Department of Health and Human Services
OFFICE OF 
 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
AVE RAGE SALES PRICES:  
 
M R
ANUFACTURER  EPORTING 
 
 
CMS O  
AND    VERSIGHT
 
 
 
 
 
 
Daniel R. Levinson  
Inspector General 
 
February 2010 
OEI-03-08-00480   
   
 E X E C U T I V E   S U M M A R Y  
OBJECTIVES
 
1.  To determine whether manufacturers that reported average sales 
price (ASP) data to the Centers for Medicare & Medicaid Services 
(CMS) did so within the timeframe required by Federal law. 
2.  To review CMSs oversight procedures for the submission of ASP 
data. 
3.  To quantify the number of manufacturers that provided ASPs to 
CMS but were not required to do so under the current system.      
BACKGROUND 
CMS continues to cover a limited number of outpatient prescription 
drugs under its Part B benefit.  Since January 2005, CMS has been 
paying for most Part B-covered drugs using a payment methodology 
based on ASP.  ASP is defined as a manufacturers sales of a drug to all 
purchasers in the United States in a calendar quarter divided by the 
total number of units of the drug sold by the manufacturer in that same 
quarter.   
Section 1927 of the Social Security Act (the Act) sets forth ASP 
reporting requirements for manufacturers.  Pursuant to section 1927 of 
the Act, manufacturers with Medicaid drug rebate agreements in effect 
must, among other things, provide CMS with pricing information, 
including the ASPs for their Part B-covered drugs.  However, drug 
coverage under Medicaid differs from drug coverage under Medicare 
Part B.  Therefore, Medicaid rebate agreements may not be applicable 
for certain manufacturers given the differences in coverage.   
Manufacturers that report ASPs are required to submit them to CMS no 
later than 30 days after the close of the previous quarter.  As a result, 
there is a two-quarter lag between the time when sales reflected in the 
ASP occur and the time when these sales become the basis for Medicare 
payment amounts.   
To fulfill their reporting requirements, manufacturers typically mail a 
floppy or compact disc containing ASP data to CMS.  CMS staff 
manually enter all ASP data received from manufacturers into 
quarterly ASP files prior to calculating the Medicare payment amounts 
for Part B-covered drugs.  CMS posts the payment amounts on its public 
Web site 2 weeks before the start of the applicable quarter (i.e., 
approximately 6 to 7 weeks after the submission deadline). 
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For 2007 and the first two quarters of 2008, we used CMS tracking 
spreadsheets, ASP pricing files, a list of labeler codes associated with 
manufacturers required to submit drug-pricing data, an interview with 
CMS, and a review of relevant documents to accomplish our three 
objectives. 
FINDINGS 
Each quarter, over 40 percent of manufacturers submitted ASPs 
late; most late submissions were within 10 days of the deadline.  
For each quarter under review, between 41 and 52 percent of 
manufacturers provided ASPs after the statutorily defined due date.  
However, at least 95 percent of manufacturers submitted ASP data to 
CMS within 10 days after the deadline.  Further, no more than              
2 percent of manufacturer submissions each quarter were more than           
30 days late.  Late submissions did not seem to have an effect on the 
Medicare payment amount because there is a 6- to 7-week period 
between the date ASP data are due and the publication of the payment 
amounts.      
CMS implemented oversight procedures for ASP data; however, 
CMSs data collection and analysis methods introduce the 
potential for inefficiency and errors.  CMS has implemented several 
oversight procedures related to payment for Part B-covered drugs.  
From the time it receives a manufacturers submission to the time 
payment amounts are posted on the Web site, CMS performs multiple 
quality assurance checks.  CMS is also coordinating with the Office of 
Inspector General (OIG) to identify manufacturers that do not submit 
ASP data in a timely fashion.   
However, other CMS practices related to ASP data may inhibit 
efficiency and result in potential errors.  For example, although CMS 
uses an automated system to collect average manufacturer prices (AMP) 
for the Medicaid program, it relies on manual processes for ASP data.  
In addition, CMS does not track which manufacturers are required to 
report ASPs, receives substantial amounts of ASP data for                 
non-Part B-covered drugs, and does not receive the underlying data that 
form the basis of manufacturer ASP submissions.   
Almost one-fifth of labeler codes with reported ASPs were 
associated with manufacturers that were not required to provide 
these prices under the current system.  Approximately 200 unique 
labeler codes were associated with ASP data submissions for  
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E X E C U T I V E   S U M M A R Y  
Part B-covered drugs during each of the quarters under review.  Nearly     
one-fifth of these codes belonged to manufacturers that were not 
required to provide ASP data under the current system because they did 
not have Medicaid drug rebate agreements in effect for that quarter.   
Some drug codes were associated only with manufacturers that did not 
have Medicaid drug rebate agreements in place.  If these manufacturers 
chose not to report ASPs, CMS would be unable to calculate ASP-based 
Medicare payment amounts for these drug codes. 
In addition, there were also manufacturers of Part B-covered drugs that 
did not have rebate agreements and did not provide ASP data to CMS.  
Because CMS does not have pricing or utilization data for these drugs, 
we are unable to quantify the impact this may have had on Medicare 
payment amounts. 
RECOMMENDATIONS 
When setting payment amounts for drugs covered under Medicare     
Part B, CMS relies on ASP data reported by manufacturers.  This report 
identifies several potential issues with the current ASP reporting 
process, including (1) the timeliness of manufacturer reporting, (2) the 
largely manual process used by CMS to collect and analyze 
manufacturer-reported data, and (3) the legal requirements for 
manufacturer reporting.  Each of these issues introduces the potential 
for inefficiency and errors.  To ensure that Medicare payments for Part 
B-covered drugs are accurate, timely, and reflective of all Part               
B-covered drug sales, we recommend that CMS: 
Develop an automated system for the collection of ASP data.  CMS 
has developed an automated system for manufacturers to submit AMPs 
and could use that system as a template for establishing an automated 
ASP system.  Many manufacturers that submit ASPs already submit 
AMPs; therefore, these manufacturers are familiar with the concept of an 
automated price-reporting system.  An automated system would 
potentially limit the possibility of data entry errors, reduce the amount of 
time it takes to calculate ASP-based payment amounts and adjust ASP 
payment limits, and enable CMS to track ASPs with greater ease.   
Seek a legislative change to directly require all manufacturers of   
Part B-covered drugs to submit ASPs.  CMS could work with Congress 
to develop legislation that would directly require all manufacturers of Part 
B-covered drugs to submit ASPs, regardless of whether the manufacturers 
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E X E C U T I V E   S U M M A R Y  
have Medicaid drug rebate agreements.  This would ensure that Medicare 
payment amounts were reflective of all Part B-covered drugs.  
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
In its comments on the draft report, CMS agreed that certain 
refinements to the ASP reporting process are desirable to ensure that 
Medicare payments for Part B-covered drugs are accurate and timely. 
CMS concurred with OIGs recommendation that it develop an 
automated system for the collection of ASP data and agreed that an 
automated system would be an improvement over the present one.  
CMS also stated that it is working with contractors to improve the 
efficiency of ASP-related processes.   
CMS did not concur at this time with OIGs recommendation that it 
seek a legislative change to directly require all manufacturers of         
Part B-covered drugs to submit ASPs.  However, CMS stated that it will 
consider this recommendation as it continues to monitor the effects of 
current payment policies.  We continue to support our recommendation 
that CMS seek a legislative change to the ASP reporting requirements 
as a way to ensure that Medicare payment amounts are reflective of all 
Part B-covered drugs. 
  
