS used in its calculation of volume-weighted ASPs; and   
 
(3) HCPCS codes with no AMP datai.e., HCPCS codes with no AMP data for any of 
the NDCs that CMS used in its calculation of volume-weighted ASPs.   
 
As previously noted, the AMP for each NDC is reported for the lowest identifiable quantity of 
the drug contained in that NDC (e.g., 1 milliliter, 1 tablet, 1 capsule).  In contrast, the ASP is 
reported for the entire amount of the drug contained in the NDC (e.g., 50 milliliters, 100 tablets).  
To ensure that the AMP would be comparable to the ASP, it was necessary to convert the AMP 
for each NDC so that it represented the total amount of the drug contained in that NDC.   
 
To calculate converted AMPs for NDCs in the first and second groups, we multiplied the AMP 
by the total amount of the drug contained in each NDC, as identified by sources, such as the 
CMS crosswalk file, manufacturer Web sites, the Red Book, and the Food and Drug 
Administrations NDC directory.16  For certain NDCs, we were unable to successfully identify 
the amount of the drug reflected by the ASP and therefore could not calculate a converted AMP.  
Because of these unsuccessful AMP conversions, a total of eight HCPCS codes were removed 
from our analysis.  
 
Using NDCs with successful AMP conversions, we then calculated a volume-weighted AMP for 
each of the corresponding HCPCS codes, consistent with CMSs methodology for calculating 
volume-weighted ASPs.  Appendix C provides a more detailed description of the methods we 
used to both convert AMPs and calculate volume-weighted AMPs.  Table 1 provides the final 
number of HCPCS codes and NDCs included in our analysis after we removed NDCs with either 
no AMP data or unsuccessful AMP conversions.   
 
Table 1:  Number of Drug Codes and NDCs Included in OIGs Pricing Comparison 
Number of   Number of 
Availability of AMP Data for HCPCS Code 
HCPCS Codes   NDCs  
Complete AMP Data  377  1,736 
Partial AMP Data  83  734 
No AMP Data  51  236 
Source:  OIG analysis of second-quarter 2009 ASP and AMP data, 2009. 
                                                 
16 We did not calculate converted AMPs for NDCs in the third group because those NDCs had no AMP data. 
OEI-03-09-00640                                                               Comparison of Second-Quarter 2009 ASPs and AMPs  
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Comparing Second-Quarter 2009 Volume-Weighted ASPs to Volume-Weighted AMPs  
For each of the HCPCS codes included in our study, we compared the volume-weighted ASP 
and AMP and determined whether the ASP for the code exceeded the AMP by at least                   
5 percent.  
 
For those HCPCS codes that met or exceeded the 5-percent threshold, we reviewed the 
associated NDCs to verify the accuracy of the billing unit information.  According to our review, 
NDCs for four codes had billing unit information in CMSs crosswalk file that may not have 
accurately reflected the number of billing units actually contained in the NDC.  Because  
volume-weighted ASPs and AMPs are calculated using this billing unit information, we could 
not be certain that the results for these codes were correct.  Therefore, we did not consider these 
four HCPCS codes as having met the 5-percent threshold.  We also excluded one additional 
HCPCS code from our findings because the manufacturer of the corresponding NDC indicated to 
OIG that the AMP data were not correct.   
 
For the remaining HCPCS codes, we then estimated the monetary impact of lowering 
reimbursement to 103 percent of the AMP.17  For each of the HCPCS codes that met the              
5-percent threshold, we calculated 103 percent of the volume-weighted AMP and subtracted this 
amount from the fourth-quarter 2009 reimbursement amount for the HCPCS code, which is equal 
to 106 percent of the volume-weighted ASP.  To estimate the financial effect for the fourth 
quarter of 2009, we then multiplied the difference by one-fourth of the number of services that 
were allowed by Medicare for each HCPCS code in 2008, as reported in the PBAR.18  This 
estimate assumes that the number of services that were allowed by Medicare in 2008 remained 
consistent from one quarter to the next and that there were no significant changes in utilization 
between 2008 and 2009. 
 
Identifying Codes That Would Have Met the 5-Percent Threshold in Previous Quarters  
We determined whether codes meeting the 5-percent threshold in the second quarter of 2009 
would have also met the 5-percent threshold in any of the four previous quarters, dating back to 
the second quarter of 2008.   
 
