DEPARTMENT OF HEALTH & HUMAN SERVICES 	 Office of Inspector General 
Washington, D.C. 20201 
;APR 2.2010 
TO: 	 Marilyn Tavenner 
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 ofThird-Quarter 2009 Average Sales Prices 
and Average Manufacturer Prices:  Impact on Medicare Reimbursementfor First 
Quarter 2010, OEI-03-10-00150 
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 15 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 third quarter of2009. Of the 
356 drugs with complete AMP data in that quarter, 16 met the 5-percent threshold.  Eight of 
these sixteen drugs were also eligible for price adjustments in one or more of the previous four 
quarters, with three drugs meeting the 5-percent threshold in all five quarters under review.  If 
reimbursement amounts for all 16 drugs had been based on 103 percent of the AMPs, we 
estimate that Medicare expenditures would have been reduced by over half a million dollars in 
the first quarter of 20 10.  Of the 99 drugs with only partial AMP data in the third quarter of 2009, 
10 had ASPs that exceeded the AMPs by at least 5 percent.  Six ofthese ten drugs also met the 
5-percent threshold in at least one ofthe previous four quarters.  We estimate that Medicare 
expenditures would have been reduced by $2.1 million during the first quarter of2010 if 
reimbursement amounts for all 10 drugs had been based on 103 percent of the AMPs.  We could 
not perform pricing comparisons for an additional 66 drugs because none of the drug products 
used to establish Medicare reimbursement had corresponding AMP data.  Manufacturers for 
16 percent of those 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 -03-10-00150 	 Comparison of Third-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 the 
Department 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 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 codes accounted for 90 percent of the expenditures for Part B drugs, with only 12 of 
these drugs representing the majority (51 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 2008 were calculated using CMSs Part B Analytics and Reports 
(PBAR).  The PBAR data were downloaded on July 8, 2009. 
3 Several Part B drugs, including certain vaccines and blood products, are not paid under the ASP methodology.  
OEI-03-10-00150                                                               Comparison of Third-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 
First-quarter 2010 Medicare payments for most covered drug codes were based on                 
third-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-03-10-00150                                                               Comparison of Third-Quarter 2009 ASPs and AMPs  
  Page 4  Marilyn Tavenner 
 
 
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 13 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 15 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 impact 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-03-10-00150                                                               Comparison of Third-Quarter 2009 ASPs and AMPs  
  Page 5  Marilyn Tavenner 
 
 
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 third quarter of 2009, 
which were used to establish Part B drug reimbursement amounts for the first 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 December 23, 2009.  We also 
obtained AMP data from CMS for the third quarter of 2009, which were current as of                            
November 4, 2009. 
 
Analysis of Average Sales Price Data From the Third 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 January 2010, CMS had established prices for 530 HCPCS codes based on the ASP 
reimbursement methodology mandated by section 1847A(b)(6) of the Act.  Reimbursement 
amounts for the 530 HCPCS codes were based on ASP data for 3,251 NDCs.   
 
Analysis of Average Manufacturer Price Data From the Third 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-03-10-00150                                                               Comparison of Third-Quarter 2009 ASPs and AMPs  
  Page 6  Marilyn Tavenner 
 
 
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 nine 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  356  1,425 
Partial AMP Data  99  987 
No AMP Data  66  244 
Source:  OIG analysis of third-quarter 2009 ASP and AMP data, 2010. 
 
Comparing Third-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 two 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 
two HCPCS codes as having met the 5-percent threshold.   
                                                 
15 We did not calculate converted AMPs for NDCs in the third group because those NDCs had no AMP data. 
OEI-03-10-00150                                                               Comparison of Third-Quarter 2009 ASPs and AMPs  
  Page 7  Marilyn Tavenner 
 
 
For the remaining HCPCS codes, we then estimated the monetary impact of lowering 
reimbursement to 103 percent of the AMP.16  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 first-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 first 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 2008, as reported in the PBAR.17  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 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 third quarter of 2009 would 
have also met the 5-percent threshold in any of the four previous quarters, dating back to the 
third 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 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. 
17 The 2008 PBAR data were downloaded on July 8, 2009.     
OEI-03-10-00150                                                               Comparison of Third-Quarter 2009 ASPs and AMPs  
  Page 8  Marilyn Tavenner 
 
 
RESULTS 
 
Of the 356 Drug Codes With Complete AMP Data, Volume-Weighted ASPs for                      
16 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 third quarter of 2009, 16 of the 356 HCPCS codes with complete 
AMP data (4 percent) met this 5-percent threshold.  A list of the 16 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 16 HCPCS codes.  For two 
of the codes, volume-weighted ASPs exceeded volume-weighted AMPs by 20 percent or more.  
 