 
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 T A B L E   O F   C O N T E N T S  
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
 
 
I N T RO DU C T IO N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 
 
 
F I N D ING S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 
Each quarter, over 40 percent of manufacturers submitted ASPs               
late; most late submissions were within 10 days of the deadline. . . . . . 11 
CMS implemented oversight procedures for ASP data; however,          
CMSs data collection and analysis methods introduce the potential          
for inefficiency and errors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 
Almost one-fifth of labeler codes with reported ASPs were associated     
with manufacturers that were not required to provide these prices          
under the current system  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 
 
R E C OMME N DA TIO N S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 
Agency Comments and Office of Inspector General Response  . . . . . . . 18 
 
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 
Agency Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 
A CKN OW LEDGMEN TS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21   
   
 I N T R O D U C T I O N  
OBJECTIVES 
1.  To determine whether manufacturers that reported average sales 
price (ASP) data to the Centers for Medicare & Medicaid Services 
(CMS) did so within the timeframe required by Federal law. 
2.  To review CMSs oversight procedures for the submission of ASP 
data. 
3.  To quantify the number of manufacturers that provided ASPs to 
CMS but were not required to do so under the current system.          
BACKGROUND 
Medicare and its beneficiaries paid over $11 billion for Part B-covered 
drugs in 2008.1  ASPs serve as the basis of Medicare payment for       
Part B-covered drugs.  Therefore, inaccurate, incomplete, and late ASP 
data could have adverse effects on beneficiary and Federal Government 
payments.  This study examined the timeliness of manufacturer ASP 
submissions, CMSs oversight as it relates to ASP data, and ASP 
reporting requirements.    
Medicare Part B Coverage of Prescription Drugs 
Although Medicare Part D covers most outpatient prescription drugs, 
CMS continues to cover a limited number of outpatient prescription 
drugs and biologicals (hereinafter referred to as drugs) under its Part B 
benefit.  Part B-covered drugs generally fall into the following 
categories:  drugs furnished incident to a physicians services (e.g., 
injectable drugs used in connection with the treatment of cancer); drugs 
explicitly covered by statute (e.g., some vaccines and oral anticancer 
drugs); and drugs used in conjunction with durable medical equipment 
(e.g., inhalation drugs).2   
Medicare Part B Payments for Prescription Drugs 
To obtain Medicare payment for Part B-covered drugs, physicians and 
suppliers submit claims to claims-processing contractors using 
Healthcare Common Procedure Coding System (HCPCS) codes.  The 
HCPCS codes provide a standardized system for describing the specific 
items and services provided in the delivery of health care.  In the case of 
 
1 Medicare expenditures for Part B drugs in 2008 were calculated using CMSs Part B 
Analytics and Reports (PBAR).  PBAR data were downloaded on July 8, 2009.   
2 68 Fed. Reg. 50428, 50429 (Aug. 20, 2003).   
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prescription drugs, each HCPCS code defines the drug name and billing 
unit size but does not specify the manufacturer or package size.  
Payment Methodology for Part B Drugs and Biologicals 
CMS pays for most Part B-covered drugs using a methodology based 
on ASPs.  Section 1847A(c) of the Social Security Act (the Act), as 
added by the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA), P.L. No. 108-173, defines an ASP 
as a manufacturers sales of a drug to all purchasers in the United 
States in a calendar quarter divided by the total number of units of 
the drug sold by the manufacturer in that same quarter.  The ASP is 
net of any price concessions, such as volume discounts, prompt pay 
discounts, cash discounts, free goods contingent on purchase 
requirements, chargebacks, and rebates other than those obtained 
through the Medicaid drug rebate program.3  Sales that are nominal 
in amount are exempted from the ASP calculation, as are sales 
excluded from the determination of best price in the Medicaid drug 
rebate program.4, 5   
Medicare payment amounts for most Part B-covered prescription 
drugs are equal to 106 percent of the volume-weighted ASPs for the 
HCPCS codes.  Medicare beneficiaries are responsible for 20 percent 
of this amount in the form of coinsurance.   
There is a two-quarter lag between the time when sales reflected in 
the ASP occur and the time when these sales become the basis for 
Medicare payment amounts.  For example, first-quarter 2008 ASP 
data from manufacturers served as the basis for third-quarter 2008 
Medicare payment amounts for most Part B-covered drugs. 
Manufacturer Reporting Requirements 
ASP data.  Section 1927 of the Act sets forth ASP reporting 
requirements for manufacturers.  This section originally pertained 
only to the Medicaid program but was modified by the MMA to 
include requirements under Medicare Part B as well.  The current 
provisions of section 1927 of the Act thus link the ASP reporting 
 
