Department of Health & Human Services 
OFFICE OF 
   
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
C   A
OMPARISON OF  VERAGE 
 
S P A
ALES   RICES AND  VERAGE 
 
M P : 
ANUFACTURER  RICES
 
A   O 2010 
N  VERVIEW OF 
 
 
 
 
 
Daniel R. Levinson  
Inspector General 
 
November 2011 
OEI-03-11-00410   
   
 E X E C U T I V E   S U M M A R Y  
OBJECTIVES
 
1.  To identify drugs with average sales prices (ASP) that exceeded 
average manufacturer prices (AMP) by at least 5 percent in any 
quarter of 2010. 
2.  To examine the impact of missing and unavailable AMP data on the 
Office of Inspector Generals (OIG) pricing comparisons in 2010. 
BACKGROUND 
By law, OIG must compare ASPs with AMPs.  As generally defined in 
statute, an ASP is a manufacturers sales of a 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, net of 
any price concessions.  Generally, manufacturers must provide the 
Centers for Medicare & Medicaid Services (CMS) with the ASP for each 
of their national drug codes (NDC) on a quarterly basis.  For most           
Part B prescription drug Healthcare Common Procedure Coding System 
(HCPCS) codes, the Medicare reimbursement is equal to 106 percent of 
the volume-weighted ASPs for the associated NDCs.  
Manufacturers that participate in the Medicaid drug rebate program 
must also provide CMS with the AMP for each of their NDCs on a 
quarterly basis, with certain exceptions.  During the first three quarters 
of 2010, the AMP was generally defined by statute to be 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.  
However, the definition of AMP changed as of the fourth quarter of 
2010, becoming the average price paid to the manufacturer for the drug 
in the United States by (1) wholesalers for drugs distributed to retail 
community pharmacies and (2) retail community pharmacies that 
purchase drugs directly from the manufacturer.   
If OIG finds that the ASP for a HCPCS code exceeds the AMP by a 
certain percentage (5 percent through 2011), the Secretary of Health 
and Human Services (the Secretary) may disregard the ASP for the 
drug when setting reimbursement and shall substitute the payment 
amount with the lesser of either the widely available market price or                           
103 percent of the AMP.  In July 2011, CMS published a proposed rule 
that, among other things, specified the circumstances under which 
AMP-based price substitutions would occur.  Generally, CMS proposed 
to lower reimbursement amounts only for HCPCS codes with complete 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  i   
   
E X E C U T I V E   S U M M A R Y  
AMP data that exceed the 5-percent threshold in two consecutive or 
three of four quarters.  CMS plans to implement its price substitution 
policy beginning in 2012.   
To date, OIG has issued 23 reports comparing ASPs with AMPs.  This 
current overview examines data across all four quarters of 2010.  To 
identify HCPCS codes that exceeded the 5-percent threshold at least 
once during the year based on either complete or partial AMP data, we 
merged the results of our pricing comparisons for each quarter of 2010.  
To determine whether missing and unavailable AMPs unduly 
influenced the results of our pricing comparisons, we reanalyzed pricing 
data for HCPCS codes with partial AMP data after accounting for the 
missing values.  We also identified the number of HCPCS codes that 
were removed from OIGs pricing comparisons because they did not 
have AMP data in 2010. 
FINDINGS 
In 2010, 32 HCPCS codes with complete AMP data exceeded the                       
5-percent threshold in one or more quarters.  If reimbursement 
amounts for all 32 codes with complete AMP data had been lowered to                
103 percent of the AMPs during the applicable quarters, we estimate that 
Medicare expenditures would have been reduced by $13.2 million 
between the third quarter of 2010 and the second quarter of 2011.  
Reimbursement amounts for 10 of the 32 HCPCS codes would have been 
reduced under CMSs proposed price substitution policy, thereby saving 
Medicare and its beneficiaries an estimated $2.3 million. 
In 2010, 41 HCPCS codes with partial AMP data exceeded the                      
5-percent threshold in one or more quarters.  When we accounted for 
missing and unavailable AMPs, 13 of the 41 HCPCS codes continued to 
exceed the threshold in at least one quarter of 2010, suggesting that the 
pricing comparisons for these codes were accurately capturing underlying 
market trends even though AMP data were not available for the full set 
of NDCs.  Because missing and unavailable AMP data had seemingly 
little influence on the pricing comparison results for these 13 HCPCS 
codes, price substitutions may be legitimately warranted in these cases. 
Because of NDCs without AMP data, the number of pricing 
comparisons performed in 2010 was reduced by at least                       
9 percent in each quarter.  In total, 90 HCPCS codes were excluded 
from OIGs pricing comparisons in one or more quarters of 2010 because 
none of the associated NDCs had AMP data.  For half of the 90 codes, we 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  ii   
   
EE XX EE CC UU TT II VV EE    SS UU MM MM AA RR YY   
were unable to perform any pricing comparisons in 2010 because of NDCs 
without AMP data.  Three-fourths of these HCPCS codes (34 of 45) would 
never have been subject to our pricing comparisons because they were 
associated exclusively with NDCs for which manufacturers were not 
required to report AMP data.  
RECOMMENDATIONS 
The Social Security Act provides the Secretary authority to lower 
reimbursement amounts for drugs with ASPs that exceed AMPs by at 
least 5 percent.  Although CMS has yet to adjust Part B drug 
reimbursement as a result of OIGs pricing comparisons, it recently 
published a proposed rule specifying the circumstances under which 
future price substitutions would occur.   
CMSs proposed policy is a step toward meeting statutory price 
substitution requirements and addressing the gap between ASPs and 
AMPs for certain Part B drugs.  However, the policy may exclude other 
drugs for which a price adjustment is legitimately warranted and may 
also inadvertently provide drug manufacturers with a disincentive to 
submit timely AMPs.  To ensure the appropriateness of Medicare Part B 
payments for a greater number of drugs, we recommend that CMS:  
Consider expanding the price substitution policy to include certain                
HCPCS codes with partial AMP data. 
Consider seeking a legislative change to directly require all 
manufacturers of Part B-covered drugs to submit both ASPs and 
AMPs. 
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS did not state whether it concurred with our recommendation to 
consider substituting prices for certain HCPCS codes with partial AMP 
data.  Rather, CMS reiterated its concerns about price substitutions 
based on partial AMP data and noted that it will finalize a price 
substitution policy after considering all comments to the draft rule.   
CMS also stated that it could not concur with our recommendation 
regarding the expansion of price reporting requirements but suggested 
that OIG provide an analysis identifying the number of manufacturers 
and drugs that would be affected by such a proposal.  Furthermore, 
CMS reiterated its uncertainty about the payoff associated with 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  iii   
   
E X E C U T I V E   S U M M A R Y  
quarterly pricing comparisons, suggesting that OIG limit its efforts to a 
single annual report. 
In its July 2011 proposed rule, CMS expressed its intention to apply a 
price substitution policy on a quarterly basis.  Therefore, OIGs 
quarterly pricing comparisons will likely be necessary for CMS to make 
responsive, short-term payment adjustments that would not be possible 
with only annual OIG pricing comparisons.  To ensure that CMS can 
make appropriate changes to reimbursement once the price substitution 
policy has been implemented, OIG will continue to issue quarterly 
reports comparing ASPs and AMPs. 
   
