Department of Health and Human Services 
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
COM PARISON OF FOURTH- 
 
Q 2005 A S
UARTER  VERAGE  ALES 
 
 
P A
RICES TO  VERAGE 
 
M   P :  
ANUFACTURER  RICES
 
I M
MP  ACT ON  EDICARE 
 
R S
EIMBURSEMENT FOR  ECOND 
 
Q 2006  
UARTER 
 
  
Daniel R. Levinson 
Inspector General 
 
July 2006 
OEI-03-06-00370  Office of Inspector General 
http://oig.hhs.gov 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department of Health and Human Services (HHS) 
programs, as well as the health and welfare of beneficiaries served by those programs. This 
statutory mission is carried out through a nationwide network of audits, investigations, and 
inspections conducted by the following operating components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides all auditing services for HHS, either by conducting 
audits with its own audit resources or by overseeing audit work done by others.  Audits examine 
the performance of HHS programs and/or its grantees and contractors in carrying out their 
respective responsibilities and are intended to provide independent assessments of HHS programs 
and operations. These assessments help reduce waste, abuse, and mismanagement and promote 
economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide HHS,  
Congress, and the public with timely, useful, and reliable information on significant issues.  
Specifically, these evaluations focus on preventing fraud, waste, or abuse and promoting economy, 
efficiency, and effectiveness in departmental programs.  To promote impact, the reports also 
present practical recommendations for improving program operations. 
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations of 
allegations of wrongdoing in HHS programs or to HHS beneficiaries and of unjust enrichment 
by providers.  The investigative efforts of OI lead to criminal convictions, administrative 
sanctions, or civil monetary penalties.  
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to OIG, 
rendering advice and opinions on HHS programs and operations and providing all legal support 
in OIGs internal operations.  OCIG imposes program exclusions and civil monetary penalties on 
health care providers and litigates those actions within HHS.  OCIG also represents OIG in the 
global settlement of cases arising under the Civil False Claims Act, develops and monitors 
corporate integrity agreements, develops compliance program guidances, renders advisory 
opinions on OIG sanctions to the health care community, and issues fraud alerts and other 
industry guidance.  I N T R O D U C T I O N
  E X E C U T I V E   S U M M A R Y  

