DEPARTMENT OF HEALTH & HUMAN SERVICES 	 Office of Inspector General 
Washington. D.C. 20201 
JUL 012010 
TO: 	 Marilyn Tavemler 
Acting Administrator and Chief Operating Officer 
Centers for Medicare & Medicaid Services 
FROM:  Stuart Wright, 
Deputy Inspector General 
for Evaluation and Inspections 
SUBJECT: 	 Memorandum Report:  Comparison ofFourth-Quarter 2009 Average Sales Prices 
and Average Manufacturer Prices:  Impact on Medicare Reimbursementfor 
Second Quarter 2010, OEI-03-10-00350 
This review was conducted in accordance with the statutory mandate for the Office of Inspector 
General (OIG) to review average sales prices (ASP) and average manufacturer prices (AMP) for 
Medicare Part B prescription drugs and identify ASPs that exceed AMPs by at least 
5 percent.  The review also determined the impact of lowering reimbursement amounts for drugs 
that meet the 5-percent threshold. 
Since the advent of the ASP reimbursement methodology in 2005, OIG has issued 16 reports 
comparing ASPs to AMPs. This latest pricing comparison examines drugs that met the 5-percent 
threshold based on either complete or partial AMP data in the fourth quarter of2009.  Of the 
328 drugs with complete AMP data in that quarter, 11 met the 5-percent threshold.  Seven of 
these eleven drugs were also eligible for price adjustments in one or more of the previous four 
quarters'.  If reimbursement amounts for all 11 drugs had been based on 103 percent ofthe 
AMPs, we estimate that Medicare expenditures would have been reduced by almost $1 million 
in the second quarter of2010.  Ofthe 137 drugs with only partial AMP data in the fourth quarter 
of2009, 24 had ASPs that exceeded the AMPs by at least 5 percent.  Eleven of these twenty-four 
drugs also met the 5-percent threshold in at least one of the previous four quarters.  We estimate 
that Medicare expenditures would have been reduced by $3.4 million during the second quarter 
of2010 ifreimbursement amounts for all 24 drugs had been based on 103 percent of the AMPs. 
We could not perform pricing comparisons for an additional 62 drugs because none ofthe drug 
products used to establish Medicare reimbursement had corresponding AMP data. 
Manufacturers for 16 percent ofthose drug products had Medicaid drug rebate agreements and 
were therefore generally required to submit AMPs.  OIG will continue to work with the Centers 
for Medicare & Medicaid Services (CMS) to evaluate and pursue appropriate actions against 
those manufacturers that fail to submit required data. 
OEI-03-10-00350 	 Comparison of Fourth-Quarter 2009 ASPs and AMPs  Page 2  Marilyn Tavenner 
 
 
BACKGROUND 
 
Section 1847A(d)(2)(B) of the Social Security Act (the Act) mandates that 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 & 
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 
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 prescription drugs, health care providers 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 the amount of drug represented by the HCPCS code but 
does not specify manufacturer or package size information.   
 
Medicare and its beneficiaries spent over $11 billion for Part B drugs in 2009.2  Although 
Medicare paid for nearly 800 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 2009, 
64 codes accounted for 90 percent of the expenditures for Part B drugs, with only 13 of these 
drugs representing the majority (52 percent) of total Part B drug expenditures. 
 
Reimbursement Methodology for Part B Drugs and Biologicals  
Medicare Part B pays for most covered drugs using a reimbursement methodology based on 
ASPs.3  Section 1847A(c) of the Act, as added by the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003, P.L. 108-173, defines an ASP as a manufacturers sales of a 
                                                 
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. 
2 Medicare expenditures for Part B drugs in 2009 were calculated using CMSs Part B Analytics and Reports 
(PBAR).  The PBAR data for 2009 were downloaded in March 2010. 
3 Several Part B drugs, including certain vaccines and blood products, are not paid under the ASP methodology.  
OEI-03-10-00350                                                             Comparison of Fourth-Quarter 2009 ASPs and AMPs  
  Page 3  Marilyn Tavenner 
 
 
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.4  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.5, 6 
 
Manufacturers report ASPs by 11-digit national drug codes (NDC), each of which identifies a 
specific manufacturer, product, and package size.  Manufacturers must provide CMS with the 
ASP and volume of sales for each NDC on a quarterly basis, with submissions due 30 days after 
the close of each quarter.7 
 
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 
Second-quarter 2010 Medicare payments for most covered drug codes were based on                 
fourth-quarter 2009 ASP submissions from manufacturers, which were volume-weighted using 
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.8  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.   
 