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  iv    
 T A B L E   O F   C O N T E N T S  
EX ECUT I VE  SUM M ARY  .....................................i 
 
I NT RO DU CT I O N  ............................................ 1 
 
F I NDI NG S  .................................................  11 
In 2010, 32 HCPCS codes with complete AMP data                                     
exceeded the 5-percent threshold in one or more quarters ......  11 
In 2010, 41 HCPCS codes with partial AMP data                                                
exceeded the 5-percent threshold in one or more quarters ......  12 
Because of NDCs without AMP data, the number of pricing 
comparisons performed in 2010 was reduced by at least                        
9 percent in each quarter. ................................  13 
 
RECO M M END AT I O N S  .....................................  15 
Agency Comments and Office of Inspector General Response ....  17 
 
APP EN DI X ES  .............................................  18 
A:  The Equation Used by the Centers for Medicare & Medicaid  
Services To Calculate Volume-Weighted Average Sales                      
Prices on or After April 1, 2008 .........................  18 
B:  Previous Office of Inspector General Reports Comparing                        
Average Sales Prices and Average Manufacturer Prices .....  19 
C:  Detailed Methodology for Calculating Volume-Weighted                        
Average Manufacturer Prices for 2010 ................... 22 
D:  Detailed Methodology for Estimating Savings for Drug                    
Codes That Exceeded the 5-Percent Threshold in 2010 ...... 24 
E:  Thirty-Two Drug Codes With Complete Average                       
Manufacturer Price Data That Exceeded the 5-Percent                      
Threshold in 2010 ...................................  25 
F:  Forty-One Drug Codes With Partial Average                          
Manufacturer Price Data That Exceeded the 5-Percent                  
Threshold in 2010 ................................... 26 
G:  Agency Comments ...................................  28 
 
ACKNO WL E DG M E N T S .....................................  30   
   
 I N T R O D U C T I O N  
OBJECTIVES 
1.  To identify drugs with average sales prices (ASP) that exceeded 
average manufacturer prices (AMP) by at least 5 percent in any 
quarter of 2010. 
2.  To examine the impact of missing and unavailable AMP data on the 
Office of Inspector Generals (OIG) pricing comparisons in 2010. 
BACKGROUND 
The Social Security Act (the Act) mandates that OIG compare ASPs 
with AMPs.1  If OIG finds that the ASP for a drug exceeds the AMP by a 
certain percentage (5 percent through 2011), the Act states that the 
Secretary of Health and Human Services (the Secretary) may disregard 
the ASP for the drug when setting reimbursement amounts.2, 3  The Act 
further states: 
... 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....4   
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 
The Centers for Medicare & Medicaid Services (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, physicians and suppliers submit claims to their 
 
1 Section 1847A(d)(2)(B) of the Act. 
2 Section 1847A(d)(3)(A) of the Act.  
3 Section 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.   
4 Section 1847A(d)(3)(C) of the Act. 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  1   
   
I N T R O D U C T I O N  
MACs using Healthcare Common Procedure Coding System (HCPCS) 
codes.  CMS established the 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 the manufacturer or the package size.   
Medicare and its beneficiaries spent almost $12 billion for Part B drugs 
in 2010.5  Although Medicare paid for more than 600 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 2010, 61 HCPCS codes accounted for 90 percent of the 
expenditures for Part B drugs, with only 12 of these codes representing 
the majority of total Part B drug expenditures. 
Reimbursement Methodology for Part B Drugs  
Medicare Part B pays for most covered drugs using a reimbursement 
methodology based on ASPs.6  As defined by law, an ASP is a 
manufacturers sales of a 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 quarter.7  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.8  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.9, 10 
Manufacturers that participate in the Medicaid drug rebate program 
must provide CMS with the ASP and volume of sales for each of their 
 
5 Medicare expenditures for Part B drugs in 2010 were calculated using CMSs Part B 
Analytics and Reports (PBAR).  The PBAR data for 2010 were 98-percent complete when 
the data were downloaded in April 2011. 
6 Several Part B drugs, including certain vaccines and blood products, are not paid for 
under the ASP methodology.  
7 Section 1847A(c) of the Act, as added by the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003, P.L. 108-173. 
8 Section 1847A(c)(3) of the Act.  
9 Section 1847A(c)(2) of the Act.  
10 Pursuant to  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. 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  2   
   
I N T R O D U C T I O N  
national drug codes (NDC) on a quarterly basis, with submissions due 
30 days after the close of each quarter.11  An NDC is an 11-digit 
identifier that represents a specific manufacturer, product, and package 
size.   
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 
To calculate a volume-weighted ASP, CMS uses 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.12  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 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 reimbursement for 
most Part B drugs is equal to 106 percent of the volume-weighted ASP 
for the HCPCS code.13  However, a two-quarter lag exists between the 
sales period for which ASPs are reported and the effective date of the 
reimbursement amounts.  For example, ASPs from the first quarter of 
2010 were used to establish reimbursement amounts for the third 
quarter of 2010, and ASPs from the fourth quarter of 2010 were used to 
establish reimbursement amounts for the second quarter of 2011.       
 
11 Section 1927(b)(3) of the Act.  
12 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. 
13 Medicare beneficiaries are responsible for 20 percent of this amount in the form of 
coinsurance. 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  3   
   
I N T R O D U C T I O N  
The Medicaid Drug Rebate Program and AMPs 
For Federal payment to be available for covered outpatient drugs 
provided under Medicaid, the Act mandates that drug manufacturers 
enter into rebate agreements with the Secretary and pay quarterly 
rebates to State Medicaid agencies.14  Under these rebate agreements 
and pursuant to the Act, manufacturers must provide CMS with the 
AMPs for each of their NDCs.15  As further explained in the regulation, 
manufacturers are required to submit AMPs within 30 days after the 
end of each quarter.16   
The AMP is generally calculated as a weighted average of prices for all 
of a manufacturers package sizes of a drug and is reported for the 
lowest identifiable quantity of the drug (e.g., 1 milliliter, one tablet, one 
capsule).17  During the first three quarters of 2010, the AMP was 
generally defined by statute to be 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.18  However, effective 
as of the fourth quarter of 2010, the Patient Protection and Affordable 
Care Act (Affordable Care Act) revised the definition of AMP to be the 
average price paid to the manufacturer for the drug in the United 
States by (1) wholesalers for drugs distributed to retail community 
pharmacies and (2) retail community pharmacies that purchase drugs 
directly from the manufacturer.19, 20  Because the AMPs calculated 
under this new definition are expected to be based on higher-priced 
 
