Department of Health and Human Services 
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
C A
O  MPARISON OF  VERAGE 
 
S P A
AL ES  RICES AND  VERAGE 
 
M P :
ANUFACTURER  RICES    
A O 2011 
N  VERVIEW OF 
 
Daniel R. Levinson  
Inspector General 
 
January 2013 
OEI-03-12-00670   
   
EXECUTIVE SUMMARY:  COMPARISON OF AVERAGE SALES PRICES AND 
AVERAGE MANUFACTURER PRICES:  AN OVERVIEW OF 2011 
OEI-03-12-00670 
 
WHY WE DID THIS STUDY  
When Congress established average sales prices (ASP) as the primary basis for Medicare 
Part B drug reimbursement, it also mandated that the Office of Inspector General (OIG) 
compare ASPs with average manufacturer prices (AMP) and directed the Centers for 
Medicare & Medicaid Services (CMS) to lower reimbursement for drugs with ASPs that 
exceed AMPs by a threshold of 5 percent.  This is OIGs 29th report comparing ASPs to 
AMPs since the ASP reimbursement methodology was implemented in January 2005.  
CMS has yet to make any changes to Part B drug reimbursement as a result of OIGs 
studies.  However, the agency published a final rule in November 2012 that specifies the 
circumstances under which AMP-based price substitutions will occur beginning in 2013. 
 
HOW WE DID THIS STUDY 
We identified drug codes that exceeded the 5-percent threshold in one or more quarters of 
2011 and estimated the financial impact of lowering reimbursement amounts for those 
drugs.  We also identified drug codes that were removed from our pricing comparison in 
one or more quarters of 2011 because they did not have AMP data. 
 
WHAT WE FOUND 
In 2011, 58 drug codes exceeded the 5-percent threshold in 1 or more quarters when 
complete AMP data were used.  If reimbursement amounts for these 58 codes had been 
lowered to 103 percent of the AMPs during the applicable quarter(s), Medicare 
expenditures would have been reduced by an estimated $14.4 million over 1 year.  Under 
CMSs proposed price substitution policy, reimbursement amounts for over 40 percent of 
these codes would have been reduced, saving an estimated $7 million over 1 year.  An 
additional 24 drug codes met the 5-percent threshold when partial AMP data were used.  
Furthermore, at least 9 percent of drug codes were excluded from OIGs pricing 
comparisons in each quarter of 2011 because none of the associated drug products had 
AMP data.   
 
WHAT WE RECOMMEND  
To ensure the appropriateness of Medicare Part B payments, we recommend that CMS 
(1) finalize the price substitution policy in the proposed rule and lower Medicare 
reimbursement amounts for drugs that exceed the 5-percent threshold, (2) consider 
expanding the price substitution policy to include all Healthcare Common Procedure 
Coding System (HCPCS) codes with complete AMP data, (3) consider expanding the 
price substitution policy to include certain HCPCS codes with partial AMP data, and    
(4) consider seeking a legislative change to require manufacturers of Part B-covered 
drugs to submit both ASPs and AMPs.  CMS concurred with our first recommendation 
and did not concur with the remaining three.
   
   
TABLE OF CONTENTS 
 
Objectives ....................................................................................................1 
Background ..................................................................................................1 
Methodology ................................................................................................6 
Findings......................................................................................................10 
In 2011, 58 HCPCS codes exceeded the 5-percent threshold                        
in 1 or more quarters when complete AMP data were used ...........10 
In 2011, 24 HCPCS codes exceeded the 5-percent threshold                        
in 1 or more quarters when partial AMP data were used ............... 11 
Because of NDCs without AMP data, the number of pricing 
comparisons performed in 2011 was reduced by at least                                  
9 percent in each quarter  ...............................................................12 
Conclusion and Recommendations ............................................................14 
Agency Comments and Office of Inspector General Response .....16 
Appendixes ................................................................................................18 
A:  The Equation Used by the Centers for Medicare & Medicaid 
Services To Calculate Volume-Weighted Average Sales                      
Prices ..............................................................................................18 
B:  Detailed Methodology for Calculating Volume-Weighted                        
Average Manufacturer Prices for 2011 ..........................................19 
C:  Detailed Methodology for Estimating Savings for Drug                    
Codes That Exceeded the 5-Percent Threshold in 2011 ................21 
D:  Fifty-Eight Drug Codes That Exceeded the 5-Percent 
Threshold in 2011 When Complete Average Manufacturer                  
Price Data Were Used ....................................................................23 
E:  Fifteen Drug Codes With Partial Average Manufacturer                  
Price Data for Which Price Substitutions May Be Warranted .......25 
F:  Agency Comments ....................................................................26 
Acknowledgments......................................................................................29 
 
   
   
OBJECTIVES 
1.  To identify drugs with average sales prices (ASP) that exceeded 
average manufacturer prices (AMP) by at least 5 percent in any quarter 
of 2011. 
2.  To examine the impact of missing and unavailable AMP data on the 
Office of Inspector Generals (OIG) pricing comparisons in 2011. 
BACKGROUND  
The Social Security Act (the Act) mandates that OIG compare ASPs with 
AMPs.1  The Act states that if OIG finds that the ASP for a drug exceeds 
the AMP by a certain percentage (5 percent through 2012), the Secretary 
of Health and Human Services (the Secretary) may disregard the ASP for 
the drug when setting reimbursement amounts.2, 3  The Act further states: 
... 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....4 
Coverage of Prescription Drugs Under Medicare Part B 
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.  
Payments for Prescription Drugs Under Medicare Part B 
The Centers for Medicare & Medicaid Services (CMS) contracts with 
private companies 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 
Medicare contractors using Healthcare Common Procedure Coding 
System (HCPCS) codes.5  In the case of prescription drugs, each HCPCS 
 
1 Section 1847A(d)(2)(B) of the Act. 
2 Section 1847A(d)(3)(A) of the Act.  
3 Section 1847A(d)(3)(B)(ii) of the Act authorizes the Secretary to adjust the applicable 
threshold percentage in 2006 and subsequent years; however, the threshold percentage 
has been maintained at 5 percent.   
4 Section 1847A(d)(3)(C) of the Act. 
5 CMS established the HCPCS to provide a standardized coding system for describing the 
specific items and services provided in the delivery of health care. 
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  1 
   
   
code defines the drug name and the amount of the drug represented by the 
HCPCS code but does not specify the manufacturer or package size. 
Medicare and its beneficiaries spent over $12 billion for Part B drugs in 
2011.6  Although Medicare paid for more than 500 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 2011,                      
62 HCPCS codes accounted for 90 percent of the expenditures for Part B 
drugs, with only 13 of these codes representing the majority of total Part B 
drug expenditures. 
Reimbursement Methodology for Part B Drugs 
Medicare Part B pays for most covered drugs using a reimbursement 
methodology based on ASPs.7  As defined by law, an ASP is a 
manufacturers sales of a drug to all purchasers in the United States in a 
calendar quarter divided by the total number of units of the drug sold by 
the manufacturer in that same quarter.8  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.9  Sales that are nominal in amount are exempted from the ASP 
calculation, as are sales excluded from the determination of best price in 
Medicaids drug rebate program.10, 11 
Manufacturers that participate in the Medicaid drug rebate program must 
provide CMS with the ASP and volume of sales for each of their national 
drug codes (NDC) on a quarterly basis, with submissions due 30 days after 
the close of each quarter.12  An NDC is an 11-digit identifier that 
represents a specific manufacturer, product, and package size. 
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 
 