Limitations 
We did not verify the accuracy of manufacturer-reported ASP and AMP data, nor did we verify 
the underlying methodology used by manufacturers to calculate ASPs and AMPs.  Furthermore, 
we did not verify the accuracy of CMSs crosswalk files or examine NDCs that CMS opted to 
exclude from its calculation of Part B drug reimbursement amounts.  
 
                                                 
17 Section 1847A(d)(3)(C) of the Act directs the Secretary to replace payment amounts for drugs that meet the   
5-percent threshold with the lesser of the widely available market price for the drug (if any) or 103 percent of the 
AMP.  For the purposes of this study, we used 103 percent of the AMP to estimate the impact of lowering 
reimbursement amounts.  If widely available market prices had been available for these drugs and lower than  
103 percent of the AMP, the savings estimate presented in this report would have been greater. 
18 The 2008 PBAR data were downloaded on July 8, 2009.     
OEI-03-09-00640                                                               Comparison of Second-Quarter 2009 ASPs and AMPs  
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Manufacturers are required to submit their quarterly ASP and AMP data to CMS 30 days after 
the close of the quarter.  Our analyses were performed on ASP and AMP data compiled by CMS 
soon after that deadline.  We did not determine whether manufacturers provided additional or 
revised pricing data to CMS at a later date. 
 
Standards   
This study was conducted in accordance with the Quality Standards for Inspections approved by 
the Council of the Inspectors General on Integrity and Efficiency. 
 
RESULTS 
 
Of the 377 Drug Codes With Complete AMP Data, Volume-Weighted ASPs for                      
13 Exceeded the Volume-Weighted AMPs by at Least 5 Percent  
Consistent with sections 1847A(d)(2)(B) and 1847A(d)(3) of the Act, OIG compared ASPs to 
AMPs to identify instances in which the ASP for a particular drug exceeded the AMP by a 
threshold of 5 percent.  In the second quarter of 2009, 13 of the 377 HCPCS codes with complete 
AMP data (3 percent) met this 5-percent threshold.  A list of the 13 HCPCS codes, including 
their descriptions and HCPCS dosage amounts, is presented in Appendix D.   
 
Table 2 describes the extent to which ASPs exceeded AMPs for the 13 HCPCS codes.  For three 
of the codes, volume-weighted ASPs exceeded volume-weighted AMPs by 20 percent or more.  
 
Table 2:  Extent to Which ASPs Exceeded AMPs for  
13 HCPCS Codes With Complete AMP Data 
Percentage by Which ASP  Number of HCPCS 
Exceeded AMP  Codes 
5.00%9.99%  5 
10.00%19.99%  5 
20.00%29.99%  0 
30.00%39.99%  1 
40.00%49.99%  1 
50.00%59.99%  0 
60.00%69.99%  1 
70.00%79.99%  0 
80.00%89.99%  0 
90.00%99.99%  0 
100% and above  0 
     Total  13 
Source:  OIG analysis of second-quarter 2009 ASP and AMP data, 2009. 
  
Over 60 percent of the HCPCS codes (8 of 13) also met the 5-percent threshold in one or more of 
the previous four quarters.  The ASPs for HCPCS code J1364 exceeded AMPs in each of the five 
quarters under review, dating back to the second quarter of 2008.  An additional six HCPCS 
OEI-03-09-00640                                                               Comparison of Second-Quarter 2009 ASPs and AMPs  
  Page 9  Charlene Frizzera 
 
 
codes met the 5-percent threshold in at least three of the five quarters under review.  Table 3 
presents a list of the eight HCPCS codes that were eligible for price adjustments in previous 
quarters. 
 
Table 3:  Eight HCPCS Codes That Met the 5-Percent Threshold in the Second Quarter of 2009                   
and Previous Quarters Using Complete AMP Data 
  OIG Reports Comparing ASP and AMP 
Second  First  Fourth  Third  Second 
HCPCS 
Quarter  Quarter  Quarter  Quarter  Quarter 
Code 
2009  2009  2008  2008  2008 
J1364  X  X  X  X  X 
J2765  X  X  X  X   
J0475  X  X  X     
J2597  X  X  X     
J7500  X  X    X   
J2792  X    X  X   
J2690  X    X    X 
J2820  X    X     
 
 
Source:  OIG analysis of ASP and AMP data from the second quarter of 2008 through the second quarter of 2009.
 
