Department of Health and Human Services
OFFICE OF 
 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
C   A S
OMPARISON OF  VERAGE  ALES 
 
P A
R ICES AND  VERAGE 
 
M P : 
ANUFACTURER  RICES
 
 
A O 2008 
N  VERVIEW OF 
 
 
 
 
 
Daniel R. Levinson  
Inspector General 
 
February 2010 
OEI-03-09-00350   
 
   
 E X E C U T I V E   S U M M A R Y  
OBJECTIVES
 
1.  To identify drugs with average sales prices (ASP) that exceeded 
average manufacturer prices (AMP) by at least 5 percent in any 
quarter of 2008. 
2.  To determine why ASPs for certain drug products exceeded the 
AMPs.  
3.  To examine the impact of missing or unavailable AMP data on 
mandated comparisons between ASPs and AMPs in 2008. 
BACKGROUND 
Since January 2005, Medicare Part B has been paying for most covered 
drugs using a reimbursement methodology based on ASPs.  In general 
terms, an ASP is a manufacturers sales of a drug to all purchasers in 
the United States in a calendar quarter divided by the total number of 
units of the drug sold by the manufacturer in that same quarter, net of 
any price concessions.  Manufacturers report ASPs by national drug 
codes (NDC) and must provide the Centers for Medicare & Medicaid 
Services (CMS) with the ASP and volume of sales for each of their NDCs 
on a quarterly basis.  Under the ASP reimbursement methodology, 
Medicares allowance for most Part B prescription drug Healthcare 
Common Procedure Coding System (HCPCS) codes is equal to                       
106 percent of the volume-weighted ASPs for the NDCs associated with 
each HCPCS code.  
By law, the Office of Inspector General (OIG) must compare ASPs with 
AMPs.  As generally defined in statute, the AMP is 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 whose drugs are covered by Medicaid generally must 
provide CMS with the AMP for each of their NDCs on a quarterly basis 
as part of the Medicaid drug rebate program.   
If OIG finds that the ASP for a drug exceeds the AMP by a certain 
percentage (currently 5 percent), the Secretary of Health and Human 
Services (the Secretary) may disregard the ASP for the drug when 
setting reimbursement and shall substitute the payment amount with 
the lesser of either the widely available market price or 103 percent of 
the AMP.   
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  i   
 
   
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Since the ASP reimbursement methodology was implemented in 2005, 
OIG has issued 14 reports comparing ASPs to AMPs.  This current 
comparison examines data across all four quarters of 2008 using the 
volume-weighted ASP pricing methodology implemented by the 
Medicare, Medicaid, and SCHIP Extension Act of 2007.     
For this study, we obtained ASP and AMP data submitted by 
manufacturers for all four quarters of 2008.  We compared the                 
volume-weighted ASP and AMP for each HCPCS code in each quarter 
and identified codes with ASPs that exceeded AMPs by at least                            
5 percent in one or more quarters of 2008.  We also asked three 
manufacturers to describe why the ASPs for certain drug products were 
higher than the AMPs throughout 2008. 
In addition, we identified the number of NDCs for which AMP data 
were missing or unavailable in 2008, as well as the number of HCPCS 
codes that were removed from OIGs pricing comparisons because AMPs 
were missing or unavailable.   
FINDINGS 
In 2008, ASPs for 80 HCPCS codes exceeded AMPs by at least                        
5 percent in one or more quarters.  Of the 482 HCPCS codes examined 
during 2008, 80 met the 5-percent threshold for price adjustment in at 
least one quarter.  Over 40 percent of these codes (33 of 80) met the              
5-percent threshold in multiple quarters, with five codes meeting the         
5-percent threshold in every quarter.  If reimbursement amounts for all 
80 HCPCS codes had been lowered to 103 percent of the AMPs during 
the applicable quarter(s), we estimate that Medicare expenditures 
would have been reduced by $21.9 million from the third quarter of 
2008 through the second quarter of 2009. 
Manufacturers identified several reasons why ASPs for certain 
drugs consistently exceeded AMPs.  According to manufacturers 
associated with the five HCPCS codes that met the 5-percent threshold 
in every quarter, ASPs can exceed AMPs as a result of many factors, 
including the way in which AMPs were weighted, the types of sales 
included in ASPs and AMPs, differential pricing arrangements among 
purchasers, and errors in the calculation of AMPs. 
Missing and unavailable AMP data in 2008 prevented OIG from 
conducting thorough drug-pricing comparisons.  A total of                      
1,431 NDCs had no AMP data during one or more quarters of 2008.  
Manufacturers for almost 60 percent of these drug products participated 
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  ii   
 
   
E X E C U T I V E   S U M M A R Y  
in the Medicaid drug rebate program in 2008 and were therefore 
generally required to submit AMP data for their products.  Because some 
NDCs had missing or unavailable AMPs, the number of pricing 
comparisons performed for 2008 was reduced by 12 percent to 14 percent 
in each quarter and 43 HCPCS codes were never evaluated. 
RECOMMENDATIONS 
The Social Security Act (the Act) directs the Secretary to lower 
reimbursement amounts for drugs with ASPs that exceed AMPs by at 
least 5 percent.  Although CMS has acknowledged the Secretarys 
authority to adjust Part B reimbursement amounts based on the 
findings of OIGs pricing comparisons, the agency has yet to make any 
changes as a result of these studies.  CMS also has yet to specify the 
process by which it would make reimbursement adjustments for drugs 
that meet the 5-percent threshold.   
OIG acknowledges that developing a price substitution policy involves 
complex decisions, including the circumstances under which 
substitutions would be made, the effective date of such substitutions, 
and the time period for which the substitutions would remain in effect.  
However, the gap between ASPs and AMPs for certain Part B drugs 
indicates that Medicare and its beneficiaries may be overpaying for 
those drugs.  Therefore, to ensure the appropriateness of Medicare               
Part B drug payments, and to be consistent with the congressional 
mandate, we recommend that CMS:  
develop a process to adjust payment amounts based on the results 
of OIGs pricing comparisons;   
lower Medicare reimbursement amounts for drugs with ASPs that 
meet the 5-percent threshold specified in section 1847A(d)(3) of the 
Act; and 
continue to explore and undertake a range of efforts to ensure that 
drug manufacturers are submitting the required AMP data in a timely 
manner, including collaborating with OIG about administrative 
remedies for noncompliance.           
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred with our first and third recommendations but does not 
currently concur with our second recommendation.  With regard to our 
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E X E C U T I V E   S U M M A R Y  
second recommendation, CMS stated that in light of the drug price 
volatility identified by OIG, making price substitutions could have a 
significant negative impact on both providers and beneficiaries.  CMS 
expressed a desire to better understand differences between ASPs and 
AMPs, engage stakeholders affected by potential price substitutions, 
and provide adequate notice when developing its price substitution 
policies.   
Although OIG has issued 14 reports demonstrating differences between 
ASPs and AMPs over the past 5 years, CMS has yet to use our data to 
propose or evaluate any concrete strategies for making price 
substitutions.  OIG acknowledges that CMS must make complex 
decisions regarding price substitutions and that ASPs and AMPs will 
inevitably fluctuate to some extent; however, OIG has not identified 
significant volatility in the ASPs and AMPs for 33 of the 80 HCPCS 
codes identified in this report.  Rather, these codes have repeatedly been 
identified as having ASPs at or above the 5-percent threshold.  OIG will 
continue to assist CMS, both in developing a price substitution policy 
and in taking appropriate action against manufacturers that fail to 
comply with AMP-reporting requirements. 
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  iv   
 T A B L E   O F   C O N T E N T S  
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
 