Table 2:  Extent to Which ASPs Exceeded AMPs for  
16 HCPCS Codes With Complete AMP Data 
Percentage by Which ASP  Number of HCPCS 
Exceeded AMP  Codes 
5.00%9.99%  12 
10.00%19.99%  2 
20.00%29.99%  1 
30.00%39.99%  0 
40.00%49.99%  0 
50.00%59.99%  0 
60.00%69.99%  1 
70.00%79.99%  0 
80.00%89.99%  0 
90.00%99.99%  0 
100% and above  0 
     Total  16 
Source:  OIG analysis of third-quarter 2009 ASP and AMP data, 2010. 
  
Half of the HCPCS codes (8 of 16) also met the 5-percent threshold in one or more of the 
previous four quarters.  The ASPs for HCPCS codes J0560, J1364, and J2765 exceeded the 
AMPs in each of the five quarters under review, dating back to the third quarter of 2008.  An 
additional two HCPCS codes met the 5-percent threshold in at least three of the five quarters 
under review.  Table 3 presents a list of the eight HCPCS codes that were eligible for price 
adjustments in previous quarters. 
 
OEI-03-10-00150                                                               Comparison of Third-Quarter 2009 ASPs and AMPs  
  Page 9  Marilyn Tavenner 
 
 
Table 3:  Eight HCPCS Codes With Complete AMP Data in the Third Quarter of 2009                       
That Also Met the 5-Percent Threshold in Previous Quarters  
  OIG Reports Comparing ASP and AMP 
Third  Second  First  Fourth  Third 
HCPCS 
Quarter  Quarter  Quarter  Quarter  Quarter 
Code 
2009  2009  2009  2008  2008 
J0560  X  X*  X*  X*  X* 
J1364  X  X  X  X  X 
J2765  X  X  X  X  X 
J2597  X  X  X  X   
J2792  X  X    X  X 
J2993  X  X       
J3470  X    X     
J9340  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 third quarter of 2008 through the third quarter of 2009.
 
Lowering reimbursement amounts for the 16 HCPCS codes to 103 percent of the AMPs would 
have reduced Medicare allowances by over half a million dollars in the first 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 16 HCPCS codes that met the 5-percent threshold specified in the Act.  If 
reimbursement amounts for these 16 codes with complete AMP data had been based on                  
103 percent of the AMPs during the first quarter of 2010, we estimate that Medicare 
expenditures would have been reduced by $563,000 in that quarter alone.18 
 
Two of the sixteen HCPCS codes accounted for 90 percent of the estimated savings.  If the 
reimbursement amounts for codes J9214 and J2792 had been based on 103 percent of the AMPs 
during the first quarter of 2010, Medicare expenditures would have been reduced by an estimated 
$354,000 and $154,000, respectively.   
 
Of the 99 Drug Codes With Partial AMP Data, Volume-Weighted ASPs for                                
10 Exceeded the Volume-Weighted AMPs by at Least 5 Percent  
In addition to examining HCPCS codes with complete AMP data, we examined 99 HCPCS 
codes for which only partial AMP data were available.  ASPs for 10 of these 99 HCPCS codes  
(10 percent) exceeded the AMPs by at least 5 percent in the third quarter of 2009.  A list of the           
                                                 
18 This savings 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 2010.  
OEI-03-10-00150                                                               Comparison of Third-Quarter 2009 ASPs and AMPs  
  Page 10  Marilyn Tavenner 
 
 
10 HCPCS codes, including their descriptions and HCPCS dosage amounts, is presented in 
Appendix E.   
 
Table 4 describes the extent to which ASPs exceeded AMPs for the 10 HCPCS codes.  For half 
of the codes (5 of 10), volume-weighted ASPs exceeded volume-weighted AMPs by 20 percent 
or more.  The ASPs for one of these codes were more than double the AMPs. 
Table 4:  Extent to Which ASPs Exceeded AMPs for  
10 HCPCS Codes With Partial AMP Data 
Percentage by Which ASP  Number of HCPCS 
Exceeded AMP  Codes 
5.00%9.99%  5 
10.00%19.99%  0 
20.00%29.99%  1 
30.00%39.99%  0 
40.00%49.99%  1 
50.00%59.99%  1 
60.00%69.99%  1 
70.00%79.99%  0 
80.00%89.99%  0 
90.00%99.99%  0 
100% and above  1 
     Total  10 
Source:  OIG analysis of third-quarter 2009 ASP and AMP data, 2010. 
 