OBJECTIVE 
To determine (1) whether average sales prices (ASP) for individual 
Medicare Part B prescription drugs exceeded average manufacturer 
prices (AMP) by at least 5 percent during the fourth quarter of 2005 and 
(2) the impact of lowering reimbursement amounts for drugs that meet 
the 5-percent threshold. 
BACKGROUND 
In 2005, Medicare Part B began paying for most covered drugs using a 
new methodology based on ASPs.  Section 1847A(c) of the Social 
Security Act (the Act) defines an ASP as a manufacturers sales of a 
drug to all purchasers in the United States in a calendar quarter 
divided by the total number of units of the drug sold by the 
manufacturer in that same quarter.  The ASP is net of any price 
concessions.  Manufacturers report ASPs by national drug codes (NDC) 
and must provide the Centers for Medicare & Medicaid Services (CMS) 
with the ASP and volume of sales for each of their NDCs on a quarterly 
basis. 
Although manufacturers submit ASP data by NDCs, CMS does not 
reimburse Medicare providers for drugs using NDCs.  Instead, CMS 
uses Healthcare Common Procedure Coding System (HCPCS) codes. 
More than one NDC may meet the definition of a particular HCPCS 
code; therefore, CMS uses NDC-level information submitted by the 
manufacturers to calculate an ASP for each covered HCPCS code. 
When CMS calculates payment amounts for HCPCS codes, it must 
weight ASPs at the NDC level by the amount of the drug sold during the 
quarter.  Under the ASP pricing methodology, Medicares allowance for 
most Part B drug codes is equal to 106 percent of the volume-weighted 
ASPs for those HCPCS codes.  
Section 1847A(d)(2)(B) of the Act mandates that OIG compare ASPs 
with AMPs.  As defined in section 1927(k)(1) of the Act, an AMP is the 
average price paid to the manufacturer for the drug in the United 
States by wholesalers for drugs distributed to the retail pharmacy class 
of trade, minus customary prompt pay discounts.  As part of the 
Medicaid drug rebate program, manufacturers must provide CMS with 
the AMP for each of their NDCs on a quarterly basis, pursuant to 
section 1927(b)(3) of the Act.  If the ASP for a drug exceeds the AMP by 
at least 5 percent, section 1847A(d)(3)(A) of the Act grants the Secretary 
  OEI-03-06-00370  COMPARISON OF FOURTH-QUARTER 2005 ASPS TO AMPS  i  of the Department of Health and Human Services authority to disregard 
the ASP pricing methodology for that drug.  Consistent with section 
1847A(d)(3)(C) of the Act, the payment amount for the drug code may 
then be replaced with the lesser of the widely available market price for 
the drug (if any) or 103 percent of the AMP. 
For this inspection, we obtained CMSs ASP data from the fourth 
quarter of 2005, which were used to establish volume-weighted ASPs 
and reimbursement amounts for the second quarter of 2006.  We also 
obtained CMSs AMP data from the fourth quarter of 2005.  We used 
these AMP data to calculate volume-weighted AMPs using the same 
method that CMS uses to calculate volume-weighted ASPs.  Ultimately, 
we compared volume-weighted ASPs to volume-weighted AMPs for 
341 HCPCS codes, and identified codes for which ASPs exceeded AMPs 
by at least 5 percent. 
FINDING 
For 46 of 341 HCPCS codes reviewed, the volume-weighted ASP 
exceeded the volume-weighted AMP by at least 5 percent.  Based on 
our analysis of data from the fourth quarter of 2005, a total of   
46 HCPCS codes had an ASP that exceeded the AMP by at least   
5 percent. For 13 of the 46 HCPCS codes, volume-weighted ASPs 
exceeded volume-weighted AMPs by at least 20 percent, with ASPs for  
4 of these exceeding AMPs by more than 50 percent.  If reimbursement 
amounts for these 46 codes had been based on 103 percent of the AMP 
during the second quarter of 2006, we estimate that Medicare 
expenditures would have been reduced by $16 million. 
  OEI-03-06-00370  COMPARISON OF FOURTH-QUARTER 2005 ASPS TO AMPS  ii  EE XX EE CC UU TT II VV EE    SS UU MM MM AA RR YY

SUMMARY 
For the purpose of monitoring new Medicare reimbursement amounts 
based on ASPs, and 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. This review is the second of such comparisons, 
and we identified 46 HCPCS codes that are eligible for price adjustment 
under authority of the Secretary. Twenty of the 46 HCPCS codes were 
previously eligible for price adjustment as a result of OIGs first 
comparison between ASPs and AMPs, which was performed using data 
from the third quarter of 2004. 
OEI-03-06-00370  COMPARISON OF FOURTH-QUARTER 2005 ASPS TO AMPS  iii    T A B L E   O F   C O N T E N T S  

EXECUTIVE SUMMARY .......................................  i

INTRODUCTION ..............................................  1 

FINDING .......................................................  8 

Results of ASP to AMPComparison. . . . . . . . . . . . . . . . . . . . . . . .   8

SUMMARY ...................................................... 10 

APPENDIXES .................................................. 11 

A: 	Equation Used by CMS to Calculate Volume-Weighted ASPs  11 

B: 	Forty-Six HCPCS Codes With an ASP That Exceeded the  

AMP by at Least 5 Percent. . . . . . . . . . . . . . . . . . . . . . . . . . . .  12

