July 2, 2020
TO: Seema Verma, M.P.H
Administrator 
Centers for Medicare & Medicaid Services 
SUZANNE Digitally signed by 
FROM: Suzanne Murrin SUZANNE MURRIN 
DeputyInspectorGMenUeraRl RIN Date: 2020.07.01 
forEvaluation and Inspections 16:01:29 -04'00'
SUBJECT: OIG Final Recommendation Followup Report: Loophole in Drug Payment Rule 
Continues To Cost Medicare and Beneficiaries Hundreds of Millions of Dollars, 
OEI-BL-20-00100
Attached is ourfinal recommendation followup report entitledLoophole in Drug Payment Rule 
Continues To Cost Medicare and Beneficiaries Hundreds of Millions of Dollar. This report 
containsno new recommendations.
If you have anyquestions about this recommendation followup report, pleasedonot hesitateto 
call me, oroneof yourstaffmaycontact Joe Chiarenzelli at (202)836-1073or 
Joe.Chiarenzelli@oig.hhs.gov.  To facilitate identification, please refer to report number
OEI-BL-20-00100 in allcorrespondence.
Attachment  
 
  HHS OIG Recommendation Followup  July 2020  OEI-BL-20-00100 
Loophole in Drug Payment Rule Continues To Cost Medicare and 
Beneficiaries Hundreds of Millions of Dollars 
With certain exceptions, self-administered drugs are 
typically not covered under Medicare Part B.1  However, as 
AT A GLANCE  described in earlier Office of Inspector General (OIG) work 
and highlighted in this report, the Centers for Medicare & 
  Medicaid Services (CMS) continues to factor in the prices for 
Closing the payment loophole  noncovered self-administered versions when it calculates 
for self-administered drugs  the payment amounts for certain Part B drugs. 
would have saved Medicare 
In general, Medicare coverage for outpatient prescription 
and its beneficiaries half a 
drugs is provided primarily under the Part D benefit.2  
billion dollars on Orencia and 
However, a limited number of drugslargely, those that are 
Cimzia in 2017 and 2018.  
injected or infused in physicians offices or hospital 
 
outpatient settingsare covered under Medicare Part B.3   
Physicians almost never 
administered the self-injected  Medicare payments for most Part B drugs are based on 
version of Orencia to patients  average sales prices (ASPs).4  In general, manufacturers must 
in their offices.   provide CMS with the ASP and sales volume for each of their 
  Part B national drug codes (NDCs) on a quarterly basis.5, 6 
The payment loophole may 
However, Medicare sets payment amounts for Part B drugs 
provide physicians with 
using a different type of codeHealthcare Common 
substantial incentives to 
Procedure Coding System (HCPCS) codesrather than 
administer Orencia and Cimzia 
NDCs.7  Because more than one NDC may meet the 
instead of other drugs. 
definition of a HCPCS code, CMS must first crosswalk 
 
manufacturers NDCs to their corresponding HCPCS codes.8  
Certain operational issues 
To determine the quarterly Part B payment amount for a 
would need to be addressed if 
HCPCS code, CMS calculates a volume-weighted ASP using 
CMS and Congress were to 
the ASPs and sales volumes for each corresponding NDC.     
exclude noncovered self-
administered versions from  In a November 2017 report, the Office of Inspector General 
payment amount calculations.  
(OIG) found that corresponding NDCs may sometimes 
represent versions of drugs that do not meet Part B drug 
coverage criteria.9  Specifically, CMS and a Federal court 
interpret relevant statute to require the inclusion of versions of drugs not generally covered under Part 
B in limited circumstances when setting Medicare payment amounts.  As a result, CMS included 
noncovered, self-administered versions of Orencia and Cimzia when determining payments for those 
two drugs.  The inclusion of these noncovered versions caused Medicare and its beneficiaries to pay an 
extra $366 million from 2014 through 2016.  Twenty percent of that total ($73.2 million) stemmed 
directly from additional coinsurance owed by Medicare beneficiaries. 
1 
  OIG recommended that CMS seek a legislative change that would provide the agency with flexibility to 
determine when noncovered versions should be included in the calculation of the Part B payment 
amount.  CMS did not concur, citing concerns related to beneficiary access and operational implications, 
and noting that further analysis is necessary to determine whether such a change in law would be 
appropriate.  OIG responded that it shares CMSs concern regarding the need to safeguard patient 
access but believes that there are more effective measures to address this issuemeasures that would 
not result in Medicare and its beneficiaries paying hundreds of millions of dollars in excess.  
RESULTS
 
