Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
Medicare Reimbursement 
of Prescription Drugs 
JANUARY 2001 
OEI-03-00-00310  OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, is to 
protect the integrity of the Department of Health and Human Services programs as well as the 
health and welfare of beneficiaries served by them.  This statutory mission is carried out through a 
nationwide program of audits, investigations, inspections, sanctions, and fraud alerts.  The 
Inspector General informs the Secretary of program and management problems and recommends 
legislative, regulatory, and operational approaches to correct them. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 
Inspector General.  It conducts short-term management and program evaluations (called 
inspections) that focus on issues of concern to the Department, the Congress, and the public.  The 
inspection reports provide findings and recommendations on the efficiency, vulnerability, and 
effectiveness of departmental programs. 
OEI's Philadelphia Regional Office prepared this report under the direction of Robert A. Vito, 
Regional Inspector General, and Linda M. Ragone, Deputy Regional Inspector General.  Principal 
OEI staff included: 
REGION  HEADQUARTERS 
David Tawes, Project Leader  Stuart Wright, Program Specialist 
Tara Schmerling, Program Analyst  Linda Moscoe, Technical Support Staff 
To obtain copies of this report, please call the Philadelphia Regional Office at (800) 531-9562. 
Reports are also available on the World Wide Web at our home page address: 
http://www.hhs.gov/oig/oei  E X E C U T I V E   S U M M A R Y  
PURPOSE 
This inspection compares Medicare reimbursement for prescription drugs to costs incurred 
by the Department of Veterans Affairs, the physician/supplier community, and Medicaid. 
BACKGROUND 
Medicare does not pay for most outpatient prescription drugs.  However, Medicare Part B 
will cover certain prescription drugs under specific circumstances.  Medicare and its 
beneficiaries paid $3.9 billion for prescription drugs in 1999.  The Health Care Financing 
Administration (HCFA) requires its local carriers and four durable medical equipment 
regional carriers (DMERCs) to establish reimbursement amounts for covered drugs.  In 
general, the Medicare reimbursement amount for a covered drug is 95 percent of the 
drugs average wholesale price (AWP).  Of this amount, Medicare pays 80 percent while 
the beneficiary is responsible for a 20 percent copayment. 
Each State Medicaid agency has the authority to develop its own drug reimbursement 
methodology subject to upper limits set by HCFA.  Additionally, Medicaid receives 
rebates from drug manufacturers as required by Federal law.  Unlike Medicare and 
Medicaid, the Department of Veterans Affairs (VA) purchases drugs for its healthcare 
system directly from manufacturers or wholesalers.  Physicians and suppliers can purchase 
drug products through closed pharmacies, group purchasing organizations, wholesalers, 
and directly from manufacturers. 
For 24 drugs with the highest total Medicare payments in 1999, we compared Medicares 
current reimbursement amount for each drug to prices available to the VA and the 
physician/supplier community, as well as to Medicaid rebate amounts. 
FINDINGS 
Medicare and its beneficiaries would save $1.6 billion a year if 24 drugs were 
reimbursed at amounts available to the VA 
After comparing the median Medicare reimbursement amount with the corresponding 
median VA acquisition cost for 24 drugs, we estimated that Medicare and its beneficiaries 
would save $1.6 billion a year if the Medicare reimbursement amounts for the drugs 
equaled prices obtained by the VA under the Federal Supply Schedule.  The estimated 
savings represents 52 percent of the $3.1 billion in reimbursement that Medicare and its 
beneficiaries paid for these 24 drugs in 1999.  The VA paid between 8 
i 
Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  and 91 percent less than Medicare for the 24 drugs reviewed.  Medicare paid more than 
double the VA price for 12 of the reviewed drugs. 
Medicare and its beneficiaries would save $761 million a year by paying the 
actual wholesale price for 24 drugs 
We estimated that Medicare payments for 24 drugs exceeded actual wholesale prices by 
$761 million a year.  This represents 25 percent of the $3.1 billion Medicare and its 
beneficiaries paid for these drugs in 1999.  Actual wholesale prices were between 6 and 84 
percent below Medicare reimbursement amounts for the 24 drugs.  Four of the drugs had 
median catalog prices that were less than half the Medicare amount.  One of these drugs 
had a Medicare reimbursement amount more than six times higher than the median catalog 
price. 
Medicare would save over $425 million a year on 24 drugs by obtaining rebates 
equal to those in the Medicaid program 
We estimated that Medicare would save $429 million a year on the 24 reviewed drugs by 
collecting rebates equal to those negotiated by the Medicaid program.  These rebates 
would lower Medicare spending on these 24 drugs by almost 15 percent. 
Carriers are not establishing consistent drug reimbursement amounts for certain 
drugs 
Although Medicares reimbursement methodology states that drugs are reimbursed at 95 
percent of AWP, we found differences in drug reimbursement amounts between local 
carriers.  Six of the 21 drugs whose reimbursement amounts are set by local carriers had 
more than a 10 percent difference between the lowest and highest reimbursement amount. 
The most egregious was J0640 (leucovorin calcium), with one carrier reimbursing $17.51 
and another reimbursing $35.47.  The variation in reimbursement amounts was not present 
for the three drugs reimbursed by DMERCs. 
RECOMMENDATIONS 
The HCFA should reduce excessive Medicare drug reimbursement amounts 
Despite numerous attempts by HCFA to lower Medicare drug reimbursement, the findings 
of this report illustrate once again that Medicare simply pays too much for prescription 
drugs.  The published AWPs that Medicare carriers currently use to establish 
reimbursement amounts bear little or no resemblance to actual wholesale prices that are 
available to physicians, suppliers, and other large government purchasers.  We believe that 
HCFAs attempts to use the more accurate AWPs supplied by First Databank, publisher of 
a drug pricing compendium used by the drug industry, is a significant first step towards 
reimbursing drugs in a more appropriate manner.  However, we believe that HCFA should 
continue to seek additional administrative and legislative remedies to reduce excessive 
drug reimbursement amounts. 
ii 
Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  We believe there are a number of options available to HCFA for implementing this 
recommendation, including: (1) continuing to collect more accurate average wholesale 
prices from drug pricing catalogs, (2) basing payment on physician/supplier acquisition 
costs, (3) establishing manufacturers rebates similar to those used in the Medicaid 
program, (4) creating a fee schedule for covered drugs based on Department of Veterans 
Affairs prices, and (5) utilizing the inherent reasonableness authority. 
The HCFA should require all carriers to reimburse a uniform amount for each 
drug 
We believe that the pricing differences among local carriers for individual drug codes is 
problematic.  The amount which physicians and suppliers are reimbursed for drugs should 
not depend on which carrier they bill.  The DMERCs have been able to adopt uniform 
pricing for the drugs which they cover, and we expect that local carriers should be able to 
do the same.  In a 1997 report which noted similar problems, we recommended two 
options to correct pricing differences: (1) the HCFA could supply all carriers with list of 
average wholesale prices that it has determined represent each drug code, or (2) the 
HCFA could contract with a single entity to calculate drug reimbursement amounts and 
then distribute the amounts to each carrier.  We continue to recommend that HCFA 
undertake one of these options. 
Agency Comments 
The HCFA concurred with our recommendation that reimbursement amounts for 
Medicare-covered drugs should be lowered, noting that the current AWP-based 
reimbursement method creates incentives for price inflation, distorts clinical decisions, and 
cheats taxpayers.  The HCFA also explained that some providers now rely on inflated drug 
payments to cover other practice expenses. The HCFA believes that any price reductions 
need to take these expenses into account.  Nevertheless, the HCFA strongly agreed that 
the payment of inflated drug prices is an inappropriate way to compensate practitioners 
and suppliers for inadequate reimbursement of other practice costs.  The HCFA also 
agreed with our recommendation that Medicare carriers should be required to reimburse 
uniform amounts for covered drugs.  The full text of HCFAs comments is presented in 
Appendix F. 
iii 
Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  T A B L E   O F   C O N T E N T S  
PAGE

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

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

FINDINGS

Medicare Reimbursement Compared to Department of Veterans Affairs . . . . . . . . . . . . .  6

Medicare Reimbursement Compared to Actual Wholesale Prices  . . . . . . . . . . . . . . . . . .  7

Potential Savings Based on Medicaid Rebates  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Variation in Reimbursement Amounts Among Local Carriers . . . . . . . . . . . . . . . . . . . . . 8

RECOMMENDATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10

APPENDICES

A: Previous OIG Reports on Medicare Drug Reimbursement . . . . . . . . . . . . . . . . . . . . 12

B: Description of HCPCS Codes  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

C: Medicare Carrier Reimbursement Amounts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

D: Medicare Savings Based on Department of Veterans Affairs Prices . . . . . . . . . . . . .  16

E: Medicare Savings Based on Physician/Supplier Prices  . . . . . . . . . . . . . . . . . . . . . . . 17

F: Health Care Financing Administration Comments . . . . . . . . . . . . . . . . . . . . . . . . . . .  18
 I N T R O D U C T I O N  
PURPOSE 
This inspection compares Medicare reimbursement for prescription drugs to costs incurred 
by the Department of Veterans Affairs, the physician/supplier community, and Medicaid. 
BACKGROUND 
Medicare Drug Reimbursement 
Medicare does not pay for over-the-counter or most outpatient prescription drugs. 
However, under specific circumstances, Medicare Part B covers drugs used with durable 
medical equipment (DME) or infusion devices.  Medicare also covers certain drugs used in 
association with organ transplantation, dialysis, chemotherapy, and pain management. 
Additionally, the program covers certain vaccines, such as those for influenza and hepatitis 
B.  Medicare beneficiaries are responsible for paying a 20 percent copayment on these 
drugs.  Medicare and its beneficiaries paid approximately $3.9 billion for prescription 
drugs in 1999. 
Physicians and suppliers usually bill Medicare directly for the prescription drugs they 
provide to beneficiaries.  The Health Care Financing Administration (HCFA), which 
administers the Medicare program, contracts with local carriers and four DME regional 
carriers (DMERCs) to process Part B claims and establish a reimbursement amount for 
covered drugs based on Medicares reimbursement methodology. 
Medicares current reimbursement methodology for prescription drugs is defined by 
Section 4556 of the Balanced Budget Act of 1997.  The HCFA requires carriers to base 
their reimbursement amount for a covered drug on its average wholesale price (AWP) as 
published in Drug Topics Red Book or similar pricing publications used by the 
pharmaceutical industry.  If a drug is available only in brand form, reimbursement is 
calculated by taking 95 percent of the drugs AWP.  For drugs that have both brand and 
generic sources available, reimbursement is based on 95 percent of the median AWP for 
generic sources.  However, if a brand name products AWP is lower than the median 
generic AWP, Medicare reimburses 95 percent of the lowest brand AWP. 
Department of Veterans Affairs Drug Reimbursement 
Unlike Medicare, the Department of Veterans Affairs (VA) purchases drugs for its 
healthcare system directly from manufacturers or wholesalers.  There are several purchase 
options available to the VA, including the Federal Supply Schedule (FSS), Blanket 
Purchase Agreements, and VA national contracts. 
1 
Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  The FSS provides agencies like the VA with a simple process for purchasing commonly-
used products in various quantities while still obtaining the discounts associated with 
volume buying.  Using competitive procedures, contracts are awarded to companies to 
provide services and supplies at the FSS price over a given period of time.  Agencies are 
not required to use the Federal Supply Schedule, however, and are sometimes able to 
negotiate prices lower than the FSS price. 
Sources of Prescription Drugs for Physicians and Suppliers 
Physicians and suppliers can purchase drug products through closed pharmacies, group 
purchasing organizations (GPOs), wholesalers, and directly from manufacturers.  Closed 
pharmacies purchase pharmaceuticals from manufacturers and wholesalers and in turn sell 
the products to healthcare providers.  Generally, closed pharmacies do not dispense drugs 
to the public.  Group purchasing organizations provide their members with lower cost 
products by negotiating prices for specific drugs from manufacturers.  The member can 
then purchase drugs at the negotiated price either directly from the manufacturer or from a 
wholesaler who accepts the GPOs price.  Wholesalers purchase large volumes of drugs 
from manufacturers and sell them directly to physicians, suppliers, and pharmacies. 
Medicaid Drug Reimbursement 
Each State Medicaid agency has the authority to develop its own drug reimbursement 
methodology subject to upper limits set by HCFA.  Like Medicare, most Medicaid 
agencies use a discounted average wholesale price as the basis for calculating drug 
reimbursement amounts.  Medicaid agencies generally use a more deeply-discounted 
average wholesale price than does Medicare.  Additionally, Medicaid receives rebates 
from drug manufacturers as required by Federal law.  In 1999, the quarterly rebate for 
brand-name drugs was based on either 15.1 percent of the average manufacturer price 
(AMP) or the difference between the AMP and the best price, whichever was greater. 
The AMP is the average price paid by wholesalers for products distributed for retail trade. 
The best price is the lowest price paid by any purchaser with the exception of Federal 
agencies and State pharmaceutical assistance programs.  The rebate amount for generic 
drugs was 11 percent of AMP. 
Recent Attempts to Lower Medicare Reimbursement 
Section 4316 of the Balanced Budget Act of 1997 allows HCFA to diverge from the 
statutorily-defined payment method if the method results in payment amounts which are 
not inherently reasonable.  In late 1998, HCFA attempted to use this authority to lower 
what it considered excessive reimbursement for several items.  One drug, albuterol, was 
targeted for an 11 percent fee reduction.  However, before any of the lower prices could 
be implemented, Congress suspended the use of inherent reasonableness through a 
provision of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999.  This provision required the General Accounting Office (GAO) to complete a study 
on the potential effects of using inherent reasonableness measures before HCFA could 
invoke the authority.  The GAO report, issued on July 5, 2000, found that inherent 
2 
Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  reasonableness reductions for some items were justified.  However, the GAO questioned 
the methodology the DMERCs used in their collection of pricing data for albuterol sulfate. 
The HCFA has also included several nebulizer drugs in a competitive bidding project in 
Texas which seeks to use market forces to set accurate prices for DME and related 
supplies.  In November 2000, HCFA announced the selection of DME suppliers who had 
submitted competitive bids for the included items.  New prices for these items will go into 
effect beginning February 1, 2001.  According to HCFA, the new reimbursement amounts 
for the effected nebulizer drugs are approximately 26 percent below the typical Medicare 
price.  The HCFA hopes to use the results from these demonstrations more generally in 
the Medicare program. 
On May 31, 2000, HCFA announced plans for Medicare to utilize newly available AWPs 
developed for Medicaid as a result of Department of Justice (DOJ) investigations.  The 
DOJ obtained the pricing data from several drug wholesale catalogs, and provided it to 
First Databank, publisher of a pricing compendium used by the pharmaceutical industry. 
The HCFA estimated that the 50 drugs identified by the DOJ represented approximately 
one-third of Medicare payments for prescription drugs.  However, legislation passed by 
Congress on December 21, 2000 required GAO to complete a comprehensive drug pricing 
study before HCFA could begin using the new lower prices. 
Physician Concerns About Reimbursement 
Some physician groups have raised concerns about Medicares attempts to lower 
reimbursement for prescription drugs.  For example, some state that Medicare does not 
adequately reimburse physicians for the practice costs associated with providing treatment 
to cancer patients.  These physician groups assert that overpayments for prescription 
drugs simply make up for inadequate payments for other practice costs.  While we agree 
that physicians need to be properly reimbursed for patient care, the analysis of such 
practice costs is beyond the scope of this study.  We believe, however, that the use of 
inflated drug prices is an inappropriate way for Medicare to address this issue. 
Related Work by the Office of Inspector General 
The Office of Inspector General (OIG) has studied a number of issues relating to Medicare 
reimbursement of prescription drugs.  Brief summaries of selected studies are presented in 
Appendix A. 
METHODOLOGY 
We collected data from five sources.  We accessed HCFAs National Claims History file 
and obtained Medicare drug payment and utilization data for 1999.  We contacted 
Medicare carriers to determine current Medicare reimbursement amounts for covered 
drugs.  We obtained drug payment amounts from the VA and physician/supplier pricing 
3 
Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  information from various drug catalogs.  We collected Medicaid drug rebate data from 
HCFAs Medicaid Drug Rebate Initiative system. 
Selecting Drugs for Review 
Medicare identifies covered drugs using HCFAs Common Procedure Coding System 
(HCPCS).  The HCPCS codes define the type of drug and, in most cases, a dosage 
amount.  Initially, we focused our study on the 30 HCPCS codes with the highest total 
Medicare payments in 1999.  These 30 codes represented 85 percent of the $3.9 billion in 
total Medicare payments for drugs in 1999. 
We removed several of the 30 HCPCS codes from our review.  We removed code J9999 
because it is defined as not otherwise classified, antineoplastic drug.  We also removed 
any HCPCS code which did not have pricing information available from each source (VA, 
Medicaid, and drug catalogs).  Five drugs were removed because they did not meet the 
three-source criteria: J1561, J7190, J7192, J7320, and J7502.  The 24 remaining HCPCS 
codes accounted for 79 percent ($3.1 billion) of the $3.9 billion in Medicare payments for 
prescription drugs in 1999.  Claims for 21 of the 24 codes are processed by local carriers. 
These drugs would most likely be purchased and administered by physicians.  The 
remaining three drugs are used with a piece of DME called a nebulizer and would most 
likely be provided by a DME supplier or pharmacy.  Claims for these drugs are processed 
by the DMERCs.  A final list of the 24 HCPCS codes under review and their definitions is 
presented in Appendix B. 
Medicare Reimbursement 
Because Medicare does not have uniform national reimbursement amounts for prescription 
drugs, we collected reimbursement information from various carriers.  We obtained 
second-quarter 2000 reimbursement amounts for the 21 HCPCS codes covered by local 
carriers.  We collected this information by contacting the 10 carriers with the highest 
utilization for these drugs in 1999.  We also received Medicare reimbursement amounts 
from the four DMERCs for the three nebulizer drugs in our review.  To determine a single 
Medicare allowed amount, we calculated median prices for each HCPCS code based on 
this information.  Tables listing the carriers and DMERCs and their reimbursement 
amounts for the HCPCS codes are presented in Appendix C. 
Matching HCPCS Codes to National Drug Codes 
Unlike Medicare, Medicaid and the VA use national drug codes (NDCs) rather than 
HCPCS codes to identify drugs products.  Because of these coding differences, we used 
the January 2000 CD-ROM edition of Drug Topics Red Book to identify the specific 
NDCs that would match the HCPCS code definition for each drug.  Every drug 
manufactured or distributed in the United States has a unique NDC.  The NDCs identify 
the manufacturer of the drug, the product dosage form, and the package size.  From the 
NDCs, drugs can be identified as either brand or generic.  Whenever possible, we selected 
NDCs that met the exact dosage defined in the HCPCS code description.  When this was 
not possible, we chose NDCs with doses where a conversion factor to the 
4 
Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  HCPCS definition could be readily determined.  Several HCPCS had only one equivalent 
NDC, while others had 10 or more matches. 
VA Pricing 
We obtained a file from the VA containing second-quarter 2000 contract acquisition costs. 
We selected the Federal Supply Schedule price for comparison purposes; however, some 
drugs had lower prices available to the VA based on other contractual methods.  If the 
dosage of an NDC did not meet the HCPCS definition, we used a conversion factor to 
ensure that the VA price and Medicare price were for equivalent amounts.  We then 
determined a single VA price for each HCPCS code by calculating the median price for its 
corresponding NDCs. 
Physician/Supplier Drug Costs 
To determine actual wholesale prices for the top drugs, we reviewed year 2000 print and 
online catalogs from five drug wholesalers and one group purchasing organization.  The 
six pricing sources we used provide pharmaceutical products to physician practices and 
closed pharmacies.  We decided that each HCPCS code under review must have prices for 
matching NDCs in at least three of the six catalogs.  If the dosage of an NDC did not meet 
the HCPCS definition, we used a conversion factor to ensure that the catalog price and 
Medicare price were for equivalent amounts.  We then computed a single catalog price for 
each HCPCS codes by calculating the median price for its corresponding NDCs. 
Medicaid Rebates 
We accessed the Medicaid Drug Rebate Initiative system to determine the Medicaid rebate 
amounts for each drug.  We used the fourth quarter 1999 rebate amounts for each NDC 
code.  For many NDCs, the listed rebate was for a dosage amount which was different 
than the HCPCS dosage amount.  In these cases, a conversion factor was used to calculate 
a rebate for the equivalent dosage. We then computed a single rebate amount for each 
HCPCS code by calculating the median rebate for its corresponding NDCs. 
Calculating Potential Medicare Savings 
To calculate potential Medicare savings, we compared Medicares reimbursement amount 
for the 24 HCPCS codes to amounts available through the VA and wholesale drug 
catalogs.  We determined the percentage difference in prices by subtracting the source 
price from the Medicare price, and then dividing this number by the Medicare price. 
These percentages indicate how much Medicare would save if reimbursement for each 
drug was based on prices available through the other sources.  We then multiplied these 
percentages by Medicares 1999 total payment for each HCPCS code to calculate dollar 
savings.  To determine potential savings based on Medicaid rebates, we divided the 
median Medicaid rebate amount for each drug by its Medicare reimbursement amount. 
We then multiplied the result by Medicares 1999 total payment for each HCPCS code to 
calculate dollar savings. 
5 
Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  F I N D I N G S  
Medicare and its beneficiaries would save $1.6 billion a year 
if 24 drugs were reimbursed at amounts available to the VA 
Medicare spending for 24 drugs would be cut in half if Medicare reimbursement 
amounts equaled VA cost 
After comparing the median Medicare reimbursement amount with the corresponding 
median VA acquisition cost for 24 drugs, we estimate that Medicare and its beneficiaries 
would save $1.6 billion a year if Medicares reimbursement amounts for the drugs equaled 
prices obtained by the VA under the Federal Supply Schedule.  These savings represent 52 
percent of the $3.1 billion that Medicare and its beneficiaries paid for these 24 drugs in 
1999. 
The estimated savings for individual drugs ranged from a high of $351 million for J9217 
(leuprolide acetate) to a low of $9.4 million for J9390 (vinorelbine tartrate).  Drugs with 
estimated annual savings greater than $50 million are listed in Table 1.  A complete list of 
the 24 drugs, Medicare reimbursement, VA costs, and potential savings is provided in 
Appendix D. 
Table 1: Drugs with Estimated Savings Over $50 Million a Year 
1999  ESTIMATED 
HCPCS  MEDICARE  VA  PERCENT  ALLOWED  MEDICARE 
CODE  GENERIC DRUG NAME  MEDIAN  MEDIAN  SAVINGS  CHARGES  SAVINGS 
J9217  Leuprolide acetate, 7.5 mg  $592.60  $257.00  56.6%  $620,102,889  $351,175,379 
J7619  Albuterol, per mg  $0.47  $0.07  85.1%  $246,136,877  $209,478,193 
J7644  Ipratropium bromide, per mg  $3.34  $.84  74.9%  $250,916,635  $187,811,853 
J9202  Goserelin acetate, 3.6 mg  $446.49  $214.87  51.9%  $321,485,273  $166,772,870 
Q0136  Epoetin alpha, 1000 units  $11.40  $7.22  36.7%  $379,708,697  $139,226,522 
J9265  Paclitaxel, 30 mg  $173.49  $107.59  38.0%  $249,940,717  $94,939,727 
J9045  Carboplatin, 50 mg  $101.37  $41.14  59.4%  $116,254,013  $69,073,485 
J0640  Leucovorin calcium, 50 mg  $18.02  $1.63  91.0%  $66,740,227  $60,703,236 
The VA paid between 15 and 91 percent less than the Medicare reimbursement 
amount for the 24 drugs reviewed 
Medicare reimbursement amounts were greater than VA cost for every drug in our review. 
However, there was substantial variation in the difference between Medicare 
reimbursement and VA cost among the 24 drugs.  Twelve of the drugs in our study had 
Medicare reimbursement amounts that were more than double the VA price.  For six of 
these drugs, Medicare reimbursed between 3 and 11 times the VA price.  The difference 
between Medicare reimbursement and VA cost was less than 20 percent for only two of 
6 
Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  the 24 drugs.  Furthermore, several drugs had even lower prices available to the VA 
through other contractual methods.  A comparison of Medicare reimbursement amounts, 
VA costs, and actual wholesale prices for selected drugs appears in Chart 1. 
Chart 1: Price Comparisons for Selected Drugs 
$50 
VA 
$45 
$42.92 
Wholesale 
$40 
Medicare 
$35 
$30 
E 
C
RI $25 
P
$20  $18.54 
$18.02 
$14.82 
$15  $13.81 
$10.08 
$10  $8.29  $7.81 
$6.29 
$4.95 
$5 
$2.94 
$1.63 
$0 
J0640  J1260  J1626  J9000 
HCPCS 
Medicare and its beneficiaries would save $761 million a year 
by paying the actual wholesale price for 24 drugs 
Medicare spending for 24 drugs would be reduced by one-fourth if Medicare 
reimbursement amounts equaled prices available to physicians and suppliers 
We estimate that Medicare payments for 24 drugs exceeded actual wholesale prices by 
$761 million a year.  This represents 25 percent of the $3.1 billion Medicare and its 
beneficiaries reimbursed for these drugs in 1999.  The difference between catalog prices 
and Medicare reimbursement amounts for J9217 (leuprolide acetate) accounted for almost 
$100 million in potential savings.  Furthermore, if Medicare reimbursed only the three 
nebulizer drugs in our study (J7608, J7619, J7644) based on actual wholesale prices rather 
than AWP, the program would save over $325 million a year.  A complete list of the 24 
drugs, Medicare reimbursement, catalog prices, and potential savings is provided in 
Appendix E. 
7 
Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  Actual wholesale prices were between 6 and 84 percent below Medicare 
reimbursement amounts for 24 drugs 
Medicare reimbursement amounts were greater than catalog prices for every drug in our 
review.  However, there were significant differences between Medicare reimbursement 
amounts and actual wholesale prices for many drugs.  Four of the drugs in our study had 
Medicare reimbursement amounts that were more than double the median catalog price. 
One of these drugs had a Medicare reimbursement amount more than six times higher than 
the median catalog price.  A chart illustrating Medicare reimbursement amounts, VA costs, 
and actual wholesale prices for selected drugs appears on the previous page. 
Medicare would save over $425 million a year on 24 drugs by 
using Medicaids rebate program 
We estimate that Medicare would save $429 million a year on 24 drugs by collecting 
rebates equal to those negotiated by the Medicaid program.  These rebates would lower 
Medicare spending on these 24 drugs by almost 15 percent.  Medicare would save more 
than $50 million on both J9217 (leuprolide acetate) and Q0136 (epoetin alfa, non-ESRD) 
by utilizing the Medicaid rebate.  Seven of the 24 drugs under review had Medicaid rebates 
that would discount the Medicare reimbursement amount by more than 30 percent. 
Carriers are not establishing consistent drug reimbursement 
amounts for certain drugs 
Medicares reimbursement methodology states that covered drugs are reimbursed at 95 
percent of AWP; therefore, geographical considerations are not taken into account. 
However, we found differences in the reimbursement amounts between local carriers. 
There was no variation in the reimbursement amounts for the three drugs reimbursed by the 
DMERCs. 
For some HCPCS codes, the difference in prices between local carriers was significant.  Six 
of the 21 drugs with carrier-established reimbursement amounts had more than a 10 
percent difference between the lowest and highest reimbursement amount.  The most 
egregious was J0640 (leucovorin calcium), with one carrier reimbursing $17.51 and 
another reimbursing $35.47.  Pricing for J9000 (doxorubicin) also varied greatly, with 
reimbursement amounts ranging from $38.03 to $52.44.  Drugs which had more than a 10 
percent price variation between carriers are listed in Table 2 on page 9.  A table listing the 
carriers and DMERCs and their reimbursement amount for all 24 HCPCS codes is 
presented in Appendix C. 
8 
Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  Table 2: Variation in Medicare Prices for Selected Drugs 
Median  Minimum  Maximum  Difference Between 
HCPCS  Medicare  Medicare  Medicare  Minimum and 
Code  Generic Drug Name  Amount  Amount  Amount  Maximum Amount 
J0640  Leucovorin Calcium  $18.02  $17.51  $35.47  102.6% 
J1562  Immune Globulin  $396.63  $380.00  $439.38  15.6% 
J2820  Sargromostim  $27.41  $23.95  $27.42  14.5% 
J9000  Doxorubicin HCl  $42.92  $38.03  $52.44  37.9% 
J9217  Leuprolide Acetate  $592.60  $564.65  $623.79  10.5% 
J9350  Topotecan  $573.75  $546.44  $602.44  10.2% 
Inconsistency in drug reimbursement amounts among Medicare carriers is not a new 
problem.  A previous OIG report released in December 1997, Excessive Medicare 
Payments for Prescription Drugs, found similar variations.  This previous report identified 
three likely causes for pricing discrepancies: (1) decisions regarding when to update 
reimbursement amounts, (2) the choice of pricing compendia used to determine AWPs, and 
(3) the selection of particular NDCs to meet the HCPCS code definition. 
9 
Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  R E C O M M E N D A T I O N S  
The HCFA should reduce excessive Medicare drug reimbursement amounts 
Despite numerous attempts by HCFA to lower Medicare drug reimbursement, the findings 
of this report illustrate once again that Medicare simply pays too much for prescription 
drugs.  The published AWPs that Medicare carriers currently use to establish 
reimbursement amounts bear little or no resemblance to actual wholesale prices that are 
available to physicians, suppliers, and other large government purchasers.  We believe that 
HCFAs attempts to use the more accurate AWPs supplied by First Databank is a 
significant first step towards reimbursing drugs in a more appropriate manner.  However, 
we believe that HCFA should continue to seek additional administrative and legislative 
remedies to reduce excessive drug reimbursement amounts. 
We believe there are a number of options available to HCFA for implementing this 
recommendation, including: (1) continuing to collect more accurate average wholesale 
prices from drug pricing catalogs, (2) basing payment on physician/supplier acquisition 
costs, (3) establishing manufacturers rebates similar to those used in the Medicaid 
program, (4) creating a fee schedule for covered drugs based on Department of Veterans 
Affairs prices, and (5) utilizing the inherent reasonableness authority. 
The HCFA should require all carriers to reimburse a uniform amount for each drug 
We believe that the pricing differences among local carriers for individual drug codes is 
problematic.  The amount which physicians and suppliers are reimbursed for drugs should 
not depend on which carrier they bill.  The DMERCs have been able to adopt uniform 
pricing for the drugs which they cover, and we expect that local carriers should be able to 
do the same.  In a 1997 report which noted similar problems, we recommended two 
options to correct pricing differences: (1) the HCFA could supply all carriers with list of 
average wholesale prices that it has determined represent each drug code, or (2) the HCFA 
could contract with a single entity to calculate drug reimbursement amounts and then 
distribute the amounts to each carrier.  We continue to recommend that HCFA undertake 
one of these options. 
Agency Comments 
The HCFA concurred with our recommendation that reimbursement amounts for 
Medicare-covered drugs should be lowered, noting that the current AWP-based 
reimbursement method creates incentives for price inflation, distorts clinical decisions, and 
cheats taxpayers.  The HCFA also explained that some providers now rely on inflated drug 
payments to cover other practice expenses. The HCFA believes that any price reductions 
need to take these expenses into account.  Nevertheless, the HCFA strongly agreed that the 
payment of inflated drug prices is an inappropriate way to compensate practitioners and 
suppliers for inadequate reimbursement of other practice costs. 
10 
Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  The HCFA also agreed with our recommendation that Medicare carriers should be required 
to reimburse uniform amounts for covered drugs.  The full text of HCFAs comments is 
presented in Appendix F. 
11 
Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  APPENDIX  A 
Previous OIG Reports on Medicare Drug Reimbursement 
Medicare Reimbursement of Albuterol (OEI-03-00-00311), June 2000.  We found that

Medicare and its beneficiaries would save $120 million or $209 million a year if albuterol was

reimbursed at amounts available through Medicaid and the VA, respectively.  Medicare and its

beneficiaries would save $47 million or $115 million a year if Medicare reimbursed albuterol at

prices available at chain and Internet pharmacies.

Medicare Reimbursement of End Stage Renal Disease Drugs (OEI-03-00-00020), June 2000.

We found that Medicare reimbursement amounts would be nearly halved for five ESRD drugs if

amounts were based on VA acquisition costs.  In addition, Medicare would save between 5 and 38

percent if its reimbursement amounts were equal to Medicaid reimbursement including rebates. 

Comparing Drug Reimbursement: Medicare and the Department of Veterans Affairs

(OEI-03-97-00293), November 1998.  We found that Medicare and its beneficiaries would save

$1 billion in 1998 if the allowed amounts for 34 drugs were equal to prices obtained by the VA. 

Furthermore, Medicare allowed between 15 and 1600 percent more than the VA for the 34 drugs

reviewed.

Are Medicare Allowances for Albuterol Sulfate Reasonable? (OEI-03-97-00292), 

August 1998.  We found that Medicare would allow between 56 to 550 percent more than the VA

would pay for generic versions of albuterol sulfate in 1998, and 20 percent more than the average

Medicaid payment for albuterol sulfate in 1997.  Additionally, Medicare allowed 333 percent more

than available acquisition costs for the drug in 1998.  Customers of mail-order pharmacies would

pay up to 30 percent less than Medicare for albuterol sulfate in 1998. 

The Impact of High-Priced Generic Drugs on Medicare and Medicaid (OEI-03-97-00510),

July 1998.  We found that Medicare and its beneficiaries could have saved between $5 million and

$12 million for four drugs if reimbursement had not been based on higher-priced generic versions. 

Floridas Medicaid program would have saved half a million dollars for eight drugs in 1996 if

higher-priced generic drugs had been reimbursed at brand prices.

Excessive Medicare Payments for Prescription Drugs (OEI-03-97-00290), December 1997. 

We found that Medicare allowances for 22 drugs exceeded actual wholesale prices by $447 million

in 1996.  For more than one-third of the 22 drugs reviewed, Medicare allowed amounts were more

than double the actual wholesale prices available to physicians and suppliers.  Furthermore, we

found that there was no consistency among Medicare carriers in establishing and updating drug

reimbursement amounts. 

12 
Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  APPENDIX  A 
Appropriateness of Medicare Prescription Drug Allowances (OEI-03-96-00420), May 1996. 
We found that under a drug rebate program similar to Medicaids, Medicare would have saved 
$122 million for 17 prescription drugs in 1994.  Medicare could have saved an additional $144 
million in 1994 had the program employed a discounted AWP drug reimbursement formula.  We 
also found that the lack of an NDC-based billing system would prevent HCFA from taking 
advantage of rebates and other discounted reimbursement formulas. 
A Comparison of Albuterol Sulfate Prices (OEI-03-94-00392), June 1996.  We found that many 
of the pharmacies surveyed charged customers less than the Medicare allowed amount for generic 
albuterol sulfate.  The five buying groups surveyed had negotiated prices between 56 and 70 
percent lower than Medicares reimbursement amount for the drug. 
Suppliers Acquisition Costs for Albuterol Sulfate (OEI-03-94-00393), June 1996.  We found 
that Medicares allowances for albuterol sulfate substantially exceeded suppliers acquisition costs 
for the drug, and that the program could have saved $94 million during the 14-month review 
period if Medicare reimbursement amounts had been based on average supplier invoice costs. 
Medicare Payments for Nebulizer Drugs (OEI-03-94-00390), February 1996.  We found that 
Medicare and its beneficiaries paid about $37 million more for three nebulizer drugs in 17 states 
than Medicaid would have paid for equivalent drugs.  In addition, we found that the potential 
savings were not limited to the three nebulizer drugs and 17 states which were reviewed. 
13 
Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  APPENDIX  B 
Description of 24 HCPCS Codes

2000  1999 
HCPCS  HCPCS  DESCRIPTION 
CODE  CODE 
J0640  J0640  Injection, Leucovorin Calcium, per 50 mg 
J1260  J1260  Injection, Dolasetron Mesylate, 10 mg 
J1440  J1440  Injection, Filgrastim (G-CSF), 300 mcg 
J1441  J1441  Injection, Filgrastim (G-CSF), 480 mcg 
J1562  J1562  Injection, Immune Globulin, intravenous, 5 g 
J1626  J1626  Injection, Granisetron Hydrochloride, per 100 mcg 
J2405  J2405  Injection, Ondansetron HCl,  per 1 mg 
J2430  J2430  Injection, Pamidronate Disodium, per 30 mg 
J2820  J2820  Injection, Sargramostim (GM-CSF), 50 mcg 
J7608*  K0503  Acetylcysteine, unit dose form, per gram 
J7619*  K0505  Albuterol Sulfate, unit dose form, per mg 
J7644*  K0518  Ipratropium Bromide, unit dose form, per mg 
J9000  J9000  Injection, Doxorubicin HCl, 10 mg 
J9045  J9045  Injection, Carboplatin, 50 mg 
J9170  J9170  Injection, Docetaxel, 20 mg 
J9201  J9201  Injection, Gemcitabine HCl, 200 mg 
J9202  J9202  Goserelin Acetate implant, per 3.6 mg 
J9206  J9206  Injection, Irinotecan, 20 mg 
J9217  J9217  Leuprolide Acetate (for depot suspension), 7.5 mg 
J9265  J9265  Injection, Paclitaxel, 30 mg 
J9310  J9310  Injection, Rituximab, 100 mg 
J9350  J9350  Injection, Topotecan, 4 mg 
J9390  J9390  Vinorelbine Tartrate, per 10 mg 
Q0136  Q0136  Injection, Epoetin Alpha, (non-ESRD), per 1000 units 
* New HCPCS codes for nebulizer drugs took affect January 1, 2000. 
14 
Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  APPENDIX  C 
Medicare Carrier Reimbursement Amounts

HCPCS  FL  TX  PA  CA  WI  NY  OH  NJ  TN  IL  MEDIAN 
J0640  $35.47  $20.45  $17.51  $17.52  $18.02  $18.51  $18.02  $18.51  $17.93  $18.02  $18.02 
J1260  $15.81  $15.82  $14.80  $14.80  $14.82  $15.81  $14.82  $15.81  $14.70  $14.82  $14.82 
J1440  $171.38  $164.21  $171.38  $171.38  $171.38  $168.00  $171.38  $168.00  $171.38  $171.38  $171.38 
J1441  $273.03  $261.58  $273.03  $273.03  $273.03  $273.03  $273.03  $273.03  $273.03  $273.03  $273.03 
J1562  $380.00  $439.38  $413.25  $380.00  $427.98  $380.00  $380.00  $380.00  $413.25  $427.98  $396.63 
J1626  $18.54  $18.54  $18.54  --- $18.54  $18.54  $18.54  $18.54  $17.67  $18.54  $18.54 
J2405  $6.08  $6.09  $6.08  $6.09  $6.10  $6.08  $6.10  $6.08  $5.94  $6.10  $6.09 
J2430  $253.20  $253.21  $232.51  $232.51  $253.20  $233.91  $253.20  $233.91  $232.51  $253.20  $243.56 
J2820  $27.41  $24.60  $25.62  $23.95  $27.42  $27.41  $27.42  $27.41  $27.41  $27.42  $27.41 
J9000  $42.81  $50.96  $52.44  $50.96  $42.82  $43.02  $42.82  $43.02  $38.03  $42.82  $42.92 
J9045  $103.84  $94.96  $98.90  $103.84  $103.84  $98.90  $103.84  $98.90  $98.90  $103.84  $101.37 
J9170  $283.65  $283.65  $270.14  $283.65  $283.65  $283.65  $283.65  $283.65  $270.14  $283.65  $283.65 
J9201  $88.46  $88.46  $88.46  $88.46  $88.46  $88.46  $88.46  $88.46  $88.46  $88.46  $88.46 
J9202  $446.49  $446.49  $446.49  $446.49  $446.49  $446.49  $446.49  $446.49  $446.49  $446.49  $446.49 
J9206  $117.81  $117.81  $110.10  $117.81  $117.82  $117.81  $117.82  $117.81  $117.81  $117.82  $117.81 
J9217  $564.91  $565.93  $564.65  $623.79  $592.60  $592.60  $592.60  $592.60  $564.92  $592.60  $592.60 
J9265  $173.49  $166.58  $173.48  $173.50  $173.50  $173.49  $173.50  $173.49  $173.49  $173.50  $173.49 
J9310  $420.28  $420.29  $420.28  $420.29  $420.29  $420.28  $420.29  $420.28  $420.28  $420.29  $420.29 
J9350  $602.44  $602.44  $573.75  $573.75  $573.75  $602.44  $573.75  $602.44  $546.44  $573.75  $573.75 
J9390  $75.50  $72.49  $68.99  $75.51  $75.51  $75.50  $75.51  $75.50  $75.50  $75.51  $75.50 
Q0136  $11.84  --- $12.00  $11.62  $11.40  $11.40  $11.40  $11.40  $11.40  $11.40  $11.40 
HCPCS  DMERC A  DMERC B  DMERC C  DMERC D  MEDIAN 
J7608  $5.05  $5.05  $5.05  $5.05  $5.05 
J7619  $0.47  $0.47  $0.47  $0.47  $0.47 
J7644  $3.34  $3.34  $3.34  $3.34  $3.34 
15 
Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  APPENDIX  D 
Medicare Savings Based on 

Department of Veterans Affairs Prices

1999  ESTIMATED 
HCPCS  MEDICARE  VA  PERCENT  ALLOWED  MEDICARE 
CODE  GENERIC DRUG NAME  MEDIAN  MEDIAN  SAVINGS*  CHARGES  SAVINGS 
J0640  Leucovorin Calcium, 50 mg  $18.02  $1.63  91.0%  $66,740,227  $60,703,236 
J1260  Dolasetron Mesylate, 10 mg  $14.82  $4.95  66.6%  $46,647,272  $31,066,705 
J1440  Filgrastim, 300 mcg  $171.38  $130.72  23.7%  $47,893,675  $11,362,801 
J1441  Filgrastim, 480 mcg  $273.03  $208.23  23.7%  $67,411,261  $15,999,157 
J1562  Immune Globulin, 5g  $396.63  $110.54  72.1%  $43,239,398  $31,188,663 
J1626  Granisetron HCl, 100 mcg  $18.54  $7.81  57.9%  $46,432,246  $26,872,600 
J2405  Ondansetron HCl, 1 mg  $6.09  $3.94  35.3%  $47,721,885  $16,847,628 
J2430  Pamidronate Disodium, 30 mg  $243.56  $203.45  16.5%  $112,916,846  $18,595,396 
J2820  Sargramostim, 50 mcg  $27.41  $10.06  63.3%  $23,533,251  $14,896,093 
J7608  Acetylcysteine, per g  $5.05  $1.50  70.3%  $35,908,222  $25,242,413 
J7619  Albuterol Sulfate, per mg  $0.47  $0.07  85.1%  $246,136,877  $209,478,193 
J7644  Ipratropium Bromide, per mg  $3.34  $0.84  74.9%  $250,916,635  $187,811,853 
J9000  Doxorubicin HCl, 10 mg  $42.92  $6.29  85.3%  $27,831,805  $23,753,006 
J9045  Carboplatin, 50 mg  $101.37  $41.14  59.4%  $116,254,013  $69,073,485 
J9170  Docetaxel, 20 mg  $283.65  $151.77  46.5%  $58,661,193  $27,273,887 
J9201  Gemcitabine HCl, 200 mg  $88.46  $74.86  15.4%  $75,256,901  $11,570,132 
J9202  Goserelin Acetate, 3.6 mg  $446.49  $214.87  51.9%  $321,485,273  $166,772,870 
J9206  Irinotecan, 20 mg  $117.81  $75.45  36.0%  $79,914,022  $28,734,046 
J9217  Leuprolide Acetate, 7.5 mg  $592.60  $257.00  56.6%  $620,102,889  $351,175,379 
J9265  Paclitaxel, 30 mg  $173.49  $107.59  38.0%  $249,940,717  $94,939,727 
J9310  Rituximab, 100 mg  $420.29  $239.58  43.0%  $71,072,780  $30,558,810 
J9350  Topotecan, 4 mg  $573.75  $307.25  46.5%  $31,504,581  $14,633,500 
J9390  Vinorelbine Tartrate, 10 mg  $75.50  $46.20  38.8%  $24,325,270  $9,440,138 
Q0136  Epoetin Alfa, per 1000 units  $11.40  $7.22  36.7%  $379,708,697  $139,226,522 
TOTAL FOR 24 HCPCS  $3,091,555,936  $1,617,216,241 
* To determine percent savings, we subtracted the VA price from the Medicare reimbursement amount. We then 
divided this number by the Medicare reimbursement amount. 
16 
Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  APPENDIX  E 
Medicare Savings Based on Physician/Supplier Costs

1999  ESTIMATED 
HCPCS  MEDICARE  CATALOG  PERCENT  ALLOWED  MEDICARE 
CODE  GENERIC DRUG NAME  MEDIAN  MEDIAN  SAVINGS*  CHARGES  SAVINGS 
J0640  Leucovorin Calcium, 50 mg  $18.02  $2.94  83.7%  $66,740,227  $55,851,422 
J1260  Dolasetron Mesylate, 10 mg  $14.82  $8.29  44.1%  $46,647,272  $20,553,758 
J1440  Filgrastim, 300 mcg  $171.38  $144.30  15.8%  $47,893,675  $7,567,748 
J1441  Filgrastim, 480 mcg  $273.03  $229.90  15.8%  $67,411,261  $10,648,821 
J1562  Immune Globulin, 5g  $396.63  $300.00  24.4%  $43,239,398  $10,534,309 
J1626  Granisetron HCl, 100 mcg  $18.54  $13.81  25.5%  $46,432,246  $11,845,983 
J2405  Ondansetron HCl, 1 mg  $6.09  $5.49  9.9%  $47,721,885  $4,701,664 
J2430  Pamidronate Disodium, 30 mg  $243.56  $223.26  8.3%  $112,916,846  $9,411,283 
J2820  Sargramostim, 50 mcg  $27.41  $23.13  15.6%  $23,533,251  $3,674,656 
J7608  Acetylcysteine, per g  $5.05  $3.38  33.1%  $35,908,222  $11,874,600 
J7619  Albuterol Sulfate, per mg  $0.47  $0.13  72.3%  $246,136,877  $178,056,464 
J7644  Ipratropium Bromide, per mg  $3.34  $1.53  54.2%  $250,916,635  $135,975,781 
J9000  Doxorubicin HCl, 10 mg  $42.92  $10.08  76.5%  $27,831,805  $21,295,351 
J9045  Carboplatin, 50 mg  $101.37  $87.79  13.4%  $116,254,013  $15,573,932 
J9170  Docetaxel, 20 mg  $283.65  $238.86  15.8%  $58,661,193  $9,262,947 
J9201  Gemcitabine HCl, 200 mg  $88.46  $74.49  15.8%  $75,256,901  $11,884,907 
J9202  Goserelin Acetate, 3.6 mg  $446.49  $375.99  15.8%  $321,485,273  $50,761,969 
J9206  Irinotecan, 20 mg  $117.81  $98.63  16.3%  $79,914,022  $13,010,364 
J9217  Leuprolide Acetate, 7.5 mg  $592.60  $499.03  15.8%  $620,102,889  $97,912,635 
J9265  Paclitaxel, 30 mg  $173.49  $146.10  15.8%  $249,940,717  $39,459,774 
J9310  Rituximab, 100 mg  $420.29  $353.93  15.8%  $71,072,780  $11,221,751 
J9350  Topotecan, 4 mg  $573.75  $507.32  11.6%  $31,504,581  $3,647,668 
J9390  Vinorelbine Tartrate, 10 mg  $75.50  $64.11  15.1%  $24,325,270  $3,669,733 
Q0136  Epoetin Alfa, per 1000 units  $11.40  $10.72  6.0%  $379,708,697  $22,649,291 
TOTAL FOR 24 HCPCS  $3,091,555,936  $761,046,810 
* To determine percent savings, we subtracted the catalog price from the Medicare reimbursement amount. We then 
divided this number by the Medicare reimbursement amount. 
17 
Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  APPENDIX  F 
Health Care Financing Administration Comments

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Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  APPENDIX  F 
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Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  APPENDIX  F 
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Medicare Reimbursement of Prescription Drugs  OEI-03-00-00310  APPENDIX  F 
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