 
I N T RO DU C T IO N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 
 
 
F I N D ING S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 
In 2008, ASPs for 80 HCPCS codes exceeded AMPs by at least             
5 percent in one or more quarters . . . . . . . . . . . . . . . . . . . . . . . . . 10 
Manufacturers identified several reasons why ASPs for                        
certain drugs consistently exceeded AMPs . . . . . . . . . . . . . . . . . . 11 
Missing and unavailable AMP data in 2008 prevented OIG from 
conducting thorough drug-pricing comparisons. . . . . . . . . . . . . . . 12 
 
 
R E C OMME N DA TIO N S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 
Agency Comments and Office of Inspector General Response . . . 15 
 
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 
  A:  Equations Used by the Centers for Medicare & Medicaid        
Services To Calculate Volume-Weighted Average Sales                    
Prices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 
  B:  Previous Office of Inspector General Reports Comparing               
Average Sales Prices and Average Manufacturer Prices. . . . . 19 
  C:  Detailed Methodology for Calculating Volume-Weighted                   
Average Manufacturer Prices for 2008 . . . . . . . . . . . . . . . . . . 21 
D:  Detailed Methodology for Estimating Savings for Drug                    
Codes That Met the 5-Percent Threshold in 2008. . . . . . . . . . 23 
  E:  Eighty Drug Codes With Average Sales Prices That                          
Exceeded Average Manufacturer Prices by                                         
at Least 5 Percent in 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 
  F:  Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 
 
A CKN OW LEDGMEN TS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30   
 
   
 I N T R O D U C T I O N  
OBJECTIVES 
1.  To identify drugs with average sales prices (ASP) that exceeded 
average manufacturer prices (AMP) by at least 5 percent in any 
quarter of 2008. 
2.  To determine why ASPs for certain drug products exceeded the 
AMPs.  
3.  To examine the impact of missing or unavailable AMP data on 
mandated comparisons between ASPs and AMPs in 2008. 
BACKGROUND 
Section 1847A(d)(2)(B) of the Social Security Act (the Act) mandates 
that the Office of Inspector General (OIG) compare ASPs to AMPs.  If 
OIG finds that the ASP for a drug exceeds the AMP by a certain 
percentage (currently 5 percent), section 1847A(d)(3)(A) of the Act states 
that the Secretary of Health and Human Services (the Secretary) may 
disregard the ASP for the drug when setting reimbursement amounts.1  
Section 1847A(d)(3)(C) of the Act goes on to state that  . . . the 
Inspector General shall inform the Secretary (at such times as the 
Secretary may specify to carry out this subparagraph) and the Secretary 
shall, effective as of the next quarter, substitute for the amount of 
payment . . . the lesser of (i) the widely available market price . . . (if 
any); or (ii) 103 percent of the average manufacturer price . . . .  
Medicare Part B Coverage of Prescription Drugs 
Medicare Part B covers only a limited number of outpatient prescription 
drugs.  Covered drugs include injectable drugs administered by a 
physician; certain self-administered drugs, such as oral anticancer 
drugs and immunosuppressive drugs; drugs used in conjunction with 
durable medical equipment; and some vaccines.  
Medicare Part B Payments for Prescription Drugs 
The Centers for Medicare & Medicaid Services (CMS) contracts with 
private companies, known as Medicare Administrative Contractors 
(MAC), to process and pay Medicare Part B claims, including those for 
prescription drugs.  To obtain reimbursement for covered outpatient 
 
1 Section 1847A(d)(3)(B)(ii) of the Act provides the Secretary with authority to adjust the 
applicable threshold percentage in 2006 and subsequent years; however, the threshold 
percentage has been maintained at 5 percent. 
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I N T R O D U C T I O N  
prescription drugs, physicians and suppliers submit claims to their 
MACs using procedure codes.  CMS established the Healthcare 
Common Procedure Coding System (HCPCS) to provide a standardized 
coding system for describing the specific items and services provided in 
the delivery of health care.  In the case of prescription drugs, each 
HCPCS code defines the drug name and dosage size but does not specify 
manufacturer or package size information.   
Medicare and its beneficiaries spent over $11 billion for Part B drugs in 
2008.2  Although Medicare paid for more than 700 outpatient 
prescription drug HCPCS codes that year, most of the spending for              
Part B drugs was concentrated on a relatively small subset of those 
codes.  In 2008, 60 HCPCS codes accounted for 90 percent of the 
expenditures for Part B drugs, with only 12 of these codes representing 
half of the total Part B drug expenditures. 
Reimbursement Methodology for Part B Drugs  
Medicare Part B pays for most covered outpatient drugs using a 
reimbursement methodology based on ASPs.  Section 1847A(c) of the 
Act, as added by the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003, P.L. No. 108-173, defines an ASP as a 
manufacturers sales of a drug to all purchasers in the United States in 
a calendar quarter divided by the total number of units of the drug sold 
by the manufacturer in that same quarter.  The ASP is net of any price 
concessions, such as volume discounts, prompt pay discounts, cash 
discounts, free goods contingent on purchase requirements, 
chargebacks, and rebates other than those obtained through the 
Medicaid drug rebate program.3  Sales that are nominal in amount are 
exempted from the ASP calculation, as are sales excluded from the 
determination of best price in the Medicaid drug rebate program.4, 5 
Manufacturers report ASPs by national drug codes (NDC), which are 
11-digit identifiers that indicate the manufacturer, product dosage form, 
and package size of the drug.  Manufacturers must provide CMS with 
 
2 Medicare expenditures for Part B drugs in 2008 were calculated using CMSs Part B 
Analytics and Reports (PBAR).  The PBAR data were downloaded on July 8, 2009. 
3 Section 1847A(c)(3) of the Act.  
4 Pursuant to section 1927(c)(1)(C)(i) of the Act, best price is the lowest price available 
from the manufacturer during the rebate period to any wholesaler, retailer, provider, health 
maintenance organization, nonprofit entity, or governmental entity within the United 
States, with certain exceptions. 
5 Section 1847A(c)(2) of the Act.  
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I N T R O D U C T I O N  
the ASP and volume of sales for each NDC on a quarterly basis, with 
submissions due 30 days after the close of each quarter.6 
Because Medicare Part B reimbursement for outpatient drugs is based 
on HCPCS codes rather than NDCs and more than one NDC may meet 
the definition of a particular HCPCS code, CMS has developed a file 
that crosswalks manufacturers NDCs to HCPCS codes.  CMS uses 
information in this crosswalk file to calculate volume-weighted ASPs for 
covered HCPCS codes.   
Calculation of Volume-Weighted Average Sales Prices 
To calculate volume-weighted ASPs, CMS uses an equation that 
involves the following variables:  the ASP for the 11-digit NDC as 
reported by the manufacturer, the volume of sales for the NDC as 
reported by the manufacturer, and the number of billing units in the 
NDC as determined by CMS.  The amount of the drug contained in an 
NDC may differ from the amount of the drug specified by the HCPCS 
code that providers use to bill Medicare.  Therefore, the number of 
billing units in an NDC describes the number of HCPCS code units that 
are in that NDC.  For instance, an NDC may contain a total of                        
10 milliliters of Drug A, but the corresponding HCPCS code may be 
defined as only 5 milliliters of Drug A.  In this case, there are two billing 
units in the NDC.  CMS calculates the number of billing units in each 
NDC when developing its crosswalk files.   
Before April 2008, CMS calculated volume-weighted ASPs using the 
equation presented in Appendix A.  However, section 112(a) of the 
Medicare, Medicaid, and SCHIP Extension Act of 2007, P.L. No.                    
110-173, changed section 1847A(b) of the Act to require that CMS 
compute volume-weighted ASPs using a revised methodology, effective 
April 2008.7  The revised equation for calculating volume-weighted 
ASPs is also provided in Appendix A.   
Under the ASP pricing methodology, the Medicare reimbursement for 
most Part B drugs is equal to 106 percent of the volume-weighted ASP 
for the HCPCS code.8  However, there is a two-quarter lag between the 
 