3 Section 1847A(c)(3) of the Act. 
4 Pursuant to section 1927(c)(1)(C)(i) of the Act, best price is the lowest price available 
from the manufacturer during the rebate period to any wholesaler, retailer, provider, health 
maintenance organization, nonprofit entity, or governmental entity within the United 
States, with certain exceptions. 
5 Section 1847A(c)(2) of the Act. 
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I N T R O D U C T I O N  
requirements to a manufacturers entry into a Medicaid drug rebate 
agreement.  More specifically, pursuant to section 1927(b)(3) of the 
Act, manufacturers with rebate agreements in effect must, among 
other things, provide CMS with pricing information, including the 
ASP for each of their Part B-covered drugs and average manufacturer 
price (AMP) for each of their Medicaid-covered drugs, on a quarterly 
basis.6  However, Medicare Part B and Medicaid cover different types 
of drugs.  As a result, Medicaid rebate agreements may not be 
applicable for certain manufacturers given the differences in 
coverage.   
Manufacturers report ASPs for Part B-covered drugs by national drug 
codes (NDC), an 11-digit numeric code divided into three segments 
identifying (1) the firm that manufactures, distributes, or repackages7 
the drug product (i.e., the labeler code); (2) the specific strength, 
dosage form, and formulation of the product; and (3) the products 
package size.  According to section 1927(b)(3) of the Act and                
42 CFR  414.804(a)(5), manufacturers are required to 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.  Because 
Medicare payment for Part B-covered 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 posts the payment 
amounts on its public Web site 2 weeks before the start of the 
applicable quarter (i.e., 6 to 7 weeks after the submission deadline).8  
CMS provides the Office of Inspector General (OIG) with quarterly 
ASP data 2 to 3 days after the payment files are posted to the Web 
site.  See Table 1 on page 4 for details on the ASP reporting timeline.   
 
 
 
 
 
6 ASPs are not actually used in the calculation of Medicaid rebates.   
7 A repackager purchases drugs from the manufacturer and typically repackages them 
into smaller quantities.   
8 CMS posts the quarterly ASP files to 
http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/.   
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Table 1:  ASP Reporting Timeline 
Payment Amounts 
 
Provided to OIG and 
Payment Amounts 
ASP Data Due to  Sent to Contractors  Payment Amounts Take 
Sales Period  Posted on CMS 
CMS  for Claims  Effect 
Web Site* 
Processing and 
 
Payment* 
January 1March 31  April 30  June 15  June 17  July 1 
April 1June 30  July 30  September 15  September 17  October 1 
July 1September 30  October 30  December 15  December 17  January 1 
October 1December 31  January 30  March 15  March 17  April 1 
Source:  OIG analysis of ASP reporting requirements. 
*Denotes approximate dates.   
 
CMS provides manufacturers a template to use when submitting ASP 
data for Part B-covered drugs.  In this template, manufacturers 
provide data including the NDC, the manufacturers ASP for the 
drug, and the number of units sold.9  Manufacturers are not required 
to report the underlying data (e.g., total sales, rebates, and price 
concessions) or the exact methods used to calculate the ASP.  Each 
ASP submission must be certified by the manufacturers Chief 
Executive Officer or Chief Financial Officer or an individual who has 
been delegated the authority.10  This certification verifies that the 
reported ASPs were calculated accurately and that all information 
and statements made in the submission are true, complete, and 
current to the best of the signatorys knowledge.11  If a manufacturer 
determines that a previous quarters submission was in error, it may 
resubmit quarterly ASP data to CMS, which will, in turn, revise the 
Medicare payment amount.12  
Manufacturers typically mail a floppy or compact disc containing ASP 
data to CMS to fulfill their reporting requirements.  CMS staff 
manually enter all ASP data received from manufacturers into the 
quarterly ASP files prior to calculating the Medicare payment 
amounts for Part B-covered drugs.13   
 
9 69 Fed. Reg. 17935, 17940 (Apr. 6, 2004).  
10 42 CFR  414.804(a)(6).   
11 69 Fed. Reg. 17935, 17941 (Apr. 6, 2004).   
12 At times, CMS may make changes to Medicare payment amounts from past quarters 
based on revised data submissions from manufacturers.   
13 Manual data entry refers to both typing and using the copy and paste function.   
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I N T R O D U C T I O N  
Manufacturers may face civil money penalties or suspension of their 
rebate agreements if they knowingly provide false information about 
their ASPs or fail to report ASP data in the required timeframe.14  
The penalties associated with late submissions may be increased by 
up to $10,000 for each day the ASP data are not provided.15, 16  
AMP data.  As part of their Medicaid rebate agreements, and for 
Federal payments to be authorized for covered outpatient drugs 
provided under Medicaid, manufacturers must report AMPs to CMS.  
As generally defined in section 1927(k)(1) of the Act, 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.  The AMP is generally calculated as a weighted average 
of prices for a manufacturers package sizes of a drug sold during a 
given quarter and is reported for the lowest identifiable quantity of 
the drug. 
Manufacturers electronically transmit AMP pricing and product data 
for each reporting period to CMS using the automated Drug Data 
Reporting for Medicaid system (DDR).  First, manufacturers must 
enter drug product data for each of their covered NDCs into the 
system.  Once the drug product data have been accepted by the 
system, manufacturers are able to submit AMPs for those drugs.  The 
DDR electronically reviews manufacturers pricing submissions for 
data errors, notifies manufacturers about potential problems, and 
may reject files with detected errors.  After resolving data errors (if 
any), manufacturers certify the pricing data in the DDR.  CMS 
provides OIG with quarterly AMP data approximately 2 weeks after 
the submission deadline (i.e., approximately 6 to 7 weeks before the 
next quarter).   
OIG Mandate To Monitor ASP 
Sections 1847A(d)(1) and (2) of the Act, as added by the MMA, direct 
OIG to undertake studies that compare ASPs to AMPs and widely 
 