14 Sections 1927(a)(1) and (b)(1) of the Act. 
15 Section 1927(b)(3) of the Act. 
16 42 CFR  447.510.   
17 During the first three quarters of 2010, 42 CFR  447.504(i)(2) specified that a quarterly 
AMP should be calculated as a weighted average of monthly AMPs in the quarter.  
18 42 CFR  447.504 (2010). 
19 Section 1927(k)(1) of the Act, as amended by section 2503 of the Affordable Care Act,  
P.L. 111-148.    
20 Pursuant to section 1927(k)(10) of the Act, retail community pharmacy means an 
independent, chain, supermarket, or mass merchandiser pharmacy that is licensed as a 
pharmacy by the State and that dispenses medications to the general public at retail prices.  
Such term does not include pharmacies that dispense prescription medications to patients 
primarily through the mail; nursing home, long-term care, or hospital pharmacies; clinics; 
charitable or not-for-profit pharmacies; government pharmacies; or pharmacy benefit 
managers. 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  4   
   
I N T R O D U C T I O N  
sales, the new AMPs are likely to be higher than the AMPs calculated 
before October 2010.21, 22   
 
Penalties for Failure To Report Timely Drug Pricing Data
Pursuant to the Act, manufacturers that fail to provide ASP and AMP 
by the statutory deadline may be subject to civil money penalties 
and/or termination from the drug rebate program.23, 24  Accordingly, 
CMS has terminated rebate agreements with a number of 
manufacturers for failure to report AMPs and, for the purposes of 
evaluating potential civil money penalties, has referred to OIG 
manufacturers that failed to submit timely ASPs and AMPs.  In 
September 2010, OIG announced an enforcement initiative under 
which it would begin imposing civil money penalties on 
manufacturers that failed to report timely ASPs and/or AMPs.25   
OIGs Monitoring of ASPs and AMPs 
In accordance with its statutory mandate, OIG has issued 20 quarterly 
pricing comparisons since the ASP reimbursement methodology for Part B 
drugs was implemented in January 2005.  In addition, OIG completed 
three annual overviews of ASPs and AMPs, which examined data across 
all four quarters of 2007, 2008, and 2009, respectively.  A list of all                     
23 reports is provided in Appendix B.   
OIG has consistently recommended that CMS develop a price 
substitution policy and subsequently lower reimbursement for drugs 
that exceed the 5-percent threshold.  Although CMS has yet to make 
any changes to Part B drug reimbursement as a result of these studies, 
the agency published a proposed rule in July 2011 that, among other  
 
21 As stated by the Department of Health and Human Services in its comments on                                  
page 12 of a 2010 Government Accountability Office report entitled Medicaid Outpatient 
Prescription Drugs:  Estimated Changes to Federal Upper Limits Using the Formula under 
the Patient Protection and Affordable Care Act (GAO-11-141R). 
22This anticipated increase in AMPs may lessen the likelihood that a drugs ASP will 
exceed the 5-percent threshold, effectively making price substitution criteria more 
stringent. 
23 Sections 1927(b)(3)(C)(i) and (4)(B)(i) of the Act.   
24 The Secretary delegated to OIG the responsibility to impose civil money penalties for 
violations of  1927(b)(3)(C) of the Act in 59 Fed. Reg. 52967 (Oct. 20, 1994). 
25 OIG, Special Advisory Bulletin:  Average Manufacturer Price and Average Sales Price 
Reporting Requirements, September 2010.  Available online at http://www.oig.hhs.gov. 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  5   
   
I N T R O D U C T I O N  
things, specifies the circumstances under which AMP-based price 
substitutions would occur.26, 27  
CMSs Proposed Price Substitution Policy  
Under CMSs July 2011 proposed price substitution policy, 103 percent 
of the AMP would be substituted for the ASP-based reimbursement 
amount when OIG identifies a HCPCS code that meets the 5-percent 
threshold in two consecutive quarters or three of four quarters.  Because 
CMS believes that substituted prices based on partial AMP data may 
not adequately reflect market trends, the agency would lower 
reimbursement amounts only when ASP and AMP comparisons are 
based on the same set of NDCs (i.e., based on complete AMP data).  
HCPCS codes that meet the 5-percent threshold based on partial AMP 
data would not be eligible for price substitution.   
Price substitutions would take effect in the quarter after OIG shares the 
results of its most recent pricing comparison and would remain in effect 
for one quarter.  To prevent CMSs proposed policy from inadvertently 
raising the Medicare reimbursement amount, a price substitution would 
not occur when the substituted amount is greater than the ASP-based 
payment amount calculated for the quarter in which the price 
substitution would take effect.  CMS plans to apply its price 
substitution policy on a quarterly basis beginning in 2012.28 
METHODOLOGY 
We obtained files from CMS containing NDC-level ASP data from the 
first through fourth quarters of 2010, which were used to establish               
Part B drug reimbursement amounts for the third quarter of 2010 
through the second quarter of 2011, respectively.  These files also 
include information that crosswalks NDCs to their corresponding 
HCPCS codes.  We also obtained AMP data from CMS for the first 
through fourth quarters of 2010.29 
 
26 76 Fed. Reg. 42772, 42947 (July 19, 2011). 
27 CMS previously proposed a price substitution policy to be used for calendar year 2011             
but opted not to finalize that price substitution policy based, in part, on impending changes 
to the definition of AMP (75 Fed. Reg. 73170,73471 (Nov. 29, 2010)).   
28 76 Fed. Reg. 42772, 42947 (July 19, 2011). 
29 ASP and crosswalk data from the first through fourth quarters of 2010 were current as of 
June 2010, September 2010, January 2011, and March 2011, respectively.  AMP data from 
the first through fourth quarters of 2010 were current as of May 2010, August 2010, 
November 2010, and February 2011, respectively.  
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  6   
   
I N T R O D U C T I O N  
Calculating Volume-Weighted ASPs and Volume-Weighted AMPs for 2010 
As mentioned previously, Medicare does not base reimbursement for 
covered drugs on NDCs; instead, it uses HCPCS codes.  Therefore, CMS 
uses quarterly 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 part of our analysis for each of the 2010 quarterly reports, we 
calculated a volume-weighted AMP for each HCPCS code, consistent 
with CMSs methodology for calculating volume-weighted ASPs.  To 
ensure that the broadest range of drug codes is subject to OIGs 
pricing comparisons, we examined HCPCS codes with complete AMP 
data (i.e., HCPCS codes with AMP data for every NDC that CMS used 
in its calculation of volume-weighted ASPs), as well as HCPCS codes 
with partial AMP data (i.e., HCPCS codes with AMP data for only 
some of the NDCs that CMS used in its calculation of                          
volume-weighted ASPs).  When calculating the volume-weighted AMP 
for a HCPCS code with partial AMP data, we excluded any NDCs 
without AMPs; however, we did not exclude those NDCs from the 
corresponding volume-weighted ASP.  This means that the              
volume-weighted AMP for a HCPCS code with partial AMP data is 
based on fewer NDCs than the volume-weighted ASP for that same 
code.  Appendix C provides a more detailed description of the methods 
used to calculate volume-weighted AMPs for HCPCS codes using 
complete or partial AMP data. 
Comparing Volume-Weighted ASPs to Volume-Weighted AMPs for 2010 
In each of our 2010 quarterly reports, we compared the                 
volume-weighted ASPs and AMPs and identified HCPCS codes with 
ASPs that exceeded the AMPs by at least 5 percent using either 
complete or partial AMP data.  For those HCPCS codes that exceeded 
the 5-percent threshold, we conducted a review of the associated NDCs 
to verify the accuracy of the billing unit information for the quarter(s) in 
which the threshold was exceeded.  If HCPCS codes had potentially 
inaccurate billing units, we excluded them from our findings. 
As part of our 2010 annual overview, we merged the results of the four 
quarterly pricing comparisons to identify HCPCS codes with ASPs that 
exceeded AMPs by at least 5 percent in one or more quarters of 2010.  
For each of the HCPCS codes we identified, we conducted additional 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  7   
   