6 Section 1927(b)(3) of the Act.  
7 This revised methodology was proposed by OIG in a February 2006 report entitled 
Calculation of Volume-Weighted Average Sales Price for Medicare Part B Prescription 
Drugs, OEI-03-05-00310.   
8 Medicare beneficiaries are responsible for 20 percent of this amount in the form of 
coinsurance. 
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I N T R O D U C T I O N  
sales period for which ASPs are reported and the effective date of the 
reimbursement amounts.  For example, ASPs from the first quarter of 
2008 were used to establish reimbursement amounts for the third 
quarter of 2008, and ASPs from the fourth quarter of 2008 were used to 
establish reimbursement amounts for the second quarter of 2009.       
As a result of this lag period, the methodological changes that went into 
effect in April 2008 were applied to ASP data from two quarters prior, 
i.e., the fourth quarter of 2007.  Therefore, CMS used the revised 
methodology to volume-weight ASP data submitted by manufacturers 
for all four quarters of 2008.   
The Medicaid Drug Rebate Program and Average Manufacturer Prices 
For Federal payment to be available for covered outpatient drugs 
provided under Medicaid, sections 1927(a)(1) and (b)(1) of the Act 
mandate that drug manufacturers enter into rebate agreements with 
the Secretary and pay quarterly rebates to State Medicaid agencies.  
Under these rebate agreements and pursuant to section 1927(b)(3) of 
the Act, manufacturers must provide CMS with the AMP for each of 
their NDCs on a quarterly basis, with submissions due 30 days after the 
close of each quarter.9    
As generally defined in section 1927(k)(1) of the Act, the AMP is 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.  Before the passage of the DRA, manufacturers were required 
to deduct customary prompt pay discounts when calculating AMPs.  
However, section 6001(c)(1) of the DRA amended section 1927(k)(1) of 
the Act such that AMPs must be determined without regard to 
customary prompt pay discounts, effective January 2007.10  In July 
2007, CMS published a final rule at 72 Fed. Reg. 39142 (July 17, 2007) 
that, among other things, implements section 6001(c)(1) of the DRA and 
 
9 Section 6001(b)(1)(A) of the Deficit Reduction Act of 2005 (DRA), P.L. No. 109-171, 
changed section 1927(b) of the Act to require that manufacturers also report AMPs on a 
monthly basis, effective January 2007.  Drug manufacturers will continue to report 
quarterly AMP data in addition to their monthly submissions.  
10 In addition, section 6001(b) of the DRA amended section 1927(b)(3) of the Act such that 
AMPs must be provided to States on a monthly basis and through a Web site that is 
publicly accessible.  However, in December 2007, the United States District Court for the 
District of Columbia preliminarily enjoined the disclosure of AMP data to States and the 
public for certain purposes not related to this report.  Section 203 of the Medicare 
Improvements for Patients and Providers Act of 2008 also delayed public disclosure of AMP 
data.   
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I N T R O D U C T I O N  
clarifies the way in which the AMP must be calculated.  Specifically,               
42 CFR  447.504 of the final regulation clarifies the manner in which 
the AMP is to be determined.11 
The AMP is generally calculated as a weighted average of prices for all 
of a manufacturers package sizes of a drug sold during a given quarter 
and is reported for the lowest identifiable quantity of the drug (e.g.,                
1 milliliter, 1 tablet, 1 capsule).   
Pursuant to section 1927(b)(3)(C) of the Act, manufacturers that fail to 
provide AMP data on a timely basis may be subject to either monetary 
penalties or termination from the drug rebate program.  The 
responsibility to impose penalties pursuant to section 1927(b)(3)(C) of 
the Act has been delegated to OIG by the Secretary.12  Pursuant to 
section 1927(b)(4)(B) of the Act, CMS also has authority to terminate 
the rebate agreements of manufacturers that fail to report timely AMP 
data.13  CMS has terminated a number of manufacturers rebate 
agreements for failure to report drug pricing data as required.  For the 
purposes of evaluating potential civil monetary penalty actions, CMS 
has also been providing OIG with information about manufacturers that 
repeatedly failed to submit timely drug-pricing data.   
Office of Inspector Generals Monitoring of Average Sales Prices and 
Average Manufacturer Prices 
In accordance with its congressional mandate, OIG has issued                       
13 quarterly pricing comparisons since the ASP reimbursement 
methodology for Part B drugs was implemented in January 2005.  In 
addition, OIG completed an annual overview of ASPs and AMPs, which 
examined data across all four quarters of 2007 using the revised 
methodology mandated by statute.  A list of all 14 reports is provided in 
Appendix B.  OIG has recommended that CMS develop a process to 
adjust payment amounts based on the results of these pricing 
comparisons and subsequently lower reimbursement for drugs that 
meet the 5-percent threshold.     
 
11In December 2007, the United States District Court for the District of Columbia also 
preliminarily enjoined the implementation of this regulation for certain purposes not 
relevant to this report.  Section 203 of the Medicare Improvements for Patients and 
Providers Act of 2008 also delayed the implementation of certain aspects of the regulation.  
Again, those aspects are not relevant for the purposes of this report.   
12 59 Fed. Reg. 52967 (Oct. 20, 1994). 
13 Specifically, CMS may terminate a rebate agreement for violation of the requirements of 
the agreement or other good cause shown. 
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Although CMS has acknowledged the Secretarys authority to adjust 
ASP payment limits based on the findings of OIGs pricing comparisons, 
CMS has yet to make any changes to Part B drug reimbursement as a 
result of these studies.  Rather, CMS has emphasized both the 
complexity of substituting payment amounts and the importance of 
proceeding cautiously to avoid unintended consequences.14  In 
commenting on OIGs reports, CMS has expressed a desire to both 
better understand fluctuating differences between ASPs and AMPs and 
engage stakeholders, with the intent of developing a process for making 
price substitutions.15  However, CMS has not specified what, if any, 
steps it will take to adjust Medicare reimbursement amounts for drugs 
that meet the 5-percent threshold specified in section 1847A(d)(3) of the 
Act. 
This current report is OIGs second annual overview of ASPs and AMPs, 
and it examines data across all four quarters of 2008 using the revised               
volume-weighted ASP methodology mandated by statute.     
OIG will continue to meet its congressional mandate by issuing reports 
based on quarterly pricing comparisons, along with annual overviews to 
summarize findings across each calendar year.  
METHODOLOGY 
We obtained files from CMS containing NDC-level ASP data from the 
first through fourth quarters of 2008, which were used to establish               
Part B drug reimbursement amounts for the third quarter of 2008 
through the second quarter of 2009, respectively.  These files also 
include information that crosswalks NDCs to their corresponding 
HCPCS codes.  We also obtained AMP data from CMS for the first 
through fourth quarters of 2008.16 
Calculation of Volume-Weighted Average Sales Prices and                           
Volume-Weighted Average Manufacturer Prices for 2008  
As mentioned previously, Medicare does not base reimbursement for 
covered drugs on NDCs; instead, it uses HCPCS codes.  Therefore, CMS 
 
