DEPARTMENT OF HEALTH &. HUMAN SERVICES 	 Office of Inspector General 
Washington, D.C.  20201 
NOV  - 1 2.010 

TO: 	 Donald M. Berwick, M.D. 
Administrator 
Centers for Medicare & Medicaid Services 
FROM:  Stuart Wright 
Deputy Inspector General 
for Evaluation and Inspections 
SUBJECT: 	 Memorandum Report:  Comparison ofFirst-Quarter 2010 Average Sales Prices 
and Average Manufacturer Prices:  Impact on Medicare Reimbursement for Third 
Quarter 2010, OEI-03-10-00440 
This review was conducted in accordance with the statutory mandate for the Office of Inspector 
General (OIG) to compare average sales prices (ASP) and average manufacturer prices (AMP) 
for Medicare Part B prescription drugs and identify ASPs that exceed AMPs by at least 
5 percent.  The review estimated the financial impact of lowering reimbursement amounts for 
drugs that met the 5-percent threshold and additionally examined the potential effect of a 
July 2010 proposed rule that, among other things, specifies the circumstances under which the 
Centers for Medicare & Medicaid Services (CMS) will make AMP-based price substitutions. 
Since the advent of the ASP reimbursement methodology, OIG has issued 17 reports comparing 
ASPs to AMPs.  This latest pricing comparison examines drugs that met the 5-percent threshold 
based on either complete or partial AMP data in the first quarter of201 O.  Of the 318 drugs with 
complete AMP data in that quarter, 13 met the 5-percent threshold.  IfCMS's proposed price 
substitution policy had been in effect, reimbursement amounts for 10 of the 13 drugs would have 
been reduced, resulting in an estimated savings of $840,000 in the third quarter of 20 1O .  Of the 
134 drugs with only partial AMP data in the first quarter of2010, 25 had ASPs that exceeded the 
AMPs by at least 5 percent.  According to CMS's proposed price substitution policy, 
reimbursement amounts for drugs with partial AMP data would not be subject to reduction 
because the partial AMP data may not adequately reflect market trends.  However, missing 
AMPs for 7 of the 25 drugs likely had little influence on the outcome ofthe pricing comparisons, 
which means that price reductions may be appropriate in these cases.  We could not perform 
pricing comparisons for an additional 68 drugs because none of the drug products used to 
establish Medicare reimbursement had corresponding AMP data.  Manufacturers for 
23 percent of those drug products had Medicaid drug rebate agreements and were therefore 
generally required to submit AMPs. 
OEI-03-10-00440  Comparison of First-Quarter 2010 ASPs and AMPs  Page 2  Donald M. Berwick, M.D. 
 
 
BACKGROUND 
 
The Social Security Act (the Act) mandates that OIG compare ASPs to AMPs.1  If OIG finds 
that the ASP for a drug exceeds the AMP by a certain percentage (currently 5 percent), section 
1847A(d)(3)(A) of the Act states that the Secretary of the Department of Health & Human 
Services (the Secretary) may disregard the ASP for the drug when setting reimbursement 
amounts.2  Section 1847A(d)(3)(C) of the Act further states that ... the Inspector General shall 
inform the Secretary (at such times as the Secretary may specify to carry out this subparagraph) 
and the Secretary shall, effective as of the next quarter, substitute for the amount of payment ... 
the lesser of (i) the widely available market price ... (if any); or (ii) 103 percent of the average 
manufacturer price....   
 
Medicare Part B Coverage of Prescription Drugs 
Medicare Part B covers only a limited number of outpatient prescription drugs.  Covered drugs 
include injectable drugs administered by a physician; certain self-administered drugs, such as 
oral anticancer drugs and immunosuppressive drugs; drugs used in conjunction with durable 
medical equipment; and some vaccines.  
 
Medicare Part B Payments for Prescription Drugs 
CMS contracts with private companies, known as Medicare Administrative Contractors (MAC), 
to process and pay Medicare Part B claims, including those for prescription drugs.  To obtain 
reimbursement for covered outpatient prescription drugs, health care providers submit claims to 
their MACs using procedure codes.  CMS established the Healthcare Common Procedure 
Coding System (HCPCS) to provide a standardized coding system for describing the specific 
items and services provided in the delivery of health care.  In the case of prescription drugs, each 
HCPCS code defines the drug name and the amount of the drug represented by the HCPCS code 
but does not specify manufacturer or package size information.   
 
Medicare and its beneficiaries spent over $11 billion for Part B drugs in 2009.3  Although 
Medicare paid for nearly 800 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 2009, 
64 HCPCS codes accounted for 90 percent of the expenditures for Part B drugs, with only 13 of 
these codes representing the majority (52 percent) of total Part B drug expenditures. 
 
Reimbursement Methodology for Part B Drugs and Biologicals  
Medicare Part B pays for most covered drugs using a reimbursement methodology based on 
ASPs.4  As defined by law, an ASP is a manufacturers sales of a drug to all purchasers in the 
                                                 
1 Section 1847A(d)(2)(B) of the Act. 
2 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. 
3 Medicare expenditures for Part B drugs in 2009 were calculated using CMSs Part B Analytics and Reports 
(PBAR).  The PBAR data for 2009 were 98 percent complete when the data were downloaded in March 2010. 
4 Several Part B drugs, including certain vaccines and blood products, are not paid under the ASP methodology.  
OEI-03-10-00440         Comparison of First-Quarter 2010 ASPs and AMPs  
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United States in a calendar quarter divided by the total number of units of the drug sold by the 
manufacturer in that same quarter.5  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.6  Sales that are nominal in amount are exempted from the ASP calculation, as 
are sales excluded from the determination of best price in Medicaids drug rebate program.7, 8 
 
Manufacturers that participate in the Medicaid drug rebate program must provide CMS with the 
ASP and volume of sales for each of their national drug codes (NDC) on a quarterly basis, with 
submissions due 30 days after the close of each quarter.9  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 ASPs 
Third-quarter 2010 Medicare payments for most covered drug codes were based on                 
first-quarter 2010 ASP submissions from manufacturers, which were volume-weighted using an 
equation that involves the following variables:  the ASP for the 11-digit NDC as reported by the 
manufacturer, the volume of sales for the NDC as reported by the manufacturer, and the number 
of billing units in the NDC as determined by CMS.10  The amount of the drug contained in an 
NDC may differ from the amount of the drug specified by the HCPCS code that providers use to 
bill Medicare.  Therefore, the number of billing units in an NDC describes the number of 
HCPCS code units that are in that NDC.  For instance, an NDC may contain a total of                          
10 milliliters of Drug A, but the corresponding HCPCS code may be defined as only 5 milliliters 
of Drug A.  In this case, there are two billing units in the NDC.  CMS calculates the number of 
billing units in each NDC when developing its crosswalk files.   
 
Under the ASP pricing methodology, the Medicare allowance for most Part B drugs is equal to 
106 percent of the volume-weighted ASP for the HCPCS code.  Medicare beneficiaries are 
responsible for 20 percent of this amount in the form of coinsurance.   
                                                 
5 Section 1847A(c) of the Act, as added by the Medicare Prescription Drug, Improvement, and Modernization Act of 
2003, P.L. 108-173. 
6 Section 1847A(c)(3) of the Act.  
7 Section 1847A(c)(2) of the Act.  
8 Pursuant to section 1927(c)(1)(C)(i) of the Act, best price is the lowest price available from the manufacturer 
during the rebate period to any wholesaler, retailer, provider, health maintenance organization, nonprofit entity, or 
governmental entity within the United States, with certain exceptions. 
9 Section 1927(b)(3) of the Act.  
10 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.   
 
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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.11  Under these rebate agreements and pursuant to 
the Act, manufacturers must provide CMS with the AMPs for each of their NDCs.12  As further 
explained in regulation, manufacturers are required to submit AMPs within 30 days after the end 
of each month and each quarter.13   
 
During the first quarter 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.14, 15  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, 1 tablet, 1 capsule).16   
 
Penalties for Failure To Report Timely Drug Pricing Data 
Under the law, manufacturers that fail to provide ASP and AMP data on a timely basis may be 
subject to civil money penalties and/or termination from the drug rebate program.17, 18  
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 AMPs.19  At the time of our review, no 
manufacturers had been terminated or formally referred to OIG for failure to report timely ASPs.  
In September 2010, OIG announced a new enforcement initiative under which OIG would begin 
imposing civil money penalties on manufacturers that failed to report timely ASPs and/or AMPs. 
 
Office of Inspector Generals Monitoring of ASPs and AMPs 
In accordance with its statutory mandate, OIG has issued 15 quarterly pricing comparisons since 
the ASP reimbursement methodology for Part B drugs was implemented in January 2005.  In 
addition, OIG has completed two annual overviews of ASPs and AMPs, which examined data 
                                                 
11 Sections 1927(a)(1) and (b)(1) of the Act. 
12 Section 1927(b)(3) of the Act. 
13 42 CFR  447.510.   
14 Section 1927(k)(1) of the Act. 
15 Effective October 2010, section 2503 of the Patient Protection and Affordable Care Act, P.L. 111-148, changes 
the definition of AMP in a way that is not relevant for the purposes of this report.  However, it may affect pricing 
comparisons between ASPs and AMPs for the fourth quarter of 2010 and beyond. 
16 As specified in 42 CFR  447.504(i), a quarterly AMP is calculated as a weighted average of monthly AMPs in 
the quarter.  However, the manufacturer must adjust the AMP for a quarter if cumulative discounts, rebates, or other 
arrangements subsequently adjust the prices actually realized.    
17 Sections 1927(b)(3)(C)(i) and (4)(B)(i) of the Act. 
18 The Secretary delegated to OIG the responsibility to impose civil money penalties for violations of               
section 1927(b)(3)(C) of the Act in 59 Fed. Reg. 52967 (Oct. 20, 1994). 
19 CMS began referring noncompliant manufacturers to OIG in response to a 2005 report entitled Deficiencies in the 
Oversight of the 340B Drug Pricing Program (OEI-05-02-00072).  As part of this report, OIG recommended that 
CMS consider referring manufacturers whose pricing data submissions do not comply with reporting requirements 
to OIG so that penalties could be imposed in appropriate cases. 
OEI-03-10-00440         Comparison of First-Quarter 2010 ASPs and AMPs  
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across all four quarters of 2007 and 2008, respectively.  A list of all 17 reports is provided in 
Appendix B.   
 
OIG has consistently recommended that CMS develop a process to adjust payment amounts 
based on the results of these pricing comparisons and subsequently lower reimbursement for 
drugs that meet 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 2010 that, among other things, specifies the circumstances under which AMP-based price 
substitutions would occur.20 
 
CMSs Proposed Price Substitution Policy 
Under CMSs 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.  Although CMS plans 
to implement its price substitution policy beginning in 2011, no payment substitutions will occur 
before a preliminary injunction issued on December 19, 2007, by the United States District Court 
for the District of Columbia is vacated.21, 22 
 
METHODOLOGY 
 
We obtained a file from CMS containing NDC-level ASP data from the first quarter of 2010, 
which were used to establish Part B drug reimbursement amounts for the third quarter of 2010.  
This file also includes information that crosswalks NDCs to their corresponding HCPCS codes.  
Both the ASP data and the crosswalk data were current as of June 29, 2010.  We also obtained 
AMP data from CMS for the first quarter of 2010, which were current as of May 10, 2010. 
 
Analyzing ASP Data From the First Quarter of 2010 
As mentioned previously, Medicare does not base reimbursement for covered drugs on NDCs; 
instead, it uses HCPCS codes.  Therefore, CMS uses ASP information submitted by 
                                                 
20 75 Fed. Reg. 40040, 40259 (July 13, 2010). 
21 75 Fed. Reg. 40040, 40158 (July 13, 2010). 
22 The injunction prohibits CMS from using AMPs in a way that affects Medicaid reimbursement rates and from 
disclosing AMPs to States and the public. 
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manufacturers for each NDC to calculate a volume-weighted ASP for each covered HCPCS 
code.  When calculating these volume-weighted ASPs, CMS includes only NDCs with ASP 
submissions that are deemed valid.   
 
As of July 2010, CMS had established prices for 529 HCPCS codes based on the ASP 
reimbursement methodology mandated by section 1847A(b)(6) of the Act.  Reimbursement 
amounts for the 529 HCPCS codes were based on ASP data for 3,203 NDCs.   
 
Analyzing AMP Data From the First Quarter of 2010 
To ensure that the broadest range of drug codes is subject to OIGs pricing comparisons, we 
divided HCPCS codes into the following three groups:                       
 
(1) HCPCS codes with complete AMP datai.e., HCPCS codes with AMP data for 
every NDC that CMS used in its calculation of volume-weighted ASPs; 
 
(2) HCPCS codes with partial AMP datai.e., HCPCS codes with AMP data for only 
some of the NDCs that CMS used in its calculation of volume-weighted ASPs; and   
 
(3) HCPCS codes with no AMP datai.e., HCPCS codes with no AMP data for any of 
the NDCs that CMS used in its calculation of volume-weighted ASPs.   
 
As previously noted, the AMP for each NDC is reported for the lowest identifiable quantity of 
the drug contained in that NDC (e.g., 1 milliliter, 1 tablet, 1 capsule).  In contrast, the ASP is 
reported for the entire amount of the drug contained in the NDC (e.g., 50 milliliters, 100 tablets).  
To ensure that the AMP would be comparable to the ASP, it was necessary to convert the AMP 
for each NDC so that it represented the total amount of the drug contained in that NDC.   
 
To calculate converted AMPs for NDCs in the first and second groups, we multiplied the AMP 
by the total amount of the drug contained in each NDC, as identified by sources such as the CMS 
crosswalk file, manufacturer Web sites, Thomson Reuters Red Book, and the Food and Drug 
Administrations NDC directory.23  For certain NDCs, we were unable to successfully identify 
the amount of the drug reflected by the ASP and therefore could not calculate a converted AMP.  
Because of these unsuccessful AMP conversions, a total of nine HCPCS codes were removed 
from our analysis.  
 
Using NDCs with successful AMP conversions, we then calculated a volume-weighted AMP for 
each of the corresponding HCPCS codes, consistent with CMSs methodology for calculating 
volume-weighted ASPs.  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 
                                                 
23 We did not calculate converted AMPs for NDCs in the third group because those NDCs had no AMP data. 
OEI-03-10-00440         Comparison of First-Quarter 2010 ASPs and AMPs  
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methods we used to both convert AMPs and calculate volume-weighted AMPs.  Table 1 
provides the final number of HCPCS codes and NDCs included in our analysis after we removed 
NDCs with either no AMP data or unsuccessful AMP conversions.   
 
Table 1:  Number of Drug Codes and NDCs Included in OIGs Pricing Comparison 
Number of   Number of 
Availability of AMP Data for HCPCS Codes 
HCPCS Codes   NDCs  
Complete AMP Data  318  1,138 
Partial AMP Data  134  1,081 
No AMP Data  68  260 
Source:  OIG analysis of first-quarter 2010 ASP and AMP data, 2010. 
 
Comparing First-Quarter 2010 Volume-Weighted ASPs and AMPs for HCPCS Codes 
With Complete AMP Data  
For each of the 318 HCPCS codes with complete AMP data, we compared the volume-weighted 
ASP and AMP and determined whether the ASP for the code exceeded the AMP by at least                
5 percent.  For HCPCS codes that met the 5-percent threshold, we reviewed the associated NDCs 
to verify the accuracy of the billing unit information.  According to our review, none of the 
HCPCS codes that met the threshold based on complete AMP data were associated with 
questionable billing units.  However, we excluded one HCPCS code from our findings because 
the manufacturer of the corresponding NDC indicated to OIG that the AMP data were not 
correct.24   
  
For each of the remaining HCPCS codes that met the 5-percent threshold, we estimated the 
monetary impact of lowering reimbursement to 103 percent of the AMP.25  First we calculated 
103 percent of the volume-weighted AMP and subtracted this amount from the third-quarter 
2010 reimbursement amount for the HCPCS code.  To estimate the financial effect for the third 
quarter of 2010, we then multiplied the difference by one-fourth of the number of services that 
were allowed by Medicare for each HCPCS code in 2009, as reported in the PBAR.26, 27   
To determine which HCPCS codes would have been subject to CMSs proposed price 
substitution policy, we identified codes with complete AMP data that met the 5-percent threshold 
                                                 
24 In the course of a previous study (see OEI-03-09-00350), a manufacturer notified us that the AMP data for one of 
its NDCs were incorrect for all four quarters of 2008.  The first-quarter 2010 AMP for that NDC was the same as the 
fourth-quarter 2008 AMP identified by the manufacturer as incorrect; therefore, we assumed that the first-quarter 
2010 AMP was incorrect as well.  We will provide the name of this manufacturer to CMS for followup. 
25 Section 1847A(d)(3)(C) of the Act directs the Secretary to replace payment amounts for drugs that meet the   
5-percent threshold with the lesser of the widely available market price for the drug (if any) or 103 percent of the 
AMP.  For the purposes of this study, we used 103 percent of the AMP to estimate the impact of lowering 
reimbursement amounts.  If widely available market prices had been available for these drugs and lower than  
103 percent of the AMP, the savings estimate presented in this report would have been greater. 
26 The PBAR data for 2009 were 98 percent complete when the data were downloaded in March 2010. 
27 All savings estimates in this report assume that the number of services that were allowed by Medicare in 2009 
remained consistent from one quarter to the next and that there were no significant changes in utilization between 
2009 and 2010. 
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in two consecutive or three of four quarters.  We then totaled the estimated savings for that 
subset of codes. 
 
Comparing First-Quarter 2010 Volume-Weighted ASPs and AMPs for HCPCS Codes 
With Partial AMP Data  
For each of the 134 HCPCS codes with partial AMP data, we compared the volume-weighted 
ASP and AMP and determined whether the ASP for the code exceeded the AMP by at least                 
5 percent.  For HCPCS codes that met the 5-percent threshold, we reviewed the associated NDCs 
to verify the accuracy of the billing units.  According to our review, NDCs for one code had 
billing unit information in CMSs crosswalk file that may not have accurately reflected the 
number of billing units actually contained in the NDC.  Because volume-weighted ASPs and 
AMPs are calculated using this billing unit information, we could not be certain that the results 
for this code were correct.  Therefore, we excluded this HCPCS code from our findings. 
 
For each of the remaining HCPCS codes that met the 5-percent threshold, we determined 
whether missing AMPs unduly influenced the results of our pricing comparison.  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 identify HCPCS codes with partial AMP data that met the 5-percent threshold only because 
AMP data were missing, we reanalyzed pricing data after accounting for the missing values.  
Specifically, we replaced each missing AMP with its corresponding ASP and recalculated the 
volume-weighted AMPs using those imputed prices.28  We then compared those new volume-
weighted AMPs to the volume-weighted ASPs originally calculated by CMS. 
 
If a HCPCS code no longer met the 5-percent threshold, we concluded that the missing AMPs 
were likely responsible for the HCPCS code initially meeting the threshold, as opposed to an 
actual disparity between ASPs and AMPs in the marketplace.   
 
If a HCPCS code continued to meet the 5-percent threshold, we concluded that missing AMPs 
had little impact on the results of our pricing comparison.  These HCPCS codes likely met the 
threshold as a result of actual pricing differences between ASPs and AMPs.  Because price 
substitutions for these HCPCS codes may be warranted, we estimated the monetary impact of 
lowering reimbursement to 103 percent of the new volume-weighted AMPs.  We also identified 
HCPCS codes with partial AMP data that met the threshold in two consecutive or three of four 
quarters and totaled the estimated savings for that subset of codes.   
                                                 
28 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.   
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Limitations 
We did not verify the accuracy of manufacturer-reported ASP and AMP data, nor did we verify 
the underlying methodology used by manufacturers to calculate ASPs and AMPs.  Furthermore, 
we did not verify the accuracy of CMSs crosswalk files or examine NDCs that CMS opted to 
exclude from its calculation of Part B drug reimbursement amounts.  
 
Manufacturers are required to submit their quarterly ASP and AMP data to CMS 30 days after 
the close of the quarter.  Our analyses were performed on ASP and AMP data compiled by CMS 
soon after that deadline.  We did not determine whether manufacturers provided additional or 
revised pricing data to CMS at a later date. 
 
Standards   
This study was conducted in accordance with the Quality Standards for Inspections approved by 
the Council of the Inspectors General on Integrity and Efficiency. 
 
RESULTS 
 
Of the 318 Drug Codes With Complete AMP Data, Volume-Weighted ASPs for                      
13 Exceeded the Volume-Weighted AMPs by at Least 5 Percent  
Consistent with sections 1847A(d)(2)(B) and 1847A(d)(3) of the Act, OIG compared ASPs to 
AMPs to identify instances in which the ASP for a particular drug exceeded the AMP by a 
threshold of 5 percent.  In the first quarter of 2010, 13 of the 318 HCPCS codes with complete 
AMP data (4 percent) met this 5-percent threshold.  Table 2 describes the extent to which ASPs 
exceeded AMPs for the 13 HCPCS codes.  For one of the codes, the volume-weighted ASP 
exceeded the volume-weighted AMP by more than 20 percent. A list of all 13 HCPCS codes, 
including their descriptions and HCPCS dosage amounts, is presented in Appendix D.   
 
Table 2:  Extent to Which ASPs Exceeded AMPs for  
13 HCPCS Codes With Complete AMP Data 
Percentage by Which ASP  Number of HCPCS 
Exceeded AMP  Codes 
5.00%9.99%  7 
10.00%19.99%  5 
20.00%29.99%  1 
30.00%39.99%  0 
40.00%49.99%  0 
50.00%59.99%  0 
60.00%69.99%  0 
70.00%79.99%  0 
80.00%89.99%  0 
90.00%99.99%  0 
100% and above  0 
     Total  13 
Source:  OIG analysis of first-quarter 2010 ASP and AMP data, 2010. 
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Pursuant to section 1847A(d)(3) of the Act, the Secretary may disregard the ASP for a drug that 
meets the 5-percent threshold and shall substitute the payment amount with the lesser of either 
the widely available market price or 103 percent of the AMP.  If reimbursement amounts for all 
13 codes with complete AMP data had been based on 103 percent of the AMPs during the third 
quarter of 2010, we estimate that Medicare expenditures would have been reduced by $988,000 
in that quarter alone.29  Three of the thirteen HCPCS codes accounted for over 90 percent of the 
estimated savings.  If the reimbursement amounts for codes J9214, J2792, and J2916 had been 
based on 103 percent of the AMPs during the third quarter of 2010, we estimate that Medicare 
expenditures would have been reduced by $591,000, $186,000, and $127,000, respectively.   
 
If CMSs proposed price substitution policy had been in effect, reimbursement amounts for 10 of 
the 13 HCPCS codes would have been reduced.  These 10 HCPCS codes had complete AMP 
data and met the 5-percent threshold in either two consecutive quarters or three of four quarters.  
If reimbursement amounts for the 10 codes had been based on 103 percent of the AMPs during 
the third quarter of 2010, Medicare expenditures would have been reduced by an estimated 
$840,000.   
 
Table 3 presents a list of the 10 HCPCS codes that would have been eligible for price 
substitution if CMSs proposed policy had been in effect. 
 
Table 3:  Ten HCPCS Codes With Complete AMP Data in the First Quarter of 2010                       
That Would Have Met CMSs Proposed Criteria for Price Substitution   
 
  OIG Reports Comparing ASP and AMP 
Fourth  Third  Second 
HCPCS  First Quarter 
Quarter   Quarter   Quarter   
Code  2010 
2009  2009  2009 
J2765  X  X*  X  X 
J2792  X  X  X  X 
J2597  X    X  X 
J0210  X  X  X   
J1327  X  X  X   
J9214  X  X  X   
J9340  X  X  X   
J9280  X  X     
J9290  X  X     
J9291  X  X     
 
*This code previously met the 5-percent threshold during the specified quarter based                                                    
on partial AMP data.  For all other quarters, codes met the 5-percent threshold based                                                 
on complete AMP data.  Source:  OIG analysis of ASP and AMP data from the second                                         
 
quarter of 2009 through the first quarter of 2010.
                                                 
29 All savings estimates in this report assume that the number of services that were allowed by Medicare in 2009 
remained consistent from one quarter to the next and that there were no significant changes in utilization between                
2009 and 2010.  
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Of the 134 Drug Codes With Partial AMP Data, Volume-Weighted ASPs for                                
25 Exceeded the Volume-Weighted AMPs by at Least 5 Percent    
In addition to examining HCPCS codes with complete AMP data, we examined 134 HCPCS 
codes for which only partial AMP data were available.  ASPs for 25 of these 134 HCPCS codes  
(19 percent) exceeded the AMPs by at least 5 percent in the first quarter of 2010.  A list of the           
25 HCPCS codes, including their descriptions and HCPCS dosage amounts, is presented in 
Appendix E.   
 
For 7 of the 25 HCPCS codes, missing AMPs likely had little influence on the outcome of the 
pricing comparisons.  Seven of the twenty-five HCPCS codes with partial AMP data continued 
to meet the threshold when we accounted for missing AMPs, suggesting that the pricing 
comparisons for these codes were accurately capturing underlying market trends even when 
AMP data were not available for the full set of NDCs.  Because missing AMPs likely had little 
influence on the pricing comparison results for these seven HCPCS codes, price substitutions 
may be legitimately warranted in these cases.  If reimbursement amounts for the seven codes had 
been based on 103 percent of the AMPs, we estimate that Medicare expenditures would have 
been reduced by $27,000 during the third quarter of 2010.   
 
Table 4 describes the extent to which ASPs exceeded AMPs for the seven HCPCS codes.  For 
one of the codes, volume-weighted ASPs exceeded volume-weighted AMPs by almost                        
70 percent. 
 
Table 4:  Extent to Which ASPs Exceeded AMPs for  
Seven HCPCS Codes With Partial AMP Data 
Percentage by Which ASP  Number of HCPCS 
Exceeded AMP  Codes 
5.00%9.99%  2 
10.00%19.99%  3 
20.00%29.99%  1 
30.00%39.99%  0 
40.00%49.99%  0 
50.00%59.99%  0 
60.00%69.99%  1 
70.00%79.99%  0 
80.00%89.99%  0 
90.00%99.99%  0 
100% and above  0 
     Total  7 
Source:  OIG analysis of first-quarter 2010 ASP and AMP data, 2010. 
 
For the remaining 18 of 25 HCPCS codes, ASPs no longer exceeded the AMPs by at least                    
5 percent in the first quarter of 2010, indicating that these codes initially met the threshold 
because of missing AMP data rather than a genuine pricing disparity between ASPs and AMPs. 
OEI-03-10-00440         Comparison of First-Quarter 2010 ASPs and AMPs  
  Page 12  Donald M. Berwick, M.D. 
 
 
Of the seven HCPCS codes on which missing AMPs likely had little influence, four met the               
5-percent threshold in either two consecutive or three of four quarters.  Although CMSs 
proposed price substitution policy would not apply to HCPCS codes with partial AMP data, 
ASPs for these four codes repeatedly met or exceeded the AMPs by at least 5 percent.  If 
reimbursement amounts for the four codes had been substituted with 103 percent of the AMPs, 
Medicare expenditures would have been reduced by an estimated $10,000 during the third 
quarter of 2010.   
Table 5 presents a list of the four HCPCS codes with partial AMP data that met the threshold in 
two consecutive or three of four quarters.  
 
Table 5:  Four HCPCS Codes With Partial AMP Data in the First Quarter of 2010                                 
That Met the 5-Percent Threshold in Two Consecutive or Three of Four Quarters  
  OIG Reports Comparing ASP and AMP 
First   Fourth  Third  Second 
HCPCS 
Quarter   Quarter   Quarter   Quarter  
Code 
2010  2009  2009  2009 
   
J0560  X X X*  X 
       
J7509  X X X X
     
J7506  X  X X
   
J1940  X X   
*This code previously met the 5-percent threshold during the specified quarters                                                      
based on complete AMP data.  For all other quarters, codes met the 5-percent threshold                                        
based on partial AMP data.  Source:  OIG analysis of ASP and AMP data from the second                                     
quarter of 2009 through the first quarter of 2010. 
 
Pricing Comparisons Could Not Be Performed on 68 Drug Codes Because No AMP Data 
Were Available 
For 68 HCPCS codes, OIG could not compare ASPs and AMPs because there were no AMP data 
for any of the 260 NDCs that CMS used when calculating drug reimbursement amounts for these 
codes.  In 2009, Medicare allowances for these 68 codes totaled $345 million.30 
 
Manufacturers for 23 percent of the NDCs without AMP data (60 of 260) participated in the 
Medicaid drug rebate program as of the first quarter of 2010 and were therefore generally 
required to submit AMP data for their covered outpatient drugs.31, 32, 33  The majority of these           
60 NDCs belonged to 4 manufacturers.  
                                                 
30 Of the 68 HCPCS codes with no associated AMP data, 4 had no expenditures listed in the 2009 PBAR file.  As a 
result, these codes were not included in the total Medicare allowances for the year.  
31 To determine whether a manufacturer participated in the Medicaid drug rebate program, we consulted the list of 
participating drug companies posted on CMSs Web site. 
32 Although manufacturers with rebate agreements are required to submit AMP data for their covered outpatient 
drugs, there may be valid reasons why an AMP was not provided for a specific NDC in a given quarter.  For 
example, a manufacturer may not have been required to submit an AMP if the drug product had been terminated and 
there was no drug utilization during the quarter.   
33 These 60 NDCs were crosswalked to 33 HCPCS codes. 
OEI-03-10-00440         Comparison of First-Quarter 2010 ASPs and AMPs  
  Page 13  Donald M. Berwick, M.D. 
 
 
Manufacturers for the remaining 200 of 260 NDCs did not participate in the Medicaid drug 
rebate program and therefore were not required to submit AMP data.   
 
CONCLUSION 
 
To monitor Medicare reimbursement amounts based on ASPs and consistent with its statutory 
mandate, OIG compared ASPs and AMPs to identify instances in which the ASP for a particular 
drug exceeded the AMP by at least 5 percent.  This is OIGs 18th report comparing ASPs and 
AMPs, and it examines HCPCS codes with AMP data for every NDC that CMS used to establish 
reimbursement amounts, as well as HCPCS codes with only partial AMP data. 
 
In the first quarter of 2010, we identified a total of 38 HCPCS codes that met the threshold for 
price adjustment specified in the Act.  If CMSs proposed price substitution policy had been in 
effect, reimbursement amounts for 10 of these HCPCS codes would have been lowered to 103 
percent of the AMP, resulting in an estimated savings of $840,000 for the quarter.  Although 
CMSs proposed price substitution policy would not apply to codes with partial AMP data, we 
identified HCPCS codes for which price reductions may be legitimately warranted because 
missing AMPs likely had little influence on the pricing comparison results.  We recognize that 
the estimated savings associated with these particular HCPCS codes is not substantial; 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.  We could not compare ASPs 
and AMPs for 68 HCPCS codes because AMP data were not submitted for any of the NDCs that 
CMS used to calculate reimbursement.  Manufacturers for 23 percent of these NDCs had 
Medicaid drug rebate agreements and were therefore generally required to submit AMPs.  OIG 
will continue to work with CMS to evaluate and pursue appropriate actions against those 
manufacturers that fail to submit required data.   
 
Some of OIGs previous reports comparing ASPs and AMPs have contained recommendations, 
which we continue to support.34  We are not making additional recommendations in this report 
and, as such, are issuing the report directly in final form.  If you have comments or questions 
about this report, please provide them within 60 days.  Please refer to report number  
OEI-03-10-00440 in all correspondence. 
                                                 
34 For example, OEI-03-08-00450, December 2008; and OEI-03-09-00350, February 2010. 
OEI-03-10-00440         Comparison of First-Quarter 2010 ASPs and AMPs  
  Page 14  Donald M. Berwick, M.D. 
 
 
APPENDIX A 
 
The Equation Used by the Centers for Medicare & Medicaid Services To Calculate            
Volume-Weighted Average Sales Prices on or After April 1, 2008 
 
A volume-weighted average sales price (ASP) is calculated for the dosage amount associated with 
the Healthcare Common Procedure Coding System (HCPCS) code.  In the following equation, the 
number of billing units represents the number of HCPCS code doses that are contained in a 
national drug code (NDC).   
 
 
 
Volume-Weighted ASP   Sum of  (ASP for NDC * Number of NDCs Sold) 
 
for Dosage Amount       =     
 of HCPCS Code  Sum of   (Number of NDCs Sold * Number of Billing Units in NDC) 
 
 
 
 
 
OEI-03-10-00440         Comparison of First-Quarter 2010 ASPs and AMPs  
  Page 15  Donald M. Berwick, M.D. 
 
 
APPENDIX B 
 
Previous Office of Inspector General Reports Comparing Average Sales Prices and Average 
Manufacturer Prices 
 
  Monitoring Medicare Part B Drug Prices:  A Comparison of Average Sales 
Prices to Average Manufacturer Prices, OEI-03-04-00430, April 2006 
 
  Comparison of Fourth-Quarter 2005 Average Sales Prices to Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Second Quarter 
2006, OEI-03-06-00370, July 2006 
 
  Comparison of Third-Quarter 2006 Average Sales Prices to Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for First Quarter 
2007, OEI-03-07-00140, July 2007 
 
  Comparison of First-Quarter 2007 Average Sales Prices to Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Third Quarter 
2007, OEI-03-07-00530, September 2007 
 
  Comparison of Second-Quarter 2007 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Fourth Quarter 
2007, OEI-03-08-00010, December 2007 
 
  Comparison of Third-Quarter 2007 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for First Quarter 
2008, OEI-03-08-00130, May 2008 
 
  Comparison of Fourth-Quarter 2007 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Second Quarter 
2008, OEI-03-08-00340, August 2008 
 
  Comparison of Average Sales Prices and Average Manufacturer Prices:  An 
Overview of 2007, OEI-03-08-00450, December 2008 
OEI-03-10-00440         Comparison of First-Quarter 2010 ASPs and AMPs  
  Page 16  Donald M. Berwick, M.D. 
 
 
  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-03-10-00440         Comparison of First-Quarter 2010 ASPs and AMPs  
  Page 17  Donald M. Berwick, M.D. 
 
 
APPENDIX C 
 
Detailed Methodology for Converting and Volume-Weighting Average Manufacturer 
Prices for the First Quarter of 2010 
 
Healthcare Common Procedure Coding System codes with complete average manufacturer price 
data.  Of the 529 Healthcare Common Procedure Coding System (HCPCS) codes with 
reimbursement amounts based on average sales prices (ASP), 326 had average manufacturer 
prices (AMP) for every national drug code (NDC) that the Centers for Medicare & Medicaid 
Services (CMS) used to calculate volume-weighted ASPs.  These 326 HCPCS codes represented 
1,205 NDCs.  For 13 NDCs, we could not successfully identify the amount of the drug reflected 
by the ASP and therefore could not calculate a converted AMP.  These 13 NDCs were 
crosswalked to 8 HCPCS codes.  We did not include these 8 HCPCS codes (67 NDCs) in our 
final analysis.   
 
Using the converted AMPs for the remaining 1,138 NDCs, we then calculated a volume-
weighted AMP for each of the remaining 318 HCPCS codes consistent with CMSs 
methodology for calculating volume-weighted ASPs.   
 
HCPCS codes with partial AMP data.  There were 135 HCPCS codes with AMP data for only 
some of the NDCs that CMS used in its calculation of volume-weighted ASPs.  These                 
135 HCPCS codes represented a total of 1,738 NDCs.  AMP data were either missing or 
unavailable for 650 of these NDCs, which were then excluded from our calculation of  
volume-weighted AMPs.35   
 
We calculated converted AMPs for each of the remaining 1,088 NDCs.  For 7 of the                  
1,088 NDCs, we could not successfully identify the amount of the drug reflected by the ASP and 
therefore could not calculate a converted AMP.  We removed these seven NDCs from our 
analysis.36  As a result, one HCPCS code no longer had any NDCs with AMP data.  Therefore, 
this HCPCS code was removed from our analysis.   
 
Using the converted AMPs for the remaining 1,081 NDCs, we then calculated a                  
volume-weighted AMP for each of the remaining 134 HCPCS codes consistent with CMSs 
methodology for calculating volume-weighted ASPs.   
 
                                                 
35 Although AMP data for these 650 NDCs were excluded from our calculation of volume-weighted AMPs, the 
corresponding ASPs were not excluded from the volume-weighted ASPs as determined by CMS.                     
Volume-weighted ASPs remained the same, regardless of the availability of AMP data.   
36 Although we removed NDCs with problematic AMP conversions, we did not remove the corresponding HCPCS 
codes, provided that other NDCs for those drug codes had usable AMP data.  This differs from our analysis of 
HCPCS codes with complete AMP data, in which we removed not only the NDCs with problematic AMP 
conversions, but also the corresponding HCPCS codes. 
OEI-03-10-00440         Comparison of First-Quarter 2010 ASPs and AMPs  
  Page 18  Donald M. Berwick, M.D. 
 
 
HCPCS codes with no AMP data.  For 68 HCPCS codes, there were no AMP data for any of the 
NDCs that CMS used in its calculation of volume-weighted ASPs.  These 68 HCPCS codes 
represented 260 NDCs.   
OEI-03-10-00440         Comparison of First-Quarter 2010 ASPs and AMPs  
  Page 19  Donald M. Berwick, M.D. 
 
 
APPENDIX D 
 
Thirteen Drug Codes With Complete Average Manufacturer Price Data That Met the              
5-Percent Threshold in the First Quarter of 2010 
 
Drug            
Code  Short Description  Drug Code Dosage 
J0210  Methyldopate HCl injection  250 mg 
J0834  Cosyntropin cortrosyn injection  0.25 mg 
J1020  Methylprednisolone injection  20 mg 
J1327  Eptifibatide injection  5 mg 
J2597  Desmopressin acetate injection  1 mcg 
J2765  Metoclopramide HCl injection  10 mg 
J2792  Rho(D) immune globulin injection  100 units 
J2916  Na ferric gluconate complex  12.5 mg 
J9214  Interferon alfa-2b injection  1 million units 
J9280  Mitomycin injection  5 mg 
J9290  Mitomycin injection  20 mg 
J9291  Mitomycin injection  40 mg 
J9340  Thiotepa injection  15 mg 
mcg=microgram, mg=milligram 
Source:  Office of Inspector General analysis of first-quarter 2010 average sales price and average manufacturer                     
price data, 2010. 
 
 
 
OEI-03-10-00440         Comparison of First-Quarter 2010 ASPs and AMPs  
  Page 20  Donald M. Berwick, M.D. 
 
 
APPENDIX E 
 
Twenty-five Drug Codes With Partial Average Manufacturer Price Data That Met the                     
5-Percent Threshold in the First Quarter of 2010 
 
Drug              
Code  Short Description  Drug Code Dosage 
J0207  Amifostine  500 mg 
J0560  Penicillin g benzathine injection  600,000 units 
J0610  Calcium gluconate injection  10 ml 
J0670  Mepivacaine HCl injection  10 ml 
J1190  Dexrazoxane HCl injection  250 mg 
J1940  Furosemide injection  20 mg 
J2700  Oxacillin sodium injection  250 mg 
J2790  Rho(D) immune globulin injection  300 mcg 
J3130  Testosterone enanthate injection  200 mg 
J3260  Tobramycin sulfate injection  80 mg 
J3475  Magnesium sulfate injection  500 mg 
J7506  Prednisone oral  5 mg 
J7509  Methylprednisolone oral  4 mg 
J7611  Albuterol, noncompounded, concentrated form  1 mg 
J7613  Albuterol, noncompounded, unit dose  1 mg 
J7620  Albuterol and ipratropium bromide, noncompounded  2.5 mg/0.5 mg 
J9040  Bleomycin sulfate injection  15 units 
J9060  Cisplatin injection  10 mg 
J9062  Cisplatin injection  50 mg 
J9178  Epirubicin HCl injection  2 mg 
J9206  Irinotecan injection  20 mg 
Q0164  Prochlorperazine maleate  5 mg 
Q0165  Prochlorperazine maleate  10 mg 
Q9965  Low osmolar contrast material,100199 mg/ml iodine  1 ml 
Q9966  Low osmolar contrast material, 200299 mg/ml iodine  1 ml 
mcg=microgram, mg=milligram, and ml=milliliter 
Source:  Office of Inspector General analysis of first-quarter 2010 average sales price and average manufacturer price 
 
data, 2010.
OEI-03-10-00440         Comparison of First-Quarter 2010 ASPs and AMPs