Under the ASP pricing methodology, the Medicare allowance for most Part B drugs is equal to 
106 percent of the volume-weighted ASP for the HCPCS code.  Medicare beneficiaries are 
responsible for 20 percent of this amount in the form of coinsurance.   
                                                 
4 Section 1847A(c)(3) of the Act.  
5 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. 
6 Section 1847A(c)(2) of the Act.  
7 Section 1927(b)(3) of the Act.  
8 The equation that CMS currently uses to calculate volume-weighted ASPs is described in section 1847A(b)(6) of 
the Act.  It is also provided in Appendix A.   
 
OEI-03-10-00350                                                             Comparison of Fourth-Quarter 2009 ASPs and AMPs  
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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 AMPs for each of their NDCs.  As further explained in regulation, manufacturers 
are required to submit AMPs within 30 days after the end of each month and 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.10  The AMP is generally calculated as a weighted average of prices for 
all of a manufacturers package sizes of a drug and is reported for the lowest identifiable quantity 
of the drug (e.g., 1 milliliter, 1 tablet, 1 capsule).11   
 
If a manufacturer fails to provide AMP data in a timely manner, civil monetary penalties may be 
imposed.12  In addition, pursuant to section 1927(b)(4)(B)(i) of the Act, the Secretary may 
terminate a rebate agreement for violation of the requirements of the agreement or other good 
cause shown.  CMS has terminated rebate agreements with a number of manufacturers for 
failure to report drug-pricing data as required by section 1927 of the Act.  For the purposes of 
evaluating potential civil monetary penalty actions, CMS has also provided OIG with 
information about manufacturers that failed to submit drug-pricing data.  
 
Office of Inspector Generals Monitoring of Average Sales Prices and Average 
Manufacturer Prices 
In accordance with its statutory mandate, OIG has issued 14 quarterly pricing comparisons since 
the ASP reimbursement methodology for Part B drugs was implemented in January 2005.  In 
addition, OIG completed two annual overviews of ASPs and AMPs, which examined data across 
all four quarters of 2007 and 2008, respectively.  A list of all 16 reports is provided in               
Appendix B.   
 
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.13  In commenting on OIGs reports, CMS has expressed a desire to both better 
                                                 
9 42 CFR  447.510.   
10 Effective October 2010, the Patient Protection and Affordable Care Act, P.L. 111-148, changes the definition of 
AMP in a way that is not relevant for the purposes of this report.  However, it may affect pricing comparisons 
between ASPs and AMPs for the fourth quarter of 2010 and beyond. 
11 As specified in 42 CFR  447.504(i), a quarterly AMP is calculated as a weighted average of monthly AMPs in 
the quarter.  However, the manufacturer must adjust the AMP for a quarter if cumulative discounts, rebates, or other 
arrangements subsequently adjust the prices actually realized.    
12 Pursuant to section 1927(b)(3)(C) of the Act. 
13 See CMS comments to OEI-03-08-00450, December 2008; and OEI-03-09-00350, February 2010. 
OEI-03-10-00350                                                             Comparison of Fourth-Quarter 2009 ASPs and AMPs  
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understand fluctuating differences between ASPs and AMPs and engage stakeholders, with the 
intent of developing a process for making price substitutions.14  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.   
 
OIG will continue to meet its statutory mandate by issuing reports based on quarterly pricing 
comparisons, along with annual overviews to summarize findings across each calendar year. 
 
METHODOLOGY 
 
We obtained a file from CMS containing NDC-level ASP data from the fourth quarter of 2009, 
which were used to establish Part B drug reimbursement amounts for the second quarter of 2010.  
This file also includes information that crosswalks NDCs to their corresponding HCPCS codes.  
Both the ASP data and the crosswalk data were current as of April 5, 2010.  We also obtained 
AMP data from CMS for the fourth quarter of 2009, which were current as of                            
February 3, 2010. 
 