Closing the payment loophole for self-administered drugs would have 
saved Medicare and its beneficiaries nearly half a billion dollars in 2017 
and 2018 
As of December 2019, CMS continued to include noncovered, self-administered versions when 
calculating Part B payment amounts for Orencia and Cimzia, the same two drugs identified in OIGs 
November 2017 report.  In both cases, the HCPCS code descriptions associated with Part B coverage of 
the drugs specifically exclude self-administration.10, 11  From our analysis, these two drugs were the only 
ones for which noncovered, self-administered versions were used to set Part B payment amounts in 
2017 or 2018 (i.e., CMS did not include in payment amount calculations any new NDCs that fit this 
criteria since the time we conducted analysis for our previous report). 
Part B spending for Orencia and Cimzia would have been reduced by $497 million (22 percent of 
expenditures for the two drugs) from 2017 through 2018 if their payment amounts had been set using 
only the physician-administered versions (i.e., if the self-administered versions had not been used in 
determining payment).  (See Exhibit 1.)  Twenty percent ($99.5 million) of the total savings would have 
come directly through reduced coinsurance owed by Medicare beneficiaries. 
Exhibit 1:  Medicare and Its Beneficiaries Would Have Saved $497 Million on Orencia and Cimzia Over 
2 Years If the Payment Loophole Had Been Closed 
$2,500,000,000
$1,774,446,801
$2,000,000,000
$1,376,467,855
$1,500,000,000
$1,000,000,000
$500,000,000
$443,611,700
$344,116,964
$0
Actual Expenditures (2017-18) Expenditures If Loophole Were Closed
(2017-18)
Beneficiary Share Medicare Share
 
Source: OIG analysis of Part B payments and expenditures for Orencia and Cimzia, November 2019. 
2 
  Medicare and its beneficiaries would have saved $394 million over 2 years if payment amounts 
for Orencia had been set using only physician-administered versions. 
The inclusion of self-administered versions of Orencia continues to artificially drive up the Medicare 
Part B payment amount.  Orencia (abatacept) is a prescription drug approved to treat arthritis.  Prior to 
2014, CMS included pricing for just a single, infused (i.e., physician-administered) version of Orencia 
when calculating the Part B payment amount for the drug.  In 2011, a new, higher-priced version of 
Orencia intended primarily for self-administration at homea prefilled syringe12was approved for 
marketing by the U.S. Food and Drug Administration.  Orencias manufacturer began reporting pricing 
data for the new version in the first quarter of 2014, and CMS subsequently blended the prices for both 
the physician- and self-administered versions (based on their respective sales volumes) when 
determining the third-quarter 2014 payment amount.  Because the self-administered version cost 
substantially more than the original, physician-administered form, Medicares payment amount for 
Orencia immediately jumped by 35 percent.   
If CMS had excluded self-administered versions of Orencia (i.e., prefilled syringes and subsequently 
approved autoinjectors) when setting payment, the quarterly Medicare payment amount would have 
been between 23 percent to 27 percent lower from January 2017 through December 2018 (see 
Exhibit 2).  As a result, Medicare and beneficiary spending would have been reduced by $394 million, or 
roughly 26 percent of the $1.5 billion spent on the drug during those 2 years. 
 