6 Medicare expenditures for Part B drugs in 2011 were calculated using CMSs Part B 
Analytics and Reports (PBAR).  The PBAR data for 2011 were 98-percent complete 
when the data were downloaded in May 2012. 
7 Several Part B drugs, including certain vaccines and blood products, are not paid for 
under the ASP methodology.  
8 Section 1847A(c) of the Act, as added by the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003, P.L. 108-173. 
9 Section 1847A(c)(3) of the Act.  
10 Section 1847A(c)(2) of the Act.  
11 Pursuant to  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. 
12 Section 1927(b)(3) of the Act.  
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  2 
   
   
crosswalks manufacturers NDCs to HCPCS codes.  CMS uses 
information in this crosswalk file to calculate volume-weighted ASPs for 
covered HCPCS codes.13 
Under the ASP pricing methodology, the Medicare reimbursement for 
most Part B drugs is equal to 106 percent of the volume-weighted ASP for 
the HCPCS code.14, 15  However, there is a two-quarter lag between the 
sales period for which ASPs are reported and the effective date of the 
reimbursement amounts.  For example, ASPs from the first quarter of 2011 
were used to establish reimbursement amounts for the third quarter of 
2011, and ASPs from the fourth quarter of 2011 were used to establish 
reimbursement amounts for the second quarter of 2012. 
The Medicaid Drug Rebate Program and AMPs 
In general, for Federal payment to be available for covered outpatient 
drugs provided under Medicaid, the Act mandates that drug manufacturers 
enter into rebate agreements with the Secretary and pay quarterly rebates 
to State Medicaid agencies.16  Under these rebate agreements and pursuant 
to the Act, manufacturers must provide CMS with the AMPs for each of 
their NDCs.17  As further explained in regulation, manufacturers are 
required to submit AMPs within 30 days after the end of each quarter.18   
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, one tablet, one capsule).  
By law, AMP is defined as the average price paid to the manufacturer for 
the drug in the United States by (1) wholesalers for drugs distributed to  
 
 
13 To calculate a volume-weighted ASP, CMS uses an equation that involves the 
following variables:  the ASP for the 11-digit NDC as reported by the manufacturer, the 
volume of sales for the NDC as reported by the manufacturer, and the number of billing 
units in the NDC as determined by CMS.  The amount of the drug represented by 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 in that NDC.  CMS calculates the number of 
billing units in each NDC when developing its crosswalk files. 
14 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. 
15 Section 1847A(b)(1) of the Act.  Medicare beneficiaries are responsible for 20 percent 
of this amount in the form of coinsurance. 
16 Sections 1927(a)(1) and (b)(1) of the Act. 
17 Section 1927(b)(3) of the Act. 
18 42 CFR  447.510.   
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  3 
   
   
retail community pharmacies and (2) retail community pharmacies that 
purchase drugs directly from the manufacturer.19, 20   
Penalties for Failure To Report Timely Drug Pricing Data 
Pursuant to the Act, manufacturers that fail to provide ASP and AMP data 
on a timely basis may be subject to civil monetary penalties and/or 
termination from the drug rebate program.21, 22  Accordingly, CMS has 
terminated rebate agreements with a number of manufacturers for failure 
to report AMPs and, for the purposes of evaluating potential civil 
monetary penalties, has referred to OIG manufacturers that failed to 
submit timely ASPs and AMPs.  In accordance with an enforcement 
initiative announced in September 2010, OIG has imposed civil monetary 
penalties on certain manufacturers that failed to report timely ASPs and/or 
AMPs.23 
OIGs Monitoring of ASPs and AMPs 
To comply with its statutory mandate, OIG has issued 24 quarterly pricing 
comparisons since the ASP reimbursement methodology for Part B drugs 
was implemented in January 2005.24  In addition, OIG has completed four 
annual overviews of ASPs and AMPs, which examined data across all four 
quarters of 2007, 2008, 2009, and 2010.   
OIG has consistently recommended that CMS develop a price substitution 
policy and subsequently lower reimbursement for drugs that exceed the           
5-percent threshold as directed by the Act.  Although CMS has yet to make 
any changes to Part B drug reimbursement as a result of OIGs studies, the 
agency published a final rule in November 2012 that, among other things, 
 
19 Section 1927(k)(1) of the Act, as amended by  2503 of the Patient Protection and 
Affordable Care Act, P.L. 111-148.    
20 Pursuant to  1927(k)(10) of the Act, retail community pharmacy means an 
independent, chain, supermarket, or mass merchandiser pharmacy that is licensed as a 
pharmacy by the State and that dispenses medications to the general public at retail 
prices.  Such term does not include a pharmacy that dispenses prescription medications to 
patients primarily through the mail; nursing home, long-term-care, or hospital 
pharmacies; clinics; charitable or not-for-profit pharmacies; government pharmacies; or 
pharmacy benefit managers. 
21 Sections 1927(b)(3)(C)(i) and (4)(B)(i) of the Act. 
22 The Secretary delegated to OIG the responsibility to impose civil monetary penalties 
for violations of   1927(b)(3)(C) of the Act in 59 Fed. Reg. 52967 (Oct. 20, 1994). 
23 OIG, Special Advisory Bulletin:  Average Manufacturer Price and Average Sales Price 
Reporting Requirements, September 2010.  Available online at http://www.oig.hhs.gov. 
24 This report total does not include our pricing comparison for the third quarter of 2011, 
which was not made available to the public.  Rather, OIG issued the results for that 
quarter directly to CMS to facilitate price substitutions that CMS intended to make 
beginning April 2012.  However, CMS ultimately did not make those price 
substitutions in light of access concerns related to drug shortages.  
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  4 
   
   
specifies the circumstances under which AMP-based price substitutions 
will occur beginning in 2013.25, 26 
CMSs Proposed Price Substitution Policy 
According to its November 2012 final rule, CMS will substitute            
103 percent of the AMP for the ASP-based reimbursement amount when 
OIG identifies a HCPCS code that exceeds the 5-percent threshold in two 
consecutive quarters or three of four quarters.27  Because CMS believes 
that comparisons based on partial AMP data may not adequately reflect 
market trends, the agency will lower reimbursement amounts only when 
ASP and AMP comparisons are based on the same set of NDCs (i.e., are 
based on complete AMP data).28  HCPCS codes that meet the 5-percent 
threshold on the basis of partial AMP data will not be eligible for price 
substitution.  
CMS plans to apply its price substitution policy on a quarterly basis 
beginning in 2013.29  Price substitutions will take effect in the quarter after 
OIG shares the results of its most recent pricing comparison and will 
remain in effect for one quarter.30  To prevent CMSs policy from 
inadvertently raising the Medicare reimbursement amount, a price 
substitution will not occur when the substituted amount is greater than the 
ASP-based payment amount calculated for the quarter in which the price 
substitution would take effect.31  Price substitutions will also not occur 
 