Analysis of Average Sales Price Data From the Fourth Quarter of 2009 
As mentioned previously, Medicare does not base reimbursement for covered drugs on NDCs; 
instead, it uses HCPCS codes.  Therefore, CMS uses 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 of April 2010, CMS had established prices for 533 HCPCS codes based on the ASP 
reimbursement methodology mandated by section 1847A(b)(6) of the Act.  Reimbursement 
amounts for the 533 HCPCS codes were based on ASP data for 3,218 NDCs.   
 
Analysis of Average Manufacturer Price Data From the Fourth Quarter of 2009 
To ensure that the broadest range of drug codes is subject to OIGs pricing comparisons, we 
divided HCPCS codes into the following three groups:                       
 
(1) HCPCS codes with complete AMP datai.e., HCPCS codes with AMP data for 
every NDC that CMS used in its calculation of volume-weighted ASPs; 
 
(2) HCPCS codes with partial AMP datai.e., HCPCS codes with AMP data for only 
some of the NDCs that CMS used in its calculation of volume-weighted ASPs; and   
 
(3) HCPCS codes with no AMP datai.e., HCPCS codes with no AMP data for any of 
the NDCs that CMS used in its calculation of volume-weighted ASPs.   
 
                                                 
14 See CMS comments to OEI-03-07-00140, July 2007; OEI-03-08-00450, December 2008; and OEI-03-09-00350, 
February 2010. 
OEI-03-10-00350                                                             Comparison of Fourth-Quarter 2009 ASPs and AMPs  
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As previously noted, the AMP for each NDC is reported for the lowest identifiable quantity of 
the drug contained in that NDC (e.g., 1 milliliter, 1 tablet, 1 capsule).  In contrast, the ASP is 
reported for the entire amount of the drug contained in the NDC (e.g., 50 milliliters, 100 tablets).  
To ensure that the AMP would be comparable to the ASP, it was necessary to convert the AMP 
for each NDC so that it represented the total amount of the drug contained in that NDC.   
 
To calculate converted AMPs for NDCs in the first and second groups, 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.15  For certain NDCs, we were unable to successfully identify 
the amount of the drug reflected by the ASP and therefore could not calculate a converted AMP.  
Because of these unsuccessful AMP conversions, a total of six HCPCS codes were removed 
from our analysis.  
 
Using NDCs with successful AMP conversions, we then calculated a volume-weighted AMP for 
each of the corresponding HCPCS codes, consistent with CMSs methodology for calculating 
volume-weighted ASPs.  Appendix C provides a more detailed description of the methods we 
used to both convert AMPs and calculate volume-weighted AMPs.  Table 1 provides the final 
number of HCPCS codes and NDCs included in our analysis after we removed NDCs with either 
no AMP data or unsuccessful AMP conversions.   
 
Table 1:  Number of Drug Codes and NDCs Included in OIGs Pricing Comparison 
Number of   Number of 
Availability of AMP Data for HCPCS Code 
HCPCS Codes   NDCs  
Complete AMP Data  328  1,065 
Partial AMP Data  137  1,068 
No AMP Data  62  243 
Source:  OIG analysis of fourth-quarter 2009 ASP and AMP data, 2010. 
 
Comparing Fourth-Quarter 2009 Volume-Weighted ASPs to Volume-Weighted AMPs  
For each of the HCPCS codes included in our study, we compared the volume-weighted ASP 
and AMP and determined whether the ASP for the code exceeded the AMP by at least                   
5 percent.  
 
For those HCPCS codes that met or exceeded the 5-percent threshold, we reviewed the 
associated NDCs to verify the accuracy of the billing unit information.  According to our review, 
NDCs for four codes had billing unit information in CMSs crosswalk file that may not have 
accurately reflected the number of billing units actually contained in the NDC.  Because  
volume-weighted ASPs and AMPs are calculated using this billing unit information, we could 
not be certain that the results for these codes were correct.  Therefore, we did not consider these 
four HCPCS codes as having met the 5-percent threshold.  We also excluded one additional 
                                                 