ACKNOWLEDGMENTS ......................................... 14
   I N T R O D U C T I O N  

OBJECTIVE 
To determine (1) whether average sales prices (ASP) for individual 
Medicare Part B prescription drugs exceeded average manufacturer 
prices (AMP) by at least 5 percent during the fourth quarter of 2005 and 
(2) the impact of lowering reimbursement amounts for drugs that meet 
the 5-percent threshold. 
BACKGROUND 
Medicare Part B Coverage of Prescription Drugs 
Medicare Part B covers only a limited number of outpatient prescription 
drugs. Covered drugs include injectable drugs administered by a 
physician; certain self-administered drugs, such as oral anticancer 
drugs and immunosuppressive drugs; drugs used in conjunction with 
durable medical equipment; and some vaccines. 
Medicare Part B Payments for Prescription Drugs 
The Centers for Medicare & Medicaid Services (CMS) contracts with 
private companies, known as carriers, to process and pay Medicare Part 
B claims, including those for prescription drugs.  Claims for drugs that 
are used with medical equipment are typically processed by one of four 
durable medical equipment regional carriers. Claims for other types of 
covered drugs are processed by local carriers.  To obtain reimbursement 
for covered outpatient prescription drugs, physicians and suppliers 
submit claims 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 dosage size but does not specify 
manufacturer or package size information. 
Medicare and its beneficiaries spent almost $10 billion for Part B drugs 
in 2005. Although Medicare paid for almost 550 outpatient prescription 
drug HCPCS codes that year, the majority of spending for Part B drugs 
was concentrated on a relatively small subset of those codes. In 2005, 
52 codes represented 90 percent of the expenditures for Part B drugs, 
with only 11 of these drugs representing half of the total Part B drug 
expenditures. 
  OEI-03-06-00370  COMPARISON OF FOURTH-QUARTER 2005 ASPS TO AMPS  1  I N T R O D U C T I O N  
Reimbursement Methodology for Part B Drugs and Biologicals  
In 2005, Medicare Part B began paying for most covered drugs using an 
entirely new methodology based on ASPs.1  Section 1847A(c) of the 
Social Security Act (the Act), as added by the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (MMA),   
P.L. 108-173, defines an ASP as a manufacturers sales of a drug to all 
purchasers in the United States in a calendar quarter divided by the 
total number of units of the drug sold by the manufacturer in that same 
quarter.  The ASP is net of any price concessions such as volume 
discounts, prompt pay discounts, and cash discounts; free goods 
contingent on purchase requirements; chargebacks; and rebates other 
than those obtained through the Medicaid drug rebate program.2 Sales 
that are nominal in amount are exempted from the ASP calculation, as 
are sales excluded from the determination of best price in the 
Medicaid drug rebate program.3,4 
Manufacturers report ASPs by national drug codes (NDC), which are 
11-digit identifiers that indicate the manufacturer of the drug, the 
product dosage form, and the package size.  Manufacturers must 
provide CMS with the ASP and volume of sales for each NDC on a 
quarterly basis, with submissions due 30 days after the close of each 
quarter.5 
Given that Medicare Part B reimbursement for outpatient drugs is 
based on HCPCS codes rather than NDCs, and that 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 to calculate volume-
weighted ASPs for covered HCPCS codes. 
Fourth-quarter 2005 ASP submissions from manufacturers served as 
the basis for second-quarter 2006 Medicare allowances for most covered 