14 OEI-03-08-00450, December 2008. 
15 OEI-03-07-00140, July 2007, and OEI-03-08-00450, December 2008. 
16 ASP and crosswalk data from the first through fourth quarters of 2008 were current as of 
June 2008, September 2008, December 2008, and March 2009, respectively.  AMP data from 
the first through fourth quarters of 2008 were current as of May 2008, August 2008, 
November 2008, and February 2009, respectively.  
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I N T R O D U C T I O N  
uses quarterly ASP information submitted by manufacturers for each 
NDC to calculate a volume-weighted ASP for each covered HCPCS code.  
When calculating these volume-weighted ASPs, CMS includes only 
NDCs with ASP submissions that are deemed valid.   
As part of our analysis for each of the 2008 quarterly reports, we 
calculated a volume-weighted AMP for each HCPCS code, consistent 
with CMSs methodology for calculating volume-weighted ASPs.  Prior 
to 2008, OIG computed volume-weighted AMPs only for those HCPCS 
codes with AMP data for every drug product used by CMS to calculate 
the Medicare reimbursement amount.  As a result, the number of 
comparisons performed in 2007 was reduced by at least 25 percent in 
each quarter and over 100 HCPCS codes were never evaluated pursuant 
to section 1847A(d)(2)(B) of the Act.  To ensure that a broader range of 
drug codes was subject to OIGs pricing comparisons in 2008, we began 
additionally examining drug codes with only partial AMP data (i.e., 
drug codes with AMP data for some, but not all, of the products used to 
establish Medicare reimbursement).  Appendix C provides a detailed 
description of the methods used to calculate volume-weighted AMPs for 
HCPCS codes using complete or partial AMP data. 
Comparing Volume-Weighted ASPs to Volume-Weighted AMPs for 2008 
In each of our 2008 quarterly reports, we compared the                              
volume-weighted ASPs and AMPs and identified HCPCS codes with 
ASPs that exceeded the AMPs by at least 5 percent using either 
complete or partial AMP data.   
For those HCPCS codes that met or exceeded the 5-percent threshold, 
we conducted a review of the associated NDCs to verify the accuracy of 
the billing unit information for the quarter(s) in which the threshold 
was met.  If HCPCS codes had potentially inaccurate billing units, we 
did not include them in our findings. 
To identify codes with ASPs that exceeded AMPs by at least 5 percent in 
one or more quarters of 2008, we then merged the results of the pricing 
comparisons from all four quarters.   
Estimating the monetary impact of lowering reimbursement.  We 
additionally estimated the monetary impact of lowering reimbursement 
to 103 percent of the AMP for codes that met the 5-percent threshold in 
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I N T R O D U C T I O N  
at least one quarter of 2008.17  In our separate quarterly pricing 
comparisons for 2008, savings estimates for codes that met the 
threshold in the first through third quarters were based on CMSs                
Part B Extract and Summary System (BESS) data from 2007, whereas 
savings estimates for codes in the fourth quarter were based on BESS 
data from 2008.  To ensure that the savings estimates were consistent 
and reflective of the most current Medicare expenditures, we 
recalculated the savings estimates for the codes that met the threshold 
in one or more quarters of 2008 using updated PBAR data for 2008.18  
As a result, the estimated savings presented in this yearend overview 
may differ from the savings presented in each of the separate quarterly 
reports previously published by OIG.  Appendix D provides a more 
detailed description of the methods we used to estimate savings for 
HCPCS codes that were eligible for price adjustment. 
Manufacturer followup.  For HCPCS codes that met the 5-percent 
threshold in every quarter of 2008, we identified any corresponding 
NDCs that had ASPs that exceeded the AMPs.  To determine why ASPs 
repeatedly exceeded AMPs for certain drug products, we contacted the 
manufacturers associated with these NDCs.  Using written data 
collection instruments distributed by mail, we asked the manufacturers 
to verify 2008 ASPs and AMPs for the NDCs in question and to explain 
why the ASPs for those NDCs were higher than the AMPs throughout 
2008.   
Analysis of Average Manufacturer Price Data That Were Missing or 
Unavailable in 2008 
We examined the number of NDCs for which manufacturers submitted 
ASP data but not AMP data across all four quarters of 2008.  For the 
purposes of this study, an AMP was considered missing if the 
manufacturer had a Medicaid rebate agreement in 2008 but did not 
submit a price for the quarter.  An AMP was considered unavailable 
for an NDC if the manufacturer did not participate in the Medicaid drug 
 
17 Section 1847A(d)(3)(C) of the Act directs the Secretary to replace payment amounts for 
drugs that meet the 5-percent threshold with the lesser of the widely available market price 
for the drug (if any) or 103 percent of the AMP.  For the purposes of this study, we used            
103 percent of the AMP to estimate the impact of lowering reimbursement amounts.  If 
widely available market prices had been available for these drugs and lower than                        
103 percent of the AMP, the savings estimate presented in this report would have been 
greater. 
18 CMS replaced BESS with PBAR in 2009, populating PBAR with data from both current 
and prior years. 
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  8   
 
   
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rebate program and was therefore not required to submit AMP data to 
CMS.19 
In each of our pricing comparisons for 2008, we excluded HCPCS codes 
that had missing or unavailable AMP data for all of the NDCs CMS 
used to calculate Medicare reimbursement.  To identify the total 
number of HCPCS codes that were excluded from OIG pricing 
comparisons in 2008, we merged the results from each of the four 
quarterly reports.  We then determined the number of HCPCS codes 
that were never included in OIGs pricing comparisons in 2008 because 
of missing or unavailable AMP data.  
Limitations 
We did not verify the accuracy of all manufacturer-reported ASP and 
AMP data, nor did we verify the underlying methodology used by 
manufacturers to calculate ASPs and AMPs.  Manufacturers 
explanations as to why certain ASPs consistently exceeded AMPs were                 
self-reported.  We did not verify whether these explanations were 
accurate.  We also did not verify the accuracy of CMSs crosswalk files 
or examine NDCs that CMS opted to exclude from its calculation of Part 
B drug reimbursement amounts. 
Manufacturers are required to submit their quarterly ASP and AMP 
data to CMS 30 days after the close of the quarter.  Our analyses were 
performed on ASP and AMP data compiled by CMS soon after that 
deadline.  We did not determine whether manufacturers provided any 
revised and/or missing data to CMS at a later date. 
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. 
 