25 77 Fed. Reg. 68892, 69368 (November 16, 2012). 
26 This is the third time that CMS has pursued rulemaking on AMP-based price 
substitutions.  In July 2010, CMS published a proposed rule that specified the 
circumstances under which AMP-based price substitutions would occur, effective 
January 2011; however, the agency opted not to finalize this proposed rule partly on the 
basis of impending changes to the definition of AMP (75 Fed. Reg. 73170, 73471                           
(Nov. 29, 2010)).  In November 2011, CMS published a final rule that again specified 
circumstances under which price substitutions would occur (76 Fed. Reg. 73026, 73473 
(Nov. 28, 2011)).  Although the final rule took effect in January 2012, CMS did not 
implement that policy in light of access concerns related to drug shortages. 
27 77 Fed. Reg. 68892, 69368 (November 16, 2012).  CMS has expressed concern that 
price substitutions based on results from a single quarter will not accurately account for 
temporary fluctuations in market prices and believes that focusing on drugs that 
consistently exceed the threshold over multiple quarters is more appropriate.  See, e.g.,                  
76 Fed. Reg. 73026, 73288, 73291 (Nov. 28, 2011). 
28 76 Fed. Reg. 73026, 73289 (Nov. 28, 2011) 
29 77 Fed. Reg. 68892, 69368 (November 16, 2012).   
30 See, e.g., 76 Fed. Reg. 73026, 73473 (Nov. 28, 2011).  After that one quarter, the 
reimbursement amount will be either 106 percent of the volume-weighted ASP for the 
current quarter or, if the HCPCS code continues to meet CMSs price substitution 
criteria, 103 percent of the volume-weighted AMP for the current quarter. 
31 77 Fed. Reg. 68892, 69368 (November 16, 2012).  For example, if the AMP-based 
substitution amount were $5 and the ASP-based reimbursement amount were $4 for the 
quarter in which the substitution would take place, CMS would not make the price 
substitution.  
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  5 
   
   
when the drug and dosage form described by the HCPCS code is a critical 
or medically necessary drug identified by the Food and Drug 
Administration (FDA) as being in short supply.32   
METHODOLOGY 
We obtained files from CMS containing NDC-level ASP data from the 
first through fourth quarters of 2011, which were used to establish               
Part B drug reimbursement amounts for the third quarter of 2011 through 
the second quarter of 2012, respectively.  These files also include 
information that crosswalks NDCs to their corresponding HCPCS codes.  
We also obtained AMP data from CMS for the first through fourth quarters 
of 2011.33 
Calculating Volume-Weighted ASPs and AMPs for 2011 
As mentioned previously, Medicare does not base reimbursement for 
covered drugs on NDCs; instead, it uses HCPCS codes.  Therefore, CMS 
uses quarterly ASP information submitted by manufacturers for each NDC 
to calculate a volume-weighted ASP for each covered HCPCS code.  
When calculating these volume-weighted ASPs, CMS includes only NDCs 
with ASP submissions that are deemed valid.   
As part of our analysis for each of the 2011 quarterly comparisons, we 
calculated a volume-weighted AMP for each HCPCS code, consistent with 
CMSs methodology for calculating volume-weighted ASPs.  To ensure 
that the broadest range of drug codes is subject to OIGs pricing 
comparisons, we examined HCPCS codes with complete AMP data (i.e., 
HCPCS codes with AMP data for every NDC that CMS used in its 
calculation of volume-weighted ASPs), as well as HCPCS codes with 
partial AMP data (i.e., HCPCS codes with AMP data for only some of the 
NDCs that CMS used in its calculation of volume-weighted ASPs).  When 
calculating the volume-weighted AMP for a HCPCS code with partial 
AMP data, we excluded any NDCs without AMPs; however, we did not 
exclude those NDCs from the corresponding volume-weighted ASP.  This 
means that the volume-weighted AMP for a HCPCS code with partial 
AMP data is based on fewer NDCs than the volume-weighted ASP for that 
same code.  Appendix B describes in more detail the methods used to 
calculate volume-weighted AMPs for HCPCS codes using complete or 
partial AMP data. 
 
32 77 Fed. Reg. 44722, 45057 (July 30, 2012). 
33 ASP and crosswalk data from the first through fourth quarters of 2011 were current as 
of June 2011, September 2011, December 2011, and March 2012, respectively.  AMP 
data from the first through fourth quarters of 2011 were current as of May 2011, August 
2011, November 2011, and April 2012, respectively.  
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  6 
   
   
Comparing Volume-Weighted ASPs and AMPs for 2011 
In each of our 2011 quarterly comparisons, we compared the volume-
weighted ASPs and AMPs and identified HCPCS codes with ASPs that 
exceeded the AMPs by at least 5 percent when calculated using either 
complete or partial AMP data.34  For each of the HCPCS codes that 
exceeded the 5-percent threshold in at least one quarter of 2011, we 
estimated the impact of lowering reimbursement to 103 percent of the 
AMP.35   
As part of our 2011 annual overview, we merged the results of the four 
quarterly pricing comparisons to identify HCPCS codes with ASPs that 
exceeded AMPs by at least 5 percent in one or more quarters of 2011 
when calculated using either complete or partial AMP data.  To provide 
more accurate savings estimates, we recalculated the savings estimates for 
the codes that exceeded the threshold in one or more quarters of 2011 
using recent Medicare payment amount and expenditures data that were 
not available when our quarterly pricing comparisons were originally 
performed.  As a result, the estimated savings presented in this annual 
overview may differ from the savings presented in each of OIGs separate 
quarterly pricing comparisons.  Appendix C describes in more detail the 
methods we used to estimate savings for HCPCS codes that exceeded the 
5-percent threshold.   
Additional Analysis of HCPCS Codes With Complete AMP Data.  To 
examine the potential effect of CMSs proposed price substitution policy, 
each of our quarterly pricing comparisons for 2011 identified codes with 
complete AMP data that exceeded the 5-percent threshold in two 
consecutive or three of four quarters.36 
As part of our 2011 annual overview, we merged the results of the four 
quarterly pricing comparisons to identify HCPCS codes that repeatedly 
 
34 For those HCPCS codes that exceeded the 5-percent threshold, we reviewed the 
associated NDCs to verify the accuracy of the billing unit information for the quarter(s) 
in which the threshold was exceeded.  If HCPCS codes had potentially inaccurate billing 
units, we excluded them from our findings. 
35 Section 1847A(d)(3)(C) of the Act directs the Secretary to replace payment amounts 
for drugs that exceed the 5-percent threshold with the lesser of the widely available 
market price (WAMP) 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 WAMPs had been available for these drugs and had been 
lower than 103 percent of the AMP, the savings estimate presented in this report would 
have been greater. 
36 To accurately identify codes that exceeded the 5-percent threshold in two consecutive 
or three of four quarters, our pricing comparisons from the first three quarters of 2011 
also examined quarterly results from 2010. 
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  7 
   
