U.S. Department of Health and Human Services 
Office of Inspector General 
Manufacturers May Need 
Additional Guidance To Ensure 
Consistent Calculations of 
Average Sales Prices 
 
Ann Maxwell 
Deputy Inspector General for Evaluation and Inspections 
December 2022, OEI-BL-21-00330  U.S. Department of Health and Human Services 
 
Office of Inspector General 
Report in Brief 
December 2022, OEI-BL-21-00330 
Why OIG Did This Review  Manufacturers May Need Additional 
To address concerns about the 
Guidance To Ensure Consistent Calculations 
accuracy of average sales prices 
(ASPs) for Medicare Part B drugs,  of Average Sales Prices 
Congress included a provision in the 
Consolidated Appropriations Act, 
What OIG Found 
2021, that directs the Office of  Key Takeaway 
Comparisons of ASPs to other benchmark 
Inspector General (OIG) to review the 
OIG identified a small  prices provided little insight into potential 
accuracy of manufacturer-reported 
number of inconsistencies  inaccuracies.  However, through 
ASP data.  Ensuring the accuracy of 
in how average sales prices  manufacturer surveys, OIG was able to 
ASPs is vital because the Centers for 
(ASPs) for Part B drugs  are  identify a small number of inconsistencies 
Medicare & Medicaid Services (CMS)  
calculated and nine specific  in manufacturer calculations of ASPs, such 
uses these prices to directly calculate 
areas for which  as in the treatment of TRICARE-related 
payment amounts under Medicare 
manufacturers believe  drug sales for military members or whether 
Part B.   
certain fees paid to third parties meet the 
additional CMS guidance 
criteria for being considered a bona fide 
How OIG Did This Review  may be needed to ensure 
service fee to be excluded from ASP.  We 
OIG has previously conducted several  more accurate and 
also noted several areas where 
resource-intensive audits of  consistent ASP calculations 
manufacturers would like additional CMS 
manufacturer-reported pricing data  across the industry. 
guidance, including the treatment of sales 
that resulted in limited findings.  In 
and rebates offered through value-based purchasing arrangements.  
general, OIGs ability to identify 
noncompliance in price reporting is  The manufacturers we surveyed also expressed concerns that CMS has 
limited because of broad regulations  published comparatively fewer regulations and less overall guidance 
that allow manufacturers to make  regarding the calculation of the ASPs used in Medicare compared to the 
reasonable assumptions in the  average manufacturer prices and best prices used in Medicaid.  As a result, 
absence of specific guidance.  For  manufacturers say they must rely on reasonable assumptions to a much 
this reason, OIG decided to try a  greater extent when calculating ASP than they do with these other payment 
different approach to assess the  benchmarks.  
accuracy of ASPs.  For this evaluation, 
we compared ASPs for the 30  What OIG Recommends 
highest-expenditure drugs in  We recommend that CMS actively review current guidance related to the 
Medicare Part B to different  areas identified in this report and determine whether additional guidance 
benchmark prices for prescription  would ensure more accurate and consistent ASP calculations. Specifically, 
drugs in the second quarter of 2021.   OIG noted nine areas for which manufacturers believe additional guidance 
We then surveyed the 20  may be needed to reduce distortions among reported ASPs and ensure 
manufacturers of these 30 drugs to  consistency across the industry.  We suggest that CMS prioritize issues that 
determine what factors they take into  may have greater effect on pricing and payments (e.g., value-based 
consideration when calculating their  arrangements).  CMS should also give particular consideration to guidance 
ASPs.    regarding TRICARE-related sales and determinations of bona fide service 
feestwo areas where insufficient guidance may be leading to 
The 30 drugs in our review accounted 
inconsistencies in manufacturer ASP calculations. 
for nearly 64 percent of Medicare 
Part B drug spending in 2020.  The  CMS concurred with our recommendation.
entire body of drugs marketed by the 
20 manufacturers included in our 
survey accounted for almost 80 
percent of Part B drug spending. 
 
   
TABLE OF CONTENTS 
 
 
GLOSSARY ....................................................................................................................................................... 1 
BACKGROUND ................................................................................................................................................ 3 
FINDINGS ......................................................................................................................................................... 8 
Comparing the ASPs of the highest-expenditure drugs in Medicare Part B to other benchmark prices 
provided little insight into potential inaccuracies ........................................................................................................ 8 
Manufacturers reported a small number of inconsistencies in their ASP calculations ................................. 10 
Manufacturers expressed concerns that a lack of CMS guidance on a range of ASP issues may result 
in inconsistencies .................................................................................................................................................................... 11 
CONCLUSION AND RECOMMENDATION ............................................................................................. 15 
Actively review current guidance related to the areas identified in this report and determine whether 
additional guidance would ensure more accurate and consistent ASP calculations .................................... 15 
AGENCY COMMENTS AND OIG RESPONSE ......................................................................................... 16 
APPENDICES .................................................................................................................................................. 17 
Appendix A: CMS Calculation of Medicare Part B Drug Payment Amounts .................................................... 17 
Appendix B: How Surveyed Manufacturers Treat Various Types of Sales When Calculating ASPs ......... 18 
Appendix C: How Surveyed Manufacturers Treat Various Types of Discounts When Calculating ASPs 19 
Appendix D: Agency Comments ....................................................................................................................................... 20 
ACKNOWLEDGMENTS AND CONTACT ................................................................................................ 23 
Acknowledgments .................................................................................................................................................................. 23 
Contact ........................................................................................................................................................................................ 23 
ABOUT THE OFFICE OF INSPECTOR GENERAL .................................................................................... 24 
ENDNOTES ................................................................................................................................................... 25 
 
 
 
   
GLOSSARY 
Terminology   General Description*  
Average Manufacturer Price (AMP)  The average price paid to the manufacturer for a drug in the 
United States by wholesalers for drugs distributed to retail 
community pharmacies and by retail community pharmacies 
that purchase drugs directly from the manufacturer, net of any 
applicable discounts. 
Average Sales Price (ASP)  A manufacturers sales of a drug to all purchasers in the United 
States in a calendar quarter (net of most discounts) divided by 
the total number of units of the drug sold by the manufacturer 
in that same quarter. 
Best Price (BP)  For a single source drug or innovator multiple source drug of a 
manufacturer (including the lowest price available to any entity 
for an authorized generic drug), the lowest price available from 
the manufacturer during the rebate period to any wholesaler, 
retailer, provider, health maintenance organization, nonprofit 
entity, or governmental entity in the United States in any 
pricing structure (including capitated payments) in the same 
quarter for which the AMP is computed. 
Bona Fide Service Fees (BFSFs)   Fees paid by a manufacturer to an entity that represent fair 
market value for a bona fide, itemized service actually 
performed on behalf of the manufacturer that the 
manufacturer would otherwise perform (or contract for) in the 
absence of the service arrangement, and that are not passed 
on in whole or in part to a client or customer of an entity, 
whether or not the entity takes title to the drug.   
Bundled Sales Arrangement  Any arrangement (1) under which the rebate, discount, or 
other price concession is conditioned upon (a) the purchase of 
the same drug, drugs of different types, or another product, or 
(b) some other performance requirement; or (2) whereby the 
resulting discounts or other price concessions are greater than 
those which would have been available had the bundled drugs 
been purchased separately or outside the bundled 
arrangement. 
Group Purchasing Organization (GPO)  An organization that purchases, or arranges for or negotiates, 
the purchase of covered drugs, devices, biologicals, or medical 
supplies for a group of individuals or entities (i.e., health care 
providers), but not solely for use by the entity itself.  Provider 
use of GPOs is voluntary and GPOs are often owned by their 
member providers. 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices   
OEI-BL-21-00330  Glossary | 1    
GPO Administrative Fees  Fees designed, in part, to cover a GPOs operating expenses 
and serve as its main source of revenue.  The amount of the 
fee is based on a percentage of the purchase price for a 
product obtained through GPO contracts.  When negotiated, 
the fee is paid by a manufacturer each time a GPOs health 
care provider customer purchases a product through a GPO 
contract.  In addition to using these fees to cover operating 
expenses, such as providing services to their customers, GPOs 
may distribute a portion of the fees to their customers or use 
them to finance other ventures such as investing in other 
companies. 
Pharmacy Benefit Manager (PBM)  An organization that serves third-party payers, including 
commercial insurance companies, government payers, and 
employer organizations in the retail/outpatient prescription 
arena, by negotiating supply and reimbursement arrangements 
for pharmaceuticals. 
PBM Administrative Fees  Fees paid by manufacturers for the various administrative 
  functions conducted by PBMs on their behalf.  For example, 
  PBMs may charge administrative fees for managing drug 
formularies; claims processing; and to administer, invoice, 
allocate, and collect rebates under a PBMs rebate program.  
PBM administrative fees are determined on an individual basis 
according to contracts with manufacturers. 
TRICARE  The U.S. militarys health care program that functions as 
government-managed health insurance.  TRICAREs various 
coverage plans provide health care for active-duty and retired 
uniformed services members and their families.  TRICAREs 
pharmacy benefit allows enrollees to obtain prescription drugs 
either from military treatment facility pharmacies operated by 
DOD or from TRICAREs mail order and retail pharmacies 
operated through the private sector. 
Value-Based Purchasing (VBP) Arrangements   Arrangements between a payer and drug manufacturer that tie 
payment for a drug to an agreed-upon measure (e.g., clinical 
outcome).  
Wholesale Acquisition Cost (WAC)  The manufacturers list price for a drug distributed to 
wholesalers or other direct purchasers, not including discounts 
or rebates.   
*Note: These descriptions are intended to be plain-language explanations rather than strict statutory or regulatory definitions. 
 
 
 
 
 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices   
OEI-BL-21-00330  Glossary | 2    
BACKGROUND 
OBJECTIVES 
1.  Determine how average sales prices (ASPs) for high-expenditure Part B drugs 
compare to other benchmark prices.  
2.  Examine the factors that manufacturers take into consideration when 
determining which sales, discounts, and fees to include in their ASP 
calculations. 
 
Costs for prescription drugs under Medicare Part B continue to rise, with the program 
and its enrollees spending over $40 billion in 2020, more than double the amount 
spent a decade ago.  Ensuring the accuracy of manufacturer-reported ASPs is vital 
given that the Centers for Medicare & Medicaid Services (CMS) uses these prices to 
directly calculate reimbursement amounts to providers.  Instances in which ASPs do 
not accurately reflect acquisition costs may result in excessive payments for Medicare 
and its enrollees, or in contrast, lead to access issues if providers are paid below cost. 
Congress has expressed concerns to the Office of Inspector General (OIG) regarding 
the accuracy of ASPs.  To address this concern, the Consolidated Appropriations Act, 
2021, directed OIG to review manufacturer-reported ASP data.1  OIG has previously 
conducted several resource-intensive audits of manufacturer-reported pricing data 
that resulted in limited findings.  In general, OIGs ability to identify noncompliance in 
price reporting is limited because of broad regulations that allow manufacturers to 
make reasonable assumptions in the absence of specific guidance.2  For this reason, 
OIG decided to try a different approach to assess the accuracy of ASPs.  This 
evaluation compares ASPs to other benchmark prices and provides insight from 
manufacturers on how ASPs are calculated.   
Medicare Part B Coverage and Payment for Prescription Drugs 
Medicare Part B covers a limited number of outpatient prescription drugs and 
biologicals (hereinafter referred to as drugs).  These drugs are usually injected or 
infused in physicians offices or other outpatient settings to treat a wide range of 
diseases including cancer, autoimmune disorders, and macular degeneration.  Part B 
also covers several vaccines, and under certain conditions, self-administered drugs 
such as oral anticancer drugs and inhalation drugs used in conjunction with durable 
medical equipment. 
 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices  
OEI-BL-21-00330  Background | 3    
Medicare Part B Drug Spending 
Medicare Part B and its enrollees spent over $40 billion on more than 600 drugs in 
2020; however, a relatively small number of drugs account for most Part B drug 
spending.  For example, just 30 brand-name drugs in 2020 represented nearly two-
thirds ($25.7 billion) of the total expenditures.3, 4  These 30 drugs had average per-
patient costs ranging from $2,200 to $351,000 in 2020, with 21 exceeding $20,000 per 
year.5  Medicare enrollees were responsible for 20 percent of these annual drug costs 
through coinsurance.6  
ASP Payment Methodology 
Effective January 1, 2005, the Medicare Modernization Act of 2003 revised how 
Medicare reimburses health care providers for drugs covered under Part B, moving 
from a methodology based on average wholesale prices to one based on ASPs.7  
Federal law defines ASP as a manufacturers sales of a drug to all purchasers in the 
United States in a calendar quarter (net of most discounts) divided by the total 
number of units of the drug sold by the manufacturer in that same quarter.8 
Given the complexities of the pharmaceutical marketplace, manufacturers may find it 
difficult to determine how to treat certain sales practices when calculating ASPs.  In 
the absence of guidance, manufacturers are permitted to make reasonable 
assumptions that are consistent with requirements and intent of federal law and 
regulations.9  See Appendix A for more detail on the ASP payment methodology. 
Manufacturer Reporting Requirements for Average Sales Price 
Pursuant to section 1927(b)(3) of the Social Security Act (the Act), manufacturers must 
provide CMS with the ASP and sales volume for each of their Part B drugs on a 
quarterly basis.  CMS also requires any reasonable assumptions to be submitted along 
with the ASP data.10   
Manufacturers may face civil money penalties if they knowingly provide false 
information about their ASPs or fail to report ASP data within the required timeframe 
(i.e., within 30 days of the close of a quarter).11   CMS provides information to OIG 
identifying manufacturers that do not submit ASP data timely.  According to CMS, the 
agency also performs numerous quality checks on ASP data at the time they are 
reported by manufacturers and seeks clarification or correction if the data do not pass 
CMSs quality checks. 
 
 
 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices  
OEI-BL-21-00330  Background | 4    
Other Benchmark Prices 
Average Manufacturer Price 
Medicaid drug rebates are calculated, in part, using average manufacturer prices 
(AMPs), a benchmark similar to ASP.  An AMP is defined as the average price paid to 
the manufacturer for the drug in the United States by wholesalers for drugs 
distributed to retail community pharmacies and retail community pharmacies that 
purchase drugs directly from the manufacturer, net of any applicable discounts.12, 13  
Manufacturers are required to provide CMS with the AMPs on a monthly and a 
quarterly basis for their covered outpatient drugs to be eligible for Federal financial 
participation provided under Medicaid.14  Manufacturers must calculate AMPs, which 
calculation includes determining which sales and discounts are included or excluded 
from their calculations, consistent with federal law and regulation.15  However, as with 
ASPs, in the absence of guidance and adequate documentation to the contrary, 
manufacturers are permitted to make reasonable assumptions that are consistent with 
the requirements and intent of the Act and federal regulations.16  Each manufacturer 
must maintain adequate documentation supporting its assumptions. 
AMP has been used as a reference point for ASP since Congress established the latter 
as the reimbursement basis for Medicare Part B drugs.  The Act mandates that OIG 
compare ASPs with AMPs each quarter.17  If OIG finds that the ASP for a drug exceeds 
the AMP by 5 percent, CMS is required to substitute the ASP-based payment amount 
with a lower calculated rate based on the AMP.18  In April 2013, CMS began 
substituting payment amounts for drugs identified by OIG when the drugs meet 
certain criteria established under the agencys published price substitution policy.19 
Wholesale Acquisition Cost 
Manufacturers regularly report wholesale acquisition costs (WACs)also referred to 
as list pricesto national drug compendia (e.g., First Databank, IBM Micromedex 
Red Book, and Medi-Span).  The WAC is defined as an estimate of the manufacturers 
list price for a drug distributed to wholesalers or other direct purchasers, not 
including discounts or rebates.20  WACs remain widely used as a payment benchmark 
for private insurance reimbursement to pharmacies, physicians, and other providers.21  
Given that WAC is a list price, it may vary widely from the ASP and AMP of a given 
drug due to a number of factors, including the amounts of discounts and rebates that 
are offered by the manufacturer. 
Other OIG Work Assessing the Accuracy of ASP and AMPs 
In addition to this evaluation, OIG is conducting a companion study that provides 
insight into CMSs oversight of ASP data, including how the agency assesses an ASPs 
accuracy before using it to calculate Medicare Part B payment amounts. 
In the 3 years following the implementation of ASP-based payments, OIG audited the 
ASP calculations of eight drug manufacturers.  Given the confidential nature of the 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices  
OEI-BL-21-00330  Background | 5    
data being audited, any findings were not released publicly.  On average, these 
manufacturer audits took over 2 years to complete.  Similarly, between 2003 and 
2014, OIG audited the AMP calculations of six drug manufacturers, at an average of 
1.5 years to complete.  In general, OIGs ability to identify noncompliance in ASP and 
AMP reporting is limited because of broad regulations that allow manufacturers to 
make reasonable assumptions in the absence of specific guidance.  In instances in 
which OIG could support findings of noncompliance, the overall impact was relatively 
minor or was soon addressed by new guidance.  In balancing the time and costs of 
these efforts with our limited findings, OIG has not conducted any additional audits of 
ASPs or AMPs since 2014.   
As previously noted, the Social Security Act mandates that OIG compare ASPs with 
AMPs.  From 2005 to the present, OIG has conducted ASP-AMP comparisons each 
quarter and provided our findings to CMS.  We also issue annual public reports 
summarizing the findings of these quarterly comparisons.22 
Methodology 
Scope  
Given that the resource-intensive nature of our past manufacturer audits resulted only 
in limited findings, OIG elected to examine existing price benchmark data as well as 
information gleaned from manufacturer surveys to identify potential inaccuracies in 
reported ASPs.  In this study, OIG compared the ASPs for the 30 highest-expenditure 
drugs in Medicare Part B to different benchmark prices in the second quarter of 2021 
to identify any anomalies. These 30 drugs accounted for nearly 64 percent of 
Medicare Part B drug spending in 2020.  We then surveyed the 20 manufacturers of 
these 30 drugs regarding the factors they consider when determining which sales, 
discounts, and fees to include in their ASP calculations for all the drugs they market 
(i.e., not only the highest-expenditure products).  In total, all drugs marketed by the 
20 manufacturers included in our survey accounted for almost 80 percent of Part B 
drug expenditures in 2020. 
Data analysis 
Sample   
We obtained 2020 data on Medicare drug expenditures at the Healthcare Common 
Procedure Coding System (HCPCS) code level from CMSs Medicare Part B Drug 
Spending Dashboard.a  We selected a purposive sample of the top 30 drugs (distinct 
HCPCS) with the highest Medicare expenditures in Part B, and categorized each of the 
drugs by common characteristics, such as the type of disease being treated, the 
amount of time on the market, or the availability of biosimilars or competitor 
_____________________________________________________________________________________________________________________________ 
a To obtain reimbursement for Part B drugs, health care providers submit claims to Medicare contractors using Healthcare 
Common Procedure Coding System (HCPCS) codes.  Each HCPCS code defines the drugs name and the amount of drug 
represented by one unit of the code but does not specify manufacturer or package size. 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices  
OEI-BL-21-00330  Background | 6    
products.b  We then identified the 75 national drug codes (NDCs) that are 
crosswalked to the 30 HCPCS codes using CMSs ASP files.c 
Comparison of Benchmark Pricing   
We obtained ASP, AMP, and WAC data from CMS for the 75 NDCs associated with the 
30 highest-expenditure Part B drugs for the second quarter of 2021.  To ensure that 
all prices represented comparable units, we calculated volume-weighted ASPs, AMPs, 
and WACs at the HCPCS code level (i.e., a single price across all associated NDCs of a 
drug) using sales and product data from CMSs ASP files.  Finally, we compared the 
quarterly volume-weighted ASPs against their corresponding AMPs and WACs.23   
Survey of Drug Manufacturers  
The 30 drugs included in our review are marketed by 20 different pharmaceutical 
manufacturers.  On February 22, 2022, we sent an electronic survey to each 
manufacturer with questions based on our analysis of the benchmark prices; previous 
evaluations related to manufacturer pricing data (including our study examining 
manufacturer reasonable assumptions in calculating AMPs); and experiences with 
auditing manufacturer ASPs and AMPs.  We asked the manufacturers (1) to identify 
what types of sales, discounts, and fees were and/or were not included in their ASP 
calculations; (2) to explain how their ASP calculations differed from their AMP 
calculations; and (3) if they had any concerns about the accuracy of ASPs reported to 
CMS.  All 20 manufacturers responded to our survey. 
Limitations 
We selected a purposive sample of 30 high-expenditure Medicare drugs produced by 
20 drug manufacturers; therefore, our findings are limited to the drugs and 
manufacturers in our sample and not generalizable to all drugs and manufacturers.  
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.  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.  We relied on manufacturer 
responses to our survey and did not request that manufacturers provide 
documentation supporting their responses.   
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.
_____________________________________________________________________________________________________________________________ 
b The influenza vaccine (HCPCS 90662) was removed from our list of top 30 Part B Drugs because vaccines are not reimbursed 
using ASP. 
c Manufacturers typically report ASPs by NDC, an 11-digit code that is divided into 3 segments identifying (1) the firm that 
manufactures, distributes, or repackages the drug product (i.e., the labeler code); (2) the specific strength, dosage form, and 
formulation of the product; and (3) the products package size. 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices  
OEI-BL-21-00330  Background | 7    
FINDINGS 
Comparing the ASPs of the highest-expenditure drugs in 
Medicare Part B to other benchmark prices provided little 
insight into potential inaccuracies 
The relationship between ASPs and WACs varied widely among 
the 30 highest-expenditure drugs, limiting any conclusions about 
potential inaccuracies 
The comparison of ASPs to WACs did not result in the identification of any potential 
inaccuracies.  The WACs exceeded the ASPs for all 30 high-expenditure Part B drugs 
in our review, which is to be expected given that WACs represent list prices (i.e., 
sticker prices) and do not reflect any available discounts.  ASPs, in contrast, are 
determined on the basis of actual sales made by manufacturers and include many of 
the discounts available to purchasers. 
Among the drugs included in our review, the gap between ASP and WAC varied 
greatly, with ASPs ranging from .5 percent to 68 percent below their WACs (see 
Exhibit A).  None of the market-based factors we examined (e.g., the type of disease 
being treated, the amount of time on the market, or the availability of biosimilars or 
competitor products) reliably explained these large variations among individual drugs. 
Exhibit A. The ASPs for the 30 highest-expenditure drugs in our review 
ranged from .5 percent to 68 percent below their WACs. 
 
Source: OIG analysis of 2Q-2021 volume-weighted ASPs and WAC at the HCPCS level. 
Four drugs in our review had ASPs that were within 2 percent of their WACs.  
However, even such surprisingly small differences between ASPs and WACs do not 
necessarily signal that the former were inaccurate, as it is not altogether uncommon 
for manufacturers to offer little in the way of discounts or other price concessions for 
certain drugs.  For each of these four drugs, manufacturers did report offering two to 
four different types of discounts for these products.24  Nevertheless, given that these 
price reductions may have been quite small or available only to a limited number of 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices   
OEI-BL-21-00330  Findings | 8    
purchasers, OIG has no basis to conclude that the ASPs for these drugs are potentially 
inaccurate.  Moreover, WACs for three of the four drugs rose by at least 2 percent 
when reported in the following quarter, raising the possibility that a reporting lag was 
partially responsible for the unusually small differences with the ASPs. 
Comparisons of ASPs to AMPs help constrain Part B pricing, but 
are not generally effective in identifying inaccuracies in ASPs 
ASPs and AMPs are calculated using similar methodologies but, in theory, are subject 
to opposite incentives.  Practically speaking, manufacturers would prefer higher ASPs 
because the subsequent increased reimbursement under Medicare may encourage 
providers to prescribe their drug.  In contrast, manufacturers would prefer lower 
AMPs, as these would result in manufacturers owing less in rebates under Medicaid.  
Congress recognized these competing incentives and mandated that OIG conduct 
regular comparisons of ASPs and AMPs, and that CMS lower Medicare payment 
amounts on the basis of our findings as a means to constrain ASPs.25 
Over a 5-year period (2016 through 2020), OIG identified 96 drugs for which the ASP 
exceeded the AMP by more than 5 percent, the threshold set forth in statute.  CMS 
subsequently lowered the payment amounts for 37 of these drugs after meeting 
criteria established through regulation.26  These reduced payment amounts have led 
to nearly $31 million in savings for Medicare and its enrollees.27  None of the 30 
highest-expenditure drugs in our review were subject to price reductions during this 
period.  Notably, only three drugs subject to price substitutions were ranked in the 
100 highest-expenditure drugs in any year from 2016 to 2020, and in three-quarters 
of instances, the drugs were ranked below 300. 
As we did for the WACs, OIG compared manufacturer-reported ASPs for the 30 
highest-expenditure Part B drugs in 2020 to their AMPs from the second quarter of 
2021 (see Exhibit B).  For 24 of the 30 drugs, ASPs were less than the AMPs by as 
much as 10 percent (note: for 17 of the 24, the ASPs and AMPs were within 2 percent).  
However, in six cases, ASPs were actually higher than their AMPs, but never by more 
than 1 percent (i.e., all were well below the 5-percent threshold set forth in statute).  
According to the manufacturers of these drugs, several factors contributed to their 
ASPs slightly exceeding their AMPs.  For example, ASPs are calculated at the package 
level while AMPs are calculated at the product level, or discounts may be applied 
during different quarters for one benchmark compared to the other.   
Exhibit B. The ASPs for 24 of the highest-expenditure drugs in our review 
were less than their AMPs by as much as 10 percent. 
 
Source: OIG analysis of 2Q-2021 volume-weighted ASPs and AMP at the HCPCS level. 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices   
OEI-BL-21-00330  Findings | 9    
Manufacturers reported a small number of inconsistencies in 
their ASP calculations 
In general, all 20 manufacturers we surveyed were in full agreement as to which types 
of sales and discounts should be included in their ASP calculations (see Appendix B 
and Appendix C for how manufacturers treated each type of transaction listed in our 
survey), with the primary exception being certain TRICARE-related transactions.  
Manufacturers also reported inconsistent practices in the treatment of bona fide 
service fees (BFSFs).d 
As many as 30 percent of manufacturers included certain 
TRICARE-related drug sales in their ASP calculations 
As shown in Exhibit C, most of the manufacturers we surveyed reported excluding 
sales made to all types of TRICARE entities from their calculations.  However, two 
manufacturers reported including sales to military treatment facilities, two reported 
including sales to TRICARE mail order pharmacies, and six included sales to TRICARE 
retail pharmacy (TRRx) programs.   
Exhibit C. Surveyed manufacturers disagreed on whether to include TRICARE-related drug 
sales in their ASP calculations. 
  
Source: OIG analysis of manufacturer responses to OIGs 2022 Accuracy of Manufacturer-Reported ASPs survey. 
* Not applicable. 
Note: See Glossary for definitions of sales types. 
A small number of manufacturers reported variations in how they 
determine whether a fee should be considered a bona fide 
service fee 
Manufacturers must determine whether certain feessuch as administrative, product 
distribution, and data collection feesare considered discounts that are included in 
their ASP calculations or BFSFs that are excluded from ASP.  Three manufacturers 
expressed concerns that competitors may be taking disparate approaches when 
applying CMSs four-part test to make these determinations.e 
_____________________________________________________________________________________________________________________________ 
d See Glossary for the definition of a bona fide service fee (BFSF). 
e 42 CFR  447.502. Under the four-part test for the purpose of calculating ASPs, a fee that is paid by a manufacturer to an 
entity is considered a bona fide service fee (BFSF) if (1) the fee is for a bona fide, itemized service that is actually performed on 
 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices   
OEI-BL-21-00330  Findings | 10    
Under the four-part test, a fee that is paid by a manufacturer to an entitysuch as a 
group purchasing organization (GPO) or a pharmacy benefit manager (PBM)cannot 
be considered a BFSF if the fee is passed through, in whole or in part, to one of its 
clients or customers.f  For example, if a small portion of an administrative fee that is 
paid to a PBM is then transferred to a third-party health insurance plan that contracts 
with the PBM, the fee does not pass the four-part test and therefore cannot be 
considered a BFSF.  Instead, the fee would be considered a discount and result in a 
lower ASP. 
When calculating ASP, manufacturers are allowed to presume, in the absence of 
evidence or notice to the contrary, that the fee paid is not passed on.28  However, five 
manufacturers made statements in their survey responses that highlight disagreement 
on what constitutes sufficient evidence of knowledge that a fee is passed through for 
purposes of the four-part test.g  More specifically, some manufacturers reportedly 
require that GPOs and PBMs include a representation and warranty in their 
agreements that they will not pass their fees through, in whole or in part, to a client or 
customer of an entity, whether or not the entity takes title to the drug.29  If a GPO or 
PBM refuses to provide this guarantee, the manufacturers do not consider the fee 
paid to be a BFSF.  However, other manufacturers seem to take a less active approach 
by presuming that a fee is not passed through unless they are informed otherwise by 
their customer or an employee. 
Manufacturers expressed concerns that a lack of CMS guidance 
on a range of ASP issues may result in inconsistencies 
Ten of the 20 manufacturers surveyed indicated that there is a lack of clear guidance 
from CMS on issues related to the treatment of sales and discounts that affect ASP 
calculations.  According to these manufacturers, CMS has published comparatively 
fewer regulations and less overall guidance regarding the calculation of ASPs used in 
Medicare than regarding the AMPs and best prices (BPs) used in Medicaid.  As a 
result, manufacturers say they must rely on reasonable assumptions to a much greater 
extent when calculating ASPs than when calculating other payment benchmarks, thus 
creating the potential for inconsistent ASP calculations across manufacturers and 
products.  
 
_____________________________________________________________________________________________________________________________ 
behalf of the manufacturer; (2) the manufacturer would otherwise perform or contract for the service in the absence of the 
service arrangement; (3) the fee represents fair market value; and (4) the fee is not passed on, in whole or in part, to a client or 
customer of any entity. 
f See Glossary for a detailed explanation of a group purchasing organization (GPO), a pharmacy benefit manager (PBM), and 
their associated administrative fees. 
g This includes two of the three manufacturers that expressed concerns that competitors may be taking disparate approaches 
when applying CMSs four-part test to make these determinations.  OIG used manufacturer responses to open-ended survey 
questions to identify inconsistencies in determinations of BFSFs.  
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices   
OEI-BL-21-00330  Findings | 11    
Manufacturers are seeking additional guidance in two sales-
related areas 
TRICARE Retail Pharmacy Sales 
Four manufacturers expressed concerns that CMS has never sufficiently addressed 
how to treat sales to TRRx programs when calculating ASPs and therefore they need 
to make reasonable assumptions in their calculations.  In discussing these reasonable 
assumptions, three manufacturers said they included such sales in their ASP 
calculations on the basis of CMS guidance related to AMP.30  The fourth manufacturer 
excluded such sales on the basis of different guidance related to ASP and BP that 
does not specifically refer to TRRx programs.31  These disparate approaches are 
reflected in the inconsistent practices related to TRRx described earlier. 
Sales in U.S. Territories 
Four manufacturers are seeking clarification on whether the ASP calculation should 
also include sales to the U.S. Territories once the requirement takes effect for AMP 
and BP.  Beginning January 1, 2023, manufacturers must begin including sales in five 
U.S. Territories in their AMP and BP calculations.32 
Manufacturers would also like additional guidance in four 
discount-related areas 
Value-Based Purchasing Arrangements 
Four manufacturers noted in their survey responses that there was insufficient 
guidance on the treatment of value-based and outcomes-based purchasing 
arrangements in the calculation of ASP.h  Without clear guidance, manufacturers 
argue that they will need to adopt varying reasonable assumptions that could create 
distortions among reported ASPs.  Specifically, three of these manufacturers cited 
issues raised by the multiple best prices (BPs) option recently created under the 
Medicaid Drug Rebate Program that removes some disincentives to the broader use 
of value-based purchasing (VBP) models.33, 34, 35  These manufacturers believe CMS 
should clarify that sales and rebates for purchasing arrangements reported under the 
multiple BPs option for Medicaid rebate purposes should be excluded from ASP 
calculations. 
Bundled Sales Price Concessions 
It was noted in the manufacturer survey responses that CMS has not adopted a 
definition of the term bundled sale for the purpose of ASP calculations and instead 
directed manufacturers to adopt reasonable assumptions.36  Two manufacturers also 
_____________________________________________________________________________________________________________________________ 
h Value-based and outcomes-based purchase arrangements are intended to align pricing or payments to an observed or 
expected therapeutic or clinical value in a population using evidence-based or outcomes-based measurements. 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices   
OEI-BL-21-00330  Findings | 12    
stated that they would like additional guidance from CMS on the appropriate 
methodology for allocating bundled sales in ASP. 
One of these two manufacturers specified three additional areas pertaining to 
bundled sales discounts for which it would like additional guidance: 
  Whether unbundling a bundled arrangement should include just the discounts 
contingent on purchase or performance requirements or all discounts that 
may be part of the underlying arrangement. 
  How to treat bundled sales that include both covered products and 
noncovered products (i.e., products for which there is no government price 
reporting obligation).   
  How manufacturers should identify and reallocate discounts associated with 
sales that may be considered bundled across time periods.  The manufacturer 
asserts that CMS guidance on these types of temporal bundling will be critical 
because they will play an important role in the implementation and evaluation 
of value- and outcomes-based arrangements, which may require assessing the 
efficacy of a drug over multiple reporting periods. 
Bona Fide Service Fees 
One manufacturer noted in its survey response that CMS has never defined the term 
fair market value for the purposes of the bona fide service fee definition.i  The 
manufacturer would like additional guidance from CMS on the methodology that 
should be used to assess fair market value and the time period after which 
manufacturers should reassess the fair market value of fees to ensure consistency 
across the industry.   
The same manufacturer also stated that it would welcome additional guidance from 
CMS regarding what constitutes sufficient evidence of knowledge that a fee is passed 
through for purposes of the four-part test.j  This is supported by the three 
manufacturers concernsas described earlierthat competitors may be taking 
disparate approaches when applying CMSs four-part test to make these 
determinations. 
Rebates for Drug Wastage Associated with Single-Use Vials 
One manufacturer is seeking clarification on whether rebates related to discarded 
drugs from single-use vials should be included in ASP calculations.  Every year, 
significant amounts of drugs left over and unused from single-dose vials are 
discarded.37  Under Medicare Part B, health care providers receive payment for the 
_____________________________________________________________________________________________________________________________ 
i Under the four-part test, a fee must represent fair market value to be considered a bona fide service fee (BFSF). 
j Under the four-part test, a fee that is paid by a manufacturer to an entity cannot be considered a BFSF if the fee is passed 
through, in whole or in part, to one of its clients or customers.  If a manufacturer has determined that a fee paid meets the 
other elements of the definition of bona fide service fee, then the manufacturer may presume, in the absence of evidence or 
notice to the contrary, that the fee paid is not passed on.  71 Fed. Reg. 69669. 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices   
OEI-BL-21-00330  Findings | 13    
total amount of the drug indicated on the vial, including that which is discarded.  
Beginning January 1, 2023, manufacturers will be required to issue rebates to CMS for 
the portion of single-dose vials that are discarded when the drug is administered to 
Medicare Part B enrollees.38, 39 
Manufacturers expressed a need for additional guidance on 
several administrative reporting issues 
Several manufacturers briefly mentioned other areas where they would like to receive 
additional guidance from CMS, particularly related to administrative reporting 
questions.  These included the following: 
  The circumstances under which manufacturers should or must refile ASP data 
or the historical period for which such refiling should be considered. 
  The reporting of potential negative ASPs (e.g., an ASP for which the amount of 
the discounts exceeds total sales in a quarter) as well as the lack of any 
guidance from CMS regarding how a negative ASP would be used in Medicare 
reimbursement rate calculations.     
  Whether or how to use information in the NDC-HCPCS Crosswalk to identify 
the insulin products for which they should report ASPs. 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices   
OEI-BL-21-00330  Findings | 14    
CONCLUSION AND RECOMMENDATION 
Ensuring the accuracy of manufacturer-reported ASPs is vital considering that CMS 
uses these prices to directly calculate reimbursement amounts under Medicare Part B.  
To address these concerns, the Consolidated Appropriations Act, 2021, directed OIG 
to review manufacturer-reported ASP data. 
OIG has previously conducted several resource-intensive audits of manufacturer-
reported pricing data that resulted in limited findings.  In general, OIGs ability to 
identify noncompliance in price reporting is limited because of broad regulations that 
allow manufacturers to make reasonable assumptions in the absence of specific 
guidance.  For this reason, OIG elected to try a different approach to assess the 
accuracy of ASPs.   
In the end, our comparisons of ASPs to other benchmark prices provided little insight 
into potential inaccuracies.  However, through the manufacturer surveys, OIG was able 
to identify a small number of inconsistencies in manufacturer calculations of ASPs, 
such as in the treatment of TRICARE-related drug sales or whether certain fees meet 
the criteria for being considered a bona fide service fee.  We also identified nine 
specific areas where manufacturers would like additional CMS guidance.   
The manufacturers we surveyed also expressed concerns that CMS has published 
comparatively fewer regulations and less overall guidance regarding the calculation of 
the ASPs used in Medicare than regarding the AMPs and BPs used in Medicaid.  As a 
result, manufacturers say they must rely on reasonable assumptions to a much greater 
extent when calculating ASP than they do with these other payment benchmarks.  We 
therefore recommend that CMS: 
Actively review current guidance related to the areas identified 
in this report and determine whether additional guidance would 
ensure more accurate and consistent ASP calculations 
OIG noted nine specific areas for which manufacturers believe additional guidance 
may be needed to reduce distortions among reported ASPs and ensure consistency 
across the industry.  CMS should review current guidance and determine whether 
additional clarification may prove beneficial, prioritizing issues that may have greater 
effects on pricing and payments (e.g., value-based arrangements).  CMS should also 
give particular consideration to guidance regarding TRICARE-related sales and 
determinations of bona fide service feestwo areas where insufficient guidance may 
be leading to inconsistencies in manufacturer ASP calculations.
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices   
OEI-BL-21-00330  Conclusion and Recommendation | 15    
AGENCY COMMENTS AND OIG RESPONSE  
CMS concurred with OIGs recommendation.  The agency stated that it will review 
current guidance related to the areas identified in this report and determine 
whether additional guidance would help ensure more accurate and consistent ASP 
calculations.  CMS went on to note that in some cases, additional guidance could 
be sub-regulatory, and in others, it may require rulemaking.  CMS also briefly 
described steps it takes to vet and verify the accuracy of ASP data upon their 
submission by manufacturers. 
OIG appreciates CMSs commitment to work within its authority to ensure the 
accuracy of manufacturer-reported ASP data and maximize the affordability and 
availability of drugs for individuals with Medicare. 
For the full text of CMSs comments, see Appendix D. 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices   
OEI-BL-21-00330  Agency Comments and OIG Response | 16    
APPENDICES 
Appendix A: CMS Calculation of Medicare Part B Drug Payment 
Amounts 
Manufacturers typically report ASPs by national drug code (NDC), an 11-digit code 
that is divided into three segments identifying (1) the firm that manufactures, 
distributes, or repackages the drug product (i.e., the labeler code); (2) the specific 
strength, dosage form, and formulation of the product; and (3) the products package 
size.  However, to obtain reimbursement for Part B drugs, health care providers 
submit claims to Medicare contractors using Healthcare Common Procedure Coding 
System (HCPCS) codes.  Each HCPCS code defines the drugs name and the amount of 
the drug represented by one unit of the code but does not specify manufacturer or 
package size information.  Because payments for Part B drugs are based on HCPCS 
codes rather than on NDCs and because more than one NDC may meet the definition 
of a particular HCPCS code, CMS must first crosswalk manufacturers NDCs to their 
matching HCPCS codes.  In addition, because the amount of a drug represented by an 
NDC may differ from the amount of a drug specified by a HCPCS code, CMS staff 
often must convert NDC units to HCPCS code units to determine the amount of 
the drug contained within a given HCPCS code.  CMS then uses this information to 
calculate a single volume-weighted ASP across all NDCs associated with a covered 
HCPCS code. 
Each quarter, CMS publishes a crosswalk file that lists the NDCs matching each Part B 
drug HCPCS code as well as the number of NDC units within the HCPCS code.  CMS 
also develops a nonpublic quarterly ASP background file for internal use, which lists 
the ASPs and number of units sold for all NDCs that meet the definition of each Part B 
drug HCPCS code paid under the ASP methodology.   
There is a two-quarter lag between the sales period for which ASPs are reported and 
the effective date of the reimbursement amounts.  For example, manufacturers ASPs 
from the first quarter of 2020 were used to establish reimbursement amounts for the 
third quarter of 2020.  CMS posts an ASP payment amount file and an ASP crosswalk 
file on its website before the start of the applicable quarter. 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices   
OEI-BL-21-00330  Appendix A | 17    
Appendix B: How Surveyed Manufacturers Treat Various Types 
of Sales When Calculating ASPs 
Source: OIG analysis of manufacturer responses to OIGs 2022 Accuracy of Manufacturer-Reported ASPs survey. 
* Not applicable. 
 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices   
OEI-BL-21-00330  Appendix B | 18    
Appendix C: How Surveyed Manufacturers Treat Various Types 
of Discounts When Calculating ASPs  
Source: OIG analysis of manufacturer responses to OIGs 2022 Accuracy of Manufacturer-Reported ASPs survey. 
* Not applicable. 
 
 
 
 
 
   
 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices   
OEI-BL-21-00330  Appendix C | 19    
Appendix D: Agency Comments 
Following this page are the official comments from CMS. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices   
OEI-BL-21-00330  Appendix D | 20   DATE:  December 9, 2022 
TO:  Ann Maxwell 
Deputy Inspector General for Evaluation and Inspections 
Office of Inspector General 
FROM:  Chiquita Brooks-LaSure 
Administrator 
Centers for Medicare & Medicaid Services 
SUBJECT:  Office of Inspector General (OIG) Draft Report: Manufacturers May Need 
Additional Guidance To Ensure Consistent Calculations of Average Sales Prices 
(OEI-BL-21-00330) 
The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to review and 
comment on the Office of Inspector Generals (OIG) draft report.  
CMS serves the public as a trusted partner and steward, dedicated to advancing health equity, 
expanding coverage, and improving health outcomes. As such, CMS strives to maximize the 
affordability and availability of drugs for individuals with Medicare while protecting taxpayer 
dollars. CMS uses manufacturer reported average sales price (ASP) product data to calculate Part 
B drug payment limits. Manufacturer reported data is vetted by CMS to verify that the reported 
values are consistent with the reported quantity of the drug. For example, files are reviewed to 
identify outliers and potential discrepancies are addressed on a case by case basis. Additionally, 
CMS works with manufacturers to mitigate and address concerns identified with the data. This 
includes providing technical assistance when manufacturers inquire about how to properly report 
their data.    
We appreciate the OIG's work on this area and look forward to working collaboratively on this 
and other issues in the future. 
The OIGs recommendations and CMS responses are below. 
OIG Recommendation  
The OIG recommends that CMS actively review current guidance related to the areas identified 
in this report and determine whether additional guidance would ensure more accurate and 
consistent ASP calculations.  
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices 
OEI-BL-21-00330  Appendix D | 21  CMS Response  
CMS concurs with this recommendation. CMS will review the current guidance related to the 
areas identified in this report and determine whether additional guidance would help to ensure 
more accurate and consistent ASP calculations. It should be noted that in some cases, additional 
guidance could be sub-regulatory, and in others, it may potentially require notice and comment 
rulemaking.  
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices 
OEI-BL-21-00330  Appendix D | 22   
ACKNOWLEDGMENTS AND CONTACT 
Acknowledgments 
Louis Day served as the lead analyst for this study.  Office of Evaluation and 
Inspections headquarters staff who provided support include Melissa Baker, Rob 
Gibbons, and Michael Novello.    
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.  
Contact 
To obtain additional information concerning this report, contact the Office of Public 
Affairs at Public.Affairs@oig.hhs.gov.  OIG reports and other information can be found 
on the OIG website at oig.hhs.gov. 
Office of Inspector General 
U.S. Department of Health and Human Services 
330 Independence Avenue, SW 
Washington, DC 20201 
 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices  
OEI-BL-21-00330  Acknowledgments and Contact | 23    
ABOUT THE OFFICE OF INSPECTOR GENERAL 
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: 
The Office of Audit Services (OAS) provides 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 audits help reduce waste, abuse, and mismanagement and promote economy 
and efficiency throughout HHS. 
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.  These evaluations focus on preventing fraud, waste, 
or abuse and promoting economy, efficiency, and effectiveness of departmental 
programs.  To promote impact, OEI reports also present practical recommendations 
for improving program operations. 
The Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of fraud and misconduct related to HHS programs, operations, and 
beneficiaries.  With investigators working in all 50 States and the District of Columbia, 
OI utilizes its resources by actively coordinating with the Department of Justice and 
other Federal, State, and local law enforcement authorities.  The investigative efforts 
of OI often lead to criminal convictions, administrative sanctions, and/or civil 
monetary penalties. 
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 for OIGs internal operations.  OCIG 
represents OIG in all civil and administrative fraud and abuse cases involving HHS 
programs, including False Claims Act, program exclusion, and civil monetary penalty 
cases.  In connection with these cases, OCIG also negotiates and monitors corporate 
integrity agreements.  OCIG renders advisory opinions, issues compliance program 
guidance, publishes fraud alerts, and provides other guidance to the health care 
industry concerning the anti-kickback statute and other OIG enforcement authorities.
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices  
OEI-BL-21-00330  About the Office of Inspector General | 24    
ENDNOTES 
 
1 Division CC, Title IV, Section 401(d), of the Consolidated Appropriations Act, 2021, P.L. 116-260 (Dec. 27, 2020). 
2 Section 1847A(c) of the Social Security Act. 
3 Based on OIG analysis of the publicly available Medicare average sales price (ASP) quarterly pricing files for 2020 from CMSs 
website (https://www.cms.gov/medicare/medicare-part-b-drug-average-sales-price/2020-asp-drug-pricing-files). 
4 Not including vaccines, as they are not reimbursed using ASP. 
5 For Medicare Part B, average spending per enrollee for each drug is based on total spending in 2020 divided by the total 
number of enrollees who received the drug.  Because an enrollee may have received a drug for only part of the year (e.g., he or 
she began treatment in November), the numbers presented here likely underestimate the actual annual cost for many patients. 
6 42 CFR  405.2410. 
7 H.R.1 - 108th Congress (2003-2004): Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Dec. 8, 2003). 
8 Section 1847A(c) of the Social Security Act (the Act), as added by the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003, P.L. 108-173.  Pursuant to  1847A(c) of the Act, 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.  Sales that are nominal in amount are 
exempted from the ASP calculation, as are sales excluded from the determination of best price (BP) in the Medicaid Drug 
Rebate Program. 
9 71 Fed. Reg. 69624, 69669 (Dec. 1, 2006).  
10 Prior to 2022, ASP reporting requirements applied only to Part B drugs subject to Medicaid drug rebate agreements.  
Congress addressed this reporting gap by requiring ASP reporting for manufacturers without a Medicaid drug rebate 
agreement through Division CC, Title IV, Section 401, of the Consolidated Appropriations Act, 2021, P.L. 116-260, with an 
implementation date of January 1, 2022. 
11 Sections 1927(b)(3)(C)(i) and (ii) of the Social Security Act. 
12 42 CFR  447.504. 
13 A retail community pharmacy is an independent pharmacy, a chain pharmacy, a supermarket pharmacy, or a mass 
merchandiser pharmacy that is licensed as a pharmacy by the State and that dispenses medications to the general public at 
retail prices.  The definition excludes a pharmacy that dispenses prescription medications primarily through the mail, nursing 
home pharmacies, long-term care facility pharmacies, hospital pharmacies, clinics, charitable or not-for-profit pharmacies, 
government pharmacies, or pharmacy benefit managers.  42 CFR  447.504. 
14 For Federal financial participation to be available for covered outpatient drugs provided under Medicaid, manufacturers 
must enter into rebate agreements with the Secretary of Health and Human Services and pay quarterly rebates to State 
Medicaid agencies.  Sections 1927(a)(1) and (b)(1)(A) of the Social Security Act. 
15 Section 1927(b)(3)(A) of the Social Security Act. 
16 81 Fed. Reg. 5170, 5209 (Feb. 1, 2016). 
17 Section 1874A(d)(2) of the Social Security Act.   
18 For example, see Medicare Part B Drug Payments: Impact of Price Substitutions Based on 2019 Average Sales Prices (OEI-03-
21-00130), June 2021. 
19 42 CFR  414.904(d)(3).  CMS outlined that it would make this price substitution only if the ASP for a drug exceeds the AMP 
by 5 percent in the previous two quarters, or three of the previous four quarters. 
20 Section 1847A(c)(6) of the Social Security Act. 
 
 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices  
OEI-BL-21-00330  Endnotes | 25    
 
21 In the case of a public health emergency or during the initial period (not to exceed a full calendar quarter) of a drugs sales, a 
drugs WAC may be used to determine its Medicare Part B payment amount when data are not currently accurate or 
sufficiently available from a manufacturer to calculate an ASP for that drug.  Sections 1847A(c)(4) and (e) of the Social Security 
Act. 
22 OIG also published the quarterly comparisons as individual reports through 2012. 
23 An AMP is reported for the lowest identifiable quantity of the drug in the NDC (e.g., one milligram, one milliliter, one tablet, 
or one capsule).  In contrast, ASP and WAC are reported for the entire amount of the drug contained in that NDC (e.g., for 50 
milliliters or for 100 tablets).   
24 The types of discounts or price concessions include volume, prompt pay, bundled sale, insurer, consolidated service centers, 
group purchasing organization (GPO), and pharmacy benefit manager (PBM) discounts or price concessions.  See Glossary for a 
detailed explanation of the different types of sales, discounts, and fees. 
25 Sections 1847A(d)(2)(B) and (3) of the Social Security Act. 
26 42 CFR  414.904(d)(3). 
27 The estimated $30.7 million in savings from calendar year (CY) 2016 through 2020 does not include $2.8 million in savings 
lost during CY 2020 due to CMS pricing errors.  There were 11 drugs eligible for price reductions based on 2020 ASPs.  
However, CMS did not correctly implement price reductions for seven of these eligible drugs.  Consequently, the price 
reductions made by CMS based on 2020 ASP data amounted to only $8,158 in actual savingsa loss of $2.8 million in savings 
to Medicare and its enrollees.  OEI-03-22-00170. 
28 71 Fed. Reg. 69624, 69669 (Dec. 1, 2006). 
29 GPO and PBM fees may include such fees as administrative, data, enterprise, gateway, and portal fees. 
30 81 Fed. Reg. 5170, 5223 (Feb. 1, 2016). 
31 71 Fed. Reg. 69624, 69671 (Dec. 1, 2006). 
32 42 CFR 447.502.  Effective January 1, 2023, manufacturers must begin including sales in five U.S. Territoriesthe 
Commonwealth of Puerto Rico, the Virgin Islands of the United States, Guam, the Commonwealth of the Northern Mariana 
Islands, and American Samoain their AMP and BP calculations.  Prior to this date, manufacturers are only required to report 
drug sales within the 50 U.S. States and the District of Columbia. 
33 42 CFR  447.502.  Value-based purchasing arrangement means an arrangement or agreement intended to align pricing or 
payments to an observed or expected therapeutic or clinical value in a select population and includes but is not limited to (1) 
evidence-based measures, which substantially link the cost of a drug product to existing evidence of effectiveness and 
potential value for specific uses of that product; and (2) outcomes-based measures, which substantially link payment for the 
drug to the drugs actual performance in a patient or to a population, or a reduction in other medical expenses. 
34 42 CFR  447.505(a).  Best price means, for a single source drug or innovator multiple source drug of a manufacturer 
(including the lowest price available to any entity for an authorized generic drug), the lowest price available from the 
manufacturer during the rebate period to any wholesaler, retailer, provider, health maintenance organization, nonprofit entity, 
or governmental entity in the United States in any pricing structure (including capitated payments) in the same quarter for 
which the AMP is computed.  If a manufacturer offers a value-based purchasing (VPB) arrangement (as defined at  447.502) to 
all states, the lowest price available from a manufacturer may include varying best price points for a single dosage form and 
strength as a result of that VBP arrangement. 
35 CMS, Medicaid Drug Rebate Program Notice for Participating Drug Manufacturers, Release No. 116.  Accessed at Technical 
Guidance - Value-Based Purchasing (VBP) Arrangements for Drug Therapies using Multiple Best Prices (medicaid.gov) on June 
2, 2022. 
36 Bundled sales is defined in the Medicaid context under  447.502.  CMS declined to provide a definition for bundled 
arrangements, and has declined to establish a specific methodology for the treatment of bundled price concessions for the 
purpose of ASP calculations and instead directed manufacturers to adopt reasonable assumptions.  72 Fed. Reg. 66258.  For 
the purpose of this study, we refer to bundled sales, the term used in survey responses by the manufacturers, 
interchangeably with bundled arrangements and bundled priced concessions. 
 
 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices  
OEI-BL-21-00330  Endnotes | 26    
 
37 National Academies of Sciences, Engineering, and Medicine, Medications in single-dose vials: implications of discarded drugs, 
2021. 
38 Sometimes, portions of fixed-dose drugs in single-dose vials are discarded.  This is, in part, because some prescription drugs 
are administered in variable doses based on a patients weight or body size.  These vials contain standard amounts of the drug 
which typically exceed the required dosage for the average patient. 
39 Section 9004 of the Infrastructure Investment and Jobs Act, P.L. 117-58 (Nov. 15, 2021). 
 
Manufacturers May Need Additional Guidance To Ensure Consistent Calculations of Average Sales Prices  
OEI-BL-21-00330  Endnotes | 27