19 To determine whether a manufacturer participated in the Medicaid drug rebate program 
in 2008, we consulted the list of participating drug companies posted on CMSs Web site. 
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  9   
 
   
 F I N D I N G S  
In 2008, ASPs for 80 HCPCS codes      Consistent with sections 
1847A(d)(2)(B) and 1847A(d)(3) of 
exceeded AMPs by at least 5 percent     
the Act, OIG compared ASPs to 
in one or more quarters   
AMPs to identify instances in 
which the ASP for a particular drug exceeded the AMP by a threshold of 
5 percent.  Of the 482 HCPCS codes examined during 2008, 80 met this 
5-percent threshold in at least one quarter using either complete AMP 
data or partial AMP data.   
Appendix E presents a list of the 80 HCPCS codes, including the 
quarter(s) during which the codes met the 5-percent threshold, and 
indicates whether each met the threshold using complete or partial 
AMP data. 
Thirty-three of the eighty HCPCS codes met the 5-percent threshold during 
multiple quarters of 2008   
In 2008, ASPs for five HCPCS codes (J0560, J1190, J1364, J2310, and 
Q0169) exceeded the AMPs by at least 5 percent in every quarter.  An 
additional 10 HCPCS codes met the 5-percent threshold in three of the 
four quarters.  For another 18 HCPCS codes, ASPs exceeded AMPs by 
at least 5 percent in two quarters.  
Lowering reimbursement amounts for the 80 HCPCS codes to 103 percent of 
the AMPs would have reduced Medicare payments by almost $22 million 
over a four-quarter period 
Sections 1847A(d)(3)(A) and (B) of the Act provide that the Secretary 
may disregard the ASP pricing methodology for a drug with an ASP 
that exceeds the AMP by at least 5 percent.  Pursuant to section 
1847A(d)(3)(C) of the Act, . . . the Secretary shall, effective as of the 
next quarter, substitute for the amount of payment . . . the lesser of (i) 
the widely available market price . . . (if any); or (ii) 103 percent of the 
average manufacturer price . . . .  In this study, we identified                      
80 HCPCS codes that met the 5-percent threshold in at least one 
quarter of 2008.  If reimbursement amounts for these 80 codes had been 
lowered to 103 percent of the AMPs during the applicable quarters, we 
estimate that Medicare expenditures would have been reduced by               
$21.9 million between the third quarter of 2008 and the second quarter 
of 2009.20 
 
20 ASP data from the first through fourth quarters of 2008 were used to establish 
reimbursement amounts for the third quarter of 2008 through the second quarter of 2009, 
respectively.  
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  10   
 
   
F I N D I N G S  
Manufacturers identified several      For the five HCPCS codes that 
met the 5-percent threshold in 
reasons why ASPs for certain drugs     
every quarter of 2008, we 
consistently exceeded AMPs   
identified any corresponding 
NDCs with ASPs that exceeded the AMPs during each period (a total of 
six NDCs).  We then contacted the three manufacturers associated with 
those six NDCs to verify their pricing data and to determine why ASPs 
for those products repeatedly exceeded the AMPs.  These manufacturers 
confirmed that the ASPs for their drugs exceeded the AMPs based on 
the pricing data provided to CMS and identified a number of reasons as 
to why this occurred.    
The manufacturer of one drug product cited differences in the ways in 
which ASPs and AMPs are calculated.  ASPs are calculated for a specific 
package size of a drug (i.e., at the 11-digit NDC level).  AMPs are 
calculated as an average across all package sizes of a drug, and that 
average price is then reported for each of the corresponding package 
sizes.  The manufacturer noted that because the AMPs for that drug 
were weighted toward the lower priced, higher volume products, the 
ASPs for the drug exceeded the AMPs.   
According to another manufacturer, AMPs for three drug products were 
low because the limited number of customers purchasing those drug 
products in the retail pharmacy class of trade had access to very 
aggressive prices negotiated by hospital group purchasing organizations 
(GPO).  The ASPs for those three products, which included a broader 
range of customers and prices, were higher by comparison.   
The same manufacturer reported that the ASPs for another of its 
products exceeded the AMPs because of differential adjustments to the 
price agreements governing sales of the product in different settings.  
Specifically, the sales included in the ASPs were based on annually 
adjusted price agreements with hospital GPOs, whereas the sales 
included in the AMPs were based on long-term agreements without 
incremental price adjustments. 
According to the manufacturer of the remaining drug product, ASPs 
exceeded AMPs in each quarter of 2008 because the AMPs were 
incorrectly determined by the manufacturer.21  If the manufacturer had 
 
21 For each of the other five NDCs included in our review, manufacturers verified that the 
2008 quarterly ASPs and AMPs were correct.   
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  11   
 
   
F I N D I N G S  
calculated the AMPs correctly in 2008, ASPs would not have exceeded 
AMPs for this drug product and the corresponding HCPCS code would 
not have met the 5-percent threshold in any quarter.22    
We will provide CMS with more detailed information regarding 
manufacturers explanations for why ASPs exceeded AMPs. 
 
Missing and unavailable AMP data in 2008  Missing or unavailable AMP 
prevented OIG from conducting      data can significantly reduce the 
number of drug codes that are 
thorough drug-pricing comparisons  
evaluated pursuant to sections 
1847A(d)(2)(B) and 1847A(d)(3) of the Act.  By including HCPCS codes 
with partial AMP data in its pricing comparisons for 2008, OIG was 
able to compare ASPs and AMPs for more HCPCS codes than in the 
previous year.  However, missing and unavailable AMP data in 2008 
continued to prevent OIG from conducting thorough drug pricing 
comparisons.   
Almost 60 percent of NDCs without AMP data belonged to manufacturers 
with Medicaid drug rebate agreements   
A total of 1,431 NDCs had no AMP data during one or more quarters of 
2008.  Manufacturers for 59 percent of these NDCs (843 of 1,431) 
participated in the Medicaid drug rebate program during 2008 and were 
therefore generally required to submit AMP data.23, 24  For 5 percent of 
these NDCs (45 of 843), manufacturers did not submit AMP data for 
any quarter of 2008.  The majority (57 percent) of the 843 NDCs with 
missing AMP data belonged to 3 manufacturers.  
Manufacturers for the remaining 588 of 1,431 NDCs did not participate in 
the Medicaid drug rebate program in 2008 and therefore were not required 
to submit AMP data during that time.   
 
22 The HCPCS code in question did not have any allowed services during 2008 and 
therefore would not affect the savings estimate included in this report. 
23 Although manufacturers with rebate agreements are generally required to submit AMP 
data, there may be valid reasons as to why AMP data were not provided for a specific NDC 
in a given quarter.  For example, a manufacturer may not necessarily be required to submit 
an AMP if the drug product has been terminated and there was no Medicaid drug 
utilization during the quarter.  
24 Manufacturers for 7 of the 843 NDCs had rebate agreements during some, but not all, of 
the quarters for which the NDCs had no AMP data.  We considered the AMPs for these 
seven NDCs to be missing in the quarters for which manufacturers had rebate agreements 
and unavailable during the quarters in which they did not. 
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  12   
 
   
FF II NN DD II NN GG SS   
As a result of NDCs without AMP data, the number of pricing comparisons 
performed in 2008 was reduced by at least 12 percent in each quarter 
If a HCPCS code had no AMPs for any of its associated NDCs, we could 
not evaluate that code pursuant to sections 1847A(d)(2)(B) and 
1847A(d)(3) of the Act.  In 2008, between 12 percent and 14 percent of 
HCPCS codes were excluded from OIGs pricing comparisons in each 
quarter because no AMPs were available for any of the NDCs associated 
with the HCPCS codes.25  Table 1 lists the number and percentage of 
HCPCS codes in each quarter that were excluded from our analysis, as 
well as the number of NDCs associated with the excluded HCPCS codes. 
Table 1:  HCPCS Codes That Were Excluded From 2008 Pricing Comparisons  
  Number of NDCs  Number of HCPCS Codes  Percentage of 
  Associated With the  Excluded Because   HCPCS Codes Excluded 
  Excluded HCPCS  None of the Corresponding  Because of 
Quarter in 2008  Codes  NDCs Had AMP Data  NDCs Without AMP Data 
First Quarter  436  76  14% 
Missing  99 
  
Unavailable  337 
Second Quarter  433  68  13% 
Missing  81 
  
Unavailable  352 
Third Quarter   222  67   13% 
Missing  65 
  
Unavailable  157 
Fourth Quarter  209  65  12% 
Missing  51 
  
Unavailable  158 
Source:  OIG analysis of ASP and AMP data from the first through fourth quarters of 2008. 
In total, 111 different HCPCS codes were excluded from OIGs pricing 
comparisons in one or more quarters of 2008 because AMP data were 
missing or unavailable for all of the NDCs that CMS used to calculate 
Medicare reimbursement for that quarter.  For 43 of the 111 codes, we 
were never able to perform pricing comparisons in 2008 because AMPs 
were always missing or unavailable for all of the associated NDCs.   
Just over half of these HCPCS codes (22 of 43) were associated only 
with NDCs that had unavailable AMP data.  Therefore, we would never 
have been able to include these 22 codes in our pricing comparisons. 
 