   
met this price substitution criterion.37  In addition, we identified and 
excluded HCPCS codes in any quarter of 2011 with AMP-based 
substitution amounts that were greater than the ASP-based payment 
amounts for the quarter in which the price substitution would have 
occurred.  We then totaled the estimated savings for the remaining HCPCS 
codes that would have had price reductions.38 
Additional Analysis of HCPCS Codes With Partial AMP Data.  For each 
of our 2011 quarterly comparisons, we identified HCPCS codes with 
partial AMP data that exceeded the 5-percent threshold only because AMP 
data were missing or unavailable.39  As mentioned previously, the                       
volume-weighted AMP for a HCPCS code with partial AMP data is based 
on fewer NDCs than the volume-weighted ASP for that same code.  
Therefore, there may be a disparity between the volume-weighted ASP 
and AMP that would not exist if AMP data were available for the full set 
of NDCs.  In other words, the volume-weighted ASP for the HCPCS code 
could exceed the volume-weighted AMP by at least 5 percent only because 
AMPs for certain NDCs were not represented. 
To determine whether NDCs without AMPs unduly influenced the results 
of our pricing comparisons, we reanalyzed pricing data after accounting 
for the missing and unavailable AMP values.  Specifically, we replaced 
each missing or unavailable value with its corresponding ASP and 
recalculated the volume-weighted AMPs using those imputed prices.40  We 
then compared those new volume-weighted AMPs to the volume-weighted 
ASPs originally calculated by CMS. 
If a HCPCS code no longer exceeded the 5-percent threshold in a given 
quarter, we concluded that the missing and unavailable AMPs were likely 
 
37 Because of the two-quarter lag between the period for which ASPs are reported and the 
effective date of reimbursement amounts and the additional quarter that will be necessary 
for OIG to complete its pricing comparison, there will be a three-quarter lag between the 
ASP reporting period and the effective date of the price substitutions.  Therefore,     
AMP-based price substitutions based on pricing data from the first through fourth 
quarters of 2011 would have applied in the fourth quarter of 2011 through the third 
quarter of 2012, respectively. 
38 We did not determine whether any of the remaining drugs were identified by FDA as 
being in short supply during the applicable quarters. 
39 For the purposes of this study, an AMP was considered missing if the manufacturer 
had a Medicaid rebate agreement in 2011 but did not submit a price for the quarter.  An 
AMP was considered unavailable for an NDC if the manufacturer did not have a 
Medicaid rebate agreement and was therefore not required to submit AMP data to CMS.  
To determine whether a manufacturer had a rebate agreement in 2011, we consulted the 
list of participating drug companies posted on CMSs Web site. 
40 Although an NDCs ASP is not usually the same as its AMP, ASPs in 2011 were 
within 3 percent of the AMPs at the median.  Therefore, we believe that ASP acts as a 
reasonable proxy for AMP, ensuring that the NDC is represented in both the volume-
weighted ASP and the volume-weighted AMP for the HCPCS code.   
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  8 
   
   
responsible for the HCPCS codes having initially exceeded the threshold 
in that quarter, as opposed to an actual disparity between ASPs and AMPs 
in the marketplace.  If a HCPCS code continued to exceed the 5-percent 
threshold in a given quarter, we concluded that missing and unavailable 
AMPs had little impact on the results of our pricing comparison for that 
quarter.  For these cases, the HCPCS codes likely exceeded the threshold 
as a result of actual pricing differences between ASPs and AMPs. 
As part of our 2011 annual overview, we merged the results of the four 
quarterly pricing comparisons to identify HCPCS codes with partial AMP 
data that exceeded the 5-percent threshold in one or more quarters of 2011 
because of an actual pricing disparity.  Because price substitutions for 
these HCPCS codes may be warranted, we estimated the monetary impact 
of lowering reimbursement for these codes to 103 percent of the new 
volume-weighted AMPs.41   
Analyzing HCPCS Codes With No AMP Data in 2011 
In each of our pricing comparisons for 2011, we excluded HCPCS codes 
that had missing or unavailable AMP data for all of the NDCs CMS used 
to calculate Medicare reimbursement.  To identify the total number of 
HCPCS codes that were excluded from OIG pricing comparisons in 2011, 
we merged the results from each of the four quarterly reports.  We then 
identified the number of HCPCS codes that were never included in OIGs 
pricing comparisons in 2011 because of missing or unavailable AMP data.  
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.  We also did not verify the accuracy of 
CMSs crosswalk files or examine NDCs that CMS opted to exclude from 
its calculation of Part B drug reimbursement amounts. 
Manufacturers are required to submit their quarterly ASP and AMP data to 
CMS within 30 days after the close of the quarter.  Our analyses were 
performed on ASP and AMP data compiled by CMS soon after that 
deadline.  We did not determine whether manufacturers provided any 
updated data to CMS at a later date. 
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General 
on Integrity and Efficiency. 
 
41 We did not determine whether any of these drugs were identified by FDA as being in 
short supply during the applicable quarters. 
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  9 
   
   
FINDINGS 
In 2011, 58 HCPCS codes exceeded the 5-percent 
threshold in 1 or more quarters when complete AMP 
data were used  
Consistent with sections 1847A(d)(2)(B) and 1847A(d)(3) of the Act, OIG 
compared ASPs with AMPs to identify instances in which the ASP for a 
particular drug exceeded the AMP by a threshold of 5 percent.  Of the                  
472 HCPCS codes examined during 2011, 58 exceeded this 5-percent 
threshold in at least one quarter when complete AMP data were used.42             
Appendix D lists the 58 HCPCS codes, including the quarter(s) during 
which the codes exceeded the threshold.  
Pursuant to section 1847A(d)(3) of the Act, the Secretary may disregard 
the ASP for a drug that exceeds the 5-percent threshold and shall substitute 
the payment amount with the lesser of either the WAMP or 103 percent of 
the AMP.  We estimate that if reimbursement amounts for the 58 codes 
with complete AMP data had been lowered to 103 percent of the AMPs 
during the applicable quarters, Medicare expenditures would have been 
reduced by $14.4 million between the fourth quarter of 2011 and the third 
quarter of 2012.43, 44 
Under CMSs proposed price substitution policy, 
reimbursement amounts for over 40 percent of the 58 HCPCS 
codes would have been reduced, resulting in an estimated 
savings of almost $7 million over 1 year 
If CMSs proposed price substitution policy had been in effect during 
2011, reimbursement amounts for 24 of the 58 HCPCS codes would have 
been reduced in at least one quarter.  These 24 HCPCS codes had 
complete AMP data and exceeded the 5-percent threshold in two 
consecutive or three of four quarters.  In addition, the AMP-based 
substitution amounts for these 24 codes were less than the ASP-based 
payment amounts for the quarter(s) in which the substitutions would have 
 