Lowering reimbursement amounts for the 13 HCPCS codes to 103 percent of the AMPs would 
have reduced Medicare allowances by $1.4 million in the fourth quarter of 2009.  Sections 
1847A(d)(3)(A) and (B) of the Act provide that the Secretary may disregard the ASP pricing 
methodology for a drug with an ASP that exceeds the AMP by at least 5 percent.  Pursuant to 
section 1847A(d)(3)(C) of the Act, . . . the Secretary shall, effective as of the next quarter, 
substitute for the amount of payment . . . the lesser of (i) the widely available market price . . . (if 
any); or (ii) 103 percent of the average manufacturer price. . . .  In this study, we identified               
13 HCPCS codes that met the 5-percent threshold specified in the Act.  If reimbursement 
amounts for these 13 codes had been based on 103 percent of the AMPs during the fourth quarter 
of 2009, we estimate that Medicare expenditures would have been reduced by $1.4 million in 
that quarter alone.19 
 
Three of the thirteen HCPCS codes accounted for 86 percent of the estimated savings.  If the 
reimbursement amounts for codes J2820, J0475, and J0735 had been based on 103 percent of the 
AMPs during the fourth quarter of 2009, Medicare expenditures would have been reduced by an 
estimated $559,000, $352,000, and $273,000, respectively.   
                                                 
19 This savings estimate assumes that the number of services that were allowed by Medicare in 2008 remained 
consistent from one quarter to the next and that there were no significant changes in utilization between                
2008 and 2009.  
OEI-03-09-00640                                                               Comparison of Second-Quarter 2009 ASPs and AMPs  
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Of the 83 Drug Codes With Partial AMP Data, Volume-Weighted ASPs for                                
11 Exceeded the Volume-Weighted AMPs by at Least 5 Percent  
In addition to examining HCPCS codes with complete AMP data, we examined 83 HCPCS 
codes for which only partial AMP data were available.  ASPs for 11 of these 83 HCPCS codes  
(13 percent) exceeded the AMPs by at least 5 percent in the second quarter of 2009.  A list of the           
11 HCPCS codes, including their descriptions and HCPCS dosage amounts, is presented in 
Appendix E.   
 
Table 4 describes the extent to which ASPs exceeded AMPs for the 11 HCPCS codes.  For 
almost half of the codes (5 of 11), volume-weighted ASPs exceeded volume-weighted AMPs by 
20 percent or more.  The ASPs for two of these codes were more than double the AMPs. 
Table 4:  Extent to Which ASPs Exceeded AMPs for  
11 HCPCS Codes With Partial AMP Data 
Percentage by Which ASP  Number of HCPCS 
Exceeded AMP  Codes 
5.00%9.99%  6 
10.00%19.99%  0 
20.00%29.99%  2 
30.00%39.99%  0 
40.00%49.99%  0 
50.00%59.99%  1 
60.00%69.99%  0 
70.00%79.99%  0 
80.00%89.99%  0 
90.00%99.99%  0 
100% and above  2 
     Total  11 
Source:  OIG analysis of second-quarter 2009 ASP and AMP data, 2009. 
 
Over 60 percent of HCPCS codes with partial AMP data (7 of 11) also met the 5-percent 
threshold in one or more of the previous four quarters.  For three HCPCS codes (J0560, J1190, 
and J2310), ASPs exceeded AMPs in each of the five quarters under review, dating back to the 
second quarter of 2008.  Another three HCPCS codes met the 5-percent threshold in four of the 
five quarters under review.  Table 5 presents a list of the seven HCPCS codes that were eligible 
for price adjustments in previous quarters. 
 
OEI-03-09-00640                                                               Comparison of Second-Quarter 2009 ASPs and AMPs  
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Table 5:  Seven HCPCS Codes That Met the 5-Percent Threshold in the Second Quarter of 2009                   
and Previous Quarters Using Partial AMP Data 
  OIG Reports Comparing ASP and AMP 
Second  First  Fourth  Third  Second 
Quarter  Quarter  Quarter  Quarter  Quarter 
HCPCS 
2009  2009  2008  2008  2008 
Code 
J0560  X  X  X  X  X 
J1190  X  X  X  X  X 
J2310  X  X  X  X  X 
Q9965  X  X  X  X   
Q9966  X  X  X  X   
J7506  X  X    X  X 
J7509  X        X 
Note:  All of these codes met the 5-percent threshold in previous quarters using partial AMP data. 
                   Source:  OIG analysis of ASP and AMP data from the second quarter of 2008 through the second quarter of 2009. 
Lowering reimbursement amounts for the 11 HCPCS codes to 103 percent of the AMPs would 
have reduced Medicare allowances by an estimated $1.7 million in the fourth quarter of 2009.20  
One of the eleven HCPCS codes accounted for over 80 percent of the $1.7 million.  If the 
reimbursement amount for code Q9965 had been based on 103 percent of the AMPs during the 
fourth quarter of 2009, Medicare expenditures would have been reduced by an estimated                    
$1.4 million. 
 