Exhibit 2:  Orencia Cost Approximately $800 to $1,100 More Per Dose Because of Payment Loophole 
$4,500
$4,000
$3,500
$3,000
$2,500
$2,000
$1,500
1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 2018 4Q 2018
Actual Part B Payment Amount Per Average Dose
Part B Payment Amount Per Average Dose If Loophole Were Closed
 
Source: OIG analysis of Part B payments and expenditures for Orencia, November 2019. 
   
The payment loophole for Orencia could cost a typical beneficiary almost $3,000 per year.  
Approximately 27,000 Medicare beneficiaries had at least 1 claim for Orencia paid under Part B in 2018.  
For the most common infused dose (750 milligrams (mg)), current payment rules resulted in Medicare 
and these beneficiaries paying close to $4,000 per infusion instead of $2,900 (using fourth-quarter   
2018 numbers).13  Given the 20-percent coinsurance under Part B, beneficiaries were therefore 
responsible for more than $200 in additional cost-sharing per treatment (i.e., almost $800 rather than 
3 
  approximately $580).  The dosing schedule for Orencia recommends an infusion every 4 weeks, meaning 
that a typical beneficiary faced approximately $2,800 per year in additional out-of-pocket spending 
simply because of a payment loophole. 
Medicare and its beneficiaries would have saved $104 million over 2 years if payment amounts 
for Cimzia had been set using only physician-administered versions. 
As with Orencia, self-administered versions of Cimzia artificially drive up the drugs Medicare Part B 
payment amount.  Cimzia (certolizumab pegol) is a prescription drug used to treat certain forms of 
arthritis, plaque psoriasis, and Crohns disease.  CMS includes the prices for three versions of Cimzia 
when calculating Part B payment amounts for the drug.  However, as with Orencia, only one of these 
versions is intended primarily for administration by physicians.  According to the manufacturer, the 
other two versions are typically intended to be self-administered by the patient.14  
If CMS had based payment solely on the version of Cimzia intended to be administered by physicians, 
Medicare quarterly payment amounts for the drug would have been 13 percent to 19 percent lower in 
2017 and 2018 (see Exhibit 3).  In turn, Medicare and beneficiary spending on Cimzia would have been 
reduced by $104 million, or 15 percent of the $684 million spent on the drug during that period. 
 
Exhibit 3:  Cimzia Cost Approximately $400 to $600 More Per Dose Because of Payment Loophole 
$3,400
$3,200
$3,000
$2,800
$2,600
$2,400
$2,200
$2,000
1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 2018 4Q 2018
Actual Part B Payment Amount Per Average Dose
Part B Payment Amount Per Average Dose If Loophole Were Closed
 
Source: OIG analysis of Part B payments and expenditures for Cimzia, November 2019. 
 
The payment loophole for Cimzia could cost a typical beneficiary more than $1,000 per year.  Nearly 
16,000 Medicare beneficiaries had at least one claim for Cimzia paid under Part B in 2018.  For the 
standard physician-administered dose (400 mg), current payment rules resulted in Medicare and these 
beneficiaries paying close to $3,250 per injection instead of roughly $2,800 (using fourth-quarter      
2018 numbers).15  Given the 20-percent coinsurance under Part B, beneficiaries were therefore 
responsible for almost $90 in additional cost-sharing per treatment (i.e., approximately $650 rather than 
$560).  The usual dosing schedule includes a 200-mg injection every 2 weeks or a 400-mg injection every 
4 weeks, meaning that a typical beneficiary faced an additional $1,100 per year in out-of-pocket 
spending simply because of a payment loophole (see Exhibit 4). 
4 
  Exhibit 4: Drug Payment Loophole Continues To Have Significant Costs for Medicare Beneficiaries 
 
Source: OIG analysis of Part B payments and expenditures for Orencia and Cimzia, November 2019. 
 