42 Three of the 58 codes also exceeded the 5-percent threshold in at least one quarter 
when partial AMP data were used. 
43 As mentioned previously, AMP-based price substitutions calculated using pricing data 
from the first through fourth quarters of 2011 would have been applied in the fourth 
quarter of 2011 through the third quarter of 2012, respectively.  
44 Of the 58 HCPCS codes, 7 had AMP-based substitution amounts that were higher than 
the ASP-based reimbursement amounts in every quarter in which the substitutions would 
have occurred; therefore, we excluded these codes from our savings estimate.  We were 
unable to estimate savings for an additional three HCPCS codes because they did not 
have any allowed services listed in the 2011 PBAR file.  
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  10 
   
   
been applied. 45  If reimbursement amounts for the 24 codes had been 
based on 103 percent of the AMPs during the applicable quarters, 
Medicare expenditures would have been reduced by an estimated                 
$6.9 million between the fourth quarter of 2011 and the third quarter of 
2012.  Appendix D includes a list of the 24 HCPCS codes and the 
quarter(s) during which those codes would have met CMSs price 
substitution criteria.  
In 2011, 24 HCPCS codes exceeded the 5-percent 
threshold in 1 or more quarters when partial AMP data 
were used 
Of the 472 HCPCS codes examined during 2011, 24 exceeded the                       
5-percent threshold in at least 1 quarter when partial AMP data were 
used.46   
For over 60 percent of the HCPCS codes, missing and 
unavailable AMPs likely had little influence on the outcome of 
the pricing comparisons 
When we accounted for missing and unavailable AMPs, 15 of the                   
24 HCPCS codes continued to exceed the threshold in at least 1 quarter of 
2011, suggesting that the pricing comparisons for these codes were 
accurately capturing underlying market trends even though AMP data 
were not available for the full set of NDCs.  Because missing and 
unavailable AMP data had seemingly little influence on the pricing 
comparison results for these 15 HCPCS codes, price substitutions may be 
legitimately warranted in these cases.  We estimate that if reimbursement 
amounts for the 15 codes had been based on 103 percent of the AMPs 
during the applicable quarters, Medicare expenditures would have been 
reduced by $485,000 between the fourth quarter of 2011 and the third 
quarter of 2012.47  Appendix E lists the 15 HCPCS codes, including the 
quarter(s) during which the codes exceeded the 5-percent threshold after 
accounting for missing and unavailable AMP values.  
 
45 Two additional HCPCS codes had complete AMP data and exceeded the 5-percent 
threshold in two consecutive or three of four quarters; however, the AMP-based 
substitution amounts for these codes were higher than the ASP-based reimbursement 
amounts in every quarter in which the substitutions would have occurred. 
46 Three of the twenty-four codes also exceeded the 5-percent threshold in at least one 
quarter when complete AMP data were used. 
47 Of the 15 HCPCS codes, 3 had AMP-based substitution amounts that were higher than 
the ASP-based reimbursement amounts in every quarter in which the substitutions may 
have occurred; therefore, we excluded these codes from our savings estimate.  We were 
unable to estimate savings for one additional HCPCS code because the code did not have 
any allowed services listed in the 2011 PBAR file.  
 
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  11 
   
   
For the remaining 9 of 24 HCPCS codes, ASPs no longer exceeded the 
AMPs in any quarter, indicating that these codes initially exceeded the 
threshold because of missing AMP data rather than a genuine pricing 
disparity between the ASPs and AMPs. 
Because of NDCs without AMP data, the number of 
pricing comparisons performed in 2011 was reduced 
by at least 9 percent in each quarter 
If a HCPCS code had no AMPs for any of its associated NDCs, we could 
not evaluate that code pursuant to sections 1847A(d)(2)(B) and 
1847A(d)(3) of the Act.  In 2011, from 9 to 10 percent of HCPCS codes 
were excluded from OIGs pricing comparisons in each quarter because 
AMP data were missing or unavailable for all of the associated NDCs.48, 49  
Table 1 lists the number and percentage of HCPCS codes in each quarter 
that were excluded from our analysis and specifies the number of codes 
that were based on unavailable NDCs, missing NDCs, or a combination of 
both. 
In total, 55 HCPCS codes were excluded from OIGs pricing comparisons 
in 1 or more quarters of 2011 because AMP data were missing or 
unavailable for all of the NDCs that CMS used to calculate Medicare 
reimbursement for that quarter.  For most of these codes (44 of 55), we 
were never able to perform pricing comparisons in 2011 because AMPs 
were always missing or unavailable for all of the associated NDCs.   
Seventy percent of the 44 HCPCS codes (31 of 44) would never have been 
subject to our pricing comparisons because they were associated 
exclusively with NDCs for which manufacturers were not required to 
report AMP data.  In 2011, Medicare and its beneficiaries spent                  
$119 million on these 31 drugs. 
 
48 Relative to the total number of HCPCS codes in each quarter with Medicare 
reimbursement amounts based on the ASP payment methodology.  
49 As mentioned previously, for the purposes of this study, an AMP was considered 
missing if the manufacturer had a Medicaid rebate agreement in 2011 but did not 
submit an AMP for the quarter.  An AMP was considered unavailable for an NDC if 
the manufacturer did not participate in the Medicaid drug rebate program and was 
therefore not required to submit AMP data.   
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  12 
   
   
Table 1:  HCPCS Codes That Were Excluded From 2011 Pricing Comparisons 
  Percentage  
Number Excluded Because  
  Excluded Because None of 
None of the Corresponding 
  the Corresponding NDCs 
NDCs Had AMP Data 
Quarter in 2010  Had AMP Data * 
First  51  10% 
Codes with unavailable AMPs only  37 
Codes with missing AMPs only  12   
Codes with a mix of missing and unavailable AMPs  2 
Second  49  10% 
Codes with unavailable AMPs only  36 
Codes with missing AMPs only  10   
Codes with a mix of missing and unavailable AMPs  3 
Third   47  9% 
Codes with unavailable AMPs only  34 
Codes with missing AMPs only  10   
Codes with a mix of missing and unavailable AMPs  3 
Fourth  48  9% 
Codes with unavailable AMPs only  36 
Codes with missing AMPs only  9   
Codes with a mix of missing and unavailable AMPs  3 
* Relative to the total number of HCPCS codes in each quarter with reimbursement amounts based on the ASP payment methodology. 
Source:  OIG analysis of ASP and AMP data from the first through fourth quarters of 2011. 
   
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  13 
   
   
CONCLUSION AND RECOMMENDATIONS 
When Congress established ASP as the basis for Medicare Part B drug 
reimbursement, it also provided a mechanism for monitoring market prices 
and limiting potentially excessive payment amounts based on ASPs.  
Specifically, the ASP statute mandates that OIG monitor ASPs by 
comparing them with AMPs and WAMPs and directs CMS to lower 
reimbursement for certain drugs on the basis of OIGs findings.  Since the 
ASP payment methodology took effect in January 2005, OIG has fulfilled 
its responsibility to monitor ASP-based payment amounts by issuing                       
28 comparisons between ASPs and AMPs, each of which identified Part B 
drugs that would have been eligible for price reductions under the law.  
However, CMS has yet to lower reimbursement in response to OIGs 
findings and recommendations.  
This report identified 58 drug codes that exceeded the 5-percent threshold 
in 1 or more quarters of 2011 when complete AMP data were used.  If 
reimbursement amounts for these 58 codes had been lowered to                         
103 percent of the AMP during the applicable quarter(s), Medicare 
expenditures would have been reduced by an estimated $14.4 million over 
1 year.  Under CMSs price substitution policy, reimbursement amounts 
for over 40 percent of these codes would have been reduced, saving an 
estimated $7 million over 1 year.  An additional 24 HCPCS codes 
exceeded the 5-percent threshold when partial AMP data were used.  We 
found that missing and unavailable AMPs for the majority of these codes 
likely had little influence on the outcome of the pricing comparisons; 
therefore, price substitution may be legitimately warranted in these cases.  
We also found that 31 HCPCS codes were never subject to pricing 
comparisons in 2011 because they were associated exclusively with NDCs 
for which manufacturers were not required to report AMP data. 
Mandated pricing comparisons enable CMS to make responsive, short-
term payment adjustments that prevent Medicare and its beneficiaries 
from overspending.  Although the savings associated with such 
adjustments may be modest relative to total expenditures for Part B drugs, 
significant savings would have accrued had CMS taken action 
immediately after OIG issued its first pricing comparison.  In the long 
term, savings achieved through price substitution could reduce waste and 
conserve taxpayer funds at a time when increased focus has been placed 
on rising health care costs and fiscal responsibility.  Therefore, we 
recommend that CMS:  
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  14 
   
