U.S. Department of Health and Human Services
Office of Inspector General
Data Snapshot
June 2021, OEI-03-21-00130
Medicare Part B Drug Payments: Impact of Price Substitutions Based on 
2019 Average Sales Prices
What OIG Did
When Congress established average sales prices (ASPs) as the basis for reimbursement for 
Medicare Part B drugs, it also provided a mechanism for monitoring market prices and  Key Takeaway
limiting potentially excessive payment amounts.  Generally, Part B-covered drugs are those  Medicare and its
that are injected or infused in physicians' offices or outpatient settings.  The Social Security  beneficiaries saved
Act (the Act) mandates that our office compare ASPs with average manufacturer prices  $6.2 million over 
(AMPs).  If OIG finds that the ASP for a drug exceeds the AMP by 5 percent, the Act directs the  1 year based
Secretary of Health and Human Services to substitute the ASP-based payment amount with a  on CMSs
lower calculated rate.  Through regulation, the Centers for Medicare & Medicaid Services  price-substitution 
(CMS) stated that it would make this substitution only if the ASP for a drug exceeds the AMP  policy that limits 
by 5 percent in the two previous consecutive quarters or three of the previous four quarters. excessive payments 
for drugs in  
This data snapshot quantifies the savings to Medicare and its beneficiaries that are a direct 
Medicare Part B.
result of CMSs price-substitution policy based on ASPs from 2019.  We calculated the 
difference between ASP-based payment and AMP-based payment for each drug with a price 
substitution.  To calculate the savings based on 2019 ASP data, we then multiplied the 
difference by the Medicare utilization for each of these drugs for the time period when the 
price substitutions occurredthe fourth quarter of 2019 through the third quarter of 2020.
. 
Results
CMSs price-substitution policy saved Medicare and  Exhibit 1: Results of the Medicare Part B 
its beneficiaries $6.2 million over 1 year Price-Substitution Policy
 CMS initiated price substitutions for 18 drugs 
based on 2019data.
 Price substitutions for these drugs saved Medicare 
and its beneficiaries $6.2 million over 1 year, as shown 
in Exhibit1.
Led to
 Since CMS instituted its price-substitution policy in 
2013, Medicare and its beneficiaries have saved         18 drugs  $6.2 million
$73.1 million, including the $6.2 million amount in2019. with lowered in Medicare
Expanding the price-substitution policy could have 
reimbursement savings
generated additional savings for Medicare and its 
beneficiaries
If CMS expanded its price-substitution criteria to include  Even greater savings could be realized:
drugs that exceeded the 5-percent threshold in a single 
quarter, Medicare and its beneficiaries could have saved 
$11.2 million in additional 
up to an additional $11.2 million over 1 year for another      
24 drugs. savings if CMS expanded the                       
price-substitution criteria.
These 24 drugs exceeded the 5-percent threshold in at 
least one quarter, but they were not eligible for price 
substitution because they did not meet CMSs  Source: OIG analysis of ASP and AMP data from 2019.
requirement that prices exceed the threshold in the two 
previous consecutive quarters or three of the previous 
four quarters.1
Data Snapshot: Impact of Price Substitutions Based on 2019 Average Sales Prices 1 Why This Matters
Medicare Part B annually spends billions to cover a limited number of outpatient prescription drugs.  To 
safeguard Medicare and its beneficiaries from excessive payment amounts, Congress established a mechanism 
for monitoring market prices, and CMS implemented a price-substitution policy that results in lower costs for 
important, lifesaving drugs covered by Medicare Part B.
Since CMS implemented the policy in 2013, OIG has produced annual reports quantifying the savings to 
Medicare and its beneficiaries from CMSs price-substitution policy.  These reports document millions in actual 
annual savings and continue to demonstrate that price substitution is an important and effective mechanism 
for ensuring reasonable payments for drugs in Medicare Part B. 
What OIG Concludes
Since the inception of CMSs price-substitution policy, Medicare and its beneficiaries have saved $73.1 million.  
However, CMS could have achieved even greater savings for Medicare and its beneficiaries by expanding its 
criteria for AMP-based price substitutions.  Specifically, Medicare and its beneficiaries could have saved up to 
an additional $42 million since 2013 if CMS had expanded its criteria for price substitutions.
OIG has previously recommended that CMS expand the price-substitution criteria.  However, CMS did not 
concur with expanding the price-substitution policy and expressed concern that expanding price-substitution 
criteria may impede physician and beneficiary access to drugs.  OIG agrees that access to prescription drugs 
should always be considered when contemplating pricing policies, and OIG supports current safeguards to 
prevent substitutions for drugs that the Food and Drug Administration has identified as being in short supply.  
However, OIG continues to believe that CMS can achieve a better balance between safeguarding access to 
drugs and ensuring that Medicare and its beneficiaries do not overpay for drugs.  To provide greater flexibility 
and achieve this continued balance, any future expansion of the payment-substitution policy could contain a 
provision that would prevent a price substitution when there are indications that the substitution amount 
would be below provider acquisition costs.
To more effectively limit excessive payment amounts based on ASPs and to generate greater savings for 
Medicare and its beneficiaries, we continue to believe that CMS should expand its price-substitution criteria to 
include some additional drugs.  For example, a more expansive policy might include all drugs (with complete 
AMP data) that exceed the 5-percent threshold in a single quarter.  However, CMS also could consider other 
approaches to expanding the price-substitution policy that are designed to capture more drugs that 
repeatedly exceed the threshold.
Data Snapshot: Impact of Price Substitutions Based on 2019 Average Sales Prices 2 Data: Results of the Medicare Part B Price-Substitution Policy
Exhibit 2: Price Substitutions Saved Medicare and Its Beneficiaries $6.2 million
Quarter(s) in Which Price Substitution Occurred                             
Fourth  First  Second  Third 
Quarter  Quarter  Quarter  Quarter 
Drug Description 2019 2020 2020 2020 Savings

J0287 Amphotericin B lipid complex $1,039
 
J0610 Calcium gluconate injection $31,547
 
J0670 Mepivacaine HCl injection $1,363
 
J0720 Chloramphenicol sodium injection $106
 
J1245 Dipyridamole injection $247,440

J1570 Ganciclovir sodium injection $17,855
  
J1756 Iron sucrose injection $117,928

J2400 Chloroprocaine HCl injection $137
   
J2501 Paricalcitol $134
   
J2720 Protamine sulfate injection $618
 
J3411 Thiamine HCl $145,755
J3486a Ziprasidone mesylate     $0
  
J7520 Sirolimus oral $2,776,401
  
J9100 Cytarabine HCl injection $1,777

J9315 Romidepsin injection $645,382
  
Q0167 Dronabinol oral $2,510

Q5105 Retacrit injection, ESRD $265

Q5106 Retacrit injection, non-ESRD $2,189,591
Total $6,179,848
Source: OIG analysis of ASP and AMP data from 2019.
a Ziprasidone mesylate did not have any allowed Part B utilization during any of these quarters.  Therefore, the savings for this drug 
were $0.
Data Snapshot: Impact of Price Substitutions Based on 2019 Average Sales Prices 3 Methodology
Data Collection.  We obtained national drug code (NDC)-level ASP data and AMP data for Part B drugs from 
CMS for 2019. In addition, we obtained the drugs that had price substitutions based on ASP data from 2019.  
We also obtained ASP-based reimbursement amounts and Part B drug utilization for the quarters in which 
price substitutions occurredi.e., the fourth quarter of 2019 through the third quarter of 2020.  
Data Analysis.  For each quarter of 2019, we calculated the volume-weighted AMP for drugs consistent with 
CMSs methodology for calculating volume-weighted ASPs.  We then compared the volume-weighted ASPs 
and AMPs and identified all drugs with ASPs that exceeded AMP by at least 5 percent.  We also identified drugs 
that exceeded the 5-percent threshold but did not meet CMSs duration criteria for price substitutioni.e., 
they did not exceed the threshold in the two previous consecutive quarters or three of the previous four 
quarters.
To calculate the savings associated with price substitutions or potential price substitutions that could be made 
by expanding the policy, we first reduced AMP-based and ASP-based reimbursement amounts (103percent of 
the volume-weighted AMP and 106 percent of the volume-weighted ASP, respectively) by the 2-percent 
reduction required by sequestration for the first three quarters of 2019.  The payment reduction required by 
sequestration was suspended beginning May 1, 2020; therefore, we did not reduce the reimbursement 
amounts from the fourth quarter 2019.2 We then subtracted the AMP-based reimbursement amount from the 
ASP-based reimbursement amount for the quarter in which the price substitution occurred.3 We then 
multiplied this difference by each drugs Part B utilization for the quarter(s) that the price substitution occurred.
Limitations.  We did not verify the accuracy of manufacturer-reported ASP and AMP data, nor did we verify the 
underlying methodology that manufacturers used to calculate ASPs and AMPs.  We also did not verify the 
accuracy of CMSs calculations of reimbursement amounts for Part B drugs.  Manufacturers are required to 
submit their quarterly ASP and AMP data to CMS within 30 days of the close of the quarter.  We did not 
determine whether manufacturers later provided any updated data to CMS.
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.
Acknowledgments
Conswelia McCourt served as team leader for this study.  Office of Evaluation and Inspections staff who 
provided support include Althea Hosein, Christine Moritz, Angela Tvarozek, and Kelsey Ridenour.  This report 
was prepared under the direction of Linda Ragone, Regional Inspector General for Evaluation and Inspections 
in the Philadelphia regional office, and Edward Burley, Deputy Regional Inspector General.
To obtain additional information concerning this report or to obtain copies, contact the Office of Public Affairs 
at Public.Affairs@oig.hhs.gov.
Data Snapshot: Impact of Price Substitutions Based on 2019 Average Sales Prices 4 Endnotes
1 These 24 drugs had complete AMP data and were not identified by the Food and Drug Administration as 
being in short supply.  They also did not have AMP-based substitution amounts that were greater than the 
ASP-based reimbursement amounts for the quarters in which substitutions would have occurred.  Two of 
these drugs had no Part B utilization during the reviewed period; therefore, the estimated savings for these 
drugs were $0.   
2 Coronavirus Aid, Relief, and Economic Security Act (CARES Act), P.L. No. 116-136 3709.  The Consolidated 
Appropriations Act, 2021 (P.L. 116-260) amended the CARES Act to extend the suspension of the payment 
reduction through March 31, 2021.  The payment reduction was suspended in the middle of the second 
quarter of 2020 (May 1, 2020).  We were unable to determine the portion of each drugs utilization from this 
quarter that was from before or after May 1, 2020.  Therefore, to be conservative in our calculation of 
savings, we reduced the reimbursement amounts for the third quarter of 2019 by 2 percent. 
3 In the fourth quarter of 2019, CMS would have established a reimbursement amount based on wholesale 
acquisition cost instead of ASP for drug code J1245 (Dipyridamole injection).  CMS establishes a 
reimbursement amount that is not based on ASP for a drug code when the ASP and/or the units sold for all 
NDCs associated with that drug code are reported by the manufacturer as 0 or a negative value.  Therefore, 
for the fourth quarter of 2019, we determined savings for J1245 by first calculating the difference between 
the AMP-based substitution amount and the reimbursement amount CMS would have calculated based on 
wholesale acquisition cost.  We then multiplied this difference by the drugs Part B utilization for the fourth 
quarter of 2019.
Data Snapshot: Impact of Price Substitutions Based on 2019 Average Sales Prices 5