Pricing Comparisons Could Not Be Performed on 51 Drug Codes Because No AMP Data 
Were Available 
For 51 HCPCS codes, OIG could not compare ASPs and AMPs because there were no AMP data 
for any of the 236 NDCs that CMS used when calculating drug reimbursement amounts for these 
codes.  In 2008, Medicare allowances for these 51 codes totaled $227 million.21 
 
Manufacturers for 10 percent of the NDCs without AMP data (23 of 236) participated in the 
Medicaid drug rebate program as of the second quarter of 2009 and were therefore generally 
required to submit AMP data for their covered outpatient drugs.22, 23, 24  The majority of these           
23 NDCs belonged to only three manufacturers.  
                                                 
20 This savings estimate assumes that the number of services that were allowed by Medicare in 2008 remained 
consistent from one quarter to the next and that there were no significant changes in utilization between                
2008 and 2009.  
21 Of the 51 HCPCS codes with no associated AMP data, 16 had no expenditures listed in the 2008 PBAR file.  As a 
result, these codes were not included in the total Medicare allowances for the year.  
22 To determine whether a manufacturer participated in the Medicaid drug rebate program, we consulted the list of 
participating drug companies posted on CMSs Web site. 
23 Although manufacturers with rebate agreements are required to submit AMP data for their covered outpatient 
drugs, there may be valid reasons why an AMP was not provided for a specific NDC in a given quarter.  For 
example, a manufacturer may not have been required to submit an AMP if the drug product had been terminated and 
there was no drug utilization during the quarter.   
24 These 23 NDCs were crosswalked to 15 HCPCS codes. 
OEI-03-09-00640                                                               Comparison of Second-Quarter 2009 ASPs and AMPs  
  Page 12  Charlene Frizzera 
 
 
Manufacturers for the remaining 213 of 236 NDCs did not participate in the Medicaid drug 
rebate program and therefore were not required to submit AMP data.   
  
CONCLUSION 
 
To monitor Medicare reimbursement amounts based on ASPs and consistent with sections 
1847A(d)(2)(B) and 1847A(d)(3) of the Act, OIG compared ASPs and AMPs to identify 
instances in which the ASP for a particular drug exceeded the AMP by at least 5 percent.  This is 
OIGs 14th report comparing ASPs and AMPs, and it examines HCPCS codes with AMP data for 
every NDC that CMS used to establish reimbursement amounts, as well as HCPCS codes with 
only partial AMP data. 
 
In the second quarter of 2009, we identified a total of 24 HCPCS codes that met the threshold for 
price adjustment.  Of these 24 HCPCS codes, 15 were previously identified by OIG as having 
ASPs that exceeded the AMPs by at least 5 percent.  Finally, we could not compare ASPs and 
AMPs for 51 HCPCS codes because AMP data were not submitted for any of the NDCs that 
CMS used to calculate reimbursement.  Manufacturers for 10 percent of these NDCs had 
Medicaid drug rebate agreements and were therefore generally required to submit AMPs.  OIG 
will continue to work with CMS to evaluate and pursue appropriate actions against those 
manufacturers that fail to submit required data.   
 
Some of OIGs previous reports comparing ASPs and AMPs have contained recommendations, 
which we continue to support.25  We are not making additional recommendations in this report 
and, as such, are issuing the report directly in final form.  If you have comments or questions 
about this report, please provide them within 60 days.  Please refer to report number  
OEI-03-09-00640 in all correspondence. 
                                                 
25 For example, OIG, Comparison of Average Sales Prices and Average Manufacturer Prices:  An Overview of 
2007, OEI-03-08-00450, December 2008. 
OEI-03-09-00640                                                               Comparison of Second-Quarter 2009 ASPs and AMPs  
  Page 13  Charlene Frizzera 
 
 
APPENDIX A 
 
The Equation Used by the Centers for Medicare & Medicaid Services To Calculate            
Volume-Weighted Average Sales Prices on or After April 1, 2008 
 
A volume-weighted average sales price (ASP) is calculated for the dosage amount associated with 
the Healthcare Common Procedure Coding System (HCPCS) code.  In the following equation, the 
number of billing units represents the number of HCPCS code doses that are contained in a 
national drug code (NDC).   
 