   
Finalize the price substitution policy in the proposed rule and 
lower Medicare reimbursement amounts for drugs that exceed 
the 5-percent threshold 
CMSs most recent proposed policy represents a step toward meeting 
statutory price substitution requirements and addressing the gap between 
ASPs and AMPs for certain Part B drugs.  We recommend that CMS move 
forward with finalizing and applying this policy. 
Consider expanding the price substitution policy to include all               
HCPCS codes with complete AMP data 
CMS has expressed concern that price substitutions based on results from 
a single quarter will not appropriately or accurately account for temporary 
fluctuations in market prices that would be corrected in a subsequent 
quarter; therefore, the agency plans to lower reimbursement amounts only 
for those codes with complete AMP data that exceed the 5-percent 
threshold in two consecutive or three of four quarters.  However, this 
cautious approach would have drastically reduced the effectiveness of ASP 
monitoring in 2011, cutting potential savings by more than half.   
Temporary fluctuations in ASPs and AMPs may nevertheless represent 
legitimate pricing discrepancies that lead Medicare and its beneficiaries to 
overpay for certain drugs, if only for a single quarter.  Because price 
substitutions will remain in effect for only one quarter and will be resolved 
when any temporary fluctuations are corrected, we suggest that CMS 
consider including in its price substitution policy all HCPCS codes with 
complete AMP data that exceed the 5-percent threshold, regardless of the 
duration of the price discrepancies. 
Consider expanding the price substitution policy to include certain                
HCPCS codes with partial AMP data 
Because CMS believes that volume-weighted AMPs based on partial AMP 
data may not adequately account for market-related drug price changes 
and may lead to artificially low price substitutions, codes that exceed the 
5-percent threshold when partial AMP data are used would not be eligible 
for price reduction under CMSs proposed price substitution policy.  
However, for 15 HCPCS codes with partial AMP data in 2011, missing 
and unavailable AMPs likely had little influence on the outcome of the 
pricing comparisons.  When we accounted for missing AMPs, these 15 
HCPCS codes continued to exceed the threshold, indicating that the 
pricing comparisons were accurately capturing underlying market trends 
even though AMP data were not available for the full set of NDCs.  
Because the risk of substituting ASP-based reimbursement with an 
artificially low volume-weighted AMP is greatly diminished for these 
types of HCPCS codes, we suggest that CMS consider including in its 
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  15 
   
   
price substitution policy HCPCS codes identified by OIG as meeting the 
threshold when missing AMPs have been imputed. 
Furthermore, by excluding from its policy all codes with partial AMP data, 
CMS may inadvertently provide drug manufacturers with a disincentive to 
submit timely AMPs.  CMS could avoid this potential disincentive by 
applying its substitution policy to at least certain HCPCS codes with 
partial AMP data. 
Consider seeking a legislative change to require manufacturers of 
Part B-covered drugs to submit both ASPs and AMPs 
During 2011, at least 34 HCPCS codes in each quarter could not be 
included in OIGs pricing comparisons because all of the associated NDCs 
belonged to manufacturers that did not have Medicaid rebate agreements 
and were therefore not required to provide AMP data to CMS.  Thirty-one 
HCPCS codes had unavailable AMP data in all four quarters of 2011.  
Although Medicare and its beneficiaries spent over $100 million for these 
drugs during that year, payment amounts for the drugs could not be 
monitored through pricing comparisons with AMPs.  To ensure that 
payment amounts are subject to regular price monitoring and reflect 
market trends for all drugs reimbursed on the basis of ASP, CMS could 
seek a legislative change requiring manufacturers of such Part B-covered 
drugs to submit ASPs and AMPs, regardless of whether they have rebate 
agreements.  OIG is planning a study that will determine the number of 
Part B drugs associated with manufacturers that do not have rebate 
agreements and therefore are not required to report ASP data. 
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred with our recommendation to finalize the price substitution 
policy and lower Medicare reimbursement amounts for drugs that exceed 
the 5-percent threshold.  CMS noted that the price substitution policy and 
threshold were finalized in a November 2012 rule and will go into effect in 
2013.50  CMS also stated that this policy will not be applied to any drugs 
that are identified by FDA as being in short supply.  CMS believes that 
this policy will safeguard its ability to achieve cost savings while 
protecting access to drugs and preventing inadvertent payment reductions.   
CMS did not concur with our recommendation to consider expanding the 
price substitution policy to include all HCPCS codes with complete AMP 
data that met the threshold in a single quarter.  CMS stated that the policy 
applies only to HCPCS codes with complete AMP data where the ASP 
 
50 77 Fed. Reg. 68892, 69140-2 (November 16, 2012). 
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  16 
   
   
exceeds the AMP by more than 5 percent in two consecutive quarters or 
three of the previous four quarters immediately preceding the quarter to 
which the price substitution would be applied.  CMS also stated that the 
November 2012 final rule includes the requirement that the applicable 
threshold must be exceeded in two consecutive or three of four quarters.  
Further, CMS noted that it has maintained a cautious approach to 
implementing the policy and that public comments have supported such an 
approach.   
CMS did not concur with our recommendation to consider expanding the 
price substitution policy to include certain HCPCS codes with partial AMP 
data.  CMS stated that it continues to believe that a distinction between 
complete and partial data is necessary because of concerns that partial 
AMP data comparisons do not adequately account for market-related drug 
price changes and may lead to the substitution of incomplete and 
inaccurate prices.  Further, CMS stated that substitutions based on this 
approach may impact physician and beneficiary access to drugs and that it 
has not received additional information that would persuade it to revise 
this position.   
CMS also did not concur with our recommendation at this time to consider 
seeking legislative change to require all manufacturers of Part B-covered 
drugs to submit both ASPs and AMPs.  CMS stated that the Presidents 
budget for 2013 does not include any proposals specific to this issue.   
In response to CMSs comments, we continue to note that CMSs cautious 
approach to expanding the price substitution policy (by not including price 
substitutions based on results from a single quarter) would have drastically 
reduced the effectiveness of ASP monitoring in 2011, cutting potential 
savings by more than half.  Also, missing and unavailable AMPs likely 
had little influence on the outcome of the pricing comparisons for the 15 
HCPCS codes with partial AMP data.  Further, we reiterate that by 
excluding from its policy all codes with partial AMP data, CMS may 
inadvertently provide drug manufacturers with a disincentive to submit 
timely AMPs.  To ensure that CMS can make appropriate and timely 
adjustments to reimbursement once the price substitution policy has been 
implemented, we will continue to issue quarterly pricing reports 
comparing ASPs and AMPs.   
For the full text of CMSs comments, see Appendix F.   
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  17 
   