Physicians almost never administered the self-injected versions of Orencia 
to patients in their offices 
In CMSs response to OIGs earlier report, the agency cited concerns related to beneficiary access as a 
reason for not concurring with our recommendation.  Specifically, CMS stated that although situations in 
which a physician administers a version of a drug that is typically self-administered may be rare, 
modifying current law could limit the flexibility afforded to physicians to do so.  
However, current payment levels already limit physician flexibility by presenting significant financial 
disincentives for physicians to provide self-administered versions of Orencia in their offices.  In the 
fourth quarter of 2018, a physician who administered the 125-mg prefilled syringe of Orencia (the 
standard dosage of the subcutaneous form of the drug) would have received approximately $660 in 
reimbursement for the drug under Part B.  However, the average cost of that same syringe approached 
5 
  $1,000, meaning the physician would face a loss of more than $300 every time he or she elected to 
administer this version.   
Furthermore, an analysis of claims data from 2018 shows just how rarely beneficiaries receive injections 
of the typically self-administered versions of Orencia in their doctors offices or hospital outpatient 
departments.  In 2018, just 1.6 percent of the injection codes listed on claims for Orencia (3,449 out of 
222,200) were for subcutaneous administrations (i.e., the only approved route for self-administered 
formulations).  Moreover, nearly 2,700 of those claims listed an additional infusion/intravenous 
injection as also having been administered during the same visit, raising the possibility that the 
subcutaneous injection was not related to Orencia at all, but instead to another drug.  In fact, just 
150 claims for Orencia in 2018 (0.07 percent) listed billing units that reflected a dosage amount (125 mg) 
associated with the subcutaneous versioni.e., the self-administered versionof Orencia. 
(Note:  For Cimzia, because the recommended dosages and route of administration of the drug are 
identical across all three versions, OIG could not distinguish which version of the drug was billed.  
However, as with Orencia, the Part B reimbursement amount for Cimzia creates a financial disincentive 
for physicians to administer the prefilled Cimzia syringes (intended for self-administration) in their 
offices and outpatient settings.) 
The payment loophole may give physicians substantial incentives to 
administer Orencia and Cimzia instead of other drugs for the same 
conditions 
Because of the payment loophole, physicians who administered Orencia to Medicare beneficiaries in 
their offices received an average of 40 percent above their cost for the drug in 2018, compared to an 
estimated 6 percent for any competitor drug paid for under Part B.16  To put this into perspective, for 
each Medicare beneficiary who received a typical dose of Orencia in the final quarter of 2018, physicians 
netted almost $1,300 every 4 weeks.  If these physicians had instead administered one of several other 
Part B drugs for the same conditiondrugs with payment amounts that are not subject to the 
loopholethey would have netted roughly $75 to $250 over a 4-week period (i.e., at least $1,000 less 
per beneficiary per month). 
Similarly, because of the loophole, physicians who administered Cimzia received an average of               
23 percent above their cost for the drug that year.  In the fourth quarter of 2018, these physicians 
netted almost $690 every 4 weeks for each beneficiary, compared to between $75 and $375 for 
administering one of several other competitor drugs not affected by the loophole. 
Previous OIG work has shown that financial incentives may affect prescribing behavior in Medicare.17  
Given that the incentives cited in those reports were far smaller than the ones that currently exist for 
Orencia and Cimzia, OIG has serious concerns that the loophole could affect prescribing decisions.  
To give an extreme example of the potential incentives associated with the loophole, a rheumatologist 
in Florida administered more than 1,000 infusions of Orencia to 118 Medicare beneficiaries in 2018.  
(We identified no obvious signs of inappropriate billing related to this provider.18)  That year, Medicare 
reimbursed this physician almost $3.8 million for Orencia.  Assuming the drug was purchased at its ASP, 
the physician would have netted an estimated $1.5 million for Orencia in 2018, compared to 
approximately $130,000 if the loophole had been closed. 
6 
  Certain operational issues would need to be addressed if CMS and 
Congress were to exclude noncovered self-administered versions from 
payment amount calculations  
In our November 2017 report, OIG recommended that CMS seek a legislative change that would allow 
the agency to exclude noncovered versions of a drug when calculating Part B payment amounts.  Given 
the complexities inherent in identifying noncovered versions and the goal of treating such versions 
consistently, it is critical that any legislation address the sources and evidence that CMS may use to 
determine self-administration. 
In general, manufacturers report ASPs  including ASPs for any new NDCs associated with a particular 
Part B drug  each quarter.  Therefore, to ensure all noncovered self-administered versions are excluded 
when setting payment, CMS would need to update OIGs analysis on a quarterly basis.19  The vast 
majority of new NDCs listed on CMSs Part B files will be associated with routes of administration that 
require the presence of healthcare professionals (e.g., intravenous infusions and intramuscular 
injections).  Further, some self-administered drugs (e.g., oral anti-cancer drugs and certain inhalation 
drugs) are covered under Part B by statute.  CMS could readily determine that any NDCs fitting the 
above criteria are considered to be covered and therefore do not fit the loophole criteria.  In contrast, 
the NDCs requiring the closest scrutiny are those associated with subcutaneous injections.  
The Medicare Benefit Policy Manual explains that a drug injected subcutaneously is presumably 
intended for self-administration, but clarifies that this likely is not the case if the drug is used to treat an 
acute condition or is administered less frequently.20  Therefore, for any new NDCs that list a 
subcutaneous route of administration (around four NDCs per quarter during the period covered by this 
review), CMS will need to examine manufacturer labeling information for details regarding the drugs 
indications and uses.  If a label indicates that the drug is for an acute condition or the label does not 
discuss the appropriateness of self-administration, CMS may reasonably conclude that the drug should 
be covered under Part B and does not fit the loophole criteria.21, 22 
However, simply because a drug treats a chronic condition and its label permits self-administration does 
not mean that it should definitively be considered noncovered.  In addition, FDA-approved labels may 
change over time or may not contain all the necessary information CMS needs to make a fully informed 
decision regarding payment.  Therefore, legislation would likely need to cite other resources that CMS 
may use in making a payment determination.  For example, the manufacturer Web site for Orencia 
specifically refers to the pre-filled syringes and auto-injectors as self-injection Orencia, which clearly 
indicates that those versions should not be included when setting Part B payment.  Further, 
manufacturer Web sites for both Orencia and Cimzia provide explicit instructions, including videos, on 
how to self-administer.   
 
 
 
 
   
7 
  CONCLUSION 
With certain exceptions, self-administered drugs are typically not covered under Medicare Part B.  
However, as described in earlier OIG work and highlighted in this report, CMS continues to factor in the 
prices for noncovered self-administered versions when calculating payment amounts for two 
high-expenditure Part B drugs:  Orencia and Cimzia.  As a result of this loophole, Medicare payment 
amounts remained inflated in 2017 and 2018, causing the program and its beneficiaries to pay an 
additional $497 million during this period.  Since 2014, current rules have resulted in an additional $173 
million in Medicare beneficiary coinsurance for Orencia and Cimzia.  
CMS interprets the applicable law to require such an inclusion of noncovered versions of drugs, and a 
Federal district court reached the same conclusion.  Accordingly, a legislative change may be required to 
address this matter.  To that end, OIG previously recommended that CMS seek a legislative change that 
would provide the agency with flexibility to determine when noncovered versions of a drug should be 
included in calculations of Part B payment amounts.  CMS did not concur with our prior 
recommendation, citing concerns related to beneficiary access and operational implications.   
OIG shares CMSs concern regarding the need to safeguard patient access.  However, OIG believes that 
there are more effective measures to address this issuemeasures that would not (1) result in 
Medicare and its beneficiaries paying hundreds of millions of dollars in excess simply to account for 
exceedingly rare treatment instances; and (2) provide substantial financial incentives for physicians to 
administer a certain drug instead of others.  Therefore, OIG continues to recommend that CMS: 
Seek a legislative change requiring that noncovered, self-administered versions of 
drugs be excluded in the calculation of Part B payment amounts  
Given the complexities inherent in identifying such noncovered versions, it is critical that any legislation 
address various decisions points in the process, particularly the sources and evidence that CMS may use 
to determine self-administration for drugs injected subcutaneously. 
 
   
8 
  AGENCY COMMENTS AND OIG RESPONSE
 
Consistent with its response to our earlier report on this issue, CMS did not concur with OIGs 
recommendation.  CMS stated that it remains concerned with a number of complexities in identifying 
any noncovered versions included in Part B payment amount calculations. 
Primarily, CMS states that because FDA does not identify an NDC on the basis of where it is likely to be 
administered, the manufacturers label would not necessarily provide the level of detail needed to make 
an appropriate determination regarding self-administration.  Further, CMS believes that it is not clear 
what sources and evidence would be appropriate to ensure that these determinations are made 
accurately and consistently.  As a result, CMS notes that the analysis required to address the issues 
identified in this report would be difficult and time consuming, and that any consideration of potential 
legislation would need to account for the time and resource requirements involved.   
CMS then reiterated its concern that, in some cases, the changes recommended by OIG could result in 
price increases or even affect access to Part B drugs.  The agency closes by noting that OIGs analysis 
identified only two drugs for which noncovered, self-administered versions were used to set Part B 
payment amounts in 2017 and 2018 and that the projected savings based on OIGs findings represent 
less than 1 percent of the total spending for Part B drugs during this period. 
OIG recognizes the potential complexities inherent in addressing the issues identified in this report, and 
as stated in our recommendation, we believe that it is critical for any legislation to address the sources 
and evidence that CMS may use to determine self-administration.  However, the evidence from relevant 
sources is abundantly clear for the two drugs identified by OIG, both of which have FDA-approved labels, 
product inserts, and advertising touting the ease and benefits of self-administration.  Simply put, the 
time and difficulty that CMS may encounter in assessing more complex examples should not mean that 
the agency does not take action on the obviously noncovered, self-administered versions of drugs like 
Orencia and Cimzia.  Although $500 million over 2 years reflects a small percentage of all Part B drug 
payments, it is not an insignificant sum, especially when considering that individual beneficiaries may be 
paying thousands extra every year simply due to a policy loophole. 
Further, CMS states that any potential fixes need to consider agency time and resources.  As OIG notes 
in the report, an average of 107 new NDCs were added to CMSs Part B drug payment files each quarter 
and 103 of them could be immediately excluded from any analysis due to their routes of administration 
and the rules for Part B coverage.  In other words, the agency would typically need to make 
determinations for just four NDCs each quarter.  On the basis of OIGs own experience conducting this 
analysis, the benefits of ensuring that Part B drugs are reimbursed appropriately far outweighs the small 
amount of resources used to conduct a more in-depth examination of how four drugs are typically 
administered.   
Finally, CMS is correct that implementing the policy recommended by OIG could potentially lead to 
payment increases in certain circumstances.  However, OIG has always maintained the importance of 
accurate payment amounts.  In fact, a drug being under-reimbursed by Medicare is much more likely to 
lead to the types of access issues raised by CMS, and provides further support that payment amounts 
should be set using only versions that are actually covered under Part B.     
9 
  METHODOLOGY
 
Data Collection and Analysis 
Determining Whether Additional Drugs Met Noncovered-Versions Criteria.  To determine whether there 
were any additional drugs (beyond the two identified in our previous report) for which noncovered 
versions were being used to set Part B payment amounts in 2017 or 2018, we: 
  identified all NDCs listed on the file used by CMS to set fourth-quarter 2018 Part B payment 
amounts that were not on a similar file for mid-2016; 
  determined whether any of the new NDCs represented subcutaneous injections (i.e., a route of 
administration more likely to be self-administered); 
  removed any new subcutaneous injections that were already included on Part B contractor-
developed lists of self-administered drugs to be excluded from payment (and therefore were 
not eligible to be paid under Part B) or were approved only for administration by health care 
professionals; and 
  determined whether the associated billing code for any remaining injections also included 
versions that were not self-administered. 
Determining Payment Amounts If Loophole Had Been Closed.  For the HCPCS codes representing Orencia 
and Cimzia, we recalculated the Medicare payment amounts using CMSs volume-weighted ASP formula 
in each quarter of 2017 and 2018 with the self-administered versions removed.  In each quarter, we 
calculated the difference between the actual payment amounts and the payment amounts that would 
have been in effect if the loophole had been closed. 
Calculating Savings.  To determine how much Medicare would have spent for each drug if CMS had not 
included self-administered versions, we multiplied the total Part B expenditures for the drug each 
quarter by the percentage reduction that would have been achieved if the payment loophole had been 
closed.23 
Determining Provider Payments for Orencia and Cimzia.  We summarized 2018 payments in physicians 
offices for Orencia and Cimzia by the national provider identifier of the rendering provider (i.e., the 
provider who administered the injection or infusion).  For hospital outpatient departments, we 
summarized 2018 payments by the national provider identifier of the billing provider because no 
information on the rendering provider was available. 
Identifying Part B Claims for Self-Administered Versions of Orencia.  For each Orencia claim in 2018, we 
identified the method of administration by referring to the drug administration code(s)e.g., for 
intravenous infusion or for subcutaneous injectionlisted on the same claim.  Further, according to the 
U.S. Food and Drug Administration label and manufacturer instructions, patients who receive Orencia 
via infusion (i.e., via physician administration) would receive 500 mg, 750 mg, or 1,000 mg, depending 
on their weight.  The recommended dosage for the prefilled syringe and autoinjector (typically for self-
administration) is 125 mg.  For any Orencia claims with an associated subcutaneous injection, we 
determined whether the amount of Orencia for which the physician billed actually reflected the 
approved subcutaneous dose. 
10 
  Limitations  
Our analysis did not take into account the effects of sequestration on Medicare payment amounts and 
expenditures.  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.24 
Standards  
We conducted this study in accordance with the Quality Standards for Inspection and Evaluation issued 
by the Council of the Inspectors General on Integrity and Efficiency. 
11 
  AGENCY COMMENTS
 
 
12 
   
   
13 
  ACKNOWLEDGMENTS
 
This report was prepared under the direction of Dave Tawes, Regional Inspector General for Evaluation 
and Inspections in the Baltimore regional office; Heather Barton, Deputy Regional Inspector General; 
and Louise Schoggen, Assistant Regional Inspector General.  
Dave Tawes also served as the team leader for this study.  Other OIG staff who provided support include 
Bahar Adili, Joe Chiarenzelli, Adam Freeman, Christine Moritz, and Jessica Swanstrom.   
14 
  ENDNOTES
 
 
1 Medicare Part B does cover a small number of self-administered drugs, including certain oral anticancer drugs; 
blood clotting factors; and inhalation and infusion drugs used with durable medical equipment.  42 CFR  
414.900(b) and the Medicare Benefit Policy Manual, ch. 15  50.  At 50.2 of the same manual, CMS describes how 
contractors can determine whether a drug is usually self-administered. 
2 Section 1860D-1 et seq. of the Social Security Act (the Act). 
3 Hereinafter referred to as physician-administered drugs.  42 CFR  414.900 and the Medicare Benefit Policy 
Manual, ch. 15,  50. 
4 Section 1847A(a) of the Act (requiring use of ASP payment methodology), 42 CFR  414.904(a). 
5 Section 1847A(f) (requiring quarterly reporting of ASP using the reporting requirements located at section 
1927(b)(3) of the Act). 
6 An NDC is an 11-digit code 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. 
7 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. 
8 Each quarter, CMS publishes a crosswalk file that lists the NDCs matching each Part B drug HCPCS code.   
9 OIG, Excluding Noncovered Versions When Setting Payment for Two Part B Drugs Would Have Resulted in Lower 
Drug Costs for Medicare and Its Beneficiaries, OEI-12-17-00260, November 2017.  Please see this report for a full 
explanation of CMSs reasoning for including noncovered versions in these calculations in certain circumstances. 
10 J0129: Injection, abatacept, 10 mg (code may be used for Medicare when drug administered under the direct 
supervision of a physician, not for use when drug is self administered). 
11 J0717:  Injection, certolizumab pegol, 1 mg (code may be used for Medicare when drug administered under the 
direct supervision of a physician, not for use when drug is self administered). 
12 Orencia, How to Take or Administer Orencia, https://www.orencia.com/about-orencia/how-to-take-orencia.  
Accessed on December 3, 2019. 
13 According to Orencias label, dosing is generally based on the patients weight.  In 2018, 65 percent of paid 
claims for Orencia were for 750 mg (3 vials) of the drug, 19 percent were for 1,000 mg (4 vials), and 15 percent 
were for 500 mg (2 vials).  The remaining 1 percent reflected nonstandard dosing.   
14 Cimzia, Cimzia Medication Guide, https://www.cimzia.com/assets/pdf/MedicationGuide.pdf.  Accessed on 
September 24, 2019. 
15 According to Cimzias label, the recommended dosing is an initial 400-mg injection followed by 200-mg or      
400-mg injections every 2 or 4 weeks depending on the condition and the patient.  In 2018, 90 percent of paid 
claims for Cimzia were for 400 mg (2 vials) of the drug and 9 percent were for 200 mg (1 vial).  The remaining          
1 percent reflected nonstandard dosing.   
16 Assuming the typically physician-administered version of Orencia was provided and that the physician purchased 
the drug at its ASP.  Medicare typically reimburses providers 106 percent of the ASP for Part B drugs.  The provider 
would also receive an additional payment for administering the drug. 
17 For example, see OIG, Least Costly Alternative Policies: Impact on Prostate Cancer Drugs Covered Under 
Medicare Part B, https://oig.hhs.gov/oei/reports/oei-12-12-00210.pdf; and OIG, Beneficiary Utilization of Albuterol 
and Levalbuterol Under Medicare Part B, https://oig.hhs.gov/oei/reports/oei-03-07-00440.pdf. 
18 For example, the physicians patients were not receiving Orencia infusions more frequently than recommended, 
and the number of units billed for each patient visit were in line with national averages.  
19 On average, 107 unique NDCs per quarter were added to CMSs ASP files during the period covered by this 
review.  
20 Medicare Benefit Policy Manual, ch. 15  50.2. 
21 CMS may also remove from their analysis any self-administered NDCs for which the related HCPCS codes are not 
associated with any physician-administered versions.  Although Part B coverage of these HCPCS codes may warrant 
 
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its own examination (i.e., because all versions of the drug are self-administered), they do not fit the payment 
loophole criteria. 
22 Solely relying on FDA labels to determine self-administration would be complicated for a drug that is frequently 
used for off-label indications.  This illustrates additional complexities that could be faced by CMS and potentially 
addressed in any legislation. 
23 The method for determining savings differs from that in our prior report because of changes made to how 
Medicare reimburses hospitals that purchase drugs under the 340B drug discount program.  We do not believe 
that this change would make a material difference in our calculations. 
24 CMS Medicare FFS Provider e-News, Mandatory Payment Reductions in the Medicare Fee-for-Service (FFS) 
Program'Sequestration, March 8, 2013.  Accessed at https://www.cms.gov/Outreach-and-
Education/Outreach/FFSProvPartProg/Downloads/2013-03-08-standalone.pdf on December 3, 2019. 
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