U.S. Department of Health and Human Services 
Office of Inspector General
 
Issue Brief 
   
August 2023, OEI-03-23-00120 
 
Medicare Part B Drug Payments: Impact of Price Substitutions 
Based on 2021 Average Sales Prices 
 
Key Takeaways                       Why This Matters 
Medicare Part B annually spends billions of dollars to 
Total Medicare Savings, 
cover a limited number of outpatient prescription 
2013-2021 
drugs.  To safeguard Medicare and its enrollees from 
excessive payment amounts, Congress established a 
Since 2013, Medicare and its 
enrollees have saved  mechanism for monitoring market prices, and the 
$73.4 million as a result of  Centers for Medicare & Medicaid Services (CMS) 
CMSs price-substitution policy  implemented a price-substitution policy that results in 
for Part B-covered drugs.  lower costs for important, lifesaving drugs covered by 
Medicare Part B. 
When Congress established average sales prices 
(ASPs) as the basis for reimbursement for 
Medicare Part B drugs, it also provided a 
Medicare Savings 
mechanism for monitoring market prices and 
for 2021 
limiting potentially excessive payment amounts.  
Generally, Part B-covered drugs are those that are 
CMS lowered Medicare 
payment amounts for  injected or infused in physicians offices or outpatient 
13 drugs, resulting in  settings.  The Social Security Act (the Act) mandates 
$273 thousand in savings.  that our office compare ASPs with average 
manufacturer prices (AMPs).1  If the Office of 
Inspector General (OIG) finds that the ASP for a drug 
exceeds the AMP by 5 percent, the Act directs 
the Secretary of Health and Human Services 
to substitute the ASP-based payment amount 
Unrealized Medicare   with a lower calculated rate.2  Through 
Savings for 2021  regulation, CMS stated that it would make this 
  substitution only if the ASP for a drug exceeds the 
Medicare and its enrollees 
AMP by 5 percent in the two previous consecutive 
could realize an additional 
quarters or three of the previous four quarters.3 
$889 thousand in Medicare 
savings if CMS expanded the  This issue brief is one in a series of annual reports
price-substitution criteria. 
produced since CMS implemented the 
price-substitution policy in 2013that quantifies the 
savings to Medicare and its beneficiaries that result 
from CMSs price-substitution policy.  
Medicare Part B Drug Payments: Impact of Price Substitutions Based on 2021 Average Sales Prices 
OEI-03-23-00120  What OIG Did 
This issue brief quantifies the savings to Medicare and its enrollees that are a direct result of 
CMSs price-substitution policy based on ASPs from 2021.  We calculated the difference 
between ASP-based payment and AMP-based payment for each drug with a price substitution.  
To calculate the savings based on 2021 ASP data, we then multiplied the difference by the 
Medicare utilization for each of these drugs for the time period when the price substitutions 
occurredthe fourth quarter of 2021 through the third quarter of 2022.  We also determined 
the potential savings that could result from an expansion of the price-substitution 
criteria. 
Results 
CMSs price-substitution policy saved Medicare and its enrollees $73.4 million over the 
past 10 years.   
  Since CMS instituted its price-substitution policy in 2013, CMS has implemented price 
substitutions for 68 drugs based on analysis performed by OIG.  These price 
substitutions have saved Medicare and its enrollees $73.4 million. 
CMS lowered Medicare payment amounts for 13 drugs on the basis of 2021 data.   
  CMS initiated price substitutions for 13 drugs based on 2021 data.  Price substitutions for 
these drugs saved Medicare and its enrollees $273 thousand over 1 year.  See the 
Appendix for a list of these drugs.  
CMS could have achieved even greater savings by expanding its criteria for AMP-based 
price substitutions. 
  If CMS had expanded its price-substitution criteria to include drugs that exceeded the 
5-percent threshold in a single quarter, Medicare and its enrollees could have saved up 
to an additional $889 thousand in 2021 for another 19 drugs.4   
  These 19 drugs exceeded the 5-percent threshold in at least one quarter, but they were 
not eligible for price substitutions because they did not meet CMSs requirement that 
prices exceed the threshold in the two previous consecutive quarters or three of the 
previous four quarters.5  See the Appendix for a list of these drugs.   
  Medicare and its enrollees could have saved up to an additional $48 million since 2013 if 
CMS had expanded its criteria for price substitutions. 
 