 
 
Volume-Weighted ASP   Sum of  (ASP for NDC * Number of NDCs Sold) 
 
for Dosage Amount       =     
 of HCPCS Code  Sum of   (Number of NDCs Sold * Number of Billing Units in NDC) 
 
 
 
 
 
OEI-03-09-00640                                                               Comparison of Second-Quarter 2009 ASPs and AMPs  
  Page 14  Charlene Frizzera 
 
 
APPENDIX B 
 
Previous Office of Inspector General Reports Comparing Average Sales Prices and Average 
Manufacturer Prices 
 
  Monitoring Medicare Part B Drug Prices:  A Comparison of Average Sales 
Prices to Average Manufacturer Prices, OEI-03-04-00430, April 2006 
 
  Comparison of Fourth-Quarter 2005 Average Sales Prices to Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Second Quarter 
2006, OEI-03-06-00370, July 2006 
 
  Comparison of Third-Quarter 2006 Average Sales Prices to Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for First Quarter 
2007, OEI-03-07-00140, July 2007 
 
  Comparison of First-Quarter 2007 Average Sales Prices to Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Third Quarter 
2007, OEI-03-07-00530, September 2007 
 
  Comparison of Second-Quarter 2007 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Fourth Quarter 
2007, OEI-03-08-00010, December 2007 
 
  Comparison of Third-Quarter 2007 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for First Quarter 
2008, OEI-03-08-00130, May 2008 
 
  Comparison of Fourth-Quarter 2007 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Second Quarter 
2008, OEI-03-08-00340, August 2008 
 
  Comparison of Average Sales Prices and Average Manufacturer Prices:  An 
Overview of 2007, OEI-03-08-00450, December 2008 
OEI-03-09-00640                                                               Comparison of Second-Quarter 2009 ASPs and AMPs  
  Page 15  Charlene Frizzera 
 
 
  Comparison of First-Quarter 2008 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Third Quarter 
2008, OEI-03-08-00530, December 2008 
 
  Comparison of Second-Quarter 2008 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Fourth Quarter 
2008, OEI-03-09-00050, February 2009 
 
  Comparison of Third-Quarter 2008 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for First Quarter 
2009, OEI-03-09-00150, April 2009 
 
  Comparison of Fourth-Quarter 2008 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Second Quarter 
2009, OEI-03-09-00340, August 2009 
 
  Comparison of First-Quarter 2009 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Third Quarter 
2009, OEI-03-09-00490, August 2009 
 
 
 
 
 
 
 
 
OEI-03-09-00640                                                               Comparison of Second-Quarter 2009 ASPs and AMPs  
  Page 16  Charlene Frizzera 
 
 
APPENDIX C 
 
Detailed Methodology for Converting and Volume-Weighting Average Manufacturer 
Prices for the Second Quarter of 2009 
 
Healthcare Common Procedure Coding System codes with complete average manufacturer price 
data.  Of the 519 Healthcare Common Procedure Coding System (HCPCS) codes with 
reimbursement amounts based on average sales prices (ASP), 384 had average manufacturer 
prices (AMP) for every national drug code (NDC) that the Centers for Medicare & Medicaid 
Services (CMS) used to calculate volume-weighted ASPs.  These 384 HCPCS codes represented 
1,816 NDCs.  For 10 NDCs, we could not successfully identify the amount of the drug reflected 
by the ASP and therefore could not calculate a converted AMP.  These 10 NDCs were 
crosswalked to seven HCPCS codes.  We did not include these seven HCPCS codes (80 NDCs) 
in our final analysis.   
 
Using the converted AMPs for the remaining 1,736 NDCs, we then calculated a volume-
weighted AMP for each of the remaining 377 HCPCS codes consistent with CMSs 
methodology for calculating volume-weighted ASPs.   
 
