Department of Health and Human Services 
OFFICE OF 

   
INSPECTOR GENERAL 

 
 
 
 
 
 
 
 
DRU  G MANUFACTURERS 
 
 
N W
ONCOMPLIANCE  ITH 

 
 
A M P
VERAGE  ANUFACTURER  RICE 

 
R   R  
EPORTING  EQUIREMENTS 

 
 
 
 
Daniel R. Levinson 
  
Inspector General 

 
September 2010 
 
OEI-03-09-00060 
   
   
 E X E C U T I V E   S U M M A R Y  
OBJECTIVES
 
1.  To determine whether manufacturers submitted 2008 average 
manufacturer prices (AMP) to the Centers for Medicare & Medicaid 
Services (CMS) within the timeframes specified by Federal 
requirements.  
2.  To determine whether CMS has taken action against manufacturers 
that did not submit AMP data within the timeframes specified by 
Federal requirements. 
BACKGROUND 
The Social Security Act sets forth price reporting obligations for certain 
manufacturers, including the obligation to report AMP data to CMS.  
During 2008, AMP was generally defined by statute to be the average 
price paid to the manufacturer for the drug in the United States by 
wholesalers for drugs distributed to the retail pharmacy class of trade.  
Manufacturers must provide CMS with the AMP for each of their 
covered outpatient drugs within 30 days after the end of each month 
and each quarter. 
Manufacturer-reported AMPs play a critical role in Government 
payments for prescription drugs.  Currently, AMPs provided by 
manufacturers on a quarterly basis are used to calculate the rebate 
amounts owed to States under the Medicaid drug rebate program.  
Quarterly AMPs are also used to establish ceiling prices in the                     
340B program, which is a prescription drug discount program 
administered by the Health Resources and Services Administration.  
In addition, consistent with the Deficit Reduction Act of 2005 (DRA) and 
the Patient Protection and Affordable Care Act, AMPs reported on a 
monthly basis are to be used to establish Federal upper limit amounts 
in the Medicaid program.  The DRA also requires CMS to disclose AMP 
data to State Medicaid programs, which would enable States to use 
monthly AMP data when setting Medicaid reimbursement rates for 
prescription drugs.  Although an injunction currently prohibits CMS 
from using AMPs in a way that affects Medicaid reimbursement rates 
and from disclosing AMPs to States, AMP data could be used for these 
purposes in the future. 
According to statute, manufacturers that fail to provide timely AMP 
data may be subject to civil money penalties and/or termination from 
the drug rebate program.  Because the responsibility to impose civil 
  OEI-03-09-00060  DRUG MANUFACTURERS NONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS  i   
   
E X E C U T I V E   S U M M A R Y  
money penalties has been delegated to the Office of Inspector General 
(OIG), CMS may refer noncompliant manufacturers to OIG for the 
purpose of imposing such penalties in appropriate cases.  CMS also has 
authority to terminate the rebate agreements of drug manufacturers 
that fail to meet price reporting requirements.   
For this study, we obtained manufacturer-reported drug product data 
and AMP data for each month and quarter of 2008, including the dates 
on which the AMPs were initially certified by manufacturers.  For each 
drug product included in our study, we determined the months and 
quarters for which AMPs were submitted late or not at all.  We then 
summarized the results for each month and quarter to identify 
manufacturers that (1) had missing data, i.e., submitted no AMP data 
for any of their drug products; (2) had late AMP data, i.e., submitted 
AMP data for all of their drug products after the deadline; or (3) had 
incomplete AMP data, i.e., submitted at least some of their AMPs by the 
deadline but submitted the remaining AMPs either late or not at all or 
submitted a portion of their AMPs late and never submitted the 
remaining AMPs.   
We also determined whether manufacturers that failed to submit timely 
monthly or quarterly AMP data during 2008 were terminated by CMS 
or referred by CMS to OIG for potential civil money penalties.     
FINDINGS 
In 2008, more than half of manufacturers did not fully comply with 
quarterly submission requirements for AMP data.  Of the                           
592 manufacturers that were required to submit quarterly AMP data 
during 2008, 313 (53 percent) failed to provide pricing data by the 
statutorily defined due date.   
Sixteen of the manufacturers under review had missing AMP data for all 
of their drug products in multiple quarters.  Forty-eight of the 
manufacturers under review submitted late AMP data for all of their 
drug products in multiple quarters.  One hundred twenty of the 
manufacturers under review submitted incomplete AMP data in multiple 
quarters. 
In 2008, more than three-fourths of manufacturers did not fully 
comply with monthly submission requirements for AMP data.  Of the                       
579 manufacturers that were required to submit monthly AMP data 
during 2008, 453 (78 percent) failed to provide pricing data by the 
statutorily defined due date.   
  OEI-03-09-00060  DRUG MANUFACTURERS NONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS  ii   
   
EE XX EE CC UU TT II VV EE    SS UU MM MM AA RR YY   
Forty of the manufacturers in our review had missing AMP data for all of 
their drug products in multiple months.  One hundred forty-eight of the 
manufacturers under review had late AMP data for all of their drug 
products in multiple months.  Two hundred twenty-seven of the 
manufacturers under review had incomplete AMP data in multiple 
months. 
CMS took action against some manufacturers for failure to comply 
with quarterly AMP reporting requirements but took no action for 
failure to comply with monthly reporting requirements.  In total,                     
78 manufacturers were referred to OIG and/or terminated by CMS for 
failure to comply with quarterly AMP reporting requirements in 2008.  Of 
these 78 manufacturers, 52 were only referred to OIG, 4 were only 
terminated by CMS, and the remaining 22 were both referred to OIG and 
subsequently terminated by CMS.  Although CMS tracks manufacturers 
that report either no monthly AMP data or less than 90 percent of their 
monthly AMP data, it does not refer or terminate those manufacturers.  
However, some noncompliant manufacturers are referred or terminated by 
CMS because they also have missing or late quarterly AMP data. 
RECOMMENDATIONS 
Because AMP data currently play such a critical role in Government 
payments for prescription drugs and may play an even greater role in 
the future, CMS should ensure that action is taken against 
noncompliant manufacturers.  Drug manufacturers must also do their 
part by reporting both quarterly and monthly AMP data to CMS in a 
timely and accurate way.   
To promote compliance with quarterly and monthly AMP reporting 
requirements and to help ensure that Medicaid and covered 340B 
entities do not overpay for prescription drugs, we recommend that CMS: 
Take action against manufacturers that submit incomplete quarterly 
AMP data. 
Take action against manufacturers that fail to submit monthly AMP 
data in a timely manner. 
  OEI-03-09-00060  DRUG MANUFACTURERS NONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS  iii   
   
E X E C U T I V E   S U M M A R Y  
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred with both recommendations and stated that it will begin 
referring manufacturers that submit incomplete quarterly and monthly 
data to OIG for civil money penalty consideration.  OIG looks forward to 
expanding its collaboration with CMS regarding administrative 
remedies for noncompliance with AMP reporting requirements.                                    
  OEI-03-09-00060  DRUG MANUFACTURERS NONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS  iv   
 T A B L E   O F   C O N T E N T S  
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
 
 
I N T RO DUC T IO N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 
 
 
F I N D IN G S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 
  In 2008, more than half of manufacturers did not fully comply              
with quarterly submission requirements for AMP data . . . . . . . . 10 
  In 2008, more than three-fourths of manufacturers did not fully 
comply with monthly submission requirements for AMP data. . . 12 
  CMS took action against some manufacturers for failure to                   
comply with quarterly AMP reporting requirements but                         
took no action for failure to comply with monthly reporting 
requirements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 
 
 
R E C O MMEN D A T ION S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 
  Agency Comments and Office of Inspector General Response . . . 19 
 