14 Sections 1927(b)(3)(C)(i) and (ii) of the Act.   
15 Section 1927(b)(3)(C)(i) of the Act. 
16 OIG is coordinating with CMS to identify manufacturers that do not submit ASP or 
other required drug pricing data (e.g., AMP) in a timely fashion.  OIG has initiated actions 
against certain manufacturers that fail to satisfy their pricing data submission 
requirements.   
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available market prices.17  Related to this requirement, OIG has 
completed numerous reports comparing ASPs to AMPs, two reports 
comparing ASPs to widely available market prices, and one report 
examining Medicare payment for drugs with newly available generic 
versions.18, 19  Although CMS has acknowledged the authority of the 
Secretary of the Department of Health and Human Services (the 
Secretary) to adjust ASP-based payment limits based on the results of 
these studies, the agency has yet to make any changes as a result of 
OIGs work.  Additionally, OIG had completed eight audits of 
manufacturer ASP data submissions as of December 2009.   
METHODOLOGY 
Scope and Data Collection 
For this study, we used CMS tracking spreadsheets, ASP pricing files, a 
list of labeler codes associated with manufacturers required to submit 
drug-pricing data, an interview with CMS, and a review of relevant 
documents for 2007 and the first two quarters of 2008. 
CMS uses one system (i.e., the tracking spreadsheet) to track the 
submission of ASP data by manufacturers and a different system (i.e., 
the background file) to compile the actual ASPs.  For the purposes of 
this study, we conducted separate analyses on each of these files.  To 
examine the timeliness of ASP submissions, we analyzed the tracking 
spreadsheets.  To determine how many labeler codes were associated 
with manufacturers that actually reported ASPs but were not required 
to provide these prices under the current system, we analyzed the 
quarterly ASP background files in conjunction with the Medicaid 
participating drug manufacturer files.   
CMS tracking spreadsheets.  CMS provided us with tracking 
spreadsheets containing the manufacturer names, the dates the ASP 
 
17 Section 1847A(d)(5) of the Act generally defines widely available market price to be the 
price that a prudent physician or supplier would pay for the drug, net of any routinely 
available price concessions.   
18 OEI-03-04-00430, April 2006; OEI-03-06-00370, July 2006; OEI-03-07-00140,               
July 2007; OEI-03-07-00530, September 2007; OEI-03-08-00010, December 2007;           
OEI-03-08-00130, May 2008; OEI-03-08-00340, August 2008; OEI-03-08-00450, December 
2008; OEI-03-08-00530, December 2008; OEI-03-09-00050, February 2009;                         
OEI-03-09-00150, April 2009; OEI-03-09-00340, August 2009; OEI-03-09-00490, August 
2009; OEI-03-09-00640, January 2010.   
19 OEI-03-05-00430, June 2006; OEI-03-07-00190, July 2008; OEI-03-08-00310, August 
2008.   
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I N T R O D U C T I O N  
submissions were recorded as received by CMS, and manufacturer 
contact information.  The tracking spreadsheets are organized by 
manufacturer name and do not contain ASPs or NDCs (or, therefore, 
labeler codes); they are files compiled by CMS and used primarily to 
document the status of manufacturer submissions and to identify 
manufacturers that require follow-up calls to request data.   
We collected tracking spreadsheets from CMS that recorded 
manufacturer submission dates for 175 manufacturers.  However, seven 
manufacturers listed on these spreadsheets did not provide ASP 
submissions to CMS during any of the quarters under review and were 
excluded from our analysis.  These manufacturers did not submit ASPs 
during the period under review because they either merged with or were 
purchased by other manufacturers or do not sell Part B-covered drugs.  
Therefore, 168 manufacturers submitted ASPs during at least one of the 
quarters under review and were included in our analysis. 
However, not all of these 168 manufacturers submitted ASP data in 
each of the quarters under review.  Manufacturers without a submission 
date for a quarter were excluded from that quarters analysis.  
According to CMS, some reasons manufacturers did not submit ASP 
data every quarter include the following:  manufacturers merged with 
or were purchased by other manufacturers (as previously mentioned), 
manufacturers did not have Medicaid rebate agreements in effect, and 
manufacturers did not sell Part B-covered drugs during a particular 
quarter.  See Table 2 for the number of manufacturers that submitted 
ASP data each quarter, according to CMSs tracking spreadsheets.  
Table 2:  ASP Submissions From CMSs Tracking Spreadsheets 
Quarter and Year  Number of Manufacturers That Submitted ASP Data 
1st Quarter 200720  152 
2nd Quarter 2007  152 
3rd Quarter 2007  151 
4th Quarter 2007  154 
1st Quarter 2008  157 
2nd Quarter 2008  157 
Source:  OIG analysis of CMS tracking spreadsheets.   
 