II NN TT RR OO DD UU CC TT II OO NN   
analyses that differed depending on whether the HCPCS code had 
complete or partial AMP data. 
Additional analysis of HCPCS codes with complete AMP data.  For each of 
the HCPCS codes with complete AMP data that exceeded the 5-percent 
threshold in at least one quarter of 2010, we estimated the monetary 
impact of lowering reimbursement to 103 percent of the AMP.30  In our 
separate quarterly pricing comparisons for 2010, savings estimates for 
codes that exceeded the threshold in the first through third quarters 
were based on CMSs PBAR data from 2009, whereas savings estimates 
for codes in the fourth quarter were based on PBAR data from 2010.  To 
ensure that the savings estimates were consistent and reflective of the 
most current Medicare expenditures, we recalculated the savings 
estimates for the codes that exceeded the threshold in one or more 
quarters of 2010 using updated PBAR data for 2010.  As a result, the 
estimated savings presented in this annual overview may differ from 
the savings presented in each of the separate quarterly reports 
previously published by OIG.  Appendix D provides a more detailed 
description of the methods we used to estimate savings for HCPCS 
codes that exceeded the 5-percent threshold using complete AMP data. 
To determine which HCPCS codes would have been subject to price 
reduction if CMSs proposed price substitution policy had been in effect 
during 2010, we identified codes with complete AMP data that exceeded 
the 5-percent threshold in two consecutive quarters or three of four 
quarters in 2010.  We then totaled the estimated savings for that subset 
of codes. 
Additional analysis of HCPCS codes with partial AMP data.  In each of our 
2010 quarterly reports, we identified HCPCS codes with partial AMP 
data that exceeded the 5-percent threshold only because AMP data were  
 
30 Section 1847A(d)(3)(C) of the Act directs the Secretary to replace payment amounts for 
drugs that exceed the 5-percent threshold with the lesser of the widely available market 
price (WAMP) 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 WAMPs had been available for these drugs and had been lower than                       
103 percent of the AMP, the savings estimate presented in this report would have been 
greater. 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  8   
   
I N T R O D U C T I O N  
missing or unavailable.31  As mentioned previously, the                        
volume-weighted AMP for a HCPCS code with partial AMP data is 
based on fewer NDCs than the volume-weighted ASP for that same 
code.  Therefore, there may be a disparity between the volume-weighted 
ASP and AMP that would not exist if AMP data were available for the 
full set of NDCs.  In other words, the volume-weighted ASP for the 
HCPCS code could exceed the volume-weighted AMP by at least                     
5 percent only because AMPs for certain NDCs were not represented. 
To determine whether missing or unavailable AMPs unduly influenced 
the results of our pricing comparisons, we reanalyzed pricing data after 
accounting for the missing values.  Specifically, we replaced each 
missing value with its corresponding ASP and recalculated the         
volume-weighted AMPs using those imputed prices.32  We then 
compared those new volume-weighted AMPs to the volume-weighted 
ASPs originally calculated by CMS. 
If a HCPCS code no longer exceeded the 5-percent threshold in a given 
quarter, we concluded that the missing and unavailable AMPs were 
likely responsible for the HCPCS codes having initially exceeded the 
threshold in that quarter, as opposed to an actual disparity between 
ASPs and AMPs in the marketplace.  If a HCPCS code continued to 
exceed the 5-percent threshold in a given quarter, we concluded that 
missing and unavailable AMPs had little impact on the results of our 
pricing comparison for that quarter.  For these cases, the HCPCS codes 
likely exceeded the threshold as a result of actual pricing differences 
between ASPs and AMPs.   
As part of our 2010 annual overview, we merged the results of the four 
quarterly pricing comparisons to identify HCPCS codes with partial 
AMP data that exceeded the 5-percent threshold in one or more 
quarters of 2010 because of an actual pricing disparity.  Because price 
substitutions for these HCPCS codes may be warranted, we used 2010 
 
31 For the purposes of this study, an AMP was considered missing if the manufacturer 
had a Medicaid rebate agreement in 2010 but did not submit a price for the quarter.  An 
AMP was considered unavailable for an NDC if the manufacturer did not have a Medicaid 
rebate agreement and was therefore not required to submit AMP data to CMS.  To 
determine whether a manufacturer had a rebate agreement in 2010, we consulted the list of 
participating drug companies posted on CMSs Web site. 
32 Although an NDCs ASP is not usually the same as its AMP, it is generally within about 
5 percent of the AMP on average.  Therefore, we believe that ASP acts as a reasonable 
proxy for AMP, ensuring that the NDC is represented in both the volume-weighted ASP and 
the volume-weighted AMP for the HCPCS code.   
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  9   
   
II NN TT RR OO DD UU CC TT II OO NN   
PBAR data to estimate the monetary impact of lowering reimbursement 
for these codes to 103 percent of the new volume-weighted AMPs.  We 
also determined which of these codes exceeded the threshold in two 
consecutive or three of four quarters in 2010 and totaled the estimated 
savings for that subset of codes. 
Analyzing HCPCS Codes With No AMP Data in 2010 
In each of our pricing comparisons for 2010, we excluded HCPCS codes 
that had missing or unavailable AMP data for all of the NDCs CMS 
used to calculate Medicare reimbursement.  To identify the total 
number of HCPCS codes that were excluded from OIG pricing 
comparisons in 2010, we merged the results from each of the four 
quarterly reports.  We then identified the number of HCPCS codes that 
were never included in OIGs pricing comparisons in 2010 because of 
missing or unavailable AMP data.  
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.  We also 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. 
Manufacturers are required to submit their quarterly ASP and AMP 
data to CMS within 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 any 
revised and/or missing data to CMS at a later date. 
To examine the effect of CMSs proposed price substitution policy, we 
identified codes that exceeded the threshold in two consecutive quarters 
or three of four quarters in 2010.   Additional codes could have been 
subject to CMSs proposed policy if they exceeded the threshold in 2010 
as well as in the second, third, or fourth quarters of 2009. 
Standards   
This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors 
General on Integrity and Efficiency. 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  10   
   