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 
  A:  Current and Future Uses of Average Manufacturer Price                
Data in Federal Health Care Programs. . . . . . . . . . . . . . . . . . 20 
  B:  Manufacturers With Missing and Late                                             
Quarterly Average Manufacturer Price Data . . . . . . . . . . . . . 24 
  C:  Manufacturers With Missing and Late                                             
Monthly Average Manufacturer Price Data. . . . . . . . . . . . . . . 25 
  D:  Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 
 
A C K NO WL E D G M E N T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28   
   
I N T R O D U C T I O N  
 I N T R O D U C T I O N  
 
OBJECTIVES 
1.  To determine whether manufacturers submitted 2008 average 
manufacturer prices (AMP) to the Centers for Medicare & Medicaid 
Services (CMS) within the timeframes specified by Federal 
requirements.  
2.  To determine whether CMS has taken action against manufacturers 
that did not submit AMP data within the timeframes specified by 
Federal requirements. 
BACKGROUND 
The Social Security Act (the Act) and Federal regulations set forth price 
reporting obligations for certain drug manufacturers, including the 
obligation to report AMP data to CMS on quarterly and monthly bases.1  
During 2008, AMP was generally defined by statute to be the average 
price paid to the manufacturer for the drug in the United States by 
wholesalers for drugs distributed to the retail pharmacy class of  
trade.2, 3 
Manufacturer-reported AMPs play a critical role in Government 
payments for prescription drugs.  Currently, AMPs provided by 
manufacturers on a quarterly basis are used to calculate the rebate 
amounts owed to States under the Medicaid drug rebate program.  
Quarterly AMPs are also used to establish ceiling prices in the 340B 
program, which is a prescription drug discount program for covered 
entities that is administered by the Health Resources and Services 
Administration (HRSA).   
In addition, consistent with the Deficit Reduction Act of 2005 (DRA) and 
the Patient Protection and Affordable Care Act (Affordable Care Act),4 
monthly AMPs are to be used to establish Federal upper limit (FUL) 
 
1 Section 1927(b)(3) of the Act and 42 CFR  447.510(a) and (d).  Price reporting obligations 
apply to manufacturers that participate in the Medicaid drug rebate program. 
2 Section 1927(k)(1) of the Act.  
3 The AMP is generally calculated as a weighted average of prices for a manufacturers 
package sizes of a drug sold during a given quarter and is reported for the lowest 
identifiable quantity of the drug as measured by one of eight unit types:  capsule, tablet, 
milliliter, gram, each, suppository, transdermal patch, and injectable antihemophilic factor 
unit.  For example, an AMP might be submitted for 1 tablet, 1 milliliter, or 1 gram. 
4 P.L. 109-171 and P.L. 111-148, respectively. 
  OEI-03-09-00060  DRUG MANUFACTURERS NONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS  1   
   
I N T R O D U C T I O N  
amounts in the Medicaid program.5  The DRA also requires CMS to 
disclose AMP data to State Medicaid programs, which would enable 
States to use monthly AMP data when setting Medicaid reimbursement 
rates for prescription drugs.6  Although a preliminary injunction from a 
Federal district court currently prohibits CMS from using AMPs in a 
way that affects Medicaid reimbursement rates and from disclosing 
AMPs to States, AMP data could be used for these purposes in the 
future.7 
If quarterly and monthly AMPs are not reported in a timely manner,  
(1) CMS may not have complete data on which to base Medicaid rebates 
and future FUL amounts,8 (2) HRSA may be unable to establish ceiling 
prices under the 340B program, and (3) States may be unable to use 
AMPs for Medicaid reimbursement purposes.9  As a result, the Medicaid 
program and covered entities participating in the 340B program could 
potentially overpay for prescription drugs.   
For more detailed information about the current and future uses of 
AMP data in Federal health care programs, see Appendix A.   
AMP Reporting Requirements  
For Federal payment to be available for covered outpatient drugs 
provided under Medicaid, the Act mandates that drug manufacturers 
enter into rebate agreements with the Secretary of Health & Human 
Services (the Secretary) and pay quarterly rebates to State Medicaid 
agencies.10   
 
5 Prior to the DRA, manufacturers were required to submit only quarterly AMPs.  However, 
section 6001 of the DRA and section 2503(b)(1)(A) of the Affordable Care Act expanded 
manufacturers reporting requirements to include, respectively, monthly AMPs and the 
total number of units used to calculate those monthly AMPs.  Section 2503(a)(1)(B) of the 
Affordable Care Act establishes monthly AMPs as the new basis for FUL amounts. 
6 Section 6001 of the DRA. 
7 National Association of Chain Drug Stores, et al., v. U.S. Department of Health & Human 
Services, et al., Civil Action No. 1:07cv02017, order dated December 19, 2007.   
8 If a manufacturer does not submit timely or complete AMP data, the manufacturer must 
manually calculate rebate amounts and send rebate payments to States.  Therefore, 
although CMS cannot calculate a rebate amount, States may nonetheless receive rebate 
payments for drug products with missing AMPs. 
9 According to a 2007 Office of Inspector General (OIG) report entitled States Use of New 
Drug Pricing Data in the Medicaid Program (OEI-03-06-00490), most States had yet to 
decide as of October 2006 whether to use AMP data for Medicaid drug reimbursement.  
Some States raised concerns about missing AMP data, AMP outliers, and the correlation 
between AMPs and acquisition costs.  Undecided States would like assurances from CMS 
that the AMP data are accurate and valid.     
10 Sections 1927(a)(1) and (b)(1) of the Act. 
  OEI-03-09-00060  DRUG MANUFACTURERS NONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS  2   
   
I N T R O D U C T I O N    
 
Under these rebate agreements and pursuant to the Act, manufacturers 
must make regular reports to CMS of the AMPs for each of their covered 
outpatient drugs.11, 12  Originally, manufacturers were required to 
calculate and report AMPs on a quarterly basis only, with submissions 
due 30 days after the end of each quarter.  However, pursuant to the 
DRA, manufacturers must also calculate monthly AMPs, with 
submissions due 30 days after the end of each month.13, 14  If a drug 
product has been discontinued, the manufacturer must provide CMS 
with the products termination date and continue reporting quarterly 
AMPs for the product for 1 full year after the termination date.15, 16  The 
manufacturer may stop reporting monthly AMPs beginning the first 
month after the termination date of the drug.17   
Manufacturers transmit drug product data and AMP data for each 
reporting period to CMS using the Drug Data Reporting for Medicaid 
system (DDR).  First, manufacturers must enter drug product data for 
their covered 11-digit national drug codes (NDC), each of which 
identifies a specific manufacturer, product, and package size.  Once the 
drug product data have been accepted by the system, manufacturers are 
able to submit AMPs for the corresponding NDCs.  The DDR reviews 
manufacturers AMP submissions for data errors, notifies 
manufacturers about potential problems, and may reject files with 
detected errors.  The DDR also displays the number of NDCs entered 
 
11 Section 1927(b)(3) of the Act. 
12 Sections 1927(k)(2-3) of the Act provide the definition of a covered outpatient drug.   
13 Pursuant to section 6001(b)(1) of the DRA, manufacturers are required to report AMPs 
on a monthly basis.  The applicable regulations at 42 CFR  447.510 specify that quarterly 
pricing reports must include other information in addition to AMPs, such as customary 
prompt pay discounts and best prices for single-source or innovator multiple-source drugs.   
14 As specified in 42 CFR  447.504(i), a quarterly AMP is now calculated as a weighted 
average of monthly AMPs in the quarter.  However, the manufacturer must adjust the AMP 
for a quarter if cumulative discounts, rebates, or other arrangements subsequently adjust 
the prices actually realized.    
15 CMS, Medicaid Drug Rebate State Release Number 140 (March 15, 2006). 
16 According to CMS, a drugs termination date depends on the reason it is being 
discontinued by the manufacturer.  If a drug product is removed from the shelf immediately 
because of a health or safety concern, the termination date is the date removed.  Otherwise, 
the termination date is the shelf life of the last batch sold.   
17 Specifically, 42 CFR  447.510(d)(5) states that manufacturers should not report monthly 
AMPs for terminated drug products beginning with the first month after the expiration date 
of the last lot sold (i.e., the termination date). 
  OEI-03-09-00060  DRUG MANUFACTURERS NONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS  3   
   
I N T R O D U C T I O N  
into the system for which AMP data have yet to be reported.18  After 
resolving data errors (if any), manufacturers certify the AMP data in 
the DDR.   
AMP data must be certified within 30 days after the end of each month 
and each quarter.  Certified monthly data are uploaded to CMSs FUL 
database, whereas certified quarterly data are uploaded to the Medicaid 
Drug Rebate (MDR) database.  Information about the dates on which 
AMPs were certified and uploaded is maintained in the DDR.   
Penalties for Failure To Report Timely AMP Data 
Manufacturers that fail to provide AMP data on a timely basis may be 
subject to civil money penalties and/or termination from the drug rebate 
program.  Pursuant to section 1927(b)(3)(C)(i) of the Act, the Secretary 
is authorized to impose a civil money penalty that increases by               
$10,000 for each day that the required information (including quarterly 
and monthly AMP data) has not been provided after applicable 
deadlines.  This section of the Act also specifies that if the required 
prices are not reported within 90 days of the deadline, the 
manufacturers rebate agreement will be suspended until the date that 
the pricing information is reported.19   
The responsibility to impose penalties pursuant to section 
1927(b)(3)(C)(i) of the Act has been delegated to OIG by the Secretary.20  
In the second quarter of 2006, CMS began referring noncompliant 
manufacturers to OIG for the purpose of imposing civil money 
penalties.21  In response to CMSs referrals, OIG has proposed that civil 
money penalties be levied against manufacturers that fail to comply 
with price reporting requirements.   
CMS also has authority to terminate the rebate agreements of 
manufacturers that fail to comply with AMP reporting requirements.22  
 
18 The DDR also allows the manufacturers themselves to run a missing data report, which 
lists the NDCs that have no pricing data in the current period or any other period going 
back to 1991.   
19 Pursuant to section 1927(b)(3)(C)(i) of the Act, rebate agreements must be suspended for 
no less than 30 days. 
20 59 Fed. Reg. 52967 (Oct. 20, 1994). 
21 CMS began referring noncompliant manufacturers to OIG in response to a 2005 report 
entitled Deficiencies in the Oversight of the 340B Drug Pricing Program (OEI-05-02-00072).  
As part of this report, OIG recommended that CMS consider referring manufacturers whose 
pricing data submissions do not comply with reporting requirements to OIG so that 
penalties could be imposed in appropriate cases. 
22 Section 1927(b)(4)(B) of the Act. 
  OEI-03-09-00060  DRUG MANUFACTURERS NONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS  4   
   
I N T R O D U C T I O N  
Specifically, CMS may terminate a rebate agreement for violation of 
the requirements of the agreement or other good cause shown.23  If a 
rebate agreement is terminated by CMS, the manufacturer may not 
enter into another rebate agreement for at least one quarter (with 
certain exceptions).24, 25   
Previous OIG Work 
Several OIG studies have found that some manufacturers may not be 
submitting quarterly AMP data for all of their NDCs by the statutory 
deadline.  In one report, OIG found that almost 20 percent of 340B 
ceiling prices in the first quarter of 2005 could not be calculated because 
of missing AMP data.26  Another OIG report identified 1,431 NDCs with 
no AMP data during one or more quarters of 2008.27  Manufacturers for 
almost 60 percent of these NDCs participated in the MDR program in 
2008 and were therefore generally required to submit AMP data.   
METHODOLOGY 
Scope 
For this study, we examined both monthly and quarterly AMP data 
from 2008 as reported in the MDR and FUL databases.   
Rebate agreements are established by labeler code, which is a five-digit 
number that identifies the manufacturer of a given drug product.  Drug 
companies and their subsidiaries may have one or more labeler codes.  
For the purposes of this report, we consider each labeler code to be a 
manufacturer.   
Data Sources and Data Collection 
We obtained from CMS a list of manufacturers that participated in the 
Medicaid drug rebate program during 2008, including the effective 
dates of the manufacturers rebate agreements and the termination 
 
23 Pursuant to section 1927(b)(4)(B) of the Act, such termination shall not be effective 
earlier than 60 days after the date of notice for the termination. 
24 Section 1927(b)(4)(C) of the Act. 
25 If, after one quarter, a manufacturer wants to reenter the program, CMS will begin the 
reinstatement process.  As part of that process, manufacturers must report all missing 
pricing data to CMS and pay any outstanding rebate amounts (including interest) to States. 
26 OIG, Deficiencies in the Oversight of the 340B Drug Pricing Program, OEI-05-02-00072, 
October 2005. 
27 OIG, Comparison of Average Sales Prices and Average Manufacturer Prices:  An 
Overview of 2008, OEI-03-09-00350, February 2010. 
  OEI-03-09-00060  DRUG MANUFACTURERS NONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS  5   
   
II NN TT RR OO DD UU CC TT II OO NN   
dates (if any).28  Using this list, we identified 592 manufacturers that 
should have submitted AMP data for one or more quarters of 2008, and 
579 manufacturers that should have submitted AMP data for 1 or more 
months of 2008.  (In 2008, more manufacturers were required to submit 
quarterly AMPs than monthly AMPs because manufacturers of 
terminated NDCs must continue reporting quarterly AMPs for 1 year 
after the termination dates but need not report monthly AMPs after the 
termination dates.)  The number of manufacturers that were required to 
submit AMP data in each individual month and quarter of 2008 is 
specified in Table 1. 
CMS also provided us with Medicaid drug product data for 2008, as 
reported by manufacturers with rebate agreements.  The data include 
information such as the name and NDC of each covered outpatient drug, 
the date each drug entered the market, and the termination date for the 
drug (if applicable).  Using the data provided by CMS, we identified 
active NDCs for each month and quarter of 2008.  Because CMS 
requires manufacturers to report quarterly AMPs for a year after a 
drugs termination date, we also identified NDCs that were terminated 
prior to 2008 but for which AMP data for one or more quarters of 2008 
were still required.  Table 1 shows the number of NDCs in each month 
and quarter for which AMP data were required. 
CMS additionally provided us with AMP data for each month and 
quarter of 2008, including the dates on which the AMPs were initially 
certified by manufacturers.  All AMP data were current as of                         
July 16, 2009. 
To determine whether CMS has taken action against manufacturers 
that do not comply with AMP reporting requirements, we interviewed 
CMS staff members who are responsible for monthly and quarterly 
AMP data.  We asked them to identify manufacturers that were either 
terminated or referred to OIG for failure to comply with AMP reporting 
requirements during 2008.29, 30  
 
28 Only manufacturers on CMSs list are required to submit AMP data.  Manufacturers 
with no valid drug product data on file with CMS were excluded from our review. 
29 Termination and referral data provided by CMS were current as of March 2010. 
30 CMS referred or terminated manufacturers based on quarterly AMP data that were 
available at the time of CMSs own analyses. 
  OEI-03-09-00060  DRUG MANUFACTURERS NONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS  6   
   
I N T R O D U C T I O N  
Table 1:  Number of NDCs in Each Month and Quarter for Which Average 
Manufacturer Price Data Were Required 
Quarter   Number of  Number of  Number of  Number of 
Month in 2008 
in 2008  Manufacturers  NDCs Manufacturers  NDCs 
January  546  35,515 
First  564  38,940  February  547  35,544 
March  549  35,545 
April  540  34,436 
Second   555  37,565  May  542  34,416 
June  545  34,426 
July  543  34,451 
Third   561  38,603  August  546  35,533 
September  551  35,579 
October  549  35,261 
Fourth   565  38,271  November  551  35,246 
December  555  35,252 
Source:  OIG analysis of manufacturers, NDCs, and AMP data from all four quarters of 2008.  
Note:  More manufacturers were required to submit quarterly AMPs for more NDCs than monthly AMPs because 
manufacturers of terminated NDCs must continue reporting quarterly AMPs for 1 year after the termination dates but                      
need not report monthly AMPs after the termination dates. 
Analysis of AMP Submissions 
For each NDC included in our study, we determined the months and 
quarters in 2008 for which AMPs were either not submitted or 
submitted late.  To accomplish this, we compared the AMP certification 
date for each period to the due date of the data (i.e., 30 days after the 
end of each period).  Data without certification dates were considered 
missing.  Data certified after the due dates were considered late.  If 
AMP data were submitted late, we calculated the number of days that 
elapsed between the due dates and the certification dates.  We also 
identified NDCs with missing or late AMP data in multiple 
months/quarters.  Using 2008 Medicaid utilization data posted on 
CMSs Web site, we also calculated Medicaids total expenditures for 
each NDC during the period(s) for which that NDCs AMP was missing 
or late.31   
For each month and quarter in 2008, we then summarized results at the 
NDC level to identify manufacturers with the following problems: 
 
31 To estimate Medicaid expenditures for an NDC without AMP data in a given month, we 
divided the total reimbursement amounts for the corresponding quarter by three. 
  OEI-03-09-00060  DRUG MANUFACTURERS NONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS  7   
   
I N T R O D U C T I O N  
 
  Missing AMP data.  Manufacturers with missing AMP data 
submitted no AMP data for any of their NDCs during the 
month/quarter. 
  Late AMP data.  Manufacturers with late AMP data submitted 
AMP data for all of their NDCs after the deadline. 
  Incomplete AMP data.  Manufacturers with incomplete AMP data 
fell into one of two categories:  (1) manufacturers that submitted 
at least some of their AMPs by the deadline but submitted the 
remaining AMPs for the month/quarter either late or not at all or 
(2) manufacturers that submitted a portion of their AMPs late and 
never submitted the remaining AMPs for the month/quarter.   
We then identified manufacturers that had missing, late, or incomplete 
AMPs in multiple months or quarters.   
We also identified manufacturers that CMS terminated or referred to 
OIG for failure to submit monthly or quarterly data by the statutory 
deadline.  We then determined whether the manufacturers identified by 
our analysis as having missing, late, or incomplete quarterly or monthly 
AMP data were terminated by CMS or referred to OIG.  
Limitations 
We did not verify whether the NDCs provided by manufacturers for 
each reporting period and subsequently listed in CMSs drug product 
file met the definition of a covered outpatient drug.32  We also did not 
examine whether AMP data initially reported by the applicable deadline 
were later corrected and resubmitted by the manufacturers.   
For NDCs with missing and late AMPs, we did not determine whether 
manufacturers manually calculated rebate amounts and paid rebates to 
States accordingly.33  States may have received appropriate rebates 
from manufacturers, even when those manufacturers did not comply 
with quarterly reporting requirements.  We also did not determine 
whether NDCs with missing and late AMPs had Medicaid utilization in 
2008.  
Furthermore, we did not contact the manufacturers of NDCs with 
missing AMPs to determine whether they discontinued the NDCs but 
neglected to report termination dates to CMS.  If NDCs with missing 
 
32 As defined by sections 1927(k)(2-3) of the Act. 
33 See Appendix A for a more detailed description of rebate calculations. 
  OEI-03-09-00060  DRUG MANUFACTURERS NONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS  8   
   
I N T R O D U C T I O N  
AMPs were, in fact, discontinued and no longer required AMPs, the 
number of manufacturers with missing and incomplete data in our 
report may be overestimated. 
OIGs determinations of missing and late AMP data for a given period 
were not always the same as those made by CMS for that same period.  
This may have resulted from a number of factors.  For instance, OIG 
identified manufacturers as having late data if the data were submitted 
any time after the due dates, whereas CMS identified manufacturers as 
having late data if the data were submitted after the rebate amounts 
were calculated.  Also, CMS terminated or referred manufacturers 
based on AMP data that were current at the time of CMSs analysis, 
whereas OIG analyzed more recently updated data.   
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspections approved by the Council of the Inspectors General on 
Integrity and Efficiency. 
  OEI-03-09-00060  DRUG MANUFACTURERS NONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS  9   
   
F I N D I N G S  
 F I N D I N G S  
In 2008, 53 percent of 
In 2008, more than half of manufacturers     
manufacturers that participated in 
did not fully comply with quarterly     
the Medicaid drug rebate program 
submission requirements for AMP data 
(313 of 592) failed to submit at least 
some of their quarterly AMPs within the timeframes specified by 
Federal requirements.  These manufacturers had missing, late, or 
incomplete AMP data during one or more quarters of 2008.  When 
manufacturers do not comply with quarterly reporting requirements, 
CMS does not have complete data on which to base Medicaid rebates 
and HRSA may be unable to establish ceiling prices under the 340B 
program.   
Manufacturers that repeatedly failed to comply with quarterly AMP 
requirements did not always have the same problems (i.e., missing, late, 
and incomplete data) with the same NDCs in each period.  Some 
manufacturers had different problems in different quarters.  As a result, 
those manufacturers were included in more than one of the missing, 
late, and incomplete quarterly AMP categories described below.34   
Five percent of manufacturers failed to submit any quarterly AMP data in 
one or more quarters of 2008 
Of the 592 manufacturers under review, 31 (5 percent) did not submit 
AMP data for any of their NDCs during at least one quarter of 2008.  
More than half of these 31 manufacturers repeatedly failed to provide 
the required AMP data during 2008.  Specifically, 2 manufacturers did 
not submit AMP data in 2 quarters, 11 did not submit AMP data in                
3 quarters, and an additional 3 did not submit AMP data in all                          
4 quarters.  Medicaid paid $3.8 million during the applicable quarters of 
2008 for NDCs belonging to the 31 manufacturers that did not submit 
the required AMP data.  
Table B-1 in Appendix B lists the number and percentage of 
manufacturers with no AMP data in each quarter, as well as the 
number of NDCs associated with those manufacturers. 
Almost one-fourth of manufacturers submitted all of their quarterly AMP 
data after the deadline in one or more quarters of 2008  
In 2008, 24 percent of manufacturers (144 of 592) submitted quarterly 
AMP data for all of their NDCs after the deadline in at least one 
 
34 Because manufacturers could have different problems in different quarters, the number 
of manufacturers in each subfinding sums to more than the total number of manufacturers 
that did not fully comply with quarterly AMP reporting requirements. 
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F I N D I N G S  
quarter.  One-third of these manufacturers (48 of 144) submitted late 
AMP data in multiple quarters, with one manufacturer submitting 
prices after the deadline in all four quarters.      
The amount of time that passed before overdue AMPs were submitted 
by these manufacturers varied by quarter.  In the second and third 
quarters of 2008, at least 80 percent of overdue AMPs were submitted 
within 5 days of the deadline and no more than 5 percent of overdue 
AMPs were more than 30 days late.  However, manufacturers with late 
AMPs in the first and last quarters of 2008 were slower to provide their 
outstanding data.  A little more than half of the overdue AMPs in the 
first quarter were submitted within 5 days of the deadline, and only              
20 percent of overdue AMPs in the fourth quarter were submitted 
within 5 days.  Furthermore, over one-third of the overdue AMPs in 
each of these quarters were more than 30 days late.   
CMS typically calculates Medicaid rebate amounts about 3 to 5 days 
after the due date for the AMP data.  If manufacturers submit AMP 
data beyond that point, CMS cannot calculate the quarterly rebate 
amounts for the corresponding NDCs.35  It then becomes the 
responsibility of the manufacturers to manually calculate the rebate 
amounts and send the rebate payments to the States. 
Table B-2 in Appendix B lists the number and percentage of 
manufacturers that submitted all of their AMP data after the deadline 
in each quarter, as well as the number of NDCs associated with those 
manufacturers. 
Almost one-third of manufacturers submitted incomplete quarterly AMP data 
in one or more quarters of 2008 
In 2008, 30 percent of manufacturers (180 of 592) submitted incomplete 
AMP data in at least one quarter of 2008.  Two-thirds of these 
manufacturers (120 of 180) submitted incomplete data in multiple 
quarters.  As mentioned previously, manufacturers with incomplete 
AMP data fell into one of two categories:  (1) manufacturers that 
submitted at least some of their AMPs by the deadline but submitted 
the remaining AMPs for the quarter either late or not at all or                             
(2) manufacturers that submitted a portion of their AMPs late and 
never submitted the remaining AMPs.  For manufacturers in the first 
category, an average of 60 percent of the outstanding AMPs in each 
 
35 Overdue AMP data submitted after rebate amounts have been calculated for the quarter 
are included with the following quarters transmission of rebate data from CMS to States.    
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quarter were never submitted.  However, for manufacturers in the 
second category, an average of only 3 percent of the outstanding AMPs 
in each quarter were never submitted.  Overall, the vast majority of 
AMPs associated with manufacturers in the second category were 
eventually provided to CMS. 
 
In 2008, 78 percent of the 
In 2008, more than three-fourths of 
manufacturers that were 
manufacturers did not fully comply with     
required to submit monthly AMP 
monthly submission requirements for AMP data   
data (453 of 579) failed to do so 
within the timeframes specified 
by Federal requirements.  These manufacturers had missing, late, or 
incomplete AMP data during 1 or more months of 2008.  Because CMS 
is currently prohibited from disclosing AMPs to States and from using 
AMPs in a way that affects Medicaid reimbursement, problematic 
monthly AMP submissions have little effect at this time.36  In the 
future, however, monthly AMPs may be used by CMS to establish FUL 
amounts and by States to set Medicaid reimbursement amounts.  If 
manufacturers continue to report monthly AMPs either late or not at 
all, CMS may be unable to establish appropriate future FUL amounts 
and States may be unable to use AMPs to set future Medicaid 
reimbursement rates. 
Manufacturers that repeatedly failed to comply with monthly reporting 
requirements did not always have the same problems for the same 
NDCs in each period.  Some manufacturers had different problems in 
different months.  As a result, those manufacturers were included in 
more than one of the missing, late, and incomplete monthly AMP 
categories described below.37   
Ten percent of manufacturers failed to submit any monthly AMP data in 1 or 
more months of 2008 
Of the 579 manufacturers under review, 57 (10 percent) did not submit 
AMP data for any of their NDCs during at least 1 month of 2008.  Forty 
of these fifty-seven manufacturers repeatedly failed to provide the 
 
36 Currently, CMS uses monthly AMP data only for internal calculations of AMP-based 
FUL amounts. 
37 Because manufacturers could have different problems in different months, the number of 
manufacturers in each subfinding sums to more than the total number of manufacturers 
that did not fully comply with monthly AMP reporting requirements. 
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FF II NN DD II NN GG SS   
required AMP data during 2008, with 21 failing to submit AMP data in 
7 or more months and 5 failing to submit monthly AMP data for all               
12 months.  Medicaid paid $29.4 million during the applicable months of 
2008 for NDCs belonging to manufacturers that did not submit any of 
the required AMP data. 
Table C-1 in Appendix C lists the number and percentage of 
manufacturers with no AMP data in each month, as well as the number 
of NDCs associated with those manufacturers. 
Over 40 percent of manufacturers submitted all of their monthly AMP data 
after the deadline in 1 or more months of 2008  
In 2008, 41 percent of manufacturers (235 of 579) submitted monthly 
AMP data for all of their NDCs after the deadline in at least 1 month.  
Almost two-thirds of these manufacturers (148 of 235) submitted late 
AMP data in multiple months, with 23 manufacturers submitting prices 
after the deadline in 6 or more months.    
The amount of time that passed before these manufacturers submitted 
their overdue AMPs varied from month to month.  During 2008, the 
percentage of late AMPs submitted within 5 days of each months 
deadline ranged from 4 percent to 74 percent, with an average of                     
48 percent.  The percentage of late AMPs submitted more than 30 days 
after each months deadline ranged from 5 percent to 64 percent, with 
an average of 31 percent.    
Table C-2 in Appendix C lists the number and percentage of 
manufacturers that submitted all of their AMP data after the deadline 
in each month, as well as the number of NDCs associated with those 
manufacturers.   
Almost half of manufacturers submitted incomplete monthly AMP data in               
1 or more months of 2008 
In 2008, 46 percent of manufacturers (268 of 579) submitted incomplete 
AMP data in at least 1 month.  Of these manufacturers, 85 percent               
(227 of 268) submitted incomplete AMP data in multiple months.  As 
with the quarterly data, manufacturers with incomplete monthly AMP 
data fell into one of two categories:  (1) manufacturers that submitted at 
least some of their AMPs by the deadline but submitted the remaining 
AMPs for the month either late or not at all or (2) manufacturers that 
submitted a portion of their AMPs late and never submitted the 
remaining AMPs.  For manufacturers in the first category, an average 
of 77 percent of the outstanding AMPs in each month were never 
submitted.  However, for manufacturers in the second category, an 
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FF II NN DD II NN GG SS   
average of only 6 percent of the outstanding AMPs in each month were 
never submitted.  Typically, the vast majority of monthly AMPs 
associated with manufacturers in the second category were eventually 
provided to CMS. 
 
CMS took action against some manufacturers for  Although CMS has instituted 
procedures to penalize 
failure to comply with quarterly AMP reporting 
manufacturers with 
requirements but took no action for failure to 
consistently missing and late 
comply with monthly reporting requirements  
quarterly AMP data, CMS has 
no such procedures to penalize manufacturers with consistently missing 
and late monthly AMP data.   
CMS referred to OIG and/or terminated 78 manufacturers that failed to 
comply with quarterly AMP reporting requirements in 2008 
CMS staff take a number of actions against manufacturers with missing 
and late quarterly AMP data.  About 1 to 2 weeks after the due date, a 
staff member emails manufacturers that missed the quarterly deadline, 
prompting them to report the outstanding prices.  Manufacturers with 
missing data in at least two of the four previous quarters are 
terminated by CMS.  Manufacturers with late AMP submissions in at 
least two of the four previous quarters are referred to OIG for potential 
civil money penalties.38  According to staff, CMS has the resources to 
pursue only manufacturers that have missing or late data for all of their 
NDCs.  Although staff can compile reports identifying manufacturers 
with incomplete AMP data, they do not currently have the resources to 
pursue those manufacturers.   
In total, 78 manufacturers were referred to OIG and/or terminated by 
CMS for failure to comply with AMP reporting requirements in 2008.  
Of these 78 manufacturers, 52 were only referred to OIG, 4 were only 
terminated by CMS, and the remaining 22 were both referred to OIG 
and subsequently terminated by CMS.39   
CMS effectively took action against manufacturers identified by OIG as 
having missing quarterly AMP data.  As shown in Table 2, CMS referred 
 
38 CMS considers late data to be data submitted after the MDR database has been shut 
down for the calculation of rebate amounts. 
39 CMSs actions were based on missing and late AMP submissions during all of the               
four-quarter periods between the second quarter of 2007 and the third quarter of 2009.  
Each of these four-quarter periods included at least one quarter of 2008.  
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F I N D I N G S  
or terminated a large majority of the manufacturers that OIG identified 
as having no AMP data in at least one quarter of 2008.  In fact, CMS 
took action against all but one of the manufacturers we identified as 
having no AMP data in multiple quarters.   
CMS also took action against manufacturers identified by OIG as having 
late quarterly data, but to a lesser extent.  Consistent with its policy to 
penalize manufacturers that repeatedly submit late AMPs, CMS was 
more likely to refer manufacturers identified by OIG as having multiple 
quarters of late data.  CMS penalized only 16 percent of the 
manufacturers with late data in just one quarter.  However, as shown in 
Table 2, it took action against 48 percent of manufacturers with late 
data in multiple quarters. 
CMS took action against few manufacturers identified by OIG as having 
incomplete data.  Because CMS does not specifically pursue 
manufacturers that submit incomplete quarterly AMPs, most of the 
manufacturers that we identified as having incomplete quarterly data 
were not penalized.  However, as shown in Table 2, a small portion of 
these manufacturers were nonetheless referred or terminated.40   
Table 2:  Manufacturers With Problematic Quarterly AMP Data That Were 
Referred or Terminated by CMS 
            Action 
Number 
Description of Problematic  Total    Total  Number  Number 
Percentage  Referred, 
Quarterly AMP Data                 Number of  Number  Referred  Terminated 
Penalized  Then 
According to OIG Analysis  Manufacturers  Penalized  Only  Only 
Terminated 
Missing AMP data  31  27  87%  5  3  19 
     In multiple quarters  16  15  94%  1  2  12 
Late AMP data  144  38  26%  34  0  4 
     In multiple quarters  48  23  48%  22  0  1 
Incomplete AMP data  180  19  11%  14  1  4 
     In multiple quarters  120  12  10%  10  1  1 
Source:  OIG analysis of AMP data from the first through fourth quarters of 2008 and CMS data regarding terminated and 
referred manufacturers, 2009.   
Note:  Because manufacturers could have different problems in different quarters and because the problems for which CMS 
terminated or referred manufacturers may not be the same as those identified by OIG in this study, the number of manufacturers 
that were terminated or referred in each problem category does not sum to the total number of manufacturers that were 
terminated or referred by CMS.  
 
40 These manufacturers may have been referred or terminated because they had untimely 
data in other quarters of 2008 or because CMS had different product or pricing information 
at the time it conducted its analysis. 
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F I N D I N G S  
CMS took no direct action against manufacturers that failed to comply with 
monthly AMP reporting requirements in 2008 
CMS staff track manufacturers that report less than 90 percent of their 
monthly AMP data; however, staff do not follow up with noncompliant 
manufacturers unless those manufacturers contact CMS for another 
reason.41  If a manufacturer contacts CMS, staff will check to see 
whether that manufacturer has been reporting monthly AMPs.  
Manufacturers that have reported less than 90 percent of their AMP 
data during at least 2 months are then instructed to report the 
outstanding data.42  CMS does not refer or terminate manufacturers 
that fail to comply with monthly AMP reporting requirements.   
Because monthly AMP data are currently used only for internal 
calculations, CMS staff stated that they see no immediate need to 
terminate manufacturers that fail to comply with monthly reporting 
requirements.   
Although CMS does not directly penalize manufacturers with missing, 
late, or incomplete monthly AMPs, some of these noncompliant 
manufacturers were referred or terminated by CMS because they also 
had missing or late quarterly AMP data.   
As shown in Table 3, more than half of manufacturers identified by OIG 
as having missing monthly AMP data were referred or terminated by 
CMS.  Manufacturers with late and incomplete monthly data were 
much less likely to be penalized.  
 
 
41 Although CMS receives monthly reporting data on all manufacturers, it tracks only 
manufacturers that have 30 or more NDCs.  
42 Months of missing data do not need to be consecutive.  They can be any 2 months of data 
since October 2007, when manufacturers first started reporting monthly AMPs.  
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Table 3:  Manufacturers With Problematic Monthly AMP Data That Were Referred 
or Terminated Because They Also Had Problematic Quarterly Data 
            Action 
Number 
Description of Problematic  Total    Total  Number  Number 
Percentage  Referred, 
Monthly AMP Data According  Number of  Number  Referred  Terminated 
Penalized  Then 
to OIG Analysis  Manufacturers  Penalized  Only  Only 
Terminated 
No AMP data  57  33  58%  11  3  19 
     In multiple months  40  28  70%  7  3  18 
Late AMP data  235  38  16%  29  3  6 
     In multiple months  148  28  19%  23  1  4 
Incomplete AMP data  268  22  8%  19  0  3 
     In multiple months  227  17  7%  15  0  2 
Source:  OIG analysis of AMP data from all 12 months of 2008 and CMS data regarding terminated and referred               
manufacturers, 2009.   
Note:  Because manufacturers could have different problems in different months, the number of manufacturers that were 
terminated or referred in each problem category does not sum to the total number of manufacturers that were terminated or 
referred by CMS.  
 
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R E C O M M E N D A T I O N S  
 R E C O M M E N D A T I O N S  
 
In 2008, more than half of the manufacturers that were required to 
submit quarterly AMP data failed to comply with reporting 
requirements in at least one quarter.  Manufacturers were even less 
likely to comply with monthly AMP reporting requirements, with more 
than three-quarters having missing, late, or incomplete AMPs in at 
least 1 month of 2008.   
CMS takes action against manufacturers with missing and late 
quarterly AMP data, including reminding noncompliant manufacturers 
to submit quarterly data, terminating manufacturers that repeatedly 
fail to submit quarterly AMPs, and referring manufacturers with 
consistently late quarterly data to OIG for potential civil money 
penalties.   
However, CMS does not take any such action against manufacturers 
with missing and late monthly AMPs.  Although CMS tracks 
manufacturers with no monthly AMP data, staff remind noncompliant 
manufacturers to submit overdue data only if those manufacturers 
initiate contact.  Furthermore, CMS has yet to terminate or refer any 
manufacturer for failure to comply with monthly AMP reporting 
requirements. 
Because AMP data play such a critical role in Government payments for 
prescription drugs, CMS must ensure that action is taken against 
noncompliant manufacturers.  Drug manufacturers must also do their 
part by reporting both quarterly and monthly AMP data to CMS in a 
timely and accurate way.   
To promote full compliance with quarterly and monthly AMP reporting 
requirements and to help ensure that Medicaid and covered 340B 
entities do not overpay for prescription drugs, we recommend that CMS:  
Take action against manufacturers that submit incomplete quarterly AMP 
data  
Although CMS staff acknowledge that incomplete data are a problem, 
they state that they do not currently have the resources to pursue 
manufacturers that submit only some of their AMPs.  CMS should 
ensure that action is taken against manufacturers with incomplete 
quarterly AMP data.  To that end, we will provide CMS with more 
detailed information about the manufacturers in this study with 
incomplete quarterly AMP data. 
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R E C O M M E N D A T I O N S  
Take action against manufacturers that fail to submit monthly AMP data in a 
timely manner 
Shortly after each monthly deadline, CMS should contact 
manufacturers that fail to comply with monthly reporting requirements 
and ask them to submit outstanding data.  If manufacturers repeatedly 
fail to report monthly AMP data or repeatedly submit them late, those 
manufacturers should be either terminated by CMS or referred to OIG 
for potential civil money penalties.  Manufacturers with incomplete 
monthly AMPs should also be addressed.  These proactive steps will 
signal the importance of complying with monthly AMP requirements 
and help to ensure that CMS has complete monthly AMP data.  This in 
turn will enable CMS to better gauge the potential impact of                       
AMP-based FULs and to ensure the integrity of future FUL amounts.  
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred with both recommendations and stated that it will begin 
referring manufacturers that submit incomplete quarterly and monthly 
data to OIG for civil money penalty consideration.  OIG looks forward to 
expanding its collaboration with CMS regarding administrative 
remedies for noncompliance with AMP reporting requirements.                                    
For the full text of CMSs comments, see Appendix D. 
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 A P P E N D I X   ~   A  
Current and Future Uses of Average Manufacturer Price Data in 
Federal Health Care Programs 
Average manufacturer price (AMP) data play a critical role in 
Government payments for prescription drugs.  Quarterly AMPs are 
currently used in both the Medicaid drug rebate program and the 340B 
drug discount program, and monthly AMPs may be used in the future 
for the purposes of Medicaid reimbursement.   
The Medicaid Drug Rebate Program and AMPs  
The Medicaid rebate amount for any given drug generally depends on 
the quarterly AMP submitted by the manufacturer, as well as on 
whether the drug is a brand-name or generic.  For the purposes of the 
Medicaid drug rebate program, drugs are classified as one of                     
three types:  single-source, innovator multiple-source, or noninnovator 
multiple-source.  Manufacturers provide the Centers for Medicare & 
Medicaid Services (CMS) with the drug type for each of their national 
drug codes (NDC), in conjunction with AMP data.  Manufacturers must 
also provide a best price for each of their single-source and innovator 
multiple-source drugs on a quarterly basis.43  Using these data, CMS 
calculates a unit rebate amount (URA) for each NDC and transmits that 
information to States. 
Manufacturers pay a higher Medicaid rebate for innovator drugs               
(i.e., brands) than for noninnovator drugs (i.e., generics).  From 1996 
through 2009, the URA for single-source and innovator multiple-source 
drugs was the greater of 15.1 percent of the AMP or the difference 
between the AMP and best price.44, 45  For noninnovator multiple-source 
drugs, the URA was 11 percent of the AMP.46   
 
43 Sections 1927(b)(3)(A)(i)(II) and (c)(1)(C) of the Social Security Act (the Act).  Generally 
speaking, best price is defined as the lowest price available from the manufacturer to any 
purchaser in the United States, with certain exceptions. 
44 Section 1927(c) of the Act.   
45 Effective January 2010, section 2501(a) of the Patient Protection and Affordable Care Act 
(Affordable Care Act), P.L. 111-148, increases the URA for single-source and innovator 
multiple-source drugs to the greater of 23.1 percent of the AMP or the difference between 
AMP and best price (with certain exceptions).  
46 Effective January 2010, section 2501(b) of the Affordable Care Act increases the URA for 
noninnovator multiple-source drugs to 13 percent.  
 
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A P P E N D I X   ~   A  
If the pricing data result in a URA of zero47 or if a manufacturer does 
not submit timely or complete pricing data, the manufacturer must 
manually calculate the URA and send a rebate payment to the States.48 
The 340B Drug Discount Program and AMPs  
In 1992, Congress amended the Public Health Service Act (PHS Act) to 
include a new section entitled Limitation on Prices of Drugs Purchased 
by Covered Entities.  This change created the 340B program, which is a 
discount drug program administered by the Health Resources and 
Services Administration (HRSA).  Under the 340B program, a 
manufacturer agrees to sell covered outpatient drugs at or below a 
specified ceiling price to qualified entities.  These entities include 
federally qualified health centers, Ryan White grantees, and 
disproportionate share hospitals, among others.49   
The 340B discount is calculated using the same component information 
that Medicaid uses to calculate rebates.50  Specifically, the 340B 
discount is equal to the AMP reduced by Medicaids URA.51  Under an 
intraagency agreement with CMS, HRSA calculates 340B ceiling prices 
using quarterly AMP and URA data supplied by CMS. 
Potential Uses of Monthly AMPs in the Medicaid Program 
Currently, all 50 States and the District of Columbia (hereinafter 
referred to as States) offer prescription drug coverage under Medicaid.  
Medicaid beneficiaries typically obtain covered drugs from pharmacies, 
which bill and are reimbursed by State Medicaid agencies using NDCs.  
In 2008, Medicaid payments for prescription drugs totaled 
approximately $24 billion.52 
 
47 According to CMS staff, if the quarterly AMP submitted by a manufacturer is                    
400 percent greater or 400 percent less than the previous quarters AMP, then an alert is 
sent to the manufacturer and the URA is sent to the States as zero. 
48 CMS, Medicaid Drug Rebate Data Guide for Labelers, p. 15.  
49 For more information about covered entities, see HRSA, Introduction to 340B Drug 
Pricing Program, accessed at http://www.hrsa.gov on December 11, 2009. 
50 HRSA, Glossary of Pharmacy-Related Terms, accessed at http://www.hrsa.gov on 
December 11, 2009. 
51 Sections 340B(a)(1-2) of the PHS Act.  
52 This total was calculated using national summary data for 2008, which were downloaded 
from CMSs Web site on July 30, 2009.  This amount includes both Federal and State 
payments.  Rebates collected by States under the Medicaid drug rebate program were not 
subtracted from this figure.  Data for some States may not have been complete at the time 
of extraction.  Therefore, the 2008 drug expenditures presented in this report may 
underestimate Medicaids actual expenditures.   
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A P P E N D I X   ~   A  
Federal regulations require, with certain exceptions, that each State 
Medicaid agencys reimbursement for covered outpatient drugs not 
exceed (in the aggregate) the lower of the estimated acquisition cost 
plus a reasonable dispensing fee or the providers usual and customary 
charge to the public for the drugs.53  CMS allows States the flexibility to 
define estimated acquisition cost, with most States basing their 
calculations on a drugs average wholesale price discounted by a certain 
percentage.  For certain drugs, States also use the Federal upper limit 
(FUL) or State maximum allowable cost programs in setting 
reimbursement amounts.54   
To reduce Medicaid prescription drug expenditures, the Deficit 
Reduction Act of 2005 (DRA)55 and the Affordable Care Act enacted a 
number of changes that expand the role of AMPs in Medicaid payments 
for prescription drugs.  For example, the DRA requires CMS to disclose 
AMP data to State Medicaid programs on a monthly basis, which would 
enable States to use AMP data when setting Medicaid reimbursement 
rates for prescription drugs.56  In addition, the DRA and the Affordable 
Care Act specify that AMPs are to be used to establish FUL amounts for 
certain multiple-source drugs in the Medicaid program.  Specifically, 
FUL amounts under the Affordable Care Act are to be no less than              
175 percent of the weighted average of the most recently reported 
monthly AMPs.57, 58 
However, CMS has yet to disclose AMP data to States or use those 
prices when establishing FUL amounts.  On December 19, 2007, the 
U.S. District Court for the District of Columbia preliminarily enjoined 
CMS from disclosing AMP data to States and from using AMP for 
purposes of Medicaid reimbursement.  Although CMS may not currently 
 
53 42 CFR  447.512(b).  
54 The FUL and State maximum allowable cost programs serve to control spending for 
multiple-source drugs.  CMS has established FUL amounts for more than 700 drugs.  In 
addition, almost all States have implemented maximum allowable cost programs to limit 
reimbursement amounts for certain drugs. 
55 P.L. 109-171. 
56 Section 6001(b) of the DRA.  Prior to the DRA, section 1927(b)(3)(D) of the Act broadly 
guaranteed the confidentiality of AMP data reported by manufacturers (with certain limited 
exceptions).  
57 Section 2503(a)(1)(B) of the Affordable Care Act. 
58 Section 6001(a)(2) of the DRA included a provision setting the FUL amount at                         
250 percent of the lowest reported AMP.  The Affordable Care Act revised this provision, 
setting the FUL amount at no less than 175 percent of the weighted average of the most 
recently reported monthly AMPs.     
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A P P E N D I X   ~   A  
implement AMP-based FULs, it calculates AMP-based FULs each 
month for internal purposes.  
  OEI-03-09-00060  DRUG MANUFACTURERS NONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS  23   
   
A P P E N D I X   ~   A  
 A P P E N D I X   ~   B  
 
Manufacturers With Missing and Late Quarterly Average Manufacturer Price Data 
 
 
 
Table B-1:  Manufacturers That Failed To Submit Any Quarterly AMP Data 
Manufacturers  Corresponding NDCs 
Quarter 
Percentage  Average    Median   
in 2008  Number With  Number of  Total 
With   per  per 
No AMP Data  NDCs  Reimbursed 
No AMP Data  Manufacturer  Manufacturer 
First  13  2.3%  331  25  10  $670,141 
Second  16  2.9%  373  23  11  $924,055 
Third  16  2.9%  382  24  11  $728,141 
Fourth  19  3.4%  204  11  7  $1,511,500 
     Total                                                                                                                                                             $3,833,836 
Source:  Office of Inspector General (OIG) analysis of average manufacturer price (AMP) data from the first through                                   
fourth quarters of 2008. 
Note:  Reimbursement totals and average national drug codes (NDC) were rounded to the nearest whole number.  Percentages 
were rounded to the nearest tenth. 
 
 
 
Table B-2:  Manufacturers That Submitted Late Quarterly AMP Data for All of Their NDCs 
Manufacturers  Corresponding NDCs 
Quarter  Number  Percentage  Average  Median  Up to 5  Between   More 
in 2008  Number  6 and 30  Than 30  Total 
With Late  With Late  per  per  Days 
of NDCs  Days  Days  Reimbursed 
AMP Data  AMP Data  Manufacturer  Manufacturer  Late 
Late  Late 
First  48  8.5%  1,232  26  9.5  51.6%  9.8%  38.6%  $88,758,970 
Second  54  9.7%  2,008  37  11  81.8%  16.5%  1.7%  $144,625,672 
Third  56  10.0%  1,792  32  11.5  90.1%  5.1%  4.9%  $250,565,315 
Fourth  47  8.3%  1,629  35  11  20.0%  44.6%  35.5%  $145,141,051 
     Total                                                                                                                                                                                            $629,091,008  
Source:  OIG analysis of AMP data from the first through fourth quarters of 2008. 
Note:  Reimbursement totals and average NDCs were rounded to the nearest whole number.  Percentages were rounded to the nearest tenth.  
Totals may not add to 100 percent because of rounding. 
 
 
  OEI-03-09-00060  DRUG MANUFACTURERS NONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS  24   
   
 A P P E N D I X   ~   C  
Manufacturers With Missing and Late Monthly Average Manufacturer Price Data 
 
Table C-1:  Manufacturers That Failed To Submit Any Monthly AMP Data 
Manufacturers  Corresponding NDCs 
Month           
Number  Percentage  Average    Median   
in 2008  Number of  Total 
With No  With   per  per 
NDCs  Reimbursed 
AMP Data  No AMP Data  Manufacturer  Manufacturer 
January  21  3.8%  2,721  130  10  $491,470 
February  19  3.5%  464  24  10  $341,543 
March  15  2.7%  409  27  10  $255,732 
April  25  4.6%  854  34  10  $3,249,378 
May  22  4.1%  547  25  9.5  $2,472,201 
June  23  4.2%  545  24  10  $2,440,754 
July  24  4.4%  556  23  10  $3,932,949 
August  26  4.8%  579  22  10.5  $2,171,715 
September  24  4.4%  569  24  10.5  $2,135,650 
October  24  4.4%  336  14  8.5  $4,677,283 
November  26  4.7%  398  15  9  $4,375,819 
December  21  3.8%  384  18  10  $2,809,279 
     Total                                                                                                                                                           $29,353,773 
Source:  Office of Inspector General (OIG) analysis of average manufacturer price (AMP) data from all 12 months of 2008.  
Note:  Reimbursement totals and average national drug codes (NDC) were rounded to the nearest whole number.  Percentages 
were rounded to the nearest tenth. 
Table C-2:  Manufacturers That Submitted Late Monthly AMP Data for All of Their NDCs 
Manufacturers  Corresponding NDCs 
Number 
Month            With  Percentage  Average  Median  Up to  Between   More 
in 2008  Late  With Late  Number  per  per  5  6 and 30  Than 30  Total 
of NDCs  Days  Days  Days  Reimbursed 
AMP  AMP Data  Manufacturer  Manufacturer 
Late  Late  Late 
Data 
January  74  13.6%  3,101  42  13.5  73.0%  6.2%  20.8%  $152,026,066 
February  102  18.6%  2,552  25  7.5  73.6%  5.4%  21.0%  $111,996,285 
March  30  5.5%  539  18  9  48.4%  19.7%  31.9%  $3,817,121 
April  42  7.8%  1,188  28  6  29.7%  6.3%  64.0%  $28,587,091 
May  41  7.6%  1,052  26  8  3.9%  35.6%  60.6%  $24,665,287 
June  32  5.9%  1,118  35  9.5  68.6%  17.7%  13.7%  $24,430,127 
July  79  14.5%  2,472  31  9  70.7%  4.1%  25.2%  $142,456,629 
August  40  7.3%  1,438  36  8  34.9%  60.0%  5.1%  $13,982,617 
September  28  5.1%  433  15  10  64.9%  19.9%  15.2%  $52,592,634 
October  83  15.1%  2,334  28  11  61.0%  11.2%  27.8%  $89,580,991 
November  35  6.4%  1,398  40  11  24.3%  42.9%  32.8%  $14,785,657 
December  35  6.3%  1,098  31  8  21.7%  29.7%  48.6%  $42,879,873 
     Total                                                                                                                                                                                            $701,800,378    
Source:  OIG analysis of AMP data from all 12 months of 2008. 
Note:  Reimbursement totals and average NDCs were rounded to the nearest whole number.  Percentages were rounded to the nearest tenth.  
Totals may not add to 100 percent because of rounding. 
  OEI-03-09-00060  DRUG MANUFACTURERS NONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS  25  ~
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  OEI-03-09-00060  DRUG MANUFACTURERS NONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS  27   
   
 A C K N O W L E D G M E N T S  
This report was prepared under the direction of Robert A. Vito, Regional 
Inspector General for Evaluation and Inspections in the Philadelphia 
regional office, and David E. Tawes, Director, Prescription Drug Pricing 
Unit.   
Lauren McNulty served as the team leader for this study.  Central office 
staff who contributed include Natasha Franklin and Rita Wurm.  
  OEI-03-09-00060  DRUG MANUFACTURERS NONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS  28   
Office of Inspector General 
http://oig.hhs.gov 
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs.  This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 
audits with its own audit resources or by overseeing audit work done by others.  Audits 
examine the performance of HHS programs and/or its grantees and contractors in carrying 
out their respective responsibilities and are intended to provide independent assessments of 
HHS programs and operations.  These assessments help reduce waste, abuse, and 
mismanagement and promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 
HHS, Congress, and the public with timely, useful, and reliable information on significant 
issues.  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.  
Office of Investigations 
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. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support 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.