15 We did not calculate converted AMPs for NDCs in the third group because those NDCs had no AMP data. 
OEI-03-10-00350                                                             Comparison of Fourth-Quarter 2009 ASPs and AMPs  
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HCPCS code from our findings because the manufacturer of the corresponding NDC indicated to 
OIG that the AMP data were not correct.16   
  
For the remaining HCPCS codes, we then estimated the monetary impact of lowering 
reimbursement to 103 percent of the AMP.17  For each of the HCPCS codes that met the              
5-percent threshold, we calculated 103 percent of the volume-weighted AMP and subtracted this 
amount from the second-quarter 2010 reimbursement amount for the HCPCS code, which is 
equal to 106 percent of the volume-weighted ASP.  To estimate the financial effect for the 
second quarter of 2010, we then multiplied the difference by one-fourth of the number of 
services that were allowed by Medicare for each HCPCS code in 2009, as reported in the 
PBAR.18  This estimate assumes that the number of services that were allowed by Medicare in 
2009 remained consistent from one quarter to the next and that there were no significant changes 
in utilization between 2009 and 2010. 
 
Identifying Codes That Would Have Met the 5-Percent Threshold in Previous Quarters  
We determined whether codes meeting the 5-percent threshold in the fourth quarter of 2009 
would have also met the 5-percent threshold in any of the four previous quarters, dating back to 
the fourth quarter of 2008.   
 
Limitations 
We did not verify the accuracy of manufacturer-reported ASP and AMP data, nor did we verify 
the underlying methodology used by manufacturers to calculate ASPs and AMPs.  Furthermore, 
we 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 additional or 
revised pricing 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. 
 
                                                 
16 In the course of a previous report (see OEI-03-09-00350), a manufacturer notified us that the AMP data for one of 
its NDCs were incorrect for all four quarters of 2008.  The fourth-quarter 2009 AMP for that NDC was the same as 
the fourth-quarter 2008 AMP identified by the manufacturer as incorrect; therefore, we assumed that the fourth-
quarter 2009 AMP was incorrect as well. 
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 The PBAR data for 2009 were downloaded in March 2010. 
OEI-03-10-00350                                                             Comparison of Fourth-Quarter 2009 ASPs and AMPs  
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RESULTS 
 
Of the 328 Drug Codes With Complete AMP Data, Volume-Weighted ASPs for                      
11 Exceeded the Volume-Weighted AMPs by at Least 5 Percent  
Consistent with sections 1847A(d)(2)(B) and 1847A(d)(3) of the Act, OIG compared ASPs to 
AMPs to identify instances in which the ASP for a particular drug exceeded the AMP by a 
threshold of 5 percent.  In the fourth quarter of 2009, 11 of the 328 HCPCS codes with complete 
AMP data (3 percent) met this 5-percent threshold.  A list of the 11 HCPCS codes, including 
their descriptions and HCPCS dosage amounts, is presented in Appendix D.   
 
Table 2 describes the extent to which ASPs exceeded AMPs for the 11 HCPCS codes.  For one 
of the codes, the volume-weighted ASP exceeded the volume-weighted AMP by more than                          
40 percent.  
 
Table 2:  Extent to Which ASPs Exceeded AMPs for  
11 HCPCS Codes With Complete AMP Data 
Percentage by Which ASP  Number of HCPCS 
Exceeded AMP  Codes 
5.00%9.99%  7 
10.00%19.99%  3 
20.00%29.99%  0 
30.00%39.99%  0 
40.00%49.99%  1 
50.00%59.99%  0 
60.00%69.99%  0 
70.00%79.99%  0 
80.00%89.99%  0 
90.00%99.99%  0 
100% and above  0 
     Total  11 
Source:  OIG analysis of fourth-quarter 2009 ASP and AMP data, 2010. 
  
Almost two-thirds of the HCPCS codes (7 of 11) also met the 5-percent threshold in one or more 
of the previous four quarters.  Although no HCPCS codes met the 5-percent threshold in all five 
of the quarters under review, the ASPs for HCPCS code J2792 exceeded the AMPs by at least              
5 percent in four of the five quarters, and the ASPs for code J9340 exceeded the AMPs by at 
least 5 percent in three of the five quarters.  Table 3 presents a list of the seven HCPCS codes 
that were eligible for price adjustments in previous quarters. 
 