F I NFF DII NNI NDD GII SNN  GG SS   
In 2010, 32 HCPCS codes with complete           C   o n  s  istent with sections 
AMP data exceeded the 5-percent threshold          1 8  4  7  A  ( d  ) ( 2  ) ( B) and 1847A(d)(3) of 
the Act, OIG compared ASPs 
in one or more quarters  
with AMPs to identify instances 
in which the ASP for a particular drug exceeded the AMP by a threshold 
of 5 percent.  Of the 501 HCPCS codes examined during 2010,                        
32 exceeded this 5-percent threshold in at least one quarter based on 
complete AMP data only.  Appendix E presents a list of the 32 HCPCS 
codes, including the quarter(s) during which the codes exceeded the              
5-percent threshold. 
Pursuant to section 1847A(d)(3) of the Act, the Secretary may disregard 
the ASP for a drug that exceeds the 5-percent threshold and shall 
substitute the payment amount with the lesser of either the WAMP or 
103 percent of the AMP.  If reimbursement amounts for all 32 codes 
with complete AMP data had been lowered to 103 percent of the AMPs 
during the applicable quarters, we estimate that Medicare expenditures 
would have been reduced by $13.2 million between the third quarter of 
2010 and the second quarter of 2011.33 
Under CMSs proposed price substitution policy, reimbursement amounts 
for almost one-third of the 32 HCPCS codes would have been reduced, 
resulting in an estimated savings of more than $2 million over 1 year  
If CMSs proposed price substitution policy had been in effect during 
2010, reimbursement amounts for 10 of the 32 HCPCS codes would 
have been reduced in at least one quarter.  These 10 HCPCS codes had 
complete AMP data and exceeded the 5-percent threshold in either two 
consecutive quarters or three of the four quarters in 2010.  If 
reimbursement amounts for these 10 codes had been based on                        
103 percent of the AMPs during the applicable quarters, Medicare 
expenditures would have been reduced by an estimated $2.3 million 
between the third quarter of 2010 and the second quarter of 2011. 
A list of the 10 HCPCS codes is included in Appendix E.   
 
 
 
 
33 ASP data from the first through fourth quarters of 2010 were used to establish 
reimbursement amounts for the third quarter of 2010 through the second quarter of 2011, 
respectively.  
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  11   
   
F I N D I N G S  
In 2010, 41 HCPCS codes with partial          O  f   t h  e    5  0  1   H   C  PCS codes 
AMP data exceeded the 5-percent threshold          e x  a  m   i n  e d    d  u  ring 2010, 41 were 
eligible for price substitution in 
in one or more quarters 
at least one quarter based on 
partial AMP data.  Thirty-seven of these 41 HCPCS codes exceeded the                    
5-percent threshold in any given quarter using only partial AMP data, 
whereas the remaining four codes exceeded the 5-percent threshold 
based on a mix of partial and complete AMP data.  Appendix F presents 
a list of the 41 HCPCS codes, including the quarter(s) during which the 
codes exceeded the 5-percent threshold. 
For almost one-third of the HCPCS codes (13 of 41), missing and 
unavailable AMPs likely had little influence on the outcome of the pricing 
comparisons  
When we accounted for missing and unavailable AMPs, 13 of the                   
41 HCPCS codes continued to exceed the threshold in at least one 
quarter of 2010, suggesting that the pricing comparisons for these 
codes were accurately capturing underlying market trends even 
though AMP data were not available for the full set of NDCs.  
Because missing and unavailable AMP data had seemingly little 
influence on the pricing comparison results for these 13 HCPCS 
codes, price substitutions may be legitimately warranted in these 
cases.  If reimbursement amounts for the 13 codes had been based on                       
103 percent of the AMPs during the applicable quarters, we estimate 
that Medicare expenditures would have been reduced by                       
$465,000 between the third quarter of 2010 and the second quarter of 
2011.  ASPs for 3 of the 13 HCPCS codes exceeded the 5-percent 
threshold in two consecutive or three of the four quarters in 2010.  A 
list of the 13 HCPCS codes is included in Appendix F.  
For the remaining 28 of 41 HCPCS codes, ASPs no longer exceeded 
the AMPs in any quarter, indicating that these codes initially 
exceeded the threshold because of missing AMP data rather than a 
genuine pricing disparity between the ASPs and AMPs. 
 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  12   
   
FF II NN DD II NN GG SS   
Because of NDCs without AMP data, the number  If a HCPCS code had no AMPs 
of pricing comparisons performed in 2010 was  for any of its associated NDCs, 
we could not evaluate that code 
reduced by at least 9 percent in each quarter  
pursuant to sections 
1847A(d)(2)(B) and 1847A(d)(3) of the Act.  In 2010, from 9 to 13 percent 
of HCPCS codes were excluded from OIGs pricing comparisons in each 
quarter because AMP data were missing or unavailable for all of the 
associated NDCs.34, 35  Table 1 lists the number and percentage of 
HCPCS codes in each quarter that were excluded from our analysis and 
specifies the number of codes that were based on unavailable NDCs, 
missing NDCs, or a combination of both. 
In total, 90 HCPCS codes were excluded from OIGs pricing comparisons 
in one or more quarters of 2010 because AMP data were missing or 
unavailable for all of the NDCs that CMS used to calculate Medicare 
reimbursement for that quarter.  For half of the 90 codes, we were never 
able to perform pricing comparisons in 2010 because AMPs were always 
missing or unavailable for all of the associated NDCs.   Three-fourths of 
these HCPCS codes (34 of 45) would never have been subject to our 
pricing comparisons because they were associated exclusively with 
NDCs for which manufacturers were not required to report AMP data.  
In 2010, Medicare and its beneficiaries spent $113 million on these             
34 drugs. 
 
34 Relative to the total number of HCPCS codes in each quarter with Medicare 
reimbursement amounts based on the ASP payment methodology.  
35 For the purposes of this study, an AMP was considered missing if the manufacturer 
had a Medicaid rebate agreement in 2010 but did not submit a price for the quarter.  An 
AMP was considered unavailable for an NDC if the manufacturer did not participate in 
the Medicaid drug rebate program and was therefore not required to submit AMP data.   
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  13   
   
F I N D I N G S  
Table 1:  HCPCS Codes That Were Excluded From 2010 Pricing Comparisons  
  Number of HCPCS Codes  Percentage of  
  Excluded Because   HCPCS Codes Excluded 
  None of the Corresponding  Because of  
Quarter in 2010  NDCs Had AMP Data  NDCs Without AMP Data* 
First Quarter  68  13% 
Codes with unavailable AMPs only  35 
Codes with missing AMPs only  25   
Codes with a mix of missing and unavailable AMPs  8 
Second Quarter  54  10% 
Codes with unavailable AMPs only  36 
Codes with missing AMPs only  14   
Codes with a mix of missing and unavailable AMPs  4 
Third Quarter   48  9% 
Codes with unavailable AMPs only  37 
Codes with missing AMPs only  9   
Codes with a mix of missing and unavailable AMPs  2 
Fourth Quarter  61  12% 
Codes with unavailable AMPs only  35 
Codes with missing AMPs only  21   
Codes with a mix of missing and unavailable AMPs  5 
* Relative to the total number of HCPCS codes in each quarter with reimbursement amounts based on the ASP payment methodology. 
Source:  OIG analysis of ASP and AMP data from the first through fourth quarters of 2010. 
   