   
APPENDIX A 
The Equation Used by the Centers for Medicare & Medicaid 
Services To Calculate Volume-Weighted Average Sales Prices 
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) 
   
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  18 
   
   
APPENDIX B 
Detailed Methodology for Calculating Volume-Weighted 
Average Manufacturer Prices for 2011
Before computing quarterly volume-weighted average manufacturer prices 
(AMP) for 2011, it was necessary to identify the national drug codes 
(NDC) that should be included in each quarters calculations.  To ensure 
that the broadest range of drug codes would be subject to the Office of 
Inspector Generals pricing comparisons, we examined Healthcare 
Common Procedure Coding System (HCPCS) codes with complete AMP 
data (i.e., HCPCS codes with AMP data for every NDC that was used to 
calculate Medicare reimbursement), as well as HCPCS codes with partial 
AMP data (i.e., HCPCS codes with AMP data for only some of the NDCs 
that were used to calculate Medicare reimbursement).51 
Calculating Converted AMPs 
An AMP is reported for the lowest identifiable quantity of the drug 
contained in the NDC (e.g., 1 milligram, 1 milliliter, one tablet,                   
one capsule).  In contrast, an ASP is reported for the entire amount of the 
drug contained in the NDC (e.g., for 50 milliliters, for 100 tablets).  To 
ensure that AMPs would be comparable to ASPs, it was necessary to 
convert the AMPs for each NDC in each quarter so that they represented 
the total amount of the drug contained in that NDC.   
To calculate converted AMPs for the NDCs included in each of our 
quarterly reports, we multiplied the AMP by the total amount of the drug 
contained in each NDC, as identified by sources such as CMSs crosswalk 
file, manufacturer Web sites, Thomson Reuters Red Book, and the Food 
and Drug Administrations NDC directory.   
For some NDCs, we could not identify the amount of the drug reflected by 
the ASP or AMP and therefore could not calculate a converted AMP.  The 
extent to which NDCs with problematic AMP conversions affected our 
analysis differed depending on whether the associated HCPCS code had 
complete AMP data or partial AMP data. 
HCPCS Codes With Complete AMP Data.  If a HCPCS code with 
complete AMP data had one or more NDCs with a problematic AMP 
conversion, we automatically excluded that HCPCS code from our pricing 
comparison for the quarter. 
 
51 We excluded NDCs without AMPs when calculating volume-weighted AMPs for 
HCPCS codes with partial AMP data; however, the corresponding average sales prices 
(ASP) were not excluded from the volume-weighted ASPs as determined by the Centers 
for Medicare & Medicaid Services (CMS).  Volume-weighted ASPs remained the same, 
regardless of the availability of AMP data.   
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  19 
   
   
HCPCS Codes With Partial AMP Data.  If a HCPCS code with partial 
AMP data had one or more NDCs with a problematic AMP conversion, we 
did not automatically exclude that HCPCS code from our pricing 
comparison.  Rather, we removed only the NDCs with problematic AMP 
conversions.  However, if all of the NDCs associated with the HCPCS 
code had problematic AMP conversions, we dropped the HCPCS code 
from that quarters analysis. 
Calculating Volume-Weighted AMPs 
Using the remaining NDCs with successful AMP conversions, we 
calculated a volume-weighted AMP for each of the corresponding HCPCS 
codes, consistent with the revised methodology for calculating volume-
weighted ASPs. 
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  20 
   
   
APPENDIX C 
Detailed Methodology for Estimating Savings for Drug Codes 
That Exceeded the 5-Percent Threshold in 2011 
If the average sales price (ASP) for a Healthcare Common Procedure 
Coding System (HCPCS) code exceeded the average manufacturer price 
(AMP) by at least 5 percent in any quarter of 2011, we estimated the 
savings associated with substituting the reimbursement amount for that 
code with 103 percent of the AMP. 
Because of the two-quarter lag between the period for which ASPs are 
reported and the effective date of reimbursement amounts and the 
additional quarter that will be necessary for the Office of Inspector 
General (OIG) to complete its pricing comparison, there will be a              
three-quarter lag between the ASP reporting period and the effective date 
of the price substitutions.  Therefore, AMP-based price substitutions based 
on pricing data from the first through fourth quarters of 2011 would have 
applied in the fourth quarter of 2011 through the third quarter of 2012, 
respectively. 
Calculation of Savings Estimates in the Separate Quarterly 
Pricing Comparisons for 2011 
For each HCPCS code that exceeded the 5-percent threshold in each 
quarter, we calculated 103 percent of the volume-weighted AMP and 
subtracted this amount from the reimbursement amount.  Because we 
performed our quarterly pricing comparisons before reimbursement 
amounts were available for the quarters in which the price substitutions 
would have occurred, we used the reimbursement amounts in effect at the 
time of our analysis.  For example, for each code that exceeded the 
threshold in the first quarter of 2011, we subtracted 103 percent of the 
volume-weighted AMP from the published reimbursement amount for the 
third quarter of 2011. 
To estimate the financial effect for each quarter, we multiplied the 
difference between the reimbursement amount and 103 percent of the 
AMP by one-fourth of the number of services that were allowed by 
Medicare for each HCPCS code, as reported in the Centers for Medicare 
& Medicaid Services (CMS) Part B Analytics and Reports (PBAR).  
Savings estimates for codes that exceeded the threshold in the first through 
third quarters were based on CMSs PBAR data from 2010, whereas 
savings estimates for codes in the fourth quarter were based on PBAR data 
from 2011.  
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  21 
   
   
Calculation of Savings Estimates in the Annual Overview for 
2011 
For each of the HCPCS codes that exceeded the 5-percent threshold in a 
given quarter of 2011, we calculated 103 percent of the volume-weighted 
AMP and subtracted this amount from the reimbursement amount for the 
HCPCS code during the quarter in which the price substitution would have 
occurred.  For example, for each code that exceeded the threshold in the 
first quarter of 2011, we subtracted 103 percent of the volume-weighted 
AMP from the published reimbursement amount for the fourth quarter of 
2011.52   
Then, to estimate the financial effect of lowering reimbursement for the 
applicable quarter, we multiplied the difference by one-fourth of the 
number of services that were allowed by Medicare for each HCPCS code 
in 2011, as reported in the PBAR.  
 