OEI-03-10-00350                                                             Comparison of Fourth-Quarter 2009 ASPs and AMPs  
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Table 3:  Seven HCPCS Codes With Complete AMP Data in the Fourth Quarter of 2009                       
That Also Met the 5-Percent Threshold in Previous Quarters  
  OIG Reports Comparing ASP and AMP 
Fourth  Third  Second  First  Fourth 
HCPCS 
Quarter  Quarter  Quarter  Quarter  Quarter 
Code 
2009  2009  2009  2009  2008 
J2792  X  X  X    X 
J9340  X  X      X 
J0210  X  X       
J1327  X  X       
J9214  X  X       
Q0166  X  X       
J0735  X    X     
 
 
Source:  OIG analysis of ASP and AMP data from the fourth quarter of 2008 through the fourth quarter of 2009.
 
Lowering reimbursement amounts for the 11 HCPCS codes to 103 percent of the AMPs would 
have reduced Medicare allowances by almost $1 million in the second quarter of 2010.  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 11 
HCPCS codes that met the 5-percent threshold specified in the Act.  If reimbursement amounts 
for these 11 codes with complete AMP data had been based on 103 percent of the AMPs during 
the second quarter of 2010, we estimate that Medicare expenditures would have been reduced by 
$909,000 in that quarter alone.19 
 
Three of the eleven HCPCS codes accounted for over 90 percent of the estimated savings.  If the 
reimbursement amounts for codes J9214, J0735 and J2792 had been based on 103 percent of the 
AMPs during the second quarter of 2010, we estimate that Medicare expenditures would have 
been reduced by $525,000, $203,000, and $101,000, respectively.   
 
Of the 137 Drug Codes With Partial AMP Data, Volume-Weighted ASPs for                                
24 Exceeded the Volume-Weighted AMPs by at Least 5 Percent  
In addition to examining HCPCS codes with complete AMP data, we examined 137 HCPCS 
codes for which only partial AMP data were available.  ASPs for 24 of these 137 HCPCS codes  
(18 percent) exceeded the AMPs by at least 5 percent in the fourth quarter of 2009.  A list of the           
24 HCPCS codes, including their descriptions and HCPCS dosage amounts, is presented in 
Appendix E.   
 
                                                 
19 This savings estimate assumes that the number of services that were allowed by Medicare in 2009 remained 
consistent from one quarter to the next and that there were no significant changes in utilization between                
2009 and 2010.  
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Table 4 describes the extent to which ASPs exceeded AMPs for the 24 HCPCS codes.  For over 
one-third of the codes (9 of 24), volume-weighted ASPs exceeded volume-weighted AMPs by  
20 percent or more.  The ASP for one of these codes was more than double the AMP. 
Table 4:  Extent to Which ASPs Exceeded AMPs for  
24 HCPCS Codes With Partial AMP Data 
Percentage by Which ASP  Number of HCPCS 
Exceeded AMP  Codes 
5.00%9.99%  11 
10.00%19.99%  4 
20.00%29.99%  2 
30.00%39.99%  3 
40.00%49.99%  0 
50.00%59.99%  1 
60.00%69.99%  1 
70.00%79.99%  1 
80.00%89.99%  0 
90.00%99.99%  0 
100% and above  1 
     Total  24 
Source:  OIG analysis of fourth-quarter 2009 ASP and AMP data, 2010. 
 
Over 45 percent of HCPCS codes with partial AMP data (11 of 24) also met the 5-percent 
threshold in one or more of the previous four quarters.  For five HCPCS codes (J0560, J1190, 
J2765, Q9965, and Q9966), ASPs exceeded AMPs by at least 5 percent in each of the five 
quarters under review, dating back to the fourth quarter of 2008.  Another two HCPCS codes met 
the 5-percent threshold in three of the five quarters under review.  Table 5 presents a list of the 
11 HCPCS codes that were eligible for price adjustments in previous quarters. 
 