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  14   
   
 R E C O M M E N D A T I O N S  
Section 1847A(d)(3)(C) of the Act directs the Secretary to lower 
reimbursement amounts for drugs with ASPs that exceed AMPs by at 
least 5 percent.  Although CMS has yet to make any changes to Part B 
drug reimbursement as a result of these studies, the agency recently 
published a proposed rule specifying the criteria under which it would 
substitute prices for drugs that meet the 5-percent threshold.  
Specifically, CMS plans to lower reimbursement amounts on a quarterly 
basis for HCPCS codes with complete AMP data that meet the 5-percent 
threshold in two consecutive quarters or three of the previous four 
quarters.   
This current overview, which summarizes data across all four quarters 
of 2010, identified 32 drug codes that exceeded the 5-percent threshold 
using complete AMP data.  If CMSs proposed price substitution policy 
had been in effect during 2010, reimbursement amounts for 10 of the                      
32 HCPCS codes would have been lowered to 103 percent of the AMPs, 
thereby saving Medicare and its beneficiaries an estimated $2.3 million.  
An additional 41 HCPCS codes exceeded the 5-percent threshold using 
partial AMP data.  We found that missing and unavailable AMPs for 
certain codes likely had little influence on the outcome of the pricing 
comparisons.  Therefore, price substitution may be legitimately 
warranted for those HCPCS codes. 
Furthermore, 10 to 13 percent of HCPCS codes were excluded from 
OIGs pricing comparisons in each quarter of 2010 because AMPs were 
missing or unavailable for all of the associated NDCs.  Thirty-four 
HCPCS codes were never subject to our 2010 pricing comparisons 
because they were associated exclusively with NDCs for which 
manufacturers were not required to report AMP data. 
CMSs proposed policy is a step toward meeting statutory price 
substitution requirements and addressing the gap between ASPs and 
AMPs for certain Part B drugs.  However, the policy may exclude other 
drugs for which a price adjustment is legitimately warranted.  To 
ensure the appropriateness of Medicare Part B payments for a greater 
number of drugs, we recommend that CMS:  
Consider expanding the price substitution policy to include certain                
HCPCS codes with partial AMP data 
Because CMS believes that volume-weighted AMPs based on partial 
AMP data may not adequately account for market-related drug price 
changes and may lead to artificially low price substitutions, codes that 
exceed the 5-percent threshold using partial AMP data would not be 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  15   
   
R E C O M M E N D A T I O N S  
eligible for price reduction under CMSs proposed price substitution 
policy.  However, for 13 HCPCS codes with partial AMP data in 2010, 
missing and unavailable AMPs likely had little influence on the 
outcome of the pricing comparisons.  When we accounted for missing 
AMPs, these 13 HCPCS codes continued to exceed the threshold, 
indicating that the pricing comparisons were accurately capturing 
underlying market trends even though AMP data were not available for 
the full set of NDCs.  Because the risk of substituting ASP-based 
reimbursement with an artificially low volume-weighted AMP is greatly 
diminished for these types of HCPCS codes, we suggest that CMS 
include in its price substitution policy HCPCS codes identified by OIG 
as meeting the threshold when missing AMPs have been imputed.   
We recognize that substituting ASP-based reimbursement amounts for 
these particular HCPCS codes would not have resulted in substantial 
savings between the third quarter of 2010 and the second quarter of 
2011; however, by excluding from its policy all codes with partial AMP 
data, CMS may inadvertently provide drug manufacturers with a 
disincentive to submit timely AMPs.  CMS could avoid this potential 
disincentive by applying its substitution policy to at least certain 
HCPCS codes with partial AMP data.  
Consider seeking a legislative change to directly require all manufacturers 
of Part B-covered drugs to submit both ASPs and AMPs 
During 2010, at least 35 HCPCS codes in each quarter could not be 
included in OIGs pricing comparisons because all of the associated 
NDCs belonged to manufacturers that did not have Medicaid rebate 
agreements and were therefore not required to provide AMP data to 
CMS.  Thirty-four HCPCS codes had unavailable AMP data in all four 
quarters of 2010.  Although Medicare and its beneficiaries spent over                    
$100 million for these drugs during that year, payment amounts for the 
drugs could not be monitored through pricing comparisons with AMPs.  
To ensure that Part B reimbursement reflects market trends for all 
covered drugs and is subject to regular price monitoring, CMS could 
seek a legislative change requiring all manufacturers of Part B-covered 
drugs to submit ASPs and AMPs, regardless of whether those 
manufacturers have rebate agreements.   
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  16   
   
R E C O M M E N D A T I O N S  
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS did not state whether it concurred with our recommendation to 
consider substituting prices for certain HCPCS codes with partial AMP 
data.  Rather, CMS reiterated its concerns about price substitutions 
based on partial AMP data and noted that it will announce a price 
substitution policy after considering all comments to the draft rule.    
CMS also stated that it could not concur with our recommendation 
regarding the expansion of price reporting requirements because the 
Presidents budget for fiscal year 2012 does not include any proposals 
specific to this issue.  To facilitate consideration for such a change, the 
agency suggested that OIG provide an analysis identifying the number 
of manufacturers and drugs that would be affected by such a proposal. 
In addition, CMS reiterated its uncertainty about the payoff associated 
with quarterly pricing comparisons, stating that the proposed price 
substitution policy will generate minor savings for the program.  
Because the Act provides discretion in determining the frequency of 
pricing comparisons, CMS suggested that OIG limit its efforts to a 
single annual report and pursue activities with higher potential rates of 
return. 
In response to CMSs comments, OIG notes that, according to the                 
July 2011 proposed rule, CMS intends to apply its price substitution 
policy on a quarterly basis.  Therefore, OIGs quarterly pricing 
comparisons will likely be necessary for CMS to make responsive, short-
term payment adjustments that prevent Medicare and its beneficiaries 
from overspending.  We question how timely adjustments would be 
possible with only annual OIG pricing comparisons. 
Furthermore, although the savings from any single OIG report may be 
small relative to total expenditures for Part B drugs, savings achieved 
through long-term price substitution could reduce waste and conserve 
taxpayer funds at a time when increased focus has been placed on rising 
health care costs and fiscal responsibility.   
To ensure that CMS can make appropriate and timely adjustments to 
reimbursement once the price substitution policy has been 
implemented, OIG will continue to issue quarterly pricing reports 
comparing ASPs and AMPs. 
For the full text of CMSs comments, please see Appendix G. 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  17   
   
 A P P E N D I X   ~   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-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  18   
   
 A P P E N D I X   ~   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-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  19   
   
A P P E N D I X   ~   B  
  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 
 
  Comparison of Second-Quarter 2009 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Fourth 
Quarter 2009, OEI-03-09-00640, January 2010 
 
  Comparison of Average Sales Prices and Average Manufacturer Prices:  An 
Overview of 2008, OEI-03-09-00350, February 2010 
 