HCPCS codes with partial AMP data.  There were 84 HCPCS codes with AMP data for only 
some of the NDCs that CMS used in its calculation of volume-weighted ASPs.  These                 
84 HCPCS codes represented a total of 1,172 NDCs.  AMP data were either missing or 
unavailable for 428 of these NDCs, which were then excluded from our calculation of  
volume-weighted AMPs.26   
 
We calculated converted AMPs for each of the remaining 744 NDCs.  For 10 of the                  
744 NDCs, we could not successfully identify the amount of the drug reflected by the ASP and 
therefore could not calculate a converted AMP.  We removed these 10 NDCs from our 
analysis.27  As a result, one HCPCS code no longer had any NDCs with AMP data.  Therefore, 
this HCPCS code was removed from our analysis.   
 
Using the converted AMPs for the remaining 734 NDCs, we then calculated a                  
volume-weighted AMP for each of the remaining 83 HCPCS codes consistent with CMSs 
methodology for calculating volume-weighted ASPs.   
 
                                                 
26 Although AMP data for these 428 NDCs were excluded from our calculation of volume-weighted AMPs, the 
corresponding ASPs were not excluded from the volume-weighted ASPs as determined by CMS.                     
Volume-weighted ASPs remained the same, regardless of the availability of AMP data.   
27 Although we removed NDCs with problematic AMP conversions, we did not remove the corresponding HCPCS 
codes, provided that other NDCs for those drug codes had usable AMP data.  This differs from our analysis of 
HCPCS codes with complete AMP data, in which we removed not only the NDCs with problematic AMP 
conversions, but also the corresponding HCPCS codes. 
OEI-03-09-00640                                                               Comparison of Second-Quarter 2009 ASPs and AMPs  
  Page 17  Charlene Frizzera 
 
 
HCPCS codes with no AMP data.  For 51 HCPCS codes, there were no AMP data for any of the 
NDCs that CMS used in its calculation of volume-weighted ASPs.  These 51 HCPCS codes 
represented 236 NDCs.   
OEI-03-09-00640                                                               Comparison of Second-Quarter 2009 ASPs and AMPs  
  Page 18  Charlene Frizzera 
 
 
APPENDIX D 
 
Thirteen Drug Codes With Complete Average Manufacturer Price Data That Met the              
5-Percent Threshold in the Second Quarter of 2009 
 
Drug            
Code  Short Description  Drug Code Dosage 
J0270  Alprostadil for injection  1.25 mcg 
J0475  Baclofen injection  10 mg 
J0735  Clonidine HCl  1 mg 
J1364  Erythro lactobionate  500 mg 
J2020  Linezolid injection  200 mg 
J2597  Desmopressin acetate injection  1 mcg 
J2690  Procainamide HCl injection  1 g 
J2765  Metoclopramide HCl injection  10 mg 
J2792  Rho(D) immune globulin  100 units 
J2820  Sargramostim injection  50 mcg 
J2993  Reteplase injection  18.1 mg 
J7500  Azathioprine, oral  50 mg 
J9178  Epirubicin HCl injection  2 mg 
Source:  Office of Inspector General analysis of second-quarter 2009 average sales price and average manufacturer 
price data, 2009. 
 
OEI-03-09-00640                                                               Comparison of Second-Quarter 2009 ASPs and AMPs  
  Page 19  Charlene Frizzera 
 
 
APPENDIX E 
 
Eleven Drug Codes With Partial Average Manufacturer Price Data That Met the                   
5-Percent Threshold in the Second Quarter of 2009 
 
Drug              
Code  Short Description  Drug Code Dosage 
J0560  Penicillin g benzathine injection  600,000 units 
J1190  Dexrazoxane HCl injection  250 mg 
J2310  Naloxone HCl injection  1 mg 
J2590  Oxytocin injection  10 units 
J7506  Prednisone, oral  5 mg 
J7509  Methylprednisolone, oral  4 mg 
J9027  Clofarabine injection  1 mg 
Q0163  Diphenhydramine HCl  50 mg 
Q0165  Prochlorperazine maleate  10 mg 
Q9965  Low osmolar contrast material,100-199 mg/mL iodine  1 ml 
Q9966  Low osmolar contrast material, 200-299 mg/mL iodine  1 ml 
Source:  Office of Inspector General analysis of second-quarter 2009 average sales price and average manufacturer 
 
price data, 2009.
OEI-03-09-00640                                                               Comparison of Second-Quarter 2009 ASPs and AMPs