20 We excluded one manufacturer from our analysis of first quarter 2007 ASP data 
because we could not determine the manufacturers submission date.  However, CMSs 
background file indicates that the manufacturer did submit ASP data to CMS. 
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CMS interview and document review.  We conducted an interview with 
CMS staff and reviewed relevant policy documents to gather 
information about oversight procedures regarding ASP data 
submissions.  The interview and document review sought to identify the 
way in which CMS collects, verifies, and analyzes data; CMS oversight 
procedures; potential vulnerabilities to the ASP system; and the way in 
which ASP reporting requirements relate to AMP reporting 
requirements. 
ASP data.  CMS uses the tracking spreadsheets to record ASP 
submission dates; it uses a different set of files (called background files) 
to compile ASPs.  The background files contain manufacturer 
submissions for Part B-covered drugs, their billing codes, and ASPs; 
they are updated each quarter.  CMS provided us with the background 
files for 2007 and the first two quarters of 2008.  Data in these files 
include the NDC; the manufacturers ASP for the drug (which factors in 
total sales, price concessions, and sales volume); and the number of 
units sold.  These files also contain information on which NDCs are 
included in the calculation of Medicare payment amounts.  See                
Table 3 for the number of labeler codes associated with ASP data 
submissions for each quarter under review.   
Table 3:  Labeler Codes Associated With ASP Data Submissions 
Number of Labeler Codes Associated With ASP Data 
Quarter and Year 
Submissions 
1st Quarter 2007  198 
2nd Quarter 2007  192 
3rd Quarter 2007  193 
4th Quarter 2007  199 
1st Quarter 2008  202 
2nd Quarter 2008  207 
Source:  OIG analysis of NDC-level ASP submissions and participating drug manufacturer file. 
     
We also collected CMSs crosswalk files for the quarters under review.  
These files link NDCs to HCPCS billing codes and could help identify 
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Part B-covered drugs for which manufacturers did not submit ASP 
data.21   
Medicaid participating drug manufacturer file.  We obtained the list of 
manufacturers that participated in the Medicaid drug rebate program 
during the quarters under review from CMS.  This list contains 
participating manufacturer information, including the manufacturers 
name; the labeler code (i.e., the first five digits of the NDC); and the 
date the rebate agreement went into effect.  Manufacturers of Part          
B-covered drugs that have rebate agreements in effect are required to 
report ASP data.  One manufacturer may have multiple labeler codes.   
Data Analysis 
Timeliness of ASP submissions.  Using CMSs tracking spreadsheets, we 
compared manufacturer submission dates to the statutorily defined 
deadline to determine the number of manufacturers that submitted late 
ASP data.  In addition, we calculated the number of days that elapsed 
before each manufacturer submitted ASP data.   
CMS oversight.  We reviewed the transcript from our interview with 
CMS as well as relevant policy documents to determine how CMS 
collects ASP data, how CMS verifies and analyzes ASP data, how CMS 
implements oversight processes for ASP data, and to what extent 
vulnerabilities exist in the ASP system.   
Manufacturer submission requirements.  Using NDC-level ASP data from 
the background files, we identified all labeler codes (i.e., the first five 
digits of the NDC) associated with data submissions during each of the 
quarters under review.  We identified the labeler codes only for NDCs 
deemed valid by CMS (i.e., the NDCs included in the calculation of the 
Medicare payment amount).  For each quarter under review, we 
compared these labeler codes to the list of labeler codes associated with 
manufacturers that participate in the Medicaid drug rebate program 
and were required to provide ASPs under the current system (see        
Table 3 on page 8 for the number of labeler codes associated with ASP 
data submissions).   
From this comparison, we determined how many labeler codes with 
reported ASPs were associated with manufacturers that were not 
required to provide these prices under the current system.  We also 
 
21 In several of its ASP files, CMS notes that the absence or presence of a particular drug 
does not indicate whether the drug is actually covered by Medicare Part B.   
  OEI-03-08-00480  AVERAGE SALES PRICES:  MANUFACTURER REPORTING AND CMS OVERSIGHT  9   
   
II NN TT RR OO DD UU CC TT II OO NN   
determined whether any HCPCS codes had Medicare payment amounts 
that were based solely on NDCs from manufacturers without rebate 
agreements.  In addition, using the crosswalk files, background files, 
and files containing labeler codes of manufacturers that participate in 
the Medicaid drug rebate program, we identified manufacturers of Part 
B-covered drugs that did not provide ASPs and also did not have rebate 
agreements during the quarters under review.   
Limitations 
We did not verify the accuracy or completeness of CMSs pricing data, 
tracking file, or the list of manufacturers participating in the Medicaid 
drug rebate program.  In addition, we did not analyze the background 
files to determine whether there were specific data entry errors.   
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. 
  OEI-03-08-00480  AVERAGE SALES PRICES:  MANUFACTURER REPORTING AND CMS OVERSIGHT  10   
   
 F I N D I N G S  
For each quarter under review, 
Each quarter, over 40 percent of manufacturers 
between 41 and 52 percent of 
submitted ASPs late; most late submissions were 
manufacturers provided ASPs 
within 10 days of the deadline  after the statutorily defined due 
date.  However, at least               
95 percent of manufacturers submitted ASP data to CMS within          
10 days after the deadline.  Further, no more than 2 percent of 
manufacturer submissions each quarter were more than 30 days late.  
See Table 4 for a description of manufacturer submissions according to 
the dates recorded by CMS in its tracking spreadsheets.  Late 
submissions did not seem to have an effect on the Medicare payment 
amount because there is a 6- to 7-week period between the ASP due 
date and the publication of the payment amounts.   
Table 4:  Manufacturer ASP Data Submissions From CMSs Tracking Spreadsheets 
Late Manufacturer Submissions* 
Percentage of  Percentage of 
Manufacturer  Percentage of  Manufacturer  Percentage of 
Quarter and Year 
Submissions Received  Manufacturer  Submissions More  Manufacturer 
Before the Deadline*  Submissions 10 or  Than 10 Days Late and  Submissions 30 or More 
Fewer Days Late  Fewer Than 30 Days  Days Late 
Late 
1st Quarter 2007  53  43  3  2 
2nd Quarter 2007  53  44  3  1** 
3rd Quarter 2007  48  47  5  1** 
4th Quarter 2007  48  50  2  0 
1st Quarter 2008  59  38  2  1 
2nd Quarter 2008  48  52  1  0 
Source:  OIG analysis of CMS ASP tracking spreadsheets.   
*Between 151 and 157 manufacturers submitted ASP data according to CMSs tracking spreadsheet.  See Table 2 on page 7 for additional detail.   
**These late submissions were from the same manufacturer.   
Note:  Totals may not add up to 100 because of rounding.     
 