  Comparison of Third-Quarter 2009 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for First Quarter 
2010, OEI-03-10-00150, April 2010 
 
  Comparison of Fourth-Quarter 2009 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Second 
Quarter 2010, OEI-03-10-00350, July 2010 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  20   
   
A P P E N D I X   ~   B  
  Comparison of First-Quarter 2010 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Third Quarter 
2010, OEI-03-10-00440, November 2010 
 
  Comparison of Second-Quarter 2010 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Fourth 
Quarter 2010, OEI-03-11-00030, February 2011 
 
  Comparison of Average Sales Prices and Average Manufacturer Prices:  An 
Overview of 2009, OEI-03-10-00380, April 2011 
 
  Comparison of Third-Quarter 2010 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for First Quarter 
2011, OEI-03-11-00160, May 2011 
 
  Comparison of Fourth-Quarter 2010 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Second 
Quarter 2011, OEI-03-11-00360, July 2011 
 
  Comparison of First-Quarter 2011 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Third Quarter 
2011, OEI-03-11-00540, August 2011 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  21   
   
 A P P E N D I X   ~   C  
Detailed Methodology for Calculating Volume-Weighted Average 
Manufacturer Prices for 2010 
 
Before computing quarterly volume-weighted average manufacturer 
prices (AMP) for 2010, it was necessary to identify the national drug 
codes (NDC) that should be included in each quarters calculations.  To 
ensure that the broadest range of drug codes is subject to the Office of 
Inspector Generals pricing comparisons, we examined Healthcare 
Common Procedure Coding System (HCPCS) codes with complete AMP 
data (i.e., HCPCS codes with AMP data for every NDC that was used to 
calculate Medicare reimbursement), as well as HCPCS codes with 
partial AMP data (i.e., HCPCS codes with AMP data for only some of 
the NDCs that were used to calculate Medicare reimbursement).36 
Calculating Converted Average Manufacturer Prices  
An AMP is reported for the lowest identifiable quantity of the drug 
contained in the NDC (e.g., 1 milligram, 1 milliliter, one tablet,                   
one capsule).  In contrast, an ASP is reported for the entire amount of 
the drug contained in the NDC (e.g., for 50 milliliters, for 100 tablets).  
To ensure that AMPs would be comparable to ASPs, it was necessary to 
convert the AMPs for each NDC in each quarter so that they 
represented the total amount of the drug contained in that NDC.   
To calculate converted AMPs for the NDCs included in each of our 
quarterly reports, we multiplied the AMP by the total amount of the 
drug contained in each NDC, as identified by sources such as CMSs 
crosswalk file, manufacturer Web sites, Thomson Reuters Red Book, 
and the Food and Drug Administrations NDC directory.   
For some NDCs, we could not identify the amount of the drug reflected 
by the ASP or AMP and therefore could not calculate a converted AMP.  
The extent to which NDCs with problematic AMP conversions affected 
our analysis differed depending on whether the associated HCPCS code 
had complete AMP data or partial AMP data. 
 
36 We excluded NDCs without AMPs when calculating volume-weighted AMPs for HCPCS 
codes with partial AMP data; however, the corresponding average sales prices (ASP) were 
not excluded from the volume-weighted ASPs as determined by the Centers for Medicare & 
Medicaid Services (CMS).  Volume-weighted ASPs remained the same, regardless of the 
availability of AMP data.   
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  22   
   
A P P E N D I X   ~   C  
HCPCS codes with complete AMP data.  If a HCPCS code with complete 
AMP data had one or more NDCs with a problematic AMP conversion, 
we automatically excluded that HCPCS code from our pricing 
comparison for the quarter.   
HCPCS codes with partial AMP data.  If a HCPCS code with partial AMP 
data had one or more NDCs with a problematic AMP conversion, we did 
not automatically exclude that HCPCS code from our pricing 
comparison.  Rather, we removed only the NDCs with problematic AMP 
conversions.  However, if all of the NDCs associated with the HCPCS 
code had problematic AMP conversions, we dropped the HCPCS code 
from that quarters analysis. 
Calculating Volume-Weighted Average Manufacturer Prices 
Using the remaining NDCs with successful AMP conversions, we  
calculated a volume-weighted AMP for each of the corresponding 
HCPCS codes, consistent with the revised methodology for calculating 
volume-weighted ASPs. 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  23   
   
 A P P E N D I X   ~   D  
Detailed Methodology for Estimating Savings for Drug Codes That Exceeded 
the 5-Percent Threshold in 2010 
If the average sales price (ASP) for a Healthcare Common Procedure 
Coding System (HCPCS) code exceeded the average manufacturer price 
(AMP) by at least 5 percent in any quarter of 2010, we estimated the 
savings associated with substituting the reimbursement amount for 
that code with 103 percent of the AMP.   
A two-quarter lag exists between the sales period for which ASPs are 
reported and the effective date of the reimbursement amounts.  As a 
result of this lag period, estimated savings for HCPCS codes that 
exceeded the 5-percent threshold during the first through fourth 
quarters of 2010 were applied to the third quarter of 2010 through the 
second quarter of 2011, respectively.  We estimated savings only for the 
time period(s) during which a HCPCS code exceeded the 5-percent 
threshold.   
For each of the HCPCS codes that exceeded the 5-percent threshold in a 
given quarter of 2010, we calculated 103 percent of the volume-weighted 
AMP and subtracted this amount from the reimbursement amount for 
the HCPCS code, which is equal to 106 percent of the volume-weighted 
ASP.  To estimate the financial effect of lowering reimbursement for the 
applicable quarter, we multiplied the difference by one-fourth of the 
number of services that were allowed by Medicare for each HCPCS code 
in 2010, as reported in the Centers for Medicare & Medicaid Services 
Part B Analytics and Reports (PBAR).37  
 
37 The PBAR data for 2010 were downloaded in April 2011.     
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  24   
   
 AAA PPP PPP EEE NNN DDD III XXX     ~~~     EEE    
Thirty-Two Drug Codes With Complete Average Manufacturer Price Data 
That Exceeded the 5-Percent Threshold in 2010   
 
Quarter(s) in Which the Codes Exceeded the 5-Percent Threshold  
Drug           First                      Second                 Third                   Fourth              
Code  Quarter                      Quarter   Quarter                      Q uarter            
J0210*  X  X  X   
J0287        X 
J0637    X     
J0834*  X  X  X   
J1120      X   
J1327*  X  X     
J1364        X 
J1572        X 
J1650        X 
J1955        X 
J2597  X       
J2675*    X  X   
J2690    X     
J2765  X       
J2792  X       
J2916  X       
J2993*    X  X   
J3095      X   
J7501*    X  X   
J9000        X 
J9155        X 
J9214*  X  X  X  X 
J9218*      X  X 
J9263      X   
J9268        X 
J9280  X       
J9290  X       
J9291  X       
J9340  X       
J9370        X 
Q0175*      X  X 
Q0176*      X  X 
* These codes would have exceeded the Centers for Medicare & Medicaid Services criteria for price substitution in at least 
one quarter if the price substitution policy had been in effect during 2010. 
Source:  Office of Inspector General analysis of average sales price and average manufacturer price data from 2010. 
 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  25   
   