OEI-03-10-00350                                                             Comparison of Fourth-Quarter 2009 ASPs and AMPs  
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Table 5:  Eleven HCPCS Codes With Partial AMP Data in the Fourth Quarter of 2009                                 
That Also Met the 5-Percent Threshold in Previous Quarters  
  OIG Reports Comparing ASP and AMP 
Fourth  Third  Second  First  Fourth 
Quarter  Quarter  Quarter  Quarter  Quarter 
HCPCS 
2009  2009  2009  2009  2008 
Code 
J0560  X*  X  X*  X*  X* 
J1190  X*  X*  X*  X*  X* 
J2765  X*  X  X  X  X 
Q9965  X*  X*  X*  X*  X* 
Q9966  X*  X*  X*  X*  X* 
J7509  X*  X*  X*     
J0170  X*      X*  X* 
J2700  X*  X*       
Q0170  X*  X*       
J9185  X*        X 
Q0179  X*        X* 
*These codes previously met the 5-percent threshold during the specified quarters based on partial AMP data. 
Source:  OIG analysis of ASP and AMP data from the fourth quarter of 2008 through the fourth quarter of 2009. 
Lowering reimbursement amounts for the 24 HCPCS codes to 103 percent of the AMPs would 
have reduced Medicare allowances by an estimated $3.4 million in the second quarter of 2010.20, 21  
Two of the twenty-four HCPCS codes accounted for almost 70 percent of the $3.4 million.  If the 
reimbursement amounts for codes Q9965 and J9185 had been based on 103 percent of the AMPs 
during the second quarter of 2010, we estimate that Medicare expenditures would have been 
reduced by $1.4 million and $869,000, respectively. 
 
Pricing Comparisons Could Not Be Performed on 62 Drug Codes Because No AMP Data 
Were Available 
For 62 HCPCS codes, OIG could not compare ASPs and AMPs because there were no AMP data 
for any of the 243 NDCs that CMS used when calculating drug reimbursement amounts for these 
codes.  In 2009, Medicare allowances for these 62 codes totaled $166 million.22 
 
Manufacturers for 16 percent of the NDCs without AMP data (39 of 243) participated in the 
Medicaid drug rebate program as of the fourth quarter of 2009 and were therefore generally  
                                                 
20 This savings estimate assumes that the number of services that were allowed by Medicare in 2009 remained 
consistent from one quarter to the next and that there were no significant changes in utilization between                
2009 and 2010.  
21 One of the twenty-four HCPCS codes was not listed in the 2009 PBAR file.  As a result, a savings estimate was 
not calculated for this code. 
22 Of the 62 HCPCS codes with no associated AMP data, 4 had no expenditures listed in the 2009 PBAR file.  As a 
result, these codes were not included in the total Medicare allowances for the year.  
OEI-03-10-00350                                                             Comparison of Fourth-Quarter 2009 ASPs and AMPs  
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required to submit AMP data for their covered outpatient drugs.23, 24, 25  The majority of these           
39 NDCs belonged to one manufacturer.  
 
Manufacturers for the remaining 204 of 243 NDCs did not participate in the Medicaid drug 
rebate program and therefore were not required to submit AMP data.   
 
CONCLUSION 
 
To monitor Medicare reimbursement amounts based on ASPs and consistent with sections 
1847A(d)(2)(B) and 1847A(d)(3) of the Act, OIG compared ASPs and AMPs to identify 
instances in which the ASP for a particular drug exceeded the AMP by at least 5 percent.  This is 
OIGs 17th report comparing ASPs and AMPs, and it examines HCPCS codes with AMP data for 
every NDC that CMS used to establish reimbursement amounts, as well as HCPCS codes with 
only partial AMP data. 
 
In the fourth quarter of 2009, we identified a total of 35 HCPCS codes that met the threshold for 
price adjustment.  Of these 35 HCPCS codes, over half were previously identified by OIG as 
having ASPs that exceeded the AMPs by at least 5 percent.  Finally, we could not compare ASPs 
and AMPs for 62 HCPCS codes because AMP data were not submitted for any of the NDCs that 
CMS used to calculate reimbursement.  Manufacturers for 16 percent of these NDCs had 
Medicaid drug rebate agreements and were therefore generally required to submit AMPs.  OIG 
will continue to work with CMS to evaluate and pursue appropriate actions against those 
manufacturers that fail to submit required data.   
 
Some of OIGs previous reports comparing ASPs and AMPs have contained recommendations, 
which we continue to support.26  We are not making additional recommendations in this report 
and, as such, are issuing the report directly in final form.  If you have comments or questions 
about this report, please provide them within 60 days.  Please refer to report number  
OEI-03-10-00350 in all correspondence. 
                                                 
23 To determine whether a manufacturer participated in the Medicaid drug rebate program, we consulted the list of 
participating drug companies posted on CMSs Web site. 
24 Although manufacturers with rebate agreements are required to submit AMP data for their covered outpatient 
drugs, there may be valid reasons why an AMP was not provided for a specific NDC in a given quarter.  For 
example, a manufacturer may not have been required to submit an AMP if the drug product had been terminated and 
there was no drug utilization during the quarter.   
25 These 39 NDCs were crosswalked to 24 HCPCS codes. 
26 For example, OEI-03-08-00450, December 2008; and OEI-03-09-00350, February 2010. 
OEI-03-10-00350                                                             Comparison of Fourth-Quarter 2009 ASPs and AMPs  
  Page 13  Marilyn Tavenner 
 
 
APPENDIX A 
 
The Equation Used by the Centers for Medicare & Medicaid Services To Calculate            
Volume-Weighted Average Sales Prices on or After April 1, 2008 
 
A volume-weighted average sales price (ASP) is calculated for the dosage amount associated with 
the Healthcare Common Procedure Coding System (HCPCS) code.  In the following equation, the 
number of billing units represents the number of HCPCS code doses that are contained in a 
national drug code (NDC).   
 
 
 
Volume-Weighted ASP   Sum of  (ASP for NDC * Number of NDCs Sold) 
 
for Dosage Amount       =     
 of HCPCS Code  Sum of   (Number of NDCs Sold * Number of Billing Units in NDC) 
 
 
 
 
 
OEI-03-10-00350                                                             Comparison of Fourth-Quarter 2009 ASPs and AMPs  
  Page 14  Marilyn Tavenner 
 
 
APPENDIX 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-03-10-00350                                                             Comparison of Fourth-Quarter 2009 ASPs and AMPs  
  Page 15  Marilyn Tavenner 
 
 
  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 
 
  Comparison of Average Sales Prices and Average Manufacturer Prices:  An Overview of 
2008, OEI-03-09-00350, February 2010 
 
  Comparison of Third-Quarter 2009 Average Sales Prices and Average Manufacturer 
Prices:  Impact on Medicare Reimbursement for First Quarter 2010, OEI-03-10-00150, 
April 2010 
OEI-03-10-00350                                                             Comparison of Fourth-Quarter 2009 ASPs and AMPs  
  Page 16  Marilyn Tavenner 
 
 
APPENDIX C 
 
Detailed Methodology for Converting and Volume-Weighting Average Manufacturer 
Prices for the Fourth Quarter of 2009 
 
Healthcare Common Procedure Coding System codes with complete average manufacturer price 
data.  Of the 533 Healthcare Common Procedure Coding System (HCPCS) codes with 
reimbursement amounts based on average sales prices (ASP), 334 had average manufacturer 
prices (AMP) for every national drug code (NDC) that the Centers for Medicare & Medicaid 
Services (CMS) used to calculate volume-weighted ASPs.  These 334 HCPCS codes represented 
1,088 NDCs.  For seven NDCs, we could not successfully identify the amount of the drug 
reflected by the ASP and therefore could not calculate a converted AMP.  These seven NDCs 
were crosswalked to six HCPCS codes.  We did not include these 6 HCPCS codes (23 NDCs) in 
our final analysis.   
 
Using the converted AMPs for the remaining 1,065 NDCs, we then calculated a volume-
weighted AMP for each of the remaining 328 HCPCS codes consistent with CMSs 
methodology for calculating volume-weighted ASPs.   
 
HCPCS codes with partial AMP data.  There were 137 HCPCS codes with AMP data for only 
some of the NDCs that CMS used in its calculation of volume-weighted ASPs.  These                 
137 HCPCS codes represented a total of 1,887 NDCs.  AMP data were either missing or 
unavailable for 814 of these NDCs, which were then excluded from our calculation of  
volume-weighted AMPs.27   
 
We calculated converted AMPs for each of the remaining 1,073 NDCs.  For 5 of the                  
1,073 NDCs, we could not successfully identify the amount of the drug reflected by the ASP and 
therefore could not calculate a converted AMP.  We removed these 5 NDCs from our analysis.28   
 
Using the converted AMPs for the remaining 1,068 NDCs, we then calculated a                  
volume-weighted AMP for each of the 137 HCPCS codes consistent with CMSs methodology 
for calculating volume-weighted ASPs.   
 
HCPCS codes with no AMP data.  For 62 HCPCS codes, there were no AMP data for any of the 
NDCs that CMS used in its calculation of volume-weighted ASPs.  These 62 HCPCS codes 
represented 243 NDCs.   
                                                 
27 Although AMP data for these 814 NDCs were excluded from our calculation of volume-weighted AMPs, 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.   
28 Although we removed NDCs with problematic AMP conversions, we did not remove the corresponding HCPCS 
codes, provided that other NDCs for those drug codes had usable AMP data.  This differs from our analysis of 
HCPCS codes with complete AMP data, in which we removed not only the NDCs with problematic AMP 
conversions, but also the corresponding HCPCS codes. 
OEI-03-10-00350                                                             Comparison of Fourth-Quarter 2009 ASPs and AMPs  
  Page 17  Marilyn Tavenner 
 
 
APPENDIX D 
 
Eleven Drug Codes With Complete Average Manufacturer Price Data That Met the              
5-Percent Threshold in the Fourth Quarter of 2009 
 
Drug            
Code  Short Description  Drug Code Dosage 
J0210  Methyldopate HCl injection  250 mg 
J0735  Clonidine HCl  1 mg 
J1327  Eptifibatide injection  5 mg 
J2675  Progesterone injection  50 mg 
J2792  Rho(D) immune globulin  100 units 
J9214  Interferon alfa-2b injection  1 million units 
J9280  Mitomycin injection  5 mg 
J9290  Mitomycin injection  20 mg 
J9291  Mitomycin injection  40 mg 
J9340  Thiotepa injection  15 mg 
Q0166  Granisetron HCl oral  1 mg 
Source:  Office of Inspector General analysis of fourth-quarter 2009 average sales price and average manufacturer 
price data, 2010. 
  mg = milligrams. 
OEI-03-10-00350                                                             Comparison of Fourth-Quarter 2009 ASPs and AMPs  
  Page 18  Marilyn Tavenner 
 
 
APPENDIX E 
 
Twenty-four Drug Codes With Partial Average Manufacturer Price Data That Met the                     
5-Percent Threshold in the Fourth Quarter of 2009 
 
Drug              
Code  Short Description  Drug Code Dosage 
90376  Rabies ig, heat treated  150 units 
90586  Bcg vaccine, intravesical  1 each 
J0170  Adrenalin epinephrin injection  1 mL 
J0461  Atropine sulfate injection  0.3 mg 
J0560  Penicillin g benzathine injection  600,000 units 
J0592  Buprenorphine HCl  0.1 mg 
J1170  Hydromorphone injection  4 mg 
J1190  Dexrazoxane HCl injection  250 mg 
J1940  Furosemide injection  20 mg 
J2175  Meperidine HCl  100 mg 
J2360  Orphenadrine injection  60 mg 
J2700  Oxacillin sodium injection  250 mg 
J2765  Metoclopramide HCl injection  10 mg 
J3010  Fentanyl citrate injection  0.1 mg 
J7509  Methylprednisolone oral  4 mg 
J9031  Bcg vaccine live, intravesical  1 each 
J9100  Cytarabine HCl injection  100 mg 
J9185  Fludarabine phosphate injection  50 mg 
J9250  Methotrexate sodium injection  5 mg 
J9260  Methotrexate sodium injection  50 mg 
Q0170  Promethazine HCl  25 mg 
Q0179  Ondansetron HCl oral  8 mg 
Q9965  Low osmolar contrast material,100199 mg/ml iodine  1 mL 
Q9966  Low osmolar contrast material, 200299 mg/ml iodine  1 mL 
Source:  Office of Inspector General analysis of fourth-quarter 2009 average sales price and average manufacturer 
price data, 2010. 
 
mg = milligrams; mL = milliliters
OEI-03-10-00350                                                             Comparison of Fourth-Quarter 2009 ASPs and AMPs