25 Relative to the total number of HCPCS codes in each quarter with Medicare 
reimbursement amounts based on the ASP payment methodology.  
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  13   
 
   
R E CR OE MCMOE MN MD AET NI DO NA ST  I O N S  
Section 1847A(d)(3)(C) of the Act directs the Secretary to lower 
reimbursement amounts for drugs with ASPs that exceed AMPs by at 
least 5 percent.  CMS has acknowledged the Secretarys authority to 
adjust Part B reimbursement amounts based on the findings of OIGs 
pricing comparisons; however, the agency has not made any changes as 
a result of these studies.  CMS also has yet to specify the process by 
which it would make reimbursement adjustments for drugs that meet 
the 5-percent threshold.   
This current study, which summarizes data across all four quarters of 
2008, identified 80 drug codes that were eligible for price adjustment 
based on either complete or partial AMP data.  Thirty-three of the 
eighty drug codes met the 5-percent threshold during multiple quarters 
of 2008.  If reimbursement amounts for all 80 codes had been lowered to 
103 percent of the AMPs during the applicable quarters, Medicare and 
its beneficiaries would have saved an estimated $21.9 million. 
According to manufacturers associated with drugs that met the                     
5-percent threshold in every quarter, ASPs can exceed AMPs as a result 
of many factors, including the way in which AMPs were weighted, the 
types of sales included in ASPs and AMPs, differential pricing 
arrangements among purchasers, and errors in the calculation of AMPs.   
By including HCPCS codes with partial AMP data in its pricing 
comparisons for 2008, OIG was able to compare ASPs and AMPs for 
more HCPCS codes than in the previous year; however, missing and 
unavailable AMP data continued to limit OIGs ability to conduct 
thorough drug pricing comparisons.   
OIG acknowledges that developing a price substitution policy involves 
complex decisions, including the circumstances under which 
substitutions would be made, the effective date of such substitutions, 
and the time period for which the substitutions would remain in effect.  
However, the gap between ASPs and AMPs for certain Part B drugs 
indicates that Medicare and its beneficiaries may be overpaying for 
those drugs.  Therefore, to ensure the appropriateness of Medicare              
Part B drug payments and to be consistent with the congressional 
mandate, we recommend that CMS:  
Develop a process to adjust payment amounts based on the results of OIGs 
pricing comparisons  
In developing a process to adjust payments, CMS could specify the 
circumstances under which it will make adjustments, the time period(s) 
to which the adjustments would apply, and the length of time the 
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  14   
 
   
R R EE CC OO MM MM EE NN DD AA TT II OO NN SS   
adjustments would remain in effect.  CMS may also wish to conduct 
additional analysis of the differences between ASPs and AMPs and the 
quality of the data reported by manufacturers.     
CMS should also determine whether the current 5-percent threshold is 
appropriate for initiating price substitution.  Pursuant to section 
1847A(d)(3)(B)(ii) of the Act, CMS has authority to adjust the threshold 
percentage used in OIGs comparisons of ASPs and AMPs.  In its 
comments on previous OIG pricing comparisons, CMS stressed the 
importance of proceeding cautiously while it seeks to further 
understand the appropriate threshold percentage for price 
substitutions.  However, CMS has yet to make any changes to the 
threshold percentage, and it is unclear what steps, if any, CMS has 
taken to determine a more appropriate cutoff.  If CMS believes that               
5 percent is not the most appropriate threshold for price substitution, it 
should adjust the percentage as necessary.   
Lower Medicare reimbursement amounts for drugs with ASPs that meet the 
5-percent threshold specified in section 1847A(d)(3) of the Act 
CMS may want to focus specifically on those drugs that, according to 
OIGs yearend review, met the 5-percent threshold in multiple quarters.   
Continue to explore and undertake a range of efforts to ensure that drug 
manufacturers are submitting the required AMP data in a timely manner, 
including collaborating with OIG about administrative remedies for 
noncompliance                                                                                                                        
We recognize that CMS has taken steps to ensure that quarterly AMP 
data are reported by manufacturers in a timely manner.  If and when CMS 
is permitted to publicly disclose AMP data, the resulting transparency 
may lead to more timely and accurate reporting of pricing data.  In the 
meantime, CMS should continue to evaluate and pursue appropriate 
actions against those manufacturers that fail to submit required data by 
the statutory deadline.  This may include termination actions and 
referrals to OIG for the pursuit of civil monetary penalty actions.  In doing 
so, CMS could focus on those manufacturers with either a relatively large 
percentage of missing AMP data or manufacturers that consistently fail to 
submit AMP data by the statutory deadline.   
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
In response to OIGs report, CMS conducted additional analysis and 
noted that it is difficult to identify a causal relationship that explains 
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  15   
 
   
R E C O M M E N D A T I O N S  
why the ASP for a particular HCPCS code would exceed the AMP by               
5 percent or more.  According to CMS, the OIG report and CMS analysis 
demonstrate the complexity of making price substitutions.   
CMS concurred with our first recommendation to develop a process for 
adjusting payment amounts based on the results of OIGs pricing 
comparisons.  However, CMS does not currently concur with our second 
recommendation to lower Medicare reimbursement for drugs that meet 
the 5-percent threshold.  CMS stated that in light of the drug price 
volatility identified by OIG, making price substitutions could have a 
significant negative impact on both providers and beneficiaries.  CMS 
expressed a desire to better understand differences between ASPs and 
AMPs, engage stakeholders affected by potential price substitutions, 
and provide adequate notice when developing price substitution policies.  
With respect to the threshold percentage for price substitutions, CMS 
noted that it does not have sufficient data to suggest a more appropriate 
level and will therefore continue the 5-percent threshold into 2010.   
Finally, CMS concurred with our third recommendation to ensure that 
manufacturers submit timely AMP data and outlined several steps that 
it already takes to address this issue, including prompting 
noncompliant manufacturers to report outstanding prices and referring 
noncompliant manufacturers to OIG.  CMS stated that it will continue 
to work with OIG and supports appropriate enforcement action against 
manufacturers that fail to comply with reporting requirements. 
Beginning with its comments on OIGs July 2007 pricing comparison, 
CMS has repeatedly emphasized the complexity of substituting 
payment amounts and expressed a desire to better understand 
differences between ASPs and AMPs with the intent of developing a 
price substitution policy.  Although OIG has issued 14 reports 
demonstrating differences between ASPs and AMPs over the past                   
5 years, CMS has yet to use our data to propose or evaluate any 
concrete strategies for making price substitutions.   
OIG acknowledges that CMS must make complex decisions regarding 
price substitutions and that ASPs and AMPs will inevitably fluctuate to 
some extent; however, OIG has not identified significant volatility in the 
ASPs and AMPs for 33 of the 80 HCPCS codes identified in this report.  
Rather, these codes have repeatedly been identified as having ASPs at 
or above the 5-percent threshold.  Therefore, consistent with statutory 
requirements, we continue to recommend that Medicare reimbursement 
amounts for eligible codes be lowered, particularly for codes that meet 
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  16   
 
   
R E C O M M E N D A T I O N S  
the threshold percentage in multiple quarters.  OIG will continue to 
assist CMS, both in developing a timely and effective price substitution 
policy and in taking appropriate action against manufacturers that fail 
to comply with AMP-reporting requirements. 
For the full text of CMSs comments, see Appendix F. 
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  17   
 
   
 AAA PPP PPP EEE NNN DDD III XXX     ~~~     AAA    
Equations Used by the Centers for Medicare & Medicaid Services To 
Calculate Volume-Weighted Average Sales Prices  
In the following equations, a billing unit is defined as the number of Healthcare 
Common Procedure Coding System (HCPCS) code units that are contained in a 
national drug code (NDC). 
 