CMS has implemented several 
CMS implemented oversight procedures for ASP 
oversight procedures related to 
data; however, CMSs data collection and 
payment for Part B-covered 
analysis methods introduce the potential for 
drugs.  From the time it receives 
inefficiency and errors  
a manufacturers submission of 
ASP data to the time payment 
amounts are posted on its Web site, CMS performs multiple quality 
assurance checks, including:  
  monitoring when manufacturers submit data,  
  contacting late manufacturers to remind them to submit ASP 
data,  
  OEI-03-08-00480  AVERAGE SALES PRICES:  MANUFACTURER REPORTING AND CMS OVERSIGHT  11   
   
FFFF IIII NNNN DDDD IIII NNNN GGGG SSSS     
  identifying the appropriate ASP data to be included in the 
Medicare payment amount, 
  identifying new drugs or billing codes that may be needed for the 
upcoming quarter, and 
  determining whether the Medicare payment amount for specific 
HCPCS codes underwent dramatic changes from quarter to 
quarter.   
CMS also posts the quarterly Medicare payment amounts to its Web 
site several days before providing the payment files to the              
claims-processing contractor.  This step allows manufacturers to review 
the Medicare payment amounts and resubmit pricing data if 
manufacturers identify errors before the contractor can download the 
new prices to its payment system.  CMS believes this process has 
reduced the need to revise and retract payment files because 
manufacturers can identify errors before the prices go into effect.  
Finally, CMS is coordinating with OIG to identify manufacturers that 
do not submit ASP or other required drug pricing data (e.g., AMP) in a 
timely fashion.   
CMSs methods for collecting and analyzing ASP data could reduce 
efficiency and lead to potential errors  
Although CMS has implemented oversight procedures related to 
payment for Part B-covered drugs, it relies on manual data entry, does 
not proactively identify which manufacturers are required to report 
ASPs, receives substantial amounts of ASP data for non-Part B-covered 
drugs, and does not receive the underlying data that form the basis of 
manufacturer ASP submissions.22  These factors may inhibit efficiency 
and result in potential errors.   
Manual data entry.  Unlike its system for reporting AMP data, CMS does 
not have an automated system for entering ASP data; staff manually 
enter every data element from manufacturer submissions into the ASP 
files, a process that could introduce errors.  Previous OIG work with 
ASP data identified multiple errors that needed to be corrected before 
any analysis could be conducted, including:   
  NDCs missing the first few digits (generally this applies only to 
NDCs where the first digit is zero), 
 
22 Manufacturers are not obligated to report the underlying data used to arrive at their 
ASPs.   
  OEI-03-08-00480  AVERAGE SALES PRICES:  MANUFACTURER REPORTING AND CMS OVERSIGHT  12   
   
FF II NN DD II NN GG SS   
  NDCs with extra or missing digits, and  
  NDCs that contain a dash or other incorrect text.23 
In addition, manual data entry is time consuming and increases the 
amount of time between when manufacturers submit ASPs and when 
CMS calculates the Medicare payment amounts.     
Tracking methods.  CMS does not maintain a comprehensive list of 
manufacturers that are required to submit ASP data; it tracks only 
those that actually make submissions.  The tracking spreadsheets 
include only manufacturers that made at least one quarterly ASP 
submission.  This method of tracking is based on previous submissions; 
it does not take into account the manufacturers that are required to 
submit ASPs.  In addition, CMS would not have any information in its 
tracking spreadsheet on manufacturers without a rebate agreement 
that did not submit ASP data.   
Data for non-Part B-covered drugs.  According to CMS, drug 
manufacturers submitted ASP data for over 8,100 NDCs each quarter; 
in any given quarter, 3,000 of these NDCs were not actually included in 
the calculation of Medicare payment amounts.  These extra data further 
complicate the process because CMS staff spend substantial time 
determining which of these NDCs are Part B-covered drugs (typically 
using manual methods).  In contrast, the automated system used to 
collect AMP data requires manufacturers to submit and certify valid 
product data for NDCs prior to providing pricing data.   
Data transparency.  Manufacturers are under no obligation to report to 
CMS the underlying data that form their ASP submissions.  CMS 
receives only the ASP, the NDC, the number of units, and some product 
information.  Manufacturers are not required to provide any data on 
total sales, price concessions, or type of customer.  Therefore, CMS is 
unable to verify how manufacturers arrive at the ASPs they submit.   
Approximately 200 unique 
Almost one-fifth of labeler codes with reported 
labeler codes were associated 
ASPs were associated with manufacturers that 
with ASP data submissions for 
were not required to provide these prices under the  Part B-covered drugs during 
current system  each of the quarters under 
review.  Nearly one-fifth of these 
 
23 OIG identified these errors during analysis for the reports comparing ASPs to AMPs.  
See page 6 for these reports.     
  OEI-03-08-00480  AVERAGE SALES PRICES:  MANUFACTURER REPORTING AND CMS OVERSIGHT  13   
   