1 For 2004, the reimbursement amount for most covered drugs was based on 85 percent of 
the average wholesale price (AWP) as published in national pricing compendia such as the 
Red Book. Prior to 2004, Medicare Part B reimbursed for covered drugs based on the 
lower of either the billed amount or 95 percent of the AWP. 
2 Section 1847A(c)(3) of the Act.  
3 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. 
4 Section 1847A(c)(2) of the Act.  
5 Section 1927(b)(3) of the Act.  
  OEI-03-06-00370  COMPARISON OF FOURTH-QUARTER 2005 ASPS TO AMPS  2  IIII NNNN TTTT RRRR OOOO DDDD UUUU CCCC TTTT IIII OOOO NNNN
drug codes. Under the ASP pricing methodology, the Medicare 
allowance for most Part B drugs is equal to 106 percent of the ASP for 
the HCPCS code. Medicare beneficiaries are responsible for 20 percent 
of this amount in the form of coinsurance. 
The Medicaid Drug Rebate Program and AMP 
For Federal payment to be available for covered outpatient drugs 
provided under Medicaid, sections 1927(a)(1) and (b)(1) of the Act 
mandate that drug manufacturers enter into rebate agreements with 
the Secretary of the Department of Health and Human Services and pay 
quarterly rebates to State Medicaid agencies. Under these rebate 
agreements, and pursuant to section 1927(b)(3) of the Act, 
manufacturers must provide CMS with the AMP for each of their NDCs 
on a quarterly basis. As defined in section 1927(k)(1) of the Act, the 
AMP is the average price paid to the manufacturer for the drug in the 
United States by wholesalers for drugs distributed to the retail 
pharmacy class of trade, minus customary prompt pay discounts. The 
AMP is calculated as a weighted average of prices for all of a 
manufacturers package sizes of a drug sold during a given quarter, and 
is reported for the lowest identifiable quantity of the drug 
(e.g., 1 milligram, 1 milliliter, 1 tablet, 1 capsule). 
Office of Inspector Generals Monitoring of ASP and AMP 
Section 1847A(d)(2)(B) of the Act mandates that the Office of Inspector 
General (OIG) compare ASPs with AMPs. If the ASP for a drug exceeds 
the AMP by at least 5 percent, section 1847A(d)(3) of the Act grants the 
Secretary authority to disregard the ASP pricing methodology for that 
drug. Consistent with section 1847A(d)(3)(C) of the Act, the payment 
amount for the drug code may then be replaced with the lesser of the 
widely available market price for the drug (if any) or 103 percent of the 
AMP. 
In April 2006, OIG released the first of its reports comparing ASPs to 
AMPs. The study, entitled Monitoring Medicare Part B Drug Prices: 
A Comparison of Average Sales Prices to Average Manufacturer Prices 
(OEI-03-04-00430), identified a number of HCPCS codes with ASPs that 
exceeded AMPs by at least 5 percent in the third quarter of 2004. 
Overall, CMS indicated that the information in the report is helpful in 
its continuing efforts to monitor payment adequacy under the ASP 
methodology. However, CMS noted that OIGs review was conducted 
using data submitted during the initial implementation phase of the 
ASP methodology. Although CMS acknowledged the Secretarys 
authority to adjust ASP payment limits when certain conditions are 
OEI-03-06-00370  COMPARISON OF FOURTH-QUARTER 2005 ASPS TO AMPS  3  II NN TT RR OO DD UU CC TT II OO NN
met, it believes that other issues should be considered, including the 
timing and frequency of pricing comparisons, stabilization of ASP 
reporting, the effective date and duration of rate substitution, and the 
accuracy of ASP and AMP data. 
Related Work by the Office of Inspector General 
In a February 2006 report entitled Calculation of Volume-Weighted 
Average Sales Price for Medicare Part B Prescription Drugs 