 A P P E N D I X   ~   F  
Forty-One Drug Codes With Partial Average Manufacturer Price Data 
That Exceeded the 5-Percent Threshold in 2010  
Quarter(s) in Which the Codes Exceeded the 5-Percent Threshold 
Drug           First                      Second                 Third                   Fourth              
Code  Quarter                      Quarter   Quarter                      Q uarter            
90586    X     
J0171        X 
J0207  X       
J0560*  X  X     
J0610  X       
J0636*        X 
J0670  X       
J1020*  X    X  X 
J1040        X 
J1080        X 
J1162        X 
J1190  X    X  X 
J1626    X  X  X 
J1940*  X  X     
J2310*    X     
J2700  X  X  X  X 
J2790  X       
J3130  X       
J3260  X       
J3475  X       
J7506*  X  X  X   
J7509*  X      X 
J7611  X  X  X   
J7613  X       
J7620  X    X   
J7644      X   
J9031    X     
J9040  X       
J9045*    X    X 
J9060  X    X  X 
J9062  X       
                        
continued on next page 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  26   
   
A P P E N D I X   ~   F  
Forty-One Drug Codes With Partial Average Manufacturer Price Data 
That Exceeded the 5-Percent Threshold in 2010 (Continued) 
Quarter(s) in Which the Codes Exceeded the 5-Percent Threshold 
Drug           First                      Second                 Third                   Fourth              
Code  Quarter                     Quarter   Quarter                      Q uarter            
J9178*  X       
J9190*    X  X   
J9206  X       
Q0164*  X      X 
Q0165*  X  X    X 
Q0177    X     
Q0178    X     
Q0179*        X 
Q9965  X  X  X  X 
Q9966  X  X  X  X 
* For these codes, missing average manufacturer prices (AMP) likely had little influence on the outcomes of the pricing 
comparisons.                             
 These codes exceeded the 5-percent threshold based on complete AMPs in some quarters and partial AMPs in others.    
Source:  Office of Inspector Generals analysis of average sales price data and AMP data from 2010. 
 
 
 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  27  x 
A  P  PEN  D  G 
Agency Comments 
Centers for Medicare & Medicaid Services 
Admillistratol' 
Washington. DC 20201 
SEP 1 5 2011
DATE: 
TO: 	 Daniel R. Levinson 
Inspector General 
11ROM: 	 Donald M. Belwick, M.D. 
Administrator 
SUBJECT: 	 Office ofInspeclor General (OIG) Draft Report: Comparison of Average Sales 
Prices and Average Manufacturer Prices: An Overview of2010 
(OEI~03~11~0041O) 
The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to review and 
respond to the OIG Draft Report entitled, "Comparison of Average Sales Prices and Average 
Manufacturer Prices: An Overview of2010" (OEI-03-11-00410). This report is part of a series 
of average sales price (ASP) and average manufacturer price (AMP) comparisons required under 
section I 847A(d) of the Social Security Act. 
The OIG stated that the objectives for the 2010 Overview were to-(1) Identify drugs with an 
ASP that exceeded AMP by at least 5 percent in any quarter of2010; and (2) Examine the 
impact of missing and unavailable data on the OIG' s 2010 pricing comparisons. The 2010 
overview found that 32 Healthcare Common Procedure Coding System (HCPCS) codes with 
complete data (Le., AMP data was available for all national drug codes (NDC) used in the ASP 
calculation for a code) met the 5 percent threshold in at least one quarter. The orG stated that of 
these 32 codcs, 10 would have been subject to the price substitution policy that was proposcd in 
the 2012 Physician Fee Schedule (PFS) Rulc (76 FR 42828). The application of the price 
substitution policy to these 10 HCPCS codes would have reduced Medicare expenditures by an 
estimatcd $2.3 million over a four-quarter period. Another 41 HCPCS codes with partial data 
(Le., AMP data was available only for some ofthe NDCs used in the ASP calculation for a code) 
met the 5 perccnt threshold, and the OIG determined that missing data for 13 of these codes 
appeared to have little influence on the outcome ofthe comparison becausc the available data 
accurately captured underlying market trends.  The OIG also noted that 90 HCPCS codes werc 
excluded from the comparison in one or more quarters due to missing or unavailable AMP data. 
While we appreciatc the 01O's continuing efforts to examine payment made under the ASP 
methodology, we remain uncertain of the payoff from quarterly reports on ASP and AMP 
comparisons.  As we noted in the calendar year (CY) 2012 PFS rule (76 FR 42937) we believe 
that, based on the OIO's estimates, our proposed price substitution policy will generate minor 
savings for the program. 
OEI031100410  COMPARISON OF ASPs AND AMPs:  AN OVERVIEW OF 2010  28   
   
A P P E N D I X   ~   G  
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  29   
   
 A C K N O W L E D G M E N T S  
This report was prepared under the direction of Robert A. Vito, Regional 
Inspector General for Evaluation and Inspections in the Philadelphia 
regional office, and David E. Tawes, Director of the Medicare and 
Medicaid Prescription Drug Unit.   
Lauren McNulty served as the team leader for this study.  Central office 
staff who contributed to this report include Tasha Trusty.  
 
  OEI-03-11-00410  COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2010  30    
Office of Inspector General 
http://oig.hhs.gov 
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department of Health & Human Services (HHS) 
programs, as well as the health and welfare of beneficiaries served by those programs.  This 
statutory mission is carried out through a nationwide network of audits, investigations, and 
inspections conducted by the following operating components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 
audits with its own audit resources or by overseeing audit work done by others.  Audits 
examine the performance of HHS programs and/or its grantees and contractors in carrying 
out their respective responsibilities and are intended to provide independent assessments of 
HHS programs and operations.  These assessments help reduce waste, abuse, and 
mismanagement and promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 
HHS, Congress, and the public with timely, useful, and reliable information on significant 
issues.  These evaluations focus on preventing fraud, waste, or abuse and promoting 
economy, efficiency, and effectiveness of departmental programs.  To promote impact, OEI 
reports also present practical recommendations for improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 
of fraud and misconduct related to HHS programs, operations, and beneficiaries.  With 
investigators working in all 50 States and the District of Columbia, OI utilizes its resources 
by actively coordinating with the Department of Justice and other Federal, State, and local 
law enforcement authorities.  The investigative efforts of OI often lead to criminal 
convictions, administrative sanctions, and/or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support for OIGs internal operations.  OCIG represents OIG in all civil and 
administrative fraud and abuse cases involving HHS programs, including False Claims Act, 
program exclusion, and civil monetary penalty cases.  In connection with these cases, OCIG 
also negotiates and monitors corporate integrity agreements.  OCIG renders advisory 
opinions, issues compliance program guidance, publishes fraud alerts, and provides other 
guidance to the health care industry concerning the anti-kickback statute and other OIG 
enforcement authorities.