Conclusion 
Since the inception of CMSs price-substitution policy, Medicare and its enrollees have saved 
$73.4 million.  CMS could have achieved even greater savings for Medicare and its enrollees by 
expanding its criteria for AMP-based price substitutions.  Specifically, Medicare and its enrollees 
could have saved up to an additional $48 million since 2013 if CMS had expanded its criteria for 
price substitutions.   
Medicare Part B Drug Payments: Impact of Price Substitutions Based on 2021 Average Sales Prices 
OEI-03-23-00120  OIG has previously recommended that CMS expand the price-substitution criteria.  However, 
CMS has not concurred with expanding the price-substitution policy and has expressed concern 
that expanding price-substitution criteria may impede physician and enrollee access to needed 
prescriptions.6  OIG agrees that access to prescription drugs should always be considered in 
contemplating pricing policies, and OIG supports current safeguards to prevent price 
substitutions for drugs that the Food and Drug Administration has identified as being in short 
supply.  However, OIG continues to believe that CMS can achieve a better balance between 
safeguarding access to drugs and ensuring that Medicare and its enrollees do not overpay for 
drugs.  To provide greater flexibility and achieve this continued balance, any future expansion of 
the payment-substitution policy could contain a provision that would prevent a price 
substitution when there are indications that the substitution amount would be below provider 
acquisition costs. 
To more effectively limit excessive payment amounts based on ASPs and to generate greater 
savings for Medicare and its enrollees, we continue to believe, CMS should expand its 
price-substitution criteria to include some additional drugs.  For example, a more expansive 
policy might include all drugs (with complete AMP data) that exceed the 5-percent threshold in 
a single quarter.  However, CMS also could consider other approaches to expanding the 
price-substitution policy that are designed to capture more drugs that repeatedly exceed the 
threshold. 
 
Methodology 
Data Collection.  We obtained national drug code (NDC)-level ASP data and AMP data for 
Part B drugs from CMS for 2021.  In addition, we identified the drugs that had price 
substitutions based on ASP data from 2021.  We also obtained ASP-based reimbursement 
amounts and Part B drug utilization for the quarters in which price substitutions occurredi.e., 
the fourth quarter of 2021 through the third quarter of 2022.   
Data Analysis.  For each quarter of 2021, we calculated the volume-weighted AMP for drugs 
consistent with CMSs methodology for calculating volume-weighted ASPs.  We then compared 
the volume-weighted ASPs and AMPs and identified all drugs with ASPs that exceeded the AMP 
by at least 5 percent.  We also identified drugs that exceeded the 5-percent threshold but did 
not meet CMSs duration criteria for price substitutionsi.e., they did not exceed the threshold 
in the two previous consecutive quarters or three of the previous four quarters. 
To calculate the savings associated with price substitutions or potential price substitutions that 
could be gained by expanding the policy, we first reduced AMP-based and ASP-based 
reimbursement amounts (103 percent of the volume-weighted AMP and 106 percent of the 
volume-weighted ASP, respectively) by the amount required by sequestration.  The payment 
reduction required by sequestration was suspended from May 1, 2020, through March 31, 2022.  
Therefore, we did not reduce the reimbursement amounts from the fourth quarter 2021 and first 
quarter of 2022.7  However, legislation reinstated a sequestration reduction of 1 percent for the 
second quarter of 2022 and 2 percent for the third quarter of 2022.  Therefore, we reduced 
Medicare Part B Drug Payments: Impact of Price Substitutions Based on 2021 Average Sales Prices 
OEI-03-23-00120  AMP-based and ASP-based reimbursement amounts by 1 percent for the second quarter of 
2022 and by 2 percent for the third quarter of 2022.   
After making the appropriate reductions resulting from sequestration, we subtracted the 
AMPbased reimbursement amount from the ASP-based reimbursement amount for the quarter 
in which the price substitution occurred.  We then multiplied this difference by each drugs 
Part B utilization for the quarter(s) for which the price substitution occurred or could have 
occurred.  
Limitations.  We did not verify the accuracy of manufacturer-reported ASP and AMP data, nor 
did we verify the underlying methodology that manufacturers used to calculate ASPs and AMPs.  
We also did not verify the accuracy of CMSs calculations of reimbursement amounts for Part B 
drugs.  Manufacturers are required to submit their quarterly ASP and AMP data to CMS within 
30 days of the close of the quarter.  We did not determine whether manufacturers later provided 
any updated data to CMS.   
Medicare Part B Drug Payments: Impact of Price Substitutions Based on 2021 Average Sales Prices 
OEI-03-23-00120  Appendix 
 
Drug codes for which CMS implemented a price substitution or 
which would be eligible for a price substitution under an 
expanded price-substitution policy  
                                                                  
                                                  Quarter(s) in Which a Price Substitution Occurred or 
Would Have Occurred Un der an Expanded Policy 
Fourth  First  Second  Third 
Quarter  Quarter  Quarter  Quarter 
  Drug  Description  2021  2022  2022  2022   
     
 
J0641  Levoleucovorin injection    
 
 
  J0642  Khapzory injection          
J0720  Chloramphenicol sodium            
 
injection 
J0895  Deferoxamine mesylate            
 
injection 
J1570  Ganciclovir sodium            
 
injection 
J1580  Garamycin gentamicin            
 
injection 
J1631  Haloperidol decanoate            
 
injection 
J1740  Ibandronate sodium            
 
injection 
   
  J1756  Iron sucrose injection        
     
  J1953  Levetiracetam injection      
   
  J2280  Moxifloxacin injection        
  J2501  Paricalcitol            
J2545  Pentamidine non-           
 
compounded unit 
     
  J3411  Thiamine hcl      
J3475  Magnesium sulfate            
 
injection 
   
  J7042  Dextrose/Normal Saline        
             
               

   Substitutio n occurred.           

Expanded substitution policy would have resulted in a substitution in this quarter.
 