(OEI-03-05-00310), OIG stated that CMSs method for calculating 
volume-weighted ASPs is incorrect because CMS does not use billing 
units consistently throughout its equation. As a result, many HCPCS 
codes have a reimbursement amount that is higher or lower than the 
amount that would have been calculated if billing units were used 
consistently. OIG recommended that CMS change its calculation of 
volume-weighted ASPs. Although CMS indicated that it may consider 
altering the ASP methodology, it has yet to do so. 
In September 2005, OIG issued a report in response to section 303(c)(3) 
of the MMA, which mandated that OIG determine whether physician 
practices in the specialties of hematology, hematology/oncology, and 
medical oncology could obtain drugs and biologicals for the treatment of 
cancer patients at 106 percent of the ASP. According to this report, 
Adequacy of Medicare Part B Drug Reimbursement to Physician 
Practices for the Treatment of Cancer Patients (A-06-05-00024), 
physician practices in these specialties could generally purchase drugs 
for the treatment of cancer patients at or below the reimbursement rate 
established under the ASP payment methodology. 
METHODOLOGY 
We obtained CMSs NDC-level ASP data from the fourth quarter of 
2005, which were used to establish Part B drug reimbursement 
amounts for the second quarter of 2006. In addition, we obtained the 
file that CMS used to crosswalk NDCs to their corresponding HCPCS 
codes. Both the ASP data and the crosswalk file were updated as of 
March 2006. We also obtained AMP data from CMS for the fourth 
quarter of 2005. 
Calculation of Volume-Weighted Average Sales Price 
As mentioned previously, Medicare does not base reimbursement for 
covered drugs on NDCs; instead, it uses HCPCS codes. Therefore, CMS 
uses ASP information submitted by manufacturers for each NDC to 
calculate a volume-weighted ASP for each covered HCPCS code. When 
OEI-03-06-00370  COMPARISON OF FOURTH-QUARTER 2005 ASPS TO AMPS  4  I N T R O D U C T I O N  
calculating these volume-weighted ASPs, CMS only includes NDCs with 
ASP submissions that are deemed valid.  We did not examine the NDCs 
that CMS opted to exclude from its calculation, nor did we verify the 
accuracy of CMSs crosswalk files. 
As of March 2006, CMS had established prices for 496 HCPCS codes 
based on the ASP reimbursement methodology. Reimbursement 
amounts for the 496 HCPCS codes were based on ASP data for   
3,061 NDCs. 
To calculate the volume-weighted ASPs for these 496 codes, CMS used 
an equation that involves the following variables:  the ASP for the 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.  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 
11-digit NDC when developing its crosswalk files.  A more detailed 
description of CMSs method of calculating volume-weighted ASPs is 
provided in Appendix A. 
Analysis of Average Manufacturer Price Data 
An AMP is reported for the lowest identifiable quantity of the drug 
contained in the NDC (e.g., 1 milligram, 1 milliliter, 1 tablet, 1 capsule).  
In contrast, an ASP is reported for the entire amount of the drug 
contained in the NDC (e.g., for 50 milliliters, for 100 tablets).  To ensure 
that 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.  
In making these conversions, we examined AMPs only for those 
3,061 NDCs that CMS used in its calculation of volume-weighted ASPs 
for the 496 codes.  If AMP data were not available for one or more of 
these NDCs, we excluded the corresponding HCPCS code from our 
analysis. We excluded a total of 144 HCPCS codes using this 
conservative approach. The remaining 352 HCPCS codes had AMP 
data for every NDC that CMS used in its calculation of volume-weighted 