F I N D I N G S  
codes belonged to manufacturers that did not have to provide ASP data 
under the current system because they did not have a Medicaid drug 
rebate agreement in effect for that quarter.  See Table 5 for the 
percentage of labeler codes associated with manufacturers that 
submitted ASP data but were not required to do so under the current 
system.  
      Table 5:  Manufacturer Requirements for Reporting ASPs 
Percentage of Labeler Codes Associated With 
Quarter and Year  Manufacturers That Submitted ASPs but Were Not 
Required To Do So Under the Current System* 
1st Quarter 2007  17 
2nd Quarter 2007  17 
3rd Quarter 2007  17 
4th Quarter 2007  18 
1st Quarter 2008  18 
2nd Quarter 2008  17 
*There were between 192 and 207 labeler codes with ASP data submissions for the quarters under review.   
See Table 3 on page 8 for additional detail. 
Source:  OIG analysis of manufacturers participating in the Medicaid drug rebate program and ASP data.   
Some HCPCS codes were crosswalked only to NDCs of manufacturers that 
were not required to report ASPs under the current system   
Medicare payment amounts in the third quarter of 2008 for some 
HCPCS codes (one version of immune globulin, for example) were based 
solely on NDCs from manufacturers that did not have rebate 
agreements in effect in the first quarter of 2008.  If these manufacturers 
chose not to report ASPs, CMS would be unable to calculate ASP-based 
Medicare payment amounts for these HCPCS codes.24     
A number of manufacturers of Part B-covered drugs were not required to 
report ASPs and did not provide ASP data to CMS   
We identified between 66 and 82 labeler codes during the quarters 
under review that were associated with manufacturers that had 
products listed in the background and crosswalk files (i.e., were Part    
B-covered drugs) but (1) did not report ASP data for a particular quarter 
and (2) did not have a rebate agreement in effect for that quarter.  
Approximately one-third of these labeler codes were associated with 
repackagers (i.e., companies that repackage drugs purchased from 
 
24 According to CMS, in the absence of reported ASP data, it still calculates a Medicare 
payment amount to ensure timely and efficient claims processing.  In these cases, CMS uses 
other published sources of pricing data.   
  OEI-03-08-00480  AVERAGE SALES PRICES:  MANUFACTURER REPORTING AND CMS OVERSIGHT  14   
   
F I N D I N G S  
manufacturers into smaller quantities).  Because CMS does not have 
pricing or utilization data for these drugs, we are unable to quantify the 
impact this may have had on Medicare payment amounts.  
  OEI-03-08-00480  AVERAGE SALES PRICES:  MANUFACTURER REPORTING AND CMS OVERSIGHT  15   
   
 R E C O M M E N D A T I O N S  
 
When setting payment amounts for drugs covered under Medicare  
Part B, CMS relies on ASP data reported by manufacturers.  This report 
identifies several potential issues with the current ASP reporting 
process, including (1) the timeliness of manufacturer reporting, (2) the 
largely manual process used by CMS to collect and analyze 
manufacturer-reported data, and (3) the legal requirements for 
manufacturer reporting.   
For example, over 40 percent of manufacturers failed to submit ASPs by 
the statutorily defined deadline each quarter.  Although this did not 
seem to have a significant impact on Medicare payment amounts during 
the quarters under review, CMSs ability to calculate appropriate 
payment amounts is reliant upon timely manufacturer data 
submissions.  
In addition, CMSs process for data collection and analysis could lead to 
inefficiency and errors.  Unlike the system CMS uses to collect AMP 
data, the agency does not have an automated process to collect ASPs.  
An automated system could reduce the time required to calculate 
payment amounts, validate that manufacturers are submitting data for 
Part B-covered drugs, and develop a more comprehensive list of 
manufacturers required to report ASPs.   
Finally, a number of manufacturers that currently report ASPs do not 
have Medicaid rebate agreements in place and therefore are not 
required to do so under the current system.  Other manufacturers with 
Part B-covered drugs are not reporting ASPs at all.  Therefore, for 
certain drugs, Medicare payment amounts may not include ASPs for all 
drugs on the market.   
Each of these issues introduces the potential for inefficiency and errors.  
To ensure that Medicare payment for Part B-covered drugs is accurate, 
timely, and reflective of all Part B-covered drug sales, we recommend 
that CMS: 
Develop an automated system for the collection of ASP data 
CMS has developed an automated system for manufacturers to submit 
AMPs and could use that system as a template for establishing an 
automated ASP system.  Many manufacturers that submit ASPs 
already submit AMPs; therefore, these manufacturers are familiar with 
the concept of an automated price-reporting system.  An automated 
system could limit the possibility of data entry errors, reduce the 
  OEI-03-08-00480  AVERAGE SALES PRICES:  MANUFACTURER REPORTING AND CMS OVERSIGHT  16   
   
R E C O M M E N D A T I O N S  
amount of time it takes to calculate ASP-based payment amounts and 
adjust ASP payment limits, and enable CMS to track ASPs with greater 
ease.   
An automated system would make the process more efficient and could 
help ensure data quality.  Similar to the AMP system, an automated 
system for ASP collection would include manufacturer submission and 
certification of NDCs prior to accepting the associated pricing data.    
The increased efficiency resulting from the implementation of an 
automated system could facilitate the adjustment of Medicare payment 
amounts based on the results of OIG ASP-to-AMP price comparisons.  
CMS has acknowledged the Secretarys authority to adjust ASP-based 
payment limits based on the results of these studies.25  However, the 
agency has yet to make any changes as a result of OIGs work, citing the 
timing of OIG pricing comparisons as one potential obstacle to adjusting 
payment amounts.26  Therefore, if OIG can provide the results of its 
pricing comparisons to CMS sooner, it could enable the adjustment of 
Medicare payment amounts based on these comparisons.   
Seek a legislative change to directly require all manufacturers of    
Part B-covered drugs to submit ASPs 
During the quarters under review, almost one-fifth of labeler codes with 
reported ASP data were associated with manufacturers that were not 
required to provide ASPs under the current system because they did not 
have Medicaid rebate agreements in place.  Also, there may be 
additional manufacturers of Part B-covered drugs that are not 
submitting ASP data because they do not have a rebate agreement in 
effect, yet their products are potentially eligible for Part B payments.  
CMS could work with Congress to develop legislation that would 
directly require all manufacturers of Part B-covered drugs to submit 
ASPs, regardless of whether the manufacturers have Medicaid drug 
rebate agreements.  This would ensure that Medicare payment amounts 
were reflective of all Part B-covered drugs.  
 