Med icare Part B Drug Payments: Impact of Price Substitutions Based on 2021 Average Sales Prices 
OEI-03-23-00120                                                                    
                                                  Quarter(s) in Which a Price Substitution Occurred or 
Would Have Occurred Un der an Expanded Policy 
Fourth  First  Second  Third 
Quarter  Quarter  Quarter  Quarter 
   
Drug  Description  2021  2022  2022  2022   
     
J7626  Budesonide   
non-compounded unit 
  J7631  Cromolyn sodium            
 
non-compounded unit 
 
  J8530  Cyclophosphamide oral          
J9000  Doxorubicin hcl injection              
 
J9021  Aspara Rylaze injection1               
 
J9190  Fluorouracil injection               
 
J9245  Melphalan hcl injection               
 
J9280  Mitomycin injection               
 
J9360  Vinblastine sulfate            
 
injection 
Q0139  Ferumoxtol                
 
Q0167  Dronabinol Oral               
 
             

Substitution occurred. 

Expanded substitution policy would have resulted in a substitution in this quarter.
1 This drug code did not have any allowed Part B utilization during the review period; therefore, the savings that would have 
resulted from a price substitution would have been $0. 
Source: OIG analysis of ASP and AMP data from 2021. 
 
Medicare Part B Drug Payments: Impact of Price Substitutions Based on 2021 Average Sales Prices 
OEI-03-23-00120  Standards 
 
We conducted this study in accordance with the Quality Standards for Inspection and Evaluation 
issued by the Council of the Inspectors General on Integrity and Efficiency. 
 
 
Acknowledgments 
 
Conswelia McCourt served as team leader for this study.  Others in the Office of Evaluation and 
Inspections staff who conducted this study include Karolina Hill and Emily Dieckman.  Office of 
Evaluation and Inspections headquarters staff who provided support include Robert Gibbons, 
Sarah Swisher, and Michael Novello.   
 
This report was prepared under the direction of Joanna Bisgaier, Regional Inspector General for 
Evaluation and Inspections in the Philadelphia regional office, and Edward Burley, Deputy 
Regional Inspector General. 
 
Contact 
To obtain additional information concerning this report, contact the Office of Public Affairs at 
Public.Affairs@oig.hhs.gov.  OIG reports and other information can be found on the OIG website 
at oig.hhs.gov.  
 
Office of Inspector General  
U.S. Department of Health and Human Services  
330 Independence Avenue, SW  
Washington, DC 20201 
Medicare Part B Drug Payments: Impact of Price Substitutions Based on 2021 Average Sales Prices 
OEI-03-23-00120  Endnotes 
References 
 
1 Section 1847A(d)(2) of Social Security Act (the Act). 
2 Section 1847A(d)(3) of the Act. 
3 42 CFR  414.904(d)(3). 
4 One drug code (J9021, Aspara Rylaze injection), met the criteria for the expanded price-substitution 
policy; however, this drug code did not have any allowed Part B utilization for the quarter for which the 
substitution would have occurred.  Therefore, there the estimated savings for this drug were $0. 
5 These 19 drugs had complete AMP data and were not identified by the Food and Drug Administration as 
being in short supply.  They also did not have AMP-based substitution amounts that were greater than 
the ASP-based reimbursement amounts for the quarters in which substitutions would have occurred.  
Further, these 19 drug codes met all of CMSs other requirements for a price substitution under 
42 CFR  414.904(d)(3). 
6 OIG, Medicare Part B Drug Payments: Impact of Price Substitutions Based on 2016 Average Sales Prices, 
OEI-03-18-00120, August 2018; and OIG, Medicare Part B Drug Payments: Impact of Price Substitutions 
Based on 2017 Average Sales Prices, OEI-03-19-00260, August 2019. 
7 Part B claims dated on or after April 1, 2013, incur a reduction in payment in accordance with the Budget 
Control Act of 2011 and the American Taxpayer Relief Act of 2012 (see CMS Medicare FFS Provider 
e-News, Mandatory Payment Reductions in the Medicare Fee-for-Service (FFS) Program Sequestration, 
March 8, 2013).  Under this mandatory payment reduction, Medicares portion of the payment rate for 
most Part B drugs is reduced by 2 percent.  This reduction does not apply to the coinsurance portion of 
the Medicare allowed amount for Part B drugs.  However, the sequestration payment reduction was 
suspended from May 1, 2020, through March 31, 2022; the sequestration reduction was then set to 
1 percent from April 1, 2022, through June 30, 2022.  The sequestration of payment reductions ended as 
of July 1, 2022, when cuts of 2 percent were reimposed.  (See the Coronavirus Aid, Relief, and Economic 
Security (CARES) Act (P.L. No. 116-136) as amended by the Consolidated Appropriations Act, 2021 
(P.L. 116-260); the Act to Prevent Across-the-Board Direct Spending Cuts, and for Other Purposes 
(P.L. No. 117-7); and the Protecting Medicare and American Farmers from Sequester Cuts Act 
(P.L. 117-71).)   
 
Medicare Part B Drug Payments: Impact of Price Substitutions Based on 2021 Average Sales Prices 
OEI-03-23-00120