ASPs. These 352 HCPCS codes represented 1,659 NDCs.   
  OEI-03-06-00370  COMPARISON OF FOURTH-QUARTER 2005 ASPS TO AMPS  5  II NN TT RR OO DD UU CC TT II OO NN
We then multiplied the AMPs for these 1,659 NDCs by the total amount 
of the drug contained in each NDC, as identified by sources such as the 
CMS crosswalk file, the Red Book, manufacturer Web sites, and the 
Food and Drug Administrations NDC directory. We will refer to the 
resulting amounts as converted AMPs. For 23 NDCs, we could not 
successfully identify the amount of the drug reflected by the ASP and 
therefore could not calculate a converted AMP. These 23 NDCs were 
crosswalked to 11 HCPCS codes. We did not include these 11 HCPCS 
codes (126 NDCs) in our final analysis. 
Using the converted AMPs for the remaining 1,533 NDCs, we then 
calculated volume-weighted AMPs for each of the codes using the same 
method that CMS uses to calculate volume-weighted ASPs. We 
calculated volume-weighted AMPs for a total of 341 HCPCS codes. We 
did not verify the accuracy of manufacturer-reported ASP and AMP 
data. 
Comparing Volume-Weighted ASPs to Volume-Weighted AMPs 
For each of the 341 HCPCS codes included in our study, we then 
compared the volume-weighted ASPs and AMPs and identified codes 
with ASPs that exceeded AMPs by at least 5 percent. 
For those HCPCS codes that met or exceeded the 5-percent threshold, 
we conducted a review of the associated NDCs to verify the accuracy of 
the billing units information. According to our review, four of the codes 
that met the 5-percent threshold had associated NDCs with potentially 
inaccurate billing units.6 Given that volume-weighted ASPs and AMPs 
were calculated using this billing unit information, we could not be 
certain that the results for these four codes were correct. Therefore, we 
did not include these four codes in our findings. 
For the remaining HCPCS codes, we then estimated the monetary 
impact of lowering reimbursement to 103 percent of the AMP.7 First we 
6 NDCs for these four codes had billing unit information in CMSs crosswalk file that may 
not have accurately reflected the number of billing units actually contained in the NDC. 
7 Pursuant to section 1847A(d)(3) of the Act, if the ASP for a drug exceeds the AMP by at 
least 5 percent, the Secretary has authority to disregard the ASP pricing methodology for 
that drug. Consistent with section 1847A(d)(3)(C) of the Act, the payment amount for the 
drug code may then be replaced 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. 
OEI-03-06-00370  COMPARISON OF FOURTH-QUARTER 2005 ASPS TO AMPS  6  II NN TT RR OO DD UU CC TT II OO NN
calculated 103 percent of the volume-weighted AMP and subtracted this 
amount from the second-quarter 2006 reimbursement amount for the 
HCPCS code, which is equal to 106 percent of the volume-weighted 
ASP. To estimate the financial effect for second quarter 2006, we then 
multiplied the difference by one-fourth of the number of services that 
were allowed by Medicare for each HCPCS code in 2005, as reported in 
CMSs Part B Extract and Summary System (BESS).8 This estimate 
assumes that the number of services that were allowed by Medicare in 
2005 remained consistent from one quarter to the next, and that there 
were no significant changes in utilization in 2006. 
This study was conducted in accordance with the Quality Standards 
for Inspections issued by the President=s Council on Integrity and 
Efficiency and the Executive Council on Integrity and Efficiency. 
8 At the time of extraction, BESS data were 98 percent complete. 
OEI-03-06-00370  COMPARISON OF FOURTH-QUARTER 2005 ASPS TO AMPS  7    FF II NN DD II NN GG   