Sixty percent of HCPCS codes with partial AMP data (6 of 10) also met the 5-percent threshold 
in one or more of the previous four quarters.  For three HCPCS codes (J1190, Q9965 and 
Q9966), ASPs exceeded AMPs in each of the five quarters under review, dating back to the third 
quarter of 2008.  Another HCPCS code met the 5-percent threshold in four of the five quarters 
under review.  Table 5 presents a list of the six HCPCS codes that were eligible for price 
adjustments in previous quarters. 
 
OEI-03-10-00150                                                               Comparison of Third-Quarter 2009 ASPs and AMPs  
  Page 11  Marilyn Tavenner 
 
 
Table 5:  Six HCPCS Codes With Partial AMP Data in the Third Quarter of 2009                                 
That Also Met the 5-Percent Threshold in Previous Quarters  
  OIG Reports Comparing ASP and AMP 
Third  Second  First  Fourth  Third 
Quarter  Quarter  Quarter  Quarter  Quarter 
HCPCS 
2009  2009  2009  2008  2008 
Code 
J1190  X  X  X  X  X 
Q9965  X  X  X  X  X 
Q9966  X  X  X  X  X 
J7506  X  X  X    X 
J7509  X  X       
Q0163  X  X       
Note:  All of these codes met the 5-percent threshold in previous quarters using partial AMP data. 
Source:  OIG analysis of ASP and AMP data from the third quarter of 2008 through the third quarter of 2009. 
Lowering reimbursement amounts for the 10 HCPCS codes to 103 percent of the AMPs would 
have reduced Medicare allowances by an estimated $2.1 million in the first quarter of 2010.19  One 
of the ten HCPCS codes accounted for over 70 percent of the $2.1 million.  If the reimbursement 
amount for code Q9965 had been based on 103 percent of the AMPs during the first quarter of 
2010, Medicare expenditures would have been reduced by an estimated $1.5 million. 
 
Pricing Comparisons Could Not Be Performed on 66 Drug Codes Because No AMP Data 
Were Available 
For 66 HCPCS codes, OIG could not compare ASPs and AMPs because there were no AMP data 
for any of the 244 NDCs that CMS used when calculating drug reimbursement amounts for these 
codes.  In 2008, Medicare allowances for these 66 codes totaled $304 million.20 
 
Manufacturers for 16 percent of the NDCs without AMP data (39 of 244) participated in the 
Medicaid drug rebate program as of the third quarter of 2009 and were therefore generally 
required to submit AMP data for their covered outpatient drugs.21, 22, 23   
 
Manufacturers for the remaining 205 of 244 NDCs did not participate in the Medicaid drug 
rebate program and therefore were not required to submit AMP data.   
                                                 
19 This savings 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 2010.  
20 Of the 66 HCPCS codes with no associated AMP data, 18 had no expenditures listed in the 2008 PBAR file.  As a 
result, these codes were not included in the total Medicare allowances for the year.  
21 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. 
22 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.   
23 These 39 NDCs were crosswalked to 27 HCPCS codes. 
OEI-03-10-00150                                                               Comparison of Third-Quarter 2009 ASPs and AMPs  
  Page 12  Marilyn Tavenner 
 
 
 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 16th 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 third quarter of 2009, we identified a total of 26 HCPCS codes that met the threshold for 
price adjustment.  Of these 26 HCPCS codes, 14 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 66 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.24  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-03-10-00150 in all correspondence. 
                                                 
24 For example, OEI-03-08-00450, December 2008; and OEI-03-09-00350, February 2010. 
OEI-03-10-00150                                                               Comparison of Third-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-03-10-00150                                                               Comparison of Third-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-03-10-00150                                                               Comparison of Third-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 
 
 
 
 
 
 
 
 
OEI-03-10-00150                                                               Comparison of Third-Quarter 2009 ASPs and AMPs  
  Page 16  Marilyn Tavenner 
 
 
APPENDIX C 
 
Detailed Methodology for Converting and Volume-Weighting Average Manufacturer 
Prices for the Third Quarter of 2009 
 
Healthcare Common Procedure Coding System codes with complete average manufacturer price 
data.  Of the 530 Healthcare Common Procedure Coding System (HCPCS) codes with 
reimbursement amounts based on average sales prices (ASP), 364 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 364 HCPCS codes represented 
1,487 NDCs.  For 10 NDCs, we could not successfully identify the amount of the drug reflected 
by the ASP and therefore could not calculate a converted AMP.  These 10 NDCs were 
crosswalked to eight HCPCS codes.  We did not include these eight HCPCS codes (62 NDCs) in 
our final analysis.   
 