1.  The Revised Equation Used by the Centers for Medicare & Medicaid  
Services (CMS) To Calculate Volume-Weighted Average Sales Prices (ASP) 
Beginning April 1, 2008 
 
 
  Volume-Weighted ASP   Sum of  (ASP for NDC x  Number of NDCs Sold) 
=  
for the Billing Unit of  
  Sum of   (Number of NDCs Sold x Billing Units in NDC) 
 HCPCS Code 
 
 
2.  The Equation Used by CMS To Calculate Volume-Weighted ASPs Before                       
April 1, 2008 
 
  ASP for NDC 
x  Number of NDCs Sold 
  Volume-Weighted ASP   Sum of 
Billing Units in NDC 
for the Billing Unit of  
=  
 HCPCS Code 
Sum of Number of NDCs Sold  
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  18   
 
   
 A P P E N D I X   ~   B  
Previous Office of Inspector General Reports Comparing Average Sales 
Prices and Average Manufacturer Prices 
 
  Monitoring Medicare Part B Drug Prices:  A Comparison of Average Sales 
Prices to Average Manufacturer Prices, OEI-03-04-00430, April 2006 
 
  Comparison of Fourth-Quarter 2005 Average Sales Prices to Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Second 
Quarter 2006, OEI-03-06-00370, July 2006 
 
  Comparison of Third-Quarter 2006 Average Sales Prices to Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for First Quarter 
2007, OEI-03-07-00140, July 2007 
 
  Comparison of First-Quarter 2007 Average Sales Prices to Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Third Quarter 
2007, OEI-03-07-00530, September 2007 
 
  Comparison of Second-Quarter 2007 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Fourth 
Quarter 2007, OEI-03-08-00010, December 2007 
 
  Comparison of Third-Quarter 2007 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for First Quarter 
2008, OEI-03-08-00130, May 2008 
 
  Comparison of Fourth-Quarter 2007 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Second 
Quarter 2008, OEI-03-08-00340, August 2008 
 
  Comparison of Average Sales Prices and Average Manufacturer Prices:  An 
Overview of 2007, OEI-03-08-00450, December 2008 
 
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  19   
 
   
A P P E N D I X   ~   B  
  Comparison of First-Quarter 2008 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Third Quarter 
2008, OEI-03-08-00530, December 2008 
 
  Comparison of Second-Quarter 2008 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Fourth 
Quarter 2008, OEI-03-09-00050, February 2009 
 
  Comparison of Third-Quarter 2008 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for First Quarter 
2009, OEI-03-09-00150, April 2009 
 
  Comparison of Fourth-Quarter 2008 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Second 
Quarter 2009, OEI-03-09-00340, August 2009 
 
  Comparison of First-Quarter 2009 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Third Quarter 
2009, OEI-03-09-00490, August 2009 
 
  Comparison of Second-Quarter 2009 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Fourth 
Quarter 2009, OEI-03-09-00640, January 2010 
 
 
 
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  20   
 
   
I N TA RPO PD EU NC TDI IOXN    ~   C  
Detailed Methodology for Calculating Volume-Weighted Average 
Manufacturer Prices for 2008 
Before computing quarterly volume-weighted average manufacturer 
prices (AMP) for 2008, it was necessary to identify the national drug 
codes (NDC) that should be included in each quarters calculations. 
Prior to 2008, the Office of Inspector General (OIG) performed pricing 
comparisons for only those Healthcare Common Procedure Coding 
System (HCPCS) codes with complete AMP data (i.e., AMP data for 
every NDC used by CMS to calculate the Medicare reimbursement 
amount).  As of the first quarter of 2008, we began additionally 
examining HCPCS codes with only partial AMP data (i.e., HCPCS codes 
with AMP data for some, but not all, of the NDCs used to establish 
Medicare reimbursement).26 
Calculating Converted Average Manufacturer Prices  
An AMP is reported for the lowest identifiable quantity of the drug 
contained in the NDC (e.g., 1 milligram, 1 milliliter, 1 tablet, 1 capsule).  
In contrast, an ASP is reported for the entire amount of the drug 
contained in the NDC (e.g., for 50 milliliters, for 100 tablets).  To ensure 
that AMPs would be comparable to ASPs, it was necessary to convert 
the AMPs for each NDC in each quarter so that they represented the 
total amount of the drug contained in that NDC.   
To calculate converted AMPs for the NDCs included in each of our 
quarterly reports, we multiplied the AMP by the total amount of the 
drug contained in each NDC, as identified by sources, such as the CMS 
crosswalk file, manufacturer Web sites, the Red Book, and the Food 
and Drug Administrations NDC directory.   
For some NDCs, we could not successfully identify the amount of the 
drug reflected by the ASP and therefore could not calculate a converted 
AMP.  The extent to which NDCs with problematic AMP conversions 
affected our analysis differed depending on whether the associated 
HCPCS code had complete AMP data or partial AMP data. 
 
26 We excluded NDCs without AMPs when calculating volume-weighted AMPs for HCPCS 
codes with partial AMP data; however, the corresponding ASPs were not excluded from the 
volume-weighted ASPs as determined by CMS.  Volume-weighted ASPs remained the same, 
regardless of the availability of AMP data.   
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  21   
 
   
A P P E N D I X   ~   C  
HCPCS codes with complete AMP data.  If a HCPCS code with complete 
AMP data had one or more NDCs with a problematic AMP conversion, 
we automatically excluded that HCPCS code from our pricing 
comparison for the quarter.   
HCPCS codes with partial AMP data.  If a HCPCS code with partial AMP 
data had one or more NDCs with a problematic AMP conversion, we did 
not automatically exclude that HCPCS code from our pricing 
comparison.  Rather, we removed only the NDCs with problematic AMP 
conversions.  However, if all of the NDCs associated with the HCPCS 
code had problematic AMP conversions, then we dropped the HCPCS 
code from that quarters analysis. 
Calculating Volume-Weighted Average Manufacturer Prices 
Using the remaining NDCs with successful AMP conversions, we then 
calculated a volume-weighted AMP for each of the corresponding 
HCPCS codes, consistent with the revised methodology for calculating 
volume-weighted ASPs. 
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  22   
 
   
 A P P E N D I X   ~   D  
Detailed Methodology for Estimating Savings for Drug Codes That Met the                      
5-Percent Threshold in 2008 
If the average sales price (ASP) for a Healthcare Common Procedure 
Coding System (HCPCS) code exceeded the average manufacturer price 
(AMP) by at least 5 percent in any quarter of 2008, we estimated the 
savings associated with lowering reimbursement for that code to                    
103 percent of the AMP.   
There is a two-quarter lag between the sales period for which ASPs are 
reported and the effective date of the reimbursement amounts.  As a 
result of this lag period, estimated savings for HCPCS codes that met 
the 5-percent threshold during the first through fourth quarters of 2008 
were applied to the third quarter of 2008 through the second quarter of 
2009, respectively.  We estimated savings only for the time period(s) 
during which a HCPCS code met the 5-percent threshold.   
For each of the HCPCS codes that met the 5-percent threshold in a 
given quarter of 2008, we calculated 103 percent of the volume-weighted 
AMP and subtracted this amount from the reimbursement amount for 
the HCPCS code, which is equal to 106 percent of the volume-weighted 
ASP.  To estimate the financial effect of lowering reimbursement for the 
applicable quarter, we then multiplied the difference by one-fourth of 
the number of services that were allowed by Medicare for each HCPCS 
code in 2008, as reported in CMSs Part B Analytics and Reports 
(PBAR).27  This estimate assumes that the number of services that were 
allowed by Medicare in 2008 remained consistent from one quarter to 
the next and that there were no significant changes in utilization 
between 2008 and 2009. 
 
 
 
 
27 The PBAR data for 2008 were downloaded on July 8, 2009.     
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  23   
 
   
 AA PP PP EE NN DD II XX   ~~    EE   
Eighty Drug Codes With Average Sales Prices That Exceeded Average 
Manufacturer Prices by at Least 5 Percent in 2008  
 
Quarter(s) in Which the Codes Met the 5-Percent Threshold  
Drug           First   Second   Third    Fourth  
Code  Quarter    Quarter  Quarter    Quarter   
J1364  X  X  X  X 
Q0169  X  X  X  X 
J0560  X*  X*  X*  X* 
J1190  X*  X*  X*  X* 
J2310  X*  X*  X*  X* 
J9260  X*  X  X*   
J0670  X*  X*  X*   
J2690  X  X    X 
J2760  X  X    X 
J2792  X    X  X 
J0170  X*    X*  X* 
J8515    X  X  X 
J9225    X  X  X 
J1642    X*  X*  X* 
J9185    X*  X*  X 
J2700  X  X*     
J9250  X*  X     
J1626  X*  X*     
J9000  X*  X*     
J1020  X    X   
J0278  X    X*   
J9060  X*    X*   
J9062  X*    X*   
J7506    X*  X*   
J9040    X*  X   
J9370    X*  X   
J9375    X*  X   
J9380    X*  X   
J9340    X    X 
J2765      X  X 
Q0179      X*  X* 
Q9965      X*  X* 
Q9966      X*  X* 
J0300  X       
J1457  X       
continued on next page
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  24   
 
   
A P P E N D I X   ~   E  
Eighty Drug Codes With Average Sales Prices That Exceeded Average 
Manufacturer Prices by at Least 5 Percent in 2008  
Quarter(s) in Which the Codes Met the 5-Percent Threshold 
Drug           First   Second   Third    Fourth  
Code  Quarter    Quarter  Quarter    Quarter   
J1955  X       
J3315  X       
J7310  X       
J9202  X       
J9320  X       
Q0166  X       
J0610  X*       
J1631  X*       
J1940  X*       
J2430  X*       
J2680  X*       
J2790  X*       
J3370  X*       
J3410  X*       
J3475  X*       
J9027  X*       
J9181  X*       
J9182  X*       
J9293  X*       
Q0164  X*       
Q0168    X     
90376    X*     
J0500    X*     
J7509    X*     
J9130    X*     
J9150    X*     
Q0175    X*     
Q0176    X*     
J0330      X   
J0720      X   
J7500      X   
J7631      X   
J0640      X*   
J3250      X*   
J7612      X*   
continued on next page
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  25   
 
   
A P P E N D I X   ~   E  
Eighty Drug Codes With Average Sales Prices That Exceeded Average 
Manufacturer Prices by at Least 5 Percent in 2008  
Quarter(s) in Which the Codes Met the 5-Percent Threshold 
Drug           First   Second   Third    Fourth  
Code  Quarter    Quarter  Quarter    Quarter   
J7614      X*   
J9045      X*   
J9390      X*   
J0475        X 
J2597        X 
J2820        X 
J7501        X 
J7611        X* 
J7644        X* 
Q9967        X* 
* These codes met the 5-percent threshold during the specified quarter based on partial AMP data. 
Source:  Office of Inspector Generals analysis of ASP and AMP data from 2008. 
 
 
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  26  x 
A  P  PEN  D  F 
Agency Comments 
+.~....~ 
{,:~ 	
DEPARTMENT OF HEALm.. HUMAN SERVICES  Centers for Medicare & Medicaid Services 
Administrator 
Washington. DC 20201 
DATE:  DEC  1 1 2.00~ 
TO: 	 Daniel R. Levinson 

Inspector General 

FROM: 	 Charlene Frizzera 

Acting Administrator 

SUBJECT: 	 Office of Inspector General's Draft Report: "Comparison of Average Sales Prices 
and Average Manufacturer Prices:  An Overview of2008" (OEI-03-09-00350) 
The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to review and 
comment on the Office of Inspector General's (OIG) draft report entitled, "Comparison of 
Average Sales Prices and Average Manufacturer Prices: An Overview of2008." We appreciate 
the OIG's continuing efforts to examine payment made under the Average Sales Price (ASP) 
methodology. The OIG report presents finqings from a comparison of Medicare payment 
amounts to an OIG-calculated Average Manufacturer Price (AMP) payment amount for certain 
drugs throughout 2008. 
The OIG is completing this report pursuant to Section 1847A(d) of the Social Security Act (the 
Act), which requires a comparison ofASP to AMP and (if any) Widely Available Market Price 
(W AMP) to determine whether ASP exceeds AMP by more than a specified threshold 
percentage, currently set at 5 percent. 
A basic analysis oftheOIG's findings is useful when considering the potential program 
implications. Reviewing the data contained in the OIG report, we note the following: 
 	 Of the 80 Healthcare Common Procedure Coding System (HCPCS) codes for which ASP 
exceeded AMP by the 5 percent threshold in 2008: 
o 	 5 codes (6 percent) exceeded the threshold in all four quarters; 
o 	 10 (13 percent) codes exceeded the threshold in three of the four quarters; 
o 	 18 (23 percent) codes exceeded the threshold in two of the four quarters; and, 
o 	 47 (59 percent) codes exceeded the threshold in one ofthe four quarters. 
  Of the 33 codes that exceeded the 5 percent threshold for two or more quarters in 2008: 
o 	 None had total allowed charges greater than $16 million; 
o 	 None are among the top 50 Part B paid physician-administered drugs, as 
determined by 2008 Medicare allowed charges; 
o 	 Total spending on these 33 HCPC'S codes was slightly more than $70 million, or 
about 7 percent of al\ Part B physician-administered drug spending. 
oE1-03 -090 0 3 5 0  COMPARISON OF ASPs AND AMPs:  AN OVERVIEW OF 2008  27    
  
     
AA PP PP EE NN DD II XX    ~~    FF   
 
OOEEII--0033--0099--0000335500      CCOOMMPPAARRIISSOONN  OOFF  AASSPPSS  AANNDD  AAMMPPSS::    AANN  OOVVEERRVVIIEEWW  OOFF  22000088   2288    
 
   
A P P E N D I X   ~   F  
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  29   
 
   
 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 of the Medicare and 
Medicaid Prescription Drug Unit.   
Lauren McNulty served as the team leader for this study.  Central office 
staff who contributed to this report include Kevin Manley and Natasha 
Franklin.  
 
OEI-03-09-00350    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2008  30   
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.