 
 
 
25 OEI-03-04-00430, April 2006. 
26 OEI-03-07-00140, July 2007. 
  OEI-03-08-00480  AVERAGE SALES PRICES:  MANUFACTURER REPORTING AND CMS OVERSIGHT  17   
   
R E C O M M E N D A T I O N S  
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
In its comments on the draft report, CMS agreed that certain 
refinements to the ASP reporting process are desirable to ensure that 
Medicare payments for Part B-covered drugs are accurate and timely. 
CMS concurred with OIGs recommendation that it develop an 
automated system for the collection of ASP data and agreed that an 
automated system would be an improvement over the present one.  
CMS noted that it recognized the risks with the current system and 
understands the need to develop an automated solution.  CMS also 
stated that it is working with contractors to improve the efficiency of 
ASP-related processes.   
CMS did not concur at this time with OIGs recommendation that it 
seek a legislative change to directly require all manufacturers of        
Part B-covered drugs to submit ASPs.  However, CMS stated that it will 
consider this recommendation as it continues to monitor the effects of 
current payment policies.  We continue to support our recommendation 
that CMS seek a legislative change to the ASP reporting requirements 
as a way to ensure that Medicare payment amounts are reflective of all 
Part B-covered drugs. 
CMS also provided several technical comments.  Based on these 
comments, we made a few minor revisions to the report, where 
appropriate.  CMSs comments are provided in the Appendix. 
  OEI-03-08-00480  AVERAGE SALES PRICES:  MANUFACTURER REPORTING AND CMS OVERSIGHT  18  x 
A  P  PEN  D 
Agency Comments 
r.p.'1Ir:~., 
~ 
(  DEPARTMENT OF HEALTH: & HUMAN SERVICES  Centers for Medlcar. & Medicaid Service. 
,S~ 
Administrator 
Washington. DC 20201 
TO:  Daniel R. Levinson 
Inspector General 
FROM:  Charlen~ Frizzera 
Acting Administraior 
SUBJECT:  Office of1nsp~ctor General Draft Report (OIG): "Average Sales Prices: 
Manufacturer Reporting and CMS Oversight" (OEI-03-08-00480) 
The.Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to r~view and 
comment on the OIG report entitled, "Average Sales Prices: Manufacturer Reporting and eMS 
Ov~rsight." We appreciate the OIG'& continuing efforts to examine payments made under the 
average sales price (ASP) methodology. TIle OIG report presents findings from a review of 
manufacturer submitted ASP data and ofeMS internal procedures .used to collect, array, -and 
manage that data irt order to calculate quarterly Part B drug payment limits. 
The report had three objectives: J) to determine whether manufacturers that reported ASP data to 
eMS did so within the timeframe required by Feilerallaw; 2) to review eMS' oversight 
procedures for the submission of ASP data; and 3) to quantify the number ofmanufacturers that 
provided ASPs to eMS but were not required to do so under the current system. 
The report had three major findings:  1) each quarter over 40 percent of manufacturers submitted 
ASPs late although most late submissions were submitted within 10 days ofthe deadline; 
2) CMS implemented oversight procedures for ASP, data but CMS' data collection and analysis 
methods introduce the potential for inefficiency and errors; and 3) almost one-fifth of labeler 
codes with reported ASPs were associated with manufacturers that were not required to provide 
these prices under the current system. 
The OIG expressed concerns about the following aspects ofthe ASP reporting process:  1) the 
timeliness of manufacturer reporting; 2) the largely manual process used by CMS to collect and 
analyze manufacturer-reported data; and 3) the legal requirements for manufacturer reporting. 
The report finds that each of these issues introduces the potential for inefficiency and errors. To 
ensure that Medicare payments for Part B-covered drugs are accurate and timely, we agree that 
certain refinements to the process are desirable. 
OEI-03-0S-004S0  AVERAGE SALES PRICES:  MANUFACTURER REPORTING AND eMS OVERSIGHT  19   
   
A P P E N D I X  
  OEI-03-08-00480  AVERAGE SALES PRICES:  MANUFACTURER REPORTING AND CMS OVERSIGHT  20   
   
A P PA EC NK DN IOX W  ~L E  AD  G M E N T S  
A P P E N D I X ~ A  
 
This report was prepared under the direction of Robert A. Vito, 
Regional Inspector General for Evaluation and Inspections in the 
Philadelphia regional office, and David E. Tawes, Director, Prescription 
Drug Pricing Unit.   
Edward K. Burley served as the team leader for this study.  Other 
principal Office of Evaluation and Inspections staff from the 
Philadelphia regional office who contributed to the report include       
Eric M. Biersmith; other central office staff who contributed include 
Scott Manley.  
  OEI-03-08-00480  AVERAGE SALES PRICES:  MANUFACTURER REPORTING AND CMS OVERSIGHT  21   
Office of Inspector General 
http://oig.hhs.gov 
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs.  This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 
audits with its own audit resources or by overseeing audit work done by others.  Audits 
examine the performance of HHS programs and/or its grantees and contractors in carrying 
out their respective responsibilities and are intended to provide independent assessments of 
HHS programs and operations.  These assessments help reduce waste, abuse, and 
mismanagement and promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 
HHS, Congress, and the public with timely, useful, and reliable information on significant 
issues.  These evaluations focus on preventing fraud, waste, or abuse and promoting 
economy, efficiency, and effectiveness of departmental programs.  To promote impact, OEI 
reports also present practical recommendations for improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 
of fraud and misconduct related to HHS programs, operations, and beneficiaries.  With 
investigators working in all 50 States and the District of Columbia, OI utilizes its resources 
by actively coordinating with the Department of Justice and other Federal, State, and local 
law enforcement authorities.  The investigative efforts of OI often lead to criminal 
convictions, administrative sanctions, and/or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support for OIGs internal operations.  OCIG represents OIG in all civil and 
administrative fraud and abuse cases involving HHS programs, including False Claims Act, 
program exclusion, and civil monetary penalty cases.  In connection with these cases, OCIG 
also negotiates and monitors corporate integrity agreements.  OCIG renders advisory 
opinions, issues compliance program guidance, publishes fraud alerts, and provides other 
guidance to the health care industry concerning the anti-kickback statute and other OIG 
enforcement authorities.