Using the converted AMPs for the remaining 1,425 NDCs, we then calculated a volume-
weighted AMP for each of the remaining 356 HCPCS codes consistent with CMSs 
methodology for calculating volume-weighted ASPs.   
 
HCPCS codes with partial AMP data.  There were 100 HCPCS codes with AMP data for only 
some of the NDCs that CMS used in its calculation of volume-weighted ASPs.  These                 
100 HCPCS codes represented a total of 1,520 NDCs.  AMP data were either missing or 
unavailable for 523 of these NDCs, which were then excluded from our calculation of  
volume-weighted AMPs.25   
 
We calculated converted AMPs for each of the remaining 997 NDCs.  For 10 of the                  
997 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 10 NDCs from our 
analysis.26  As a result, one HCPCS code no longer had any NDCs with AMP data.  Therefore, 
this HCPCS code was removed from our analysis.   
 
Using the converted AMPs for the remaining 987 NDCs, we then calculated a                  
volume-weighted AMP for each of the remaining 99 HCPCS codes consistent with CMSs 
methodology for calculating volume-weighted ASPs.   
 
                                                 
25 Although AMP data for these 523 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.   
26 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-03-10-00150                                                               Comparison of Third-Quarter 2009 ASPs and AMPs  
  Page 17  Marilyn Tavenner 
 
 
HCPCS codes with no AMP data.  For 66 HCPCS codes, there were no AMP data for any of the 
NDCs that CMS used in its calculation of volume-weighted ASPs.  These 66 HCPCS codes 
represented 244 NDCs.   
OEI-03-10-00150                                                               Comparison of Third-Quarter 2009 ASPs and AMPs  
  Page 18  Marilyn Tavenner 
 
 
APPENDIX D 
 
Sixteen Drug Codes With Complete Average Manufacturer Price Data That Met the              
5-Percent Threshold in the Third Quarter of 2009 
 
Drug            
Code  Short Description  Drug Code Dosage 
J0210  Methyldopate HCl injection  250 mg 
J0476  Baclofen injection for intrathecal trial  50 mcg 
J0560  Penicillin g benzathine injection  600,000 units 
J1327  Eptifibatide injection  5 mg 
J1364  Erythromycin lactobionate  500 mg 
J2597  Desmopressin acetate injection  1 mcg 
J2765  Metoclopramide HCl injection  10 mg 
J2792  Rho(D) immune globulin  100 units 
J2993  Reteplase injection  18.1 mg 
J3470  Hyaluronidase injection  150 units 
J7606  Formoterol fumarate, inhalation solution  20 mcg 
J9155  Degarelix injection  1 mg 
J9214  Interferon alfa-2b injection  1 million units 
J9340  Thiotepa injection  15 mg 
Q0166  Granisetron HCl oral  1 mg 
Q0171  Chlorpromazine HCl oral  10 mg 
Source:  Office of Inspector General analysis of third-quarter 2009 average sales price and average  
manufacturer price data, 2010. 
 
OEI-03-10-00150                                                               Comparison of Third-Quarter 2009 ASPs and AMPs  
  Page 19  Marilyn Tavenner 
 
 
APPENDIX E 
 
Ten Drug Codes With Partial Average Manufacturer Price Data That Met the                     
5-Percent Threshold in the Third Quarter of 2009 
 
Drug              
Code  Short Description  Drug Code Dosage 
J1190  Dexrazoxane HCl injection  250 mg 
J1885  Ketorolac tromethamine injection  15 mg 
J2700  Oxacillin sodium injection  250 mg 
J7506  Prednisone oral  5 mg 
J7509  Methylprednisolone oral  4 mg 
J7613  Albuterol non-compounded  1 mg 
Q0163  Diphenhydramine HCl  50 mg 
Q0170  Promethazine HCl oral  25 mg 
Q9965  Low osmolar contrast material,100-199 mg/mL iodine  1 ml 
Q9966  Low osmolar contrast material, 200-299 mg/mL iodine  1 ml 
Source:  Office of Inspector General analysis of third-quarter 2009 average sales price and average  
 
manufacturer price data, 2010.
OEI-03-10-00150                                                               Comparison of Third-Quarter 2009 ASPs and AMPs