For 46 of 341 HCPCS codes reviewed,    Consistent with sections 1847A(d)(2)(B) 
the volume-weighted ASP exceeded the  and 1847A(d)(3) of the Act, OIG 
compared ASPs to AMPs to identify 
volume-weighted AMP by at least 5 percent 
instances in which the ASP for a 
particular drug exceeded the AMP by a threshold of 5 percent.  Forty-six 
of the 341 HCPCS codes included in our comparison met or surpassed 
this 5-percent threshold in the fourth quarter of 2005.  Of these 
46 HCPCS codes, 20 were identified in a previous OIG report as having 
ASPs that exceeded AMPs by at least 5 percent in the third quarter of 
2004.9  A list of all 46 HCPCS codes is presented in Appendix B.   
Table 1 below describes the extent to which ASPs exceeded AMPs for 
the 46 HCPCS codes.  For 13 of the 46 codes, volume-weighted ASPs 
exceeded volume-weighted AMPs by at least 20 percent, with ASPs for  
4 of these exceeding AMPs by more than 50 percent.10 
Table 1: Extent to Which ASPs Exceeded AMPs for 46 HCPCS Codes 
Percentage Difference  Number of 
Between ASP and AMP  HCPCS Codes 
59%  14 
1019%  19 
2029%  5 
3039%  1 
4049%  3 
5059%  1 
6069%  0 
7079%  0 
8089%  2 
9099%  1 
Total  46 
Source: OIG analysis of fourth-quarter 2005 ASP and AMP data, 2006. 
9 This report, Monitoring Medicare Part B Drug Prices:  A Comparison of Average Sales 
Price to Average Manufacturer Price (OEI-03-04-00430), found that 51 HCPCS codes met 
the 5-percent threshold when CMSs method was used to calculate volume-weighted ASPs 
and AMPs using data from the third quarter of 2004.     
10 Due to the confidential nature of ASP and AMP data, OIG is not publicly providing the 
exact percentages for each of the 46 HCPCS codes.  However, OIG will provide CMS with 
detailed information regarding the codes identified in this report.  
  OEI-03-06-00370  COMPARISON OF FOURTH-QUARTER 2005 ASPS TO AMPS  8  F I N D I N G  
Lowering reimbursement amounts for these 46 HCPCS codes to 103 percent 
of the average manufacturer price would have reduced Medicare allowances 
by an estimated $16 million in the second quarter of 2006. 
Sections 1847A(d)(3)(A) and (B) of the Act grant the Secretary authority 
to disregard the ASP pricing methodology for a drug with an ASP that 
exceeds the AMP by at least 5 percent. If that criterion is met, the 
Secretary has authority to lower the reimbursement amount for the 
drug to 103 percent of the AMP.11  In this study, we identified 
46 HCPCS codes that met or exceeded the 5-percent threshold specified 
in the Act.  If reimbursement amounts for these 46 codes had been 
based on 103 percent of AMP during the second quarter of 2006, we 
estimate that Medicare expenditures would have been reduced by     
$16 million.12 
Three of the 46 HCPCS codes accounted for almost 80 percent of the  
$16 million.  If the reimbursement amounts for these 3 codes had been 
based on 103 percent of the AMP during the second quarter of 2006, 
Medicare expenditures would have been reduced by an estimated   
$13 million. 
11 Consistent with section 1847A(d)(3)(C) of the Act, the payment amount for the drug code 
may then be replaced 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. 
12 This estimate is based on one-fourth of the number of services allowed by Medicare for 
each HCPCS code in 2005.  
  OEI-03-06-00370  COMPARISON OF FOURTH-QUARTER 2005 ASPS TO AMPS  9  B A N N E R   2 N D   P A G E  
  S U M M A R Y  