52 If the AMP-based substitution amount for a given code was higher than the ASP-based 
reimbursement amount for the quarter in which the substitution would have occurred, we 
excluded that code from our savings estimate for that quarter.   
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  22 
   
   
APPENDIX D 
Fifty-Eight Drug Codes That Exceeded the 5-Percent Threshold 
in 2011 When Complete Average Manufacturer Price Data   
Were Used 
Quarter(s) in Which the Codes 
 
Exceeded the 5-Percent Threshold 
   
Drug  Drug Code  First  Second  Third  Fourth 
Code  Description  Dosage  Quarter  Quarter  Quarter  Quarter 
A9583  Gadofosveset trisodium injection  1 mL     X       
J0130  Abciximab injection  10 mg  X  X*       
J0287  Amphotericin b lipid complex injection  10 mg  X*          
J0456  Azithromycin injection  500 mg           X 
J0470  Dimecaprol injection  100 mg     X       
J0500  Dicyclomine injection  20 mg        X  X* 
J0515  Benztropine mesylate injection  1 mg           X 
J0595  Butorphanol tartrate injection  1 mg           X 
J0610  Calcium gluconate injection  10 mL           X 
J0670  Mepivacaine HCl injection  10 mL           X 
J0713  Ceftazidime injection  500 mg     X  X*  X* 
J0720  Chloramphenicol sodium injection  1 g  X          
J0744  Ciprofloxacin for intravenous infusion injection  200 mg        X    
J0770  Colistimethate sodium injection  150 mg           X 
J0780  Prochlorperazine injection  10 mg        X    
J1070  Testosterone cypionate injection  100 mg     X  X  X* 
J1120  Acetazolamide sodium injection  500 mg     X       
J1205  Chlorothiazide sodium injection  500 mg  X  X*  X*  X* 
J1240  Dimenhydrinate injection  50 mg     X       
J1364  Erythromycin lactobionate injection  500 mg  X*          
J1557  Gammaplex injection  500 mg        X    
J1570  Ganciclovir sodium injection  500 mg  X  X*  X*    
J1580  Garamycin gentamicin injection  80 mg  X          
J1644  Heparin sodium injection  1,000 units     X       
J1650  Enoxaparin sodium injection  10 mg  X*  X*  X*  X* 
J1742  Ibutilide fumarate injection  1 mg        X  X* 
J1756  Iron sucrose injection  1 mg           X 
J1955  Levocarnitine injection  1 g  X*        X 
J2360  Orphenadrine injection  60 mg        X    
J2440  Papaverin HCl injection  60 mg        X    
J2501  Paricalcitol injection  1 g     X  X*  X* 
J2545  Pentamidine isethionate inhalation solution  300 mg  X  X*       
J2675  Progesterone injection  50 mg        X  X* 
J2780  Ranitidine HCl injection  25 mg     X  X*  X* 
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  23 
   
   
APPENDIX D (CONTINUED) 
Quarter(s) in Which the Codes 
 
Exceeded the 5-Percent Threshold 
   
Drug  Drug Code  First  Second  Third  Fourth 
Code  Description  Dosage  Quarter  Quarter  Quarter  Quarter 
J2916  Sodium ferric gluconate complex injection  12.5 mg  X          
J2993  Reteplase injection  18.1 mg     X       
J3303  Triamcinolone hexacetonl injection  5 mg     X  X*  X 
J3411  Thiamine HCl injection  100 mg           X 
J7507  Tacrolimus, oral  1 mg     X  X    
J7620  Albuterol and ipratropium bromide, noncompounded  2.5 mg/0.5 mg     X  X*  X 
J7631  Cromolyn sodium, noncompounded, unit dose form  10 mg           X 
J8510  Busulfan, oral  2 mg           X 
J9045  Carboplatin injection  50 mg        X  X* 
J9060  Cisplatin injection  10 mg  X*          
J9065  Cladribine injection  1 mg     X     X 
J9100  Cytarabine HCl injection  100 mg  X          
J9150  Daunorubicin injection  10 mg     X  X*    
J9171  Docetaxel injection  1 mg     X       
J9190  Fluorouracil injection  500 mg     X       
J9211  Idarubicin HCl injection  5 mg        X  X* 
J9214  Interferon alfa-2b injection  1 million units  X*  X*  X*  X* 
J9218  Leuprolide acetate injection  1 mg     X*       
J9280  Mitomycin injection  5 mg           X 
J9293  Mitoxantrone HCl injection  5 mg           X 
J9370  Vincristine sulfate injection  1 mg  X*          
Q0166  Granisetron HCL, oral  1 mg     X  X    
Q0167  Dronabinol, oral  2.5 mg           X 
Q0169  Promethazine HCl, oral  12.5 mg     X       
* Pricing comparisons for quarters marked with an asterisk would have triggered a price substitution based on criteria proposed by the Centers 
for Medicare & Medicaid Services (CMS) (i.e., the drug code exceeded the 5-percent threshold in two consecutive or three of four quarters 
and had a substitution amount that was less than the payment amount for the quarter in which the substitution would have occurred).  In 2011, 
a total of 24 drug codes would have been subject to price substitution under CMSs proposed criteria.     
Source:  Office of Inspector General analysis of average sales price and average manufacturer price data from 2011. 
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  24 
   
   
APPENDIX E 
Fifteen Drug Codes With Partial Average Manufacturer Price 
Data for Which Price Substitutions May Be Warranted  
Quarter(s) in Which the Codes 
 
Exceeded the 5-Percent Threshold 
   
Drug  Drug Code  First  Second  Third  Fourth 
Code  Description  Dosage  Quarter  Quarter  Quarter  Quarter 
J0290  Ampicillin injection  500 mg    X     
J1020  Methylprednisolone injection  20 mg  X       
J1644  Heparin sodium injection  1000 units  X       
J2930  Methylprednisolone injection  125 mg        X 
J7509  Methylprednisolone, oral  4 mg  X  X     
J7608  Acetylcysteine inhalation solution, noncompounded  1 g    X  X   
J9045  Carboplatin injection  50 mg  X       
J9190  Fluorouracil injection  500 mg  X       
J9206  Irinotecan injection  20 mg  X       
J9390  Vinorelbine tartrate injection  10 mg    X     
Q0162  Ondansetron, oral  1 mg      X  X 
Q0163  Diphenhydramine HCl injection  50 mg  X  X  X  X 
Q0164  Prochlorperazine maleate, oral  5 mg  X    X  X 
Q0165  Prochlorperazine maleate, oral  10 mg  X  X    X 
Q0179  Ondansetron HCl, oral  8 mg  X  X     
Source:  Office of Inspector General analysis of average sales price and average manufacturer price data from 2011. 
   
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  25 
  APPENDIX F 
Agency Comments 
(,,,.~  DEPARTME~'T 
OP 11Al:ffl &. HUMAN SERVKt.s 
\ .~~ 	 - - --- ----
Office vf tltt ,-\dmi n islrQior 
Waa'""91on. DC 20201 
I>ATE:  DEC 0 7 2.012 
TO: 	 Daniel R. Levinson 

Inspector General 

FROM: 	 Marilyn Tavenner 

Acting Administrator 

SUH.JE 'T: 	 Office of lnspt:rlo r General (010) Draft Report: " t ompmison of Average Sales 
Prices and Ave mge Manufacturer Prices: An Overview of 2011 '' (OEI-0 3-1 2
00670) 
The Centers for ~ed.iate & Medicaid Se r'dces (CMS) appreciates the opportunit y to review and 
<.:omment on OlG ' s Drnft Repon entitleAI, ''Co mparis on of Average Sale s Prices and Avcr<~ ge 
Manufa<-i urer Prices: An Overview of 2011'' (0El-03-12~J670). This report is part or a series 
o f average sales price (ASP) and ave mgc manufacturer price (AMP} c:omparisons required under 
section 1847A (d) of th e Social Securi ty Acl. 
The 010 stated that the objectives fo r this report were to identify drugs with an ASP that 
exceeded AMP by atlct~'>t 5 percent in any quarter of 2011. and examine the impact of missing. 
and unavailable data on the Ol'G 's 2010 pricing compari so ns. The 2011 ove rