Department of Health and Human Services 
OFFICE OF 
 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
 
C P
ALCULATION OF  OTENTIAL 
 
I   -I R
NFLATION NDEXED  EBATES FOR 
 
M P B D  
EDICARE  ART    RUGS 
 
 
 
 
 
 
 
 
 
 
Suzanne Murrin  
Deputy Inspector General for 
Evaluation and Inspections 
 
August 2017 
OEI-12-17-00180   
   
Report in Brief 
August 2017  
Report No. OEI-12-17-00180   
 
Why OIG Did This Review   Calculation of Potential Inflation-Indexed 
OIG conducted this review to respond to  Rebates for Medicare Part B Drugs   
a congressional request asking us to 
update our earlier rebate calculations 
What OIG Found 
using only the inflation-indexed portion of 
An ASP-based rebate program for Medicare Part B drugs could have 
the Medicaid rebate methodology.  This 
resulted in $1.4 billion in inflation-indexed rebates in 2015 for 
report is part of OIG efforts to provide 
64 high-expenditure drugs.  An AMP-based rebate program for the 
relevant data for policymakers in their 
same 64 drugs could have resulted in $1.8 billion in inflation-indexed 
discussions related to Medicare Part B 
rebates that same year.  Several implementation issues related to 
drug spending.   
claims and data would need to be addressed should Congress decide 
Statutorily mandated rebates, which  to establish a rebate program under Part B. 
include both basic rebates and inflation-
What OIG Concludes   
indexed rebates (additional rebates owed 
Inflation-indexed rebates are intended to help protect State 
when drug prices rise faster than 
Medicaid programs and the Federal Government from 
inflation), amount to a substantial 
significant drug price increases.  Medicare Part B does not 
percentage of spending on Medicaid 
prescription drugs.  Medicare does not  have similar rebate authority.  The results of this current 
have the authority to collect rebates for  study build upon our original 2011 analysis.  This analysis did 
Part B drugs and biologicals (i.e., Part B  not take into account how implementation of a Part B rebate 
drugs).  In an earlier report, OIG found  requirement could affect beneficiary coinsurance obligations, 
that a rebate program for Part B drugs  beneficiary access to prescription drugs, and the overall 
could have resulted in at least $2.7 billion  pharmaceutical marketplace.  Furthermore, we did not 
in rebates (both basic rebate and  address the operational burden of implementing such a 
inflation-indexed rebate segments) in 
requirement. 
2011.   
Any consideration of a rebate program should address the 
How OIG Did This Review 
following administrative issues that may hinder rebate 
Applying the same formula that Medicaid 
collections:  the use of Healthcare Common Procedure Coding 
uses to determine inflation-indexed 
System codes, incorrect coding conversions, unavailable drug 
rebates, we calculated how much in 
pricing data, and difficulties in identifying 340B-purchased 
inflation-indexed rebates could have been 
drugs.   
associated with 64 high-expenditure Part 
B drugs in 2015.  We performed separate 
 
calculations using both average sales 
prices (ASPs) and average manufacturer   
prices (AMPs).  We also identified claims 
 
issues and coding-related issues that 
would need to be addressed before   
establishing a rebate program under 
 
Part B, should Congress choose to do so.    
Full report can be fou nd at http://oig.hhs.gov/oei/reports/oei-12-17-00180.asp 
       
   
 
TABLE OF CONTENTS 
 
Objectives ....................................................................................................1 
Background ..................................................................................................1 
Methodology ................................................................................................5 
Findings........................................................................................................7 
A rebate program for Medicare Part B drugs could have resulted in 
at least $1.4 billion in inflation-indexed rebates in 2015 .................7 
Several implementation issues related to claims and data would 
need to be addressed to establish a comprehensive drug rebate 
program for Medicare Part B ...........................................................9 
Conclusion .................................................................................................13 
Appendix ....................................................................................................14 
A:  Glossary ...................................................................................14    
B:  Inflation-Indexed Rebate Calculation ......................................15 
C:  Detailed Methodology ..............................................................16 
D:  Drug Descriptions ....................................................................20 
E:  ASP-Based and AMP-Based 2015 Part B Rebates for 
64 High-Expenditure Drugs ...........................................................22 
F:  Potential Inflation Indexed Rebates Associated With Each Drug 
Type ................................................................................................24 
Acknowledgments......................................................................................25
 
 
       
   
OBJECTIVES 
1.  To estimate the amount of rebates in 2015 if pharmaceutical 
manufacturers had been required to pay inflation-indexed rebates for 
Part B drugs. 
2.  To identify implementation issues that would need to be addressed if 
such rebates were required. 
BACKGROUND 
Rationale 
To protect Medicaid from significant price increases, Federal law requires 
drug manufacturers to pay additional rebates (i.e., inflation-indexed 
rebates) on drugs whose average manufacturer prices (AMPs) rise faster 
than inflation.1, 2  According to previous Office of Inspector General (OIG) 
work, these inflation-indexed rebates accounted for more than half of all 
the statutory rebates collected for selected brand-name drugs in 2012.3, 4  
No similar rebate authority exists for Medicare for Part B drugs and 
biologicals.5  
On August 30, 2016, OIG received a congressional request asking us to 
update our earlier calculations of potential rebates for Part B drugs using 
only the inflation-indexed portion of the rebate methodology.  This report 
presents an independent analysis to inform the ongoing congressional and 
administration discussions related to Medicare Part B drug spending. 
Medicare Part B Payments for Prescription Drugs 
Medicare coverage for outpatient prescription drugs is primarily provided 
under the Part D benefit.  However, Medicare also covers specific 
categories of outpatient drugs under its Part B benefit, including injectable 
drugs used in the treatment of cancer, certain vaccines, and inhalation and 
                        ____________________________________________________________ 
1 Section 1927(k)(1) of the Act defines AMP.  
2 Prior to January 2017, manufacturers were required to pay inflation-indexed rebates for 
only their brand-name drugs (i.e., single-source and innovator multiple-source drugs).  
Manufacturers are now required to pay inflation-indexed rebates for both their brand-
name and generic drugs (i.e., noninnovator multiple source) pursuant to section 
1927(c)(3) of the Social Security Act (the Act) as amended by the Bipartisan Budget Act 
of 2015. 
3 OIG, Medicaid Rebates for Brand-Name Drugs Exceeded Part D Rebates by a 
Substantial Margin, OEI-03-13-00650, April 2015.   
4 Collectively, State Medicaid programs and the Federal Government will hereinafter 
be referred to as Medicaid. 
5 Part B drugs and biologicals will hereinafter be referred to as Part B drugs. 
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  1   
   
infusion drugs used with durable medical equipment (DME).6  Medicare 
beneficiaries receive Part B drugs through physician offices; hospital 
outpatient departments; DME suppliers; and, in certain instances, 
pharmacies. 
To obtain payment for Part B drugs, providers submit claims to Medicare 
using Healthcare Common Procedure Coding System (HCPCS) codes (see 
Appendix A for a glossary that describes HCPCS codes and other 
technical terms used in this report).  Medicare pays for most Part B drug 
HCPCS codes at 106 percent of their volume weighted average sales 
prices (ASPs).7, 8  Beneficiaries are responsible for 20 percent of these 
payments in coinsurance.  Medicare and its beneficiaries spent a total of 
$25.8 billion for Part B drugs in 2015.  Although Part B paid for more than 
700 prescription drug HCPCS codes that year, spending was concentrated 
on a relatively small subset, with 64 HCPCS codes accounting for 
81 percent of total expenditures. 
Medicaid Drug Rebate Program 
The Omnibus Budget Reconciliation Act of 1990 created the Medicaid 
drug rebate program to reduce State and Federal Medicaid expenditures 
for prescription drugs.  For Federal financial participation to be available 
for covered outpatient drugs provided under Medicaid, manufacturers 
must enter into rebate agreements with the Secretary of Health and Human 
Services and pay quarterly rebates to State Medicaid agencies.9  In 2015, 
Medicaid spent $47 billion on prescription drugs.  Federal and State 
governments received $23 billion in statutorily-mandated rebates, which 
include both the inflation-indexed rebate and basic rebate segments of the 
rebate formula, that same year.   
Under their rebate agreements and pursuant to section 1927(b)(3) of the 
Social Security Act (the Act), manufacturers must provide the Centers for 
Medicare & Medicaid Services (CMS) with the AMP and drug category 
for each of their covered outpatient drugs on a quarterly basis.  For rebate 
purposes, drugs are generally categorized as one of three types:  
single-source, innovator multiple-source, or noninnovator multiple-
                        ____________________________________________________________ 
6 42 CFR  414.900(b); Medicare Benefit Policy Manual, ch. 15  50. 
7 79 Fed. Reg. 66770, 66874 (Nov. 10, 2014) and section 1847A of the Act.  Part B 
claims dated on or after April 1, 2013, incur a 2-percent reduction in payment in 
accordance with the Budget Control Act of 2011 and the American Taxpayer Relief Act 
of 2012 (i.e., sequestration).  This mandatory payment reduction is applied after the 
beneficiarys coinsurance has been determined. 
8 Section 1847A(c) of the Act defines ASP. 
9 Sections 1927(a)(1) and (b)(1) of the Act. 
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  2   
   
source.10  Manufacturers of single-source and innovator multiple-source 
drugs must also provide CMS with the best price for each covered 
outpatient drug.11  Manufacturers of noninnovator multiple-source drugs 
are not required to provide best prices. 
Medicaid Drug Rebate Calculation 
Under section 1927 of the Act, manufacturers are responsible for 
accurately calculating and paying rebates to the States.  To assist States, 
CMS uses the pricing and drug category data reported by manufacturers to 
calculate by national drug code (NDC) a unit rebate amount (URA) every 
quarter for each covered outpatient drug included in the Medicaid drug 
rebate program.  In general, the URA equals the sum of the basic rebate 
and the inflation-indexed rebate (if any).  
Basic Rebate.  Pursuant to section 1927(c) of the Act, the formula used to 
calculate the URA depends on the drug category reported by the 
manufacturer.  The basic URA for a noninnovator multiple-source drug is 
13 percent of the AMP.  The basic URA for a single-source or innovator 
multiple-source drug is the greater of 23.1 percent of the AMP or the 
difference between the AMP and best price.  In addition, for drugs 
approved exclusively for pediatric indications and certain blood-clotting 
factors, the basic rebate is the greater of 17.1 percent of AMP or the 
difference between the AMP and the best price.  
Inflation-Indexed Rebate.  If the AMP for a drug has risen faster than the 
Consumer Price Index-Urban (CPI-U), the drugs manufacturer must pay 
an additional rebate over and above the basic URA.12  The formula in 
section 1927(c) of the Act requires adjusting the original AMP reported for 
an NDC by inflation and comparing the result to the AMP reported in a 
given quarter.  See Appendix B for a detailed description of the 
inflation-indexed rebate calculation 
Total Rebate.  CMS provides the URA for each NDC to State Medicaid 
agencies each quarter.  To determine the total rebate due from 
manufacturers for each NDC, the URA is multiplied by the total number 
of units of the NDC reimbursed by the State during the quarter.  This 
utilization figure should include all units for which Medicaid paid a 
                        ____________________________________________________________ 
10 In general terms, a single-source drug would typically be a brand-name product with 
no available generic versions.  An innovator multiple-source drug would typically be a 
brand-name product that has available generic versions.  A noninnovator multiple-source 
drug would be a generic version of any innovator product. 
11 Section 1927(b)(3)(A)(i)(II) of the Act.  Section 1927(c)(1)(C) of the Act defines best 
price.  
12 Section 1927(c)(2) of the Act.  
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  3   
   
portion of the claim, including Part B claims for beneficiaries who also 
have coverage under Medicare (hereinafter referred to as dual eligibles) 
for which Medicaid covered any Part B coinsurance or deductible.   
The 340B Program and Prohibition of Duplicate Discounts.  The 340B 
Drug Discount Program (340B program) requires drug manufacturers to 
provide discounted outpatient drugs to certain eligible health care 
entitiesknown as covered entities that serve the underinsured or 
uninsured and include disproportionate share hospitals.13  In general, State 
Medicaid agencies are responsible for ensuring that manufacturers do not 
provide duplicate discounts for drugs purchased under the 340B 
program.  Manufacturers provide duplicate discounts when they pay 
Medicaid rebates to States for drugs sold at discounted prices through the 
340B program.  Duplicate discounts under Medicaid are prohibited by 
law.14  To prevent subjecting drug manufacturers to duplicate discounts 
when claiming Medicaid rebates, States need to exclude claims for drugs 
purchased under the 340B program (340B claims) when calculating the 
total rebates owed.  
Previous OIG Work 
In 2011, a member of Congress requested that OIG quantify the potential 
rebates that could be associated with a rebate program for Medicare Part B 
drugs, similar to that under Medicaid.  In response, OIG estimated that 
requiring manufacturers to pay full rebates (i.e., both basic and 
inflation-indexed rebates) could have resulted in rebates amounting to 
between $1.9 billion and $2.4 billion in 2010 for 20 brand-name drugs.15  
In 2013, OIG conducted a study estimating the amount of rebates that 
could be associated with a rebate program, similar to that under Medicaid, 
for Part B drugs.16  OIG found that implementing a Part B rebate program 
could have resulted in at least $2.7 billion in rebates in 2011 for 60 high-
expenditure Part B drugs (note:  this estimate was based on both segments 
of the rebate calculation  basic rebates and inflation-indexed rebates).  
We recommended that CMS examine the potential impacts of establishing 
a prescription drug rebate program under Medicare Part B and, if 
appropriate, seek legislative change.  CMS did not concur with this 
recommendation because the annual Presidents Budget did not include a 
proposal to establish a Part B rebate program.  In addition, CMS stated 
                        ____________________________________________________________ 
13 Covered entities do not necessarily purchase all of their drugs at 340B prices.  Family 
planning clinics, disproportionate share hospitals, and federally qualified health centers 
are other examples of covered entities.   
14 42 U.S.C.  256b(a)(5)(A). 
15 https://oig.hhs.gov/newsroom/spotlight/2011/rebate-letter.pdf  
16 OIG, Medicare Could Collect Billions If Pharmaceutical Manufacturers Were 
Required To Pay Rebates for Part B Drugs, OEI-12-12-00260, September 2013.   
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  4   
   
that a comprehensive examination of the impact of such a rebate program 
would require significant resources. 
METHODOLOGY 
    Data Analysis 
Selection of Drugs.  We identified 498 HCPCS codes for which we could 
determine both ASP- and AMP-based rebate amounts (hereinafter referred 
to as rebatable drugs).  Using Medicare claims data, we summarized 
2015 Medicare expenditures and utilization in all settings and selected the 
64 HCPCS codes with the highest total expenditures.17  Spending for these 
64 HCPCS codes constituted 81 percent of total 2015 Part B drug 
expenditures and 90 percent of expenditures for rebatable drugs.   
Calculation of ASP-Based and AMP-Based Inflation-Indexed Rebate 
Amounts.  Because Part B payments for most covered drugs are based on 
ASPs, we calculated inflation-indexed rebates using this benchmark in 
each quarter of 2015.  We also calculated inflation-indexed rebates based 
on AMPsthe pricing benchmark used to determine Medicaid rebates.  
The distinct statutory definitions of ASP and AMP (see Appendix A) mean 
that certain sales may be included in one benchmark but not the other, and 
sometimes result in meaningful differences between the two figures. 
For all NDCs associated with each of the 64 HCPCS included in our 
review, we calculated the inflation-indexed rebate using the same method 
that CMS uses to calculate the inflation-indexed rebate for Medicaid drugs 
(i.e., we substituted ASPs for AMPs in the statutory formula).  We then 
converted each NDCs inflation-indexed rebate amount so that it 
represented the amount of the drug specified by the HCPCS code. 
Removing Claims for Which Manufacturers Would Not Owe Rebates.  We 
presumed that, similar to Medicaid, duplicate discounts would also be 
prohibited by law under Medicare if a rebate program were established for 
Part B drugs.  Therefore, before calculating the total Part B 
inflation-indexed rebate amounts, we removed claims for dual-eligible 
beneficiaries and claims submitted by 340B-covered entities.  We then 
summarized the utilization for the remaining claims to determine the total 
units of each HCPCS code that would have been subject to rebates in 
2015. 
                        ____________________________________________________________ 
17 We excluded claims for hospitals that are paid at cost rather than under the hospital 
outpatient prospective payment system (e.g., critical access hospitals, hospitals of the 
Indian Health Service).  Furthermore, our review includes only drugs that were separately 
paid for by Medicare (i.e., we did not include drugs for which Medicare bundles payment 
with associated services). 
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  5   
   
Total Rebate Calculations.  We apportioned the remaining utilization 
among the NDCs within each HCPCS code using quarterly sales data 
reported by manufacturers (i.e., one NDC represents 10 percent of total 
sales, and another NDC represents 15 percent).  To determine total 
inflation-indexed rebate amounts, we multiplied the estimated utilization 
of each NDC by its ASP-based and AMP-based inflation-indexed rebate 
amounts and summarized the NDC-level figures by HCPCS code. 
Implementation Issues Related to Calculating and Collecting Rebates for 
Part B.  We reviewed previous OIG work involving Medicaid rebates, 
ASP and AMP data, and the 340B program to identify potential issues that 
would need to be addressed before implementing a Part B rebate program.  
We also reviewed issues that we encountered during the current analysis of 
this study. 
See Appendix C for a detailed description of our methodology. 
 
Limitations 
We did not review Part B claims or pricing data for accuracy.  Because 
there is no 340B identifier on Part B claims, we removed all claims 
submitted by 340B-covered entities from our analysis.  Therefore, we may 
have inadvertently removed claims for drugs not purchased at 340B 
prices, possibly resulting in underestimating potential collections 
associated with a Part B rebate program. 
Furthermore, our rebate estimates apply only to the 64 drugs in our sample 
that represent 81 percent of total 2015 Part B drug expenditures; the 
estimates cannot be generalized to all drug HCPCS codes paid under 
Part B.   
This analysis did not consider how manufacturers might adjust their 
pricing strategies in response to new rebates.  We also did not explore how 
such rebates may affect beneficiaries.  Furthermore, we did not address the 
operational burden of implementing such a requirement. 
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.   
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  6   
   
FINDINGS 
A rebate program for Medicare Part B drugs could 
have resulted in at least $1.4 billion in 
inflation-indexed rebates in 2015  
Medicare and its beneficiaries spent $20.8 billion in 2015 for the 64 
selected high-expenditure Part B drugs included in our review.  That same 
year, a rebate program for Part B drugs could have resulted in $1.4 billion 
in inflation-indexed rebates when ASPs rose faster than inflation (see 
Exhibit 1).  Inflation-indexed rebates when AMPs rose faster than inflation 
could have resulted in $1.8 billion in rebates (see Appendix E for a 
summary of potential rebates by HCPCS code).   
Exhibit 1:  Potential Inflation-Indexed Rebates  
Actual Part B Drug  Potential Inflation-
Rebate Methodology  Percentage 
Expenditures  Indexed Rebates 
ASP-based  $20,816,953,325  $1,421,459,195  7% 
AMP-based  $20,816,953,325  $1,812,830,465  9% 
Source:  OIG analysis of CMSs 2015 ASP and AMP files and the 2015 National Claims History file 
An ASP-based rebate program for Medicare Part B drugs could 
have resulted in $1.4 billion in inflation-indexed rebates for 
drugs with ASPs that rose faster than inflation  
An ASP-based inflation-indexed rebate program could have resulted in 
$1.4 billion (7 percent) in rebates for the 64 drugs included in this review.  
Almost all of the total projected rebates were attributable to single-brand 
HCPCS codes (i.e., codes associated with one brand-name drug produced 
by a single manufacturer), which represented $1.3 billion of the total 
potential rebates and $18.5 billion of the total expenditures (see Appendix 
F).   
In 2015, a rebate program could have resulted in inflation-indexed rebates 
for 50 of the 64 drugs.  ASP-based rebates for just 20 of these 50 HCPCS 
codes accounted for 89 percent of the $1.4 billion in total projected 
rebates; just 5 drugs accounted for half of total projected rebates (see 
Exhibit 2).  In contrast, there would have been no inflation-indexed 
rebates for 14 of the 64 drugs in 2015 because their associated ASPs did 
not rise faster than inflation.  For example, there would have been no 
inflation-indexed rebates for 2 of the 5 highest-expenditure drugs 
(aflibercept and ranibizumab), as their ASPs have remained unchanged or 
have decreased since their introduction to the market. 
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  7   
   
Exhibit 2:  Drugs with the highest potential inflation-indexed rebates using 
ASP   
 
An AMP-based rebate program for Medicare Part B drugs 
could have resulted in $1.8 billion in inflation-indexed rebates 
for drugs with AMPs that rose faster than inflation 
An AMP-based inflation-indexed rebate program (i.e., using the same 
rebate formula and pricing data used in Medicaid) could have resulted in 
$1.8 billion (9 percent) in rebates for the 64 drugs included in this review.  
Once again, almost all of the total projected rebates were attributable to 
single-brand HCPCS codes. 
In 2015, a rebate program could have resulted in inflation-indexed rebates 
for 56 of the 64 drugs.  AMP-based rebates for just 19 of the 56 HCPCS 
codes accounted for 89 percent of the $1.8 billion in total projected 
rebates; just 5 drugs account for nearly half of total projected rebates (see 
Exhibit 3).  In contrast, there would have been no rebates for 8 of the 64 
drugs in 2015 because their associated AMPs did not rise faster than 
inflation.   
 
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  8   
   
Exhibit 3:  Drugs with the highest potential inflation-indexedrebates using 
AMP 
 
Several implementation issues related to claims and 
data would need to be addressed to establish a 
comprehensive drug rebate program for Medicare 
Part B  
The use of HCPCS codes, incorrect coding conversions, unavailable drug 
pricing data, and difficulties in identifying drugs purchased under the 
340B program would all affect CMSs ability to calculate accurate rebates 
and invoice the appropriate manufacturers for drug claims.  OIG has 
identified many of these issues in prior reports and has made relevant 
recommendations that have improved the Medicaid drug rebate program.     
The use of HCPCS codes to bill for Part B drugs would present 
challenges when identifying the manufacturer responsible for 
rebates  
Because NDCs are not typically listed on Part B drug claims, CMS would 
not be able to determine the appropriate manufacturer to invoice in certain 
instances.  Therefore, the use of HCPCS codes rather than NDCs to bill 
for Part B drugs would need to be addressed before Medicare could 
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  9   
   
effectively collect rebates for multiple-brand and generic drugs.  For 15 of 
the 64 HCPCS codes under review, CMSs crosswalk file lists NDCs from 
more than 1 manufacturer, and multiple manufacturers reported sales 
during the quarters under review.   
For many years, Medicaid faced a similar problem in collecting rebates for 
physician-administered drugs, i.e., the principal type of drug also covered 
under Medicare Part B.  To address this issue, the Deficit Reduction Act of 
2005 mandated that claims for certain physician-administered drugs 
include the NDC for the drug being billed.   
Incorrect unit conversions related to HCPCS codes could 
cause CMS to improperly invoice manufacturers 
Even if providers were required to report both NDCs and HCPCS codes 
on physician-administered drug claims, the information may be inaccurate.  
In our June 2011 report on physician-administered drugs, OIG found that 
Medicaid providers incorrectly converted HCPCS code units to NDC units 
on claims and that providers listed NDCs that do not correspond to the 
same drug as the HCPCS code.18  Because manufacturers are invoiced for 
rebates on the basis of the number of units billed by providers, inaccurate 
conversions and incorrect codes may cause States to request substantially 
more or less than they are actually owed.  HCPCS/NDC coding and 
subsequent unit conversion issues were cited by many States as a primary 
cause of manufacturer rebate disputes.  To ensure that manufacturers are 
invoiced for the correct number of units under a Part B rebate program, 
CMS would need to verify that providers accurately convert HCPCS units 
to NDC units on Part B claims. 
Unreported drug pricing data would prevent Medicare from 
collecting rebates for all Part B drugs 
A previous OIG study found that for a small number of Part B HCPCS 
codes, none of the associated drugs were manufactured by companies with 
Medicaid drug rebate agreements.19  Therefore, if these manufacturers 
chose not to report ASPs or AMPs, the missing pricing data would prevent 
Medicare from calculating and collecting rebates for the relevant drugs.  
This barrier to a Part B drug rebate program would be addressed if 
legislation were enacted that requires all manufacturers of Part B drugs to 
report the necessary pricing data, as OIG has recommended in the past.  
CMS did not concur with this recommendation and stated that a proposal 
                        ____________________________________________________________ 
18 OIG, States Collection of Medicaid Rebates for Physician-Administered Drugs, 
OEI-03-09-00410, June 2011. 
19 OIG, Limitations in Manufacturer Reporting of Average Sales Price Data for Part B 
Drugs, OEI-12-13-00040, July 2014. 
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  10   
   
to require manufacturers of Part B drugs to submit ASPs was not included 
in the annual Presidents budget. 
Drugs purchased at 340B prices have proven challenging to 
identify and exclude from rebates 
If a Part B rebate program were implemented, Medicare would likely be 
responsible for ensuring that manufacturers do not provide duplicate 
discounts for drugs purchased under the 340B program.20  Like Medicaid, 
Medicare would need to exclude claims for drugs purchased at 340B 
prices from the utilization data sent to drug manufacturers when collecting 
rebates.  However, OIG has found that it is challenging for States to 
prevent duplicate discounts in Medicaid because they cannot always 
identify 340B claims with current billing and claims policies.  A 2011 OIG 
study found that 31 States had not implemented steps necessary for 
collecting rebates on all eligible physician-administered drugs purchased 
by 340B-covered entities.21   
A 2016 OIG study also highlighted the challenge faced by States when 
identifying 340B-purchased drugs.22  OIG found that fewer than half of the 
States included in the review use claim-level methods to identify 340B 
drug claims.  They instead use provider-level methods to identify 340B 
drug claims, which may not accurately identify all individual 340B drug 
claims.23  Provider-level methods generally treat all drug claims from a 
given covered entity in the same waythat is, as either 340B claims or 
non-340B claimsand do not allow covered entities to differentiate 
among specific claims.  In practice, however, a covered entity may submit 
both 340B claims and non-340B claims to Medicaid.  OIG recommended 
that CMS require States to use claim-level methods to identify 340B 
claims.  CMS did not concur with our recommendation, noting that while 
it agrees with the importance of claim-level methods, the statute does not 
contemplate such a requirement for States.   
                        ____________________________________________________________ 
20 OIG found that Medicare Part B and its beneficiaries spent $3.5 billion for 
340B-purchased drugs in 2013, representing nearly one-fifth of the $19 billion that Part B 
spent that year on the HCPCS codes included in our review.  OIG, Part B Payments for 
340B-Purchased Drugs, OEI-12-14-00030, November 2015. 
21 OIG, States Collection of Medicaid Rebates for Physician-Administered Drugs, 
OEI-03-09-00410, June 2011. 
22 OIG, State Efforts to Exclude 340B Drugs from Medicaid Managed Care Rebates, 
OEI-05-14-00430, June 2016. 
23 Provider-level methods identify covered entities that use 340B-purchased drugs for 
their Medicaid patients and exclude all drug claims billed by those entities when 
determining total rebates owed.  The most prominent provider-level method is HRSAs 
Medicaid Exclusion File.  Claim-level methods exclude individual drug claims that 
covered entities have explicitly identified on the claim as a 340B-purchased drug.  
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  11   
   
Because there is no 340B identifier on Part B claims, problems with 
identifying drugs purchased at 340B prices could affect the accuracy of 
Part B rebates.  For example, to be conservative in Part B rebate 
calculations, CMS could elect to exclude all claims submitted by covered 
entities because drugs that were purchased at 340B prices cannot be 
identified.  This might result in unnecessarily excluding claims for drugs 
not purchased at 340B prices.  In this case, Medicare would not collect the 
full amount manufacturers owe in rebates.  On the other hand, if CMS 
could not identify claims submitted by covered entities, Medicare could 
exclude too few claims, and manufacturers would be inappropriately billed 
in excess of the amounts owed in rebates.  Requiring claim-level methods 
to identify 340B-purchased drugs on Part B claims, as OIG has 
recommended for Medicaid, could resolve this challenge.  
   
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  12   
   
CONCLUSION  
Each year, manufacturers pay statutorily-mandated Medicaid drug rebates   
amounting to a substantial percentage of the billions spent on Medicaid 
prescription drugs.  A considerable portion can be attributed to the 
inflation-indexed portion of the rebate methodology, triggered when 
manufacturers significantly increase drug prices.  Medicare does not have 
the authority to collect rebates from manufacturers when the cost of Part B 
drugs increases faster than inflation. 
We found that prices for most of the high-expenditure Part B drugs 
included in our study rose faster than inflation in 2015 and that an 
inflation-indexed rebate program for Part B could have resulted in at least 
$1.4 billion in inflation-indexed rebates for 64 high-expenditure outpatient 
prescription drugs in 2015.  However, we did not address the operational 
burden of implementing such a rebate program or related issues, such as 
how such a program could affect beneficiary coinsurance obligations, 
beneficiary drug access, and the overall pharmaceutical marketplace. 
This report presents an independent analysis to inform the ongoing 
congressional and administration discussions related to Medicare Part B 
drug spending.  The results of this current study build upon our original 
2013 work and help inform analysis of the potential impact of a Part B 
rebate program.  In implementing a rebate program under Medicare 
Part B, it would be essential that the data- and claims-related issues 
described in our findings be addressed.   
   
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  13   
   
APPENDIX A 
Glossary 
340B claim:  Claims for drugs purchased under the 340B Drug Discount 
Program.  To prevent subjecting drug manufacturers to duplicate discounts 
when claiming Medicaid rebates, States need to exclude 340B claims 
when calculating the total rebates owed by manufacturers. 
Average manufacturer price (AMP):  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.  CMS uses 
AMPs to calculate Medicaid rebate amounts. 
Average sales price (ASP):  A manufacturers sales of a drug (with certain 
exceptions) to all purchasers in the United States in a quarter divided by 
the number of units of the drug sold by the manufacturer in that same 
quarter, net of certain price concessions and discounts.  Medicare pays for 
most Part B drug codes at 106 percent of their ASPs. 
Best price:  The lowest price available from the manufacturer to any 
wholesaler, retailor, provider, health maintenance organization, nonprofit 
entity, or governmental entity within the United States, with certain 
exceptions.  CMS uses best price to calculate Medicaid rebate amounts for 
certain categories of drugs. 
Healthcare Common Procedure Coding System (HCPCS) code:  
Procedure codes used by providers to submit claims to Medicare and to 
obtain payment for Part B drugs.  In the case of prescription drugs, each 
HCPCS code defines the drugs name and the amount of drug represented 
by one unit of the HCPCS code but does not specify manufacturer or 
package size information. 
National drug code (NDC):  An 11-digit code that is divided into three 
segments identifying (1) the firm that manufactures, distributes, or 
repackages the drug product; (2) the strength, dosage form, and 
formulation of the product; and (3) the products package size.  CMS 
calculates rebate amounts for each NDC representing a Medicaid-covered 
outpatient drug.  
Unit rebate amount (URA):  CMS uses the pricing and drug category data 
reported by manufacturers to calculate a URA every quarter for each NDC 
included in the Medicaid drug rebate program.  The URA equals the sum 
of the basic rebate and the inflation-indexed rebate (if any).   
 
 
   
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  14   
   
APPENDIX B 
Inflation-Indexed Rebate Calculation 
If the AMP for a brand-name drug (i.e., single-source or innovator 
multiple-source drug) has risen faster than inflation, the drugs 
manufacturer must pay an additional rebate over and above the basic 
URA.  To determine whether a brand-name drug is subject to the increased 
rebate amount, CMS compares the reported AMP for a given quarter to its 
inflation-adjusted baseline AMP.  The baseline AMP for a drug is either 
the AMP for the calendar quarter beginning July 1, 1990, or, for drugs 
approved by the Food and Drug Administration after October 1, 1990, the 
AMP for the first quarter after the drugs initial market date.   
To adjust the baseline AMP for inflation, CMS first divides the baseline 
AMP by the baseline consumer price index, which is the consumer price 
index for September 1990 or the consumer price index for the first month 
before the first quarter after the drugs initial market date.  The result of 
that calculation is then multiplied by the quarterly consumer price index, 
which is the consumer price index for the month before the quarter being 
calculated.  The resulting figure is known as the inflation-adjusted 
baseline AMP.   
If the reported AMP is greater than the inflation-adjusted baseline AMP, 
the difference is added to the basic rebate when determining the URA.  
Manufacturers are also required to pay inflation-indexed rebates for their 
generic (i.e., noninnovator multiple-source) drugs as of January 2017.24   
   
                        ____________________________________________________________ 
24 Section 1927(c)(3) of the Act as amended by the Bipartisan Budget Act of 2015. 
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  15   
   
APPENDIX C 
Detailed Methodology 
Data Analysis 
Selection of Drugs.  Medicare paid providers for 765 Part B drug HCPCS 
codes in 2015.  We removed 267 of the HCPCS codes that year because 
(1) the associated products were not subject to Medicaid rebates under 
current rules, or (2) rebate amounts could not be determined for various 
reasons (see Exhibit 4).  The former group includes supplies, vaccines, and 
products classified as devices by the Food and Drug Administration and 
Medicaid.  The latter group includes products for which rebates could not 
be determined (e.g., diagnostic agents).   
For the remaining 498 HCPCS codes (hereinafter referred to as rebatable 
drugs), we used the National Claims History (NCH) file to summarize 
2015 Medicare expenditures and utilization in all settings (i.e., physician 
offices, and hospital outpatient departments, durable medical equipment 
suppliers) and selected the 64 HCPCS codes that accounted for 90 percent 
of 2015 expenditures for rebatable Part B drugs. 25  Spending for these 64 
codes constituted 81 percent of total 2015 Part B drug expenditures. 
Exhibit 4:  Summary of Part B Drug HCPCS Codes Included in Analysis 
Number of HCPCS  2015 Part B  Percentage 
Drugs Removed 
Codes  Spending  of Total 
765 (All Part B Drug 
None  $25.8 billion  100% 
HCPCS codes) 
664 (After removing  38 devices 
drugs not subject to  4 supplies  $24 billion  93% 
rebates)  59 vaccines 
498 (After removing  4 blood products 
drugs for which we  66 diagnostic agents 
$23.2 billion  90% 
could not calculate  14 Not Otherwise Classified codes 
rebates)   82 other drugs without pricing data 
64 (Remaining codes with the highest Part B expenditures)  $20.8 billion  81% 
Source:  OIG analysis of CMSs 2015 ASP and AMP files and the 2015 NCH file. 
                        ____________________________________________________________ 
25 We excluded claims for hospitals that are paid at cost rather than under the hospital 
outpatient prospective payment system (e.g., critical access hospitals, hospitals of the 
Indian Health Service).  Furthermore, our review includes only drugs that were separately 
paid for by Medicare (i.e., we did not include drugs for which Medicare bundles payment 
with associated services). 
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  16   
   
Categorization of Drugs.  Using CMSs quarterly 2016 ASP files, we 
categorized the 64 HCPCS codes as representing a single-brand drug, 
multiple-brand drug, or generic drug (see Appendix D for a list of the 64 
HCPCS codes and their respective categorizations).  A single-brand 
HCPCS code represents only one brand-name drug (and no generics) 
produced by a single manufacturer.  We classified 50 of the 64 HCPCS 
codes as single brand.  A multiple-brand HCPCS code represents two or 
more brand-name drugs produced by more than one manufacturer.  We 
classified 5 of the 64 HCPCS codes as multiple brand.  A generic HCPCS 
code represents either a combination of brand-name and generic drugs or 
generic drugs only.  We classified 9 of the 64 HCPCS codes as generic. 
Calculation of ASP-Based Inflation-Indexed Rebate Amounts.  We 
calculated inflation-indexed rebates based on ASPsthe pricing 
benchmark used to determine Medicare Part B paymentsfor each of the 
64 HCPCS codes included in our review.  For all NDCs included in our 
review (i.e., single-source, innovator multiple-source drug, and 
noninnovator multiple-source NDCs), we calculated the quarterly 
ASP-based inflation-indexed rebate using the same method that CMS uses 
to calculate the inflation-indexed rebate for Medicaid drugs.   
Specifically, for each drug, we calculated its inflation-adjusted baseline 
ASP.26  We then compared the drugs inflation-adjusted baseline ASP to its 
ASP in a given quarter.  If the ASP was greater than the inflation-adjusted 
baseline ASP, the manufacturer would have owed the difference as the 
drugs inflation-indexed rebate amount. 
Calculation of AMP-Based Inflation-Indexed Rebate Amounts.  We also 
calculated inflation-indexed rebates based on AMPsthe pricing 
benchmark used to determine Medicaid rebatesfor each of the 
64 HCPCS codes included in our review.  We calculated the 
inflation-indexed rebate amount for each single-source and innovator 
multiple-source drug NDC within a HCPCS code in our sample using 
Medicaid URAs reported for the associated NDCs in each quarter of 2015.  
A Medicaid URA includes basic and inflation-indexed rebates.  Therefore, 
to calculate the inflation-indexed portion of the rebate for single-source 
                        ____________________________________________________________ 
26 Similar to base-date AMP, we defined base-date ASP as the drugs ASP in the first 
reported quarter or, for older drugs, the drugs ASP when the ASP-based payment went 
into effect in 2005.  Similar to CMSs inflation-adjusted AMP methodology, we adjusted 
the baseline ASP for inflation by first dividing the baseline ASP by the baseline 
consumer price index for all urban consumers (consumer price index), which is the 
consumer price index for the first month before the first reported quarter.  The result of 
that calculation is then multiplied by the quarterly consumer price index, which is the 
consumer price index for the month before the quarter being calculated. 
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  17   
   
and innovator multiple-source drugs, we reduced each NDCs URA by its 
basic rebate amount, which, for single-source or innovator multiple-source 
drugs is the greater of 23.1 percent of the AMP or the difference between 
the AMP and best price.27 
Manufacturers are required to pay inflation-indexed rebates for their 
generic (i.e., noninnovator multiple-source) drugs beginning in 
January 2017.28  Because these requirements were not in effect during our 
study period, the Medicaid URA for these NDCs did not include the 
inflation-indexed portion of the rebate.  Therefore, for generic drugs, we 
calculated the inflation-indexed rebate using the same method that CMS 
uses to calculate the inflation-indexed rebate for Medicaid drugs.  For each 
drug, we calculated its inflation-adjusted baseline AMP.29  We then 
compared the drugs inflation-adjusted baseline AMP to its AMP in a 
given quarter.  If the AMP was greater than the inflation-adjusted baseline 
AMP, the manufacturer would have owed the difference as the drugs 
inflation-indexed rebate amount. 
The AMP and URA are calculated for the lowest identifiable quantity of 
the drug contained in that NDC (e.g., 1 milliliter).  In contrast, ASPs and 
utilization are reported by manufacturers for the entire amount of the drug 
contained in the NDC (e.g., 50 milliliters).  When calculating Part B 
payment amounts, CMS converts the ASPs and utilization so that they 
represent the amount of the drug contained in the HCPCS code (e.g., 
5 milliliters).  To ensure that each NDCs inflation-indexed rebate amount 
was representative of the correct number of units for the HCPCS code, we 
converted the inflation-indexed rebate amount so that it represents the 
amount of the drug specified by the HCPCS code. 
Removing Claims for Which Manufacturers Would Not Owe Rebates.  
Before calculating the total potential Part B inflation-indexed rebate 
amounts, we removed from our analysis claims for which manufacturers 
would not owe rebates.  First we excluded claims associated with dual 
eligible beneficiaries because those claims should have already been 
                        ____________________________________________________________ 
27 In addition, for drugs approved exclusively for pediatric indications and certain blood-
clotting factors, the basic rebate is the greater of 17.1 percent of AMP or the difference 
between the AMP and the best price. Section 1927(c) of the Act. 
28 Section 1927(c)(3) of the Act as amended by the Bipartisan Budget Act of 2015. 
29 Base-date AMP is the AMP for the first quarter after the drugs market date.  We used 
CMSs methodology to adjust the baseline AMP for inflation.  We first divided the 
baseline AMP by the baseline consumer price index for all urban consumers (consumer 
price index), which is the consumer price index for the first month before the first quarter 
after the drugs initial market date.  We then multiplied the result of that calculation by 
the quarterly consumer price index, which is the consumer price index for the month 
before the quarter being calculated. 
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  18   
   
subject to Medicaid rebates.  We identified Part B drug claims for dual 
eligibles by matching beneficiaries health care identifier numbers listed 
on Part B drug claims against the beneficiary enrollment file.   
Next, we removed 340B claims from our analysis because duplicate 
discounts are prohibited by law.30, 31  Using the Health Resources and 
Services Administrations 340B-covered entities file accessed on 
November 16, 2016, we identified and removed any Part B drug claims 
submitted by 340B-covered entities.  We then summarized the utilization 
for the remaining claims to determine the total units of each HCPCS code 
that would have been subject to rebates in 2015. 
Total Rebate Calculations.  After removing claims associated with dual 
eligible beneficiaries and/or 340B entities, we apportioned the remaining 
utilization among the NDCs within each HCPCS code.  Because NDC-
level utilization is not tracked under Part B, we used CMSs ASP files to 
determine the percentage of total units sold of a drug represented by each 
NDC (i.e., one NDC represents 10 percent of total sales, and another NDC 
represents 15 percent).  We then multiplied these percentages by the total 
quarterly utilization of each HCPCS code to estimate utilization for each 
NDC.32  To determine total inflation-indexed rebate amounts, we 
multiplied the estimated utilization of each NDC by its AMP-based and 
ASP-based inflation-indexed rebate amounts and summarized the NDC-
level figures by HCPCS code. 
We also summarized HCPCS codes ASP-based and AMP-based rebates 
by whether they represented a single-brand, multiple-brand drug, or 
generic drug in 2015. 
Implementation Issues Related to Calculating and Collecting Rebates for 
Part B.  We reviewed previous OIG work involving Medicaid rebates, 
AMP and ASP data, and the 340B program to identify potential issues that 
would need to be addressed before implementing a Part B rebate program.  
We also reviewed issues that we encountered during the analysis of this 
                        ____________________________________________________________ 
30 Manufacturers provide duplicate discounts when they pay Medicaid rebates to States 
for drugs sold at discounted prices through the 340B Drug Pricing Program (i.e., 340B 
program).  42 U.S.C.  256b(a)(5)(A). 
31 We presumed that similar to Medicaid, duplicate discounts would also be prohibited by 
law under Medicare if a rebate program were established for Part B drugs.   
32 We determined that the number of units listed in the 2015 NCH file for two HCPCS 
codes (representing factor viii recombinant and factor viia, which are used to treat 
hemophilia) underrepresented the actual number of HCPCS units reimbursed by a 
substantial margin.  We estimated the correct number of Medicare units by dividing the 
total Part B spending (after removing dual-eligible and 340B claims) by the Part B 
payment amount in each quarter.   
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  19   
   
study, such as identifying claims for drugs purchased at 340B prices and 
obtaining information to calculate drug rebates.   
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  20   
   
APPENDIX D 
Drug Descriptions 
HCPCS Code  HCPCS Code Description  HCPCS Dosage  HCPCS Classification 
A9606  Radium ra-223 dichloride  1 microCurie  Single-Brand 
C9027  Pembrolizumab injection  1 mg  Single-Brand 
C9453  Nivolumab injection  1 mg  Single-Brand 
J0129  Abatacept injection  10 mg  Single-Brand 
J0178  Aflibercept injection  1 mg  Single-Brand 
J0256  Alpha 1 proteinase inhibitor injection  10 mg  Multiple-Brand 
J0490  Belimumab injection  10 mg  Single-Brand 
J0585  Onabotulinumtoxina injection  1 unit  Single-Brand 
J0717  Certolizumab pegol injection  1 mg  Single-Brand 
J0878  Daptomycin injection  1 mg  Single-Brand 
J0881  Darbepoetin alfa injection  1 mcg  Single-Brand 
J0885  Epoetin alfa injection  1000 units  Multiple-Brand 
J0894  Decitabine injection  1 mg  Generic 
J0897  Denosumab injection  1 mg  Single-Brand 
J1300  Eculizumab injection  10 mg  Single-Brand 
J1442  Filgrastim (g-csf) injection  1 mcg  Single-Brand 
J1453  Fosaprepitant injection  1 mg  Single-Brand 
J1459  Immune globulin (privigen) injection  500 mg  Single-Brand 
J1559  Immune globulin (hizentra) injection  100 mg  Single-Brand 
Immune globulin (gamunex-c/gammaked) 
J1561  500 mg  Multiple-Brand 
injection 
J1568  Immune globulin (octagam) injection  500 mg  Single-Brand 
J1569  Immune globulin (gammagard liquid) injection  500 mg  Single-Brand 
J1602  Golimumab injection  1 mg  Single-Brand 
J1745  Infliximab injection  10 mg  Single-Brand 
J2260  Milrinone lactate injection  5 mg  Generic 
J2323  Natalizumab injection  1 mg  Single-Brand 
J2353  Octreotide depot injection  1 mg  Single-Brand 
J2357  Omalizumab injection  5 mg  Single-Brand 
J2469  Palonosetron hcl injection  25 mcg  Single-Brand 
J2505  Pegfilgrastim injection  6 mg  Single-Brand 
J2778  Ranibizumab injection  0.1 mg  Single-Brand 
J2785  Regadenoson injection  0.1 mg  Single-Brand 
J2796  Romiplostim injection  10 mcg  Single-Brand 
J3262  Tocilizumab injection  1 mg  Single-Brand 
J3285  Treprostinil injection  1 mg  Single-Brand 
J7189  Factor viia  1 mcg  Single-Brand 
J7192  Factor viii  1 IU  Multiple-Brand 
J7507  Tacrolimus oral  1 mg  Generic 
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  21   
   
HCPCS Code  HCPCS Code Description  HCPCS Dosage  HCPCS Classification 
J7517  Mycophenolate mofetil oral  250 mg  Generic 
J7518  Mycophenolic acid oral  180 mg  Generic 
J7605  Arformoterol inhalation solution  15 mcg  Single-Brand 
J7606  Formoterol fumarate inhalation solution  20 mcg  Single-Brand 
J7626  Budesonide inhalation solution  up to 0.50 mg  Generic 
J7686  Treprostinil inhalation solution  1.74 mg  Single-Brand 
J9025  Azacitidine injection  1 mg  Generic 
J9033  Bendamustine hcl injection  1 mg  Single-Brand 
J9035  Bevacizumab injection  10 mg  Single-Brand 
J9041  Bortezomib injection  0.1 mg  Single-Brand 
J9043  Cabazitaxel injection  1 mg  Single-Brand 
J9047  Carfilzomib injection  1 mg  Single-Brand 
J9055  Cetuximab injection  10 mg  Single-Brand 
J9070  Cyclophosphamide  100 mg  Generic 
J9217  Leuprolide acetate suspension  7.5 mg  Multiple-Brand 
J9228  Ipilimumab injection  1 mg  Single-Brand 
J9264  Paclitaxel protein bound  1 mg  Single-Brand 
J9303  Panitumumab injection  10 mg  Single-Brand 
J9305  Pemetrexed injection  10 mg  Single-Brand 
J9306  Pertuzumab injection  1 mg  Single-Brand 
J9310  Rituximab injection  100 mg  Single-Brand 
J9354  Ado-trastuzumab emtansine injection  1 mg  Single-Brand 
J9355  Trastuzumab injection  10 mg  Single-Brand 
J9395  Fulvestrant injection  25 mg  Single-Brand 
Q2043  Sipuleucel-T auto CD54+  minimum 50 million cells  Single-Brand 
Q2050  Doxorubicin hydrochloride injection  10 mg  Generic 
Note:  A single-brand HCPCS code represents only one brand-name drug (and no generics) produced by a single manufacturer.  A 
multiple-brand HCPCS code represents two or more brand-name drugs produced by more than one manufacturer.  A generic HCPCS code 
represents either a combination of brand-name and generic drugs or of generic drugs only.   
Source:  OIG analysis of Centers for Medicare & Medicaid Services (CMS) 2015 average sales price files. 
 
   
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  22   
   
APPENDIX E 
ASP-Based and AMP-Based 2015 Part B Inflation-Indexed 
Rebates for 64 High-Expenditure Drugs 
Total 2015  2015  Percentage of  2015  Percentage of 
HCPCS Code  Part B  ASP-Based  Part B  AMP-Based  Part B 
Expenditures  Rebates  Spending  Rebates  Spending 
A9606  $126,060,515  $686,707  1%  $9,979,200  8% 
C9027  $96,225,452  $33,347  0%  $14,458  0% 
C9453  $134,717,544  $0  0%  $95  0% 
J0129  $464,998,446  $71,652,810  15%  $105,177,314  23% 
J0178  $1,850,750,116  $0  0%  $0  0% 
J0256  $68,144,898  $1,323,129  2%  $636,142  1% 
J0490  $67,602,924  $119,485  0%  $538,212  1% 
J0585  $262,433,507  $0  0%  $24,940,558  10% 
J0717  $178,260,140  $41,824,518  23%  $63,602,222  36% 
J0878  $104,716,722  $36,529,223  35%  $37,093,622  35% 
J0881  $298,442,136  $24,863,038  8%  $46,356  0% 
J0885  $294,837,423  $13,427,498  5%  $454,505  0% 
J0894  $104,703,502  $0  0%  $5,710  0% 
J0897  $932,095,376  $0  0%  $7,702,712  1% 
J1300  $236,251,083  $6,217,949  3%  $6,217,935  3% 
J1442  $129,494,396  $20,038,850  15%  $29,785,084  23% 
J1453  $75,973,914  $0  0%  $0  0% 
J1459  $210,002,809  $1,418,328  1%  $2,402,977  1% 
J1559  $184,215,806  $4,260,100  2%  $7,723,456  4% 
J1561  $293,809,820  $2,371,386  1%  $2,883,989  1% 
J1568  $169,329,971  $17,017,136  10%  $8,354,829  5% 
J1569  $268,543,924  $12,189,481  5%  $22,190,634  8% 
J1602  $129,747,902  $698,440  1%  $1,282,215  1% 
J1745  $1,279,370,904  $145,620,900  11%  $163,857,900  13% 
J2260  $141,554,000  $2,241,982  2%  $0  0% 
J2323  $303,571,226  $20,836,852  7%  $74,719,833  25% 
J2353  $386,650,822  $24,871,621  6%  $101,442,449  26% 
J2357  $275,915,288  $57,429,253  21%  $58,054,607  21% 
J2469  $181,237,603  $10,084,267  6%  $144  0% 
J2505  $1,279,584,855  $168,676,519  13%  $127,404,160  10% 
J2778  $1,173,915,082  $0  0%  $0  0% 
J2785  $120,262,495  $4,032,133  3%  $4,443,601  4% 
J2796  $161,439,429  $16,174,907  10%  $15,822,414  10% 
J3262  $162,852,165  $4,270,842  3%  $4,377,919  3% 
J3285  $177,698,758  $0  0%  $22,950,051  13% 
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  23   
   
Total 2015  2015  Percentage of  2015  Percentage of 
HCPCS Code  Part B  ASP-Based  Part B  AMP-Based  Part B 
Expenditures  Rebates  Spending  Rebates  Spending 
J7189  $99,806,682  $3,772,769  4%  $7,587,084  8% 
J7192  $234,401,062  $635,056  0%  $0  0% 
J7507  $97,729,530  $491,592  1%  $8,484,148  9% 
J7517  $80,073,907  $20,675,247  26%  $24,359,190  30% 
J7518  $119,606,568  $13,889,331  12%  $16,302,289  14% 
J7605  $181,724,396  $47,922,668  26%  $88,510,116  49% 
J7606  $81,036,463  $31,725,224  39%  $46,664,659  58% 
J7626  $233,792,529  $15,062,458  6%  $15,298,228  7% 
J7686  $213,630,146  $22,404,754  10%  $16,335,484  8% 
J9025  $144,225,592  $364,107  0%  $16,809  0% 
J9033  $314,863,267  $5,598,500  2%  $5,364,896  2% 
J9035  $1,139,264,181  $0  0%  $54  0% 
J9041  $514,529,558  $76,994,382  15%  $87,838,026  17% 
J9043  $75,335,126  $620,586  1%  $77,510  0% 
J9047  $231,980,278  $5,493,153  2%  $5,788,165  2% 
J9055  $247,660,653  $0  0%  $232  0% 
J9070  $86,196,664  $14,926,623  17%  $16,886,218  20% 
J9217  $283,102,959  $17,286,231  6%  $17,883,963  6% 
J9228  $218,882,552  $6,892,938  3%  $5,701,862  3% 
J9264  $281,360,889  $0  0%  $0  0% 
J9303  $80,409,421  $1,577,667  2%  $1,929,033  2% 
J9305  $555,401,558  $57,123,938  10%  $59,978,718  11% 
J9306  $169,153,658  $0  0%  $0  0% 
J9310  $1,592,316,822  $269,255,495  17%  $362,766,151  23% 
J9354  $107,447,525  $0  0%  $0  0% 
J9355  $654,609,456  $93,306,028  14%  $114,588,997  18% 
J9395  $189,303,156  $2,337,083  1%  $31  0% 
Q2043  $173,648,618  $4,192,665  2%  $4,546,123  3% 
Q2050  $90,049,156  $0  0%  $1,817,177  2% 
Totals  $20,816,953,325  $1,421,459,195  7%  $1,812,830,465  9% 
Notes: Total Part B expenditures were calculated using 2015 figures for physician, outpatient hospital, and durable medical equipment 
claims.  Rebates based on average manufacturer prices and average sales prices for 2015 were calculated after removing claims for drugs 
purchased at 340B prices and claims for beneficiaries enrolled in both Medicare and Medicaid.  Totals may not equal the sum of individual 
numbers due to rounding. 
Source:  OIG analysis of 2015 National Claims History files, Centers for Medicare & Medicaid Services (CMS) 2015 Medicaid unit rebate 
amounts files, and CMSs 2015 average sales price files. 
 
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  24   
   
APPENDIX F 
Potential Inflation-Indexed Rebates Associated With Each 
Drug Type  
HCPCS Classification  ASP-Based Rebates  AMP-Based Rebates 
Single-Brand (n=50)  $1,318,764,556  $1,707,802,095 
Multiple-Brand (n=5)  $35,043,299  $21,858,600 
Generic (n=9)  $67,651,339  $83,169,770 
TOTAL  $1,421,459,195  $1,812,830,465 
Source:  OIG analysis of CMSs 2015 ASP and AMP files and the 2015 NCH file.  
Note:  The total does not equal the sum of the individual rebates due to rounding. 
 
   
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  25   
   
ACKNOWLEDGMENTS 
This report was prepared under the direction of Dave Tawes, Regional 
Inspector General for Evaluation and Inspections in the Baltimore regional 
office, and Louise Schoggen, Assistant Regional Inspector General.  
Bahar Adili served as team leader for this study.  Central office staff who 
provided support include Clarence Arnold, Berivan Demir Neubert, 
Meghan Kearns, and Christine Moritz.  Office of Management and Policy 
Staff who provided support include Jessica Swanstrom. 
Calculation of Potential Inflation-Indexed Rebates for Medicare Part B Drugs (OEI-12-17-00180)  26   
Office of Inspector General
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The mission of the Office of Inspector General (OIG), as mandated by Public Law 95452, as  
amended, is  to protect the integrity of the Department of  Health and Human Services  
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This statutory mission is carried  out through a nationwide network of audits, investigations,  
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