For the purpose of monitoring new Medicare reimbursement amounts 
based on ASPs, and 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.  This review is the second of such comparisons, 
and we identified 46 HCPCS codes that are eligible for price adjustment 
under authority of the Secretary.  Twenty of the forty-six HCPCS codes 
were previously eligible for price adjustment as a result of OIGs first 
comparison between ASPs and AMPs, which was performed using data 
from the third quarter of 2004. 
  OEI-03-06-00370  COMPARISON OF FOURTH-QUARTER 2005 ASPS TO AMPS  10  A P P E N D I X ~ A  
  AA PP PP EE NN DD II XX    ~~    AA  

Equation Used by the Centers for Medicare & Medicaid Services to Calculate 
Volume-Weighted Average Sales Prices 
In the following equation, a unit is defined as the entire amount of the drug 
contained in the National Drug Code (NDC): 
ASP for NDC 
* Number of NDCs Sold

Volume-Weighted ASP  Sum of 

Billing Units in NDC 
for the Billing Unit of  
= 

 HCPCS Code

Sum of Number of NDCs Sold

CMSs calculation of volume-weighted ASPs is discussed in greater detail in the 
Office of Inspector General (OIG) report, Calculation of Volume-Weighted Average 
Sales Price for Medicare Part B Prescription Drugs (OEI-03-05-00310).  This report 
found that CMSs method for calculating volume-weighted ASPs is incorrect because 
CMS does not use billing units consistently throughout its equation.  Therefore, OIG 
recommended that CMS adopt an alternate method for calculating volume-weighted 
ASPs. 
  OEI-03-06-00370  COMPARISON OF FOURTH-QUARTER 2005 ASPS TO AMPS  11    AAA PPP PPP EEE NNN DDD III XXX     ~~~     BBB    
Forty-Six HCPCS Codes With an ASP That Exceeded the AMP by at Least 5 Percent 
Code  Description 
J0207  Injection, amifostine, 500 mg 
J0360*  Injection, hydralazine HCl, up to 20 mg 
J0470*  Injection, dimercaprol, per 100 mg 
J0610  Injection, calcium gluconate, per 10 mL 
J0640  Injection, leucovorin calcium, per 50 mg 
J0694  Injection, cefoxitin sodium, 1 g 
J0720  Injection, chloramphenicol sodium succinate, up to 1 g 
J0745  Injection, codeine phosphate, per 30 mg 
J1230  Injection, methadone HCl, up to 10 mg 
J1240*  Injection, dymenhydrinate, up to 50 mg 
J1270  Injection, doxercalciferol, 1 mcg 
J1460*  Injection, gamma globulin, intramuscular, 1 cc 
J1470*  Injection, gamma globulin, intramuscular, 2 cc 
J1480*  Injection, gamma globulin, intramuscular, 3 cc 
J1490*  Injection, gamma globulin, intramuscular, 4 cc 
J1500*  Injection, gamma globulin, intramuscular, 5 cc 
J1510*  Injection, gamma globulin, intramuscular, 6 cc 
J1520*  Injection, gamma globulin, intramuscular, 7 cc 
J1530*  Injection, gamma globulin, intramuscular, 8 cc 
J1540*  Injection, gamma globulin, intramuscular, 9 cc 
J1550*  Injection, gamma globulin, intramuscular, 10 cc 
J1560*  Injection, gamma globulin, intramuscular, over 10 cc 
J1670  Injection, tetanus immune globulin, human, up to 250 units 
J1850  Injection, kanamycin sulfate, up to 75 mg 
J2545*  Pentamidine isethionate, inhalation solution, per 300 mg 
J2690*  Injection, procainamide HCl, up to 1 g 
J2720  Injection, protamine sulfate, per 10 mg  
J3000  Injection, streptomycin, up to 1 g 
J3120  Injection, testosterone enanthate, up to 100 mg 
J3130  Injection, testosterone enanthate, up to 200 mg 
J3410*  Injection, hydroxyzine HCl, up to 25 mg 
J3411  Injection, thiamine HCl, 100 mg 
J3420*  Injection, vitamin B-12 cyanocobalamin, up to 1,000 mcg 
J3475  Injection, magnesium sulfate, per 500 mg 
J7501  Azathioprine, parenteral, 100 mg 
Albuterol, up to 2.5 mg and ipratropium bromide, up to 0.5 mg, noncompounded inhalation 
J7620 
solution, administered through DME 
J7638  Dexamethasone, inhalation solution administered through DME, unit dose form, per mg 
  OEI-03-06-00370  COMPARISON OF FOURTH-QUARTER 2005 ASPS TO AMPS  12  A P P E N D I X   ~   B  

Code  Description 
J9000  Doxorubicin HCl, 10 mg 
J9130  Dacarbazine, 100 mg 
J9140  Dacarbazine, 200 mg 
J9190  Fluorouracil, 500 mg 
J9202*  Goserelin acetate implant, per 3.6 mg 
J9211  Idarubicin HCl, 5 mg 
J9214  Interferon, alfa-2b, recombinant, 1 million units 
J9340  Thiotepa, 15 mg 
J9360*  Vinblastine sulfate, 1 mg 
*Codes marked with an asterisk were identified in a previous OIG report as having ASPs that exceeded AMPs by 
at least 5 percent in the third quarter of 2004. 
Source: OIG analysis of fourth-quarter 2005 ASP and AMP data, 2006. 
  OEI-03-06-00370  COMPARISON OF FOURTH-QUARTER 2005 ASPS TO AMPS  13    A C K N O W L E D G M E N T S  

This report was prepared under the direction of Robert A. Vito, Regional 
Inspector General for Evaluation and Inspections in the Philadelphia 
regional office, and David E. Tawes, Director of the Medicare and 
Medicaid Prescription Drug Unit.  Other principal Office of Evaluation 
and Inspections staff who contributed include: 
Lauren McNulty, Team Leader 
Linda Boone Abbott, Program Specialist 
  OEI-03-06-00370  COMPARISON OF FOURTH-QUARTER 2005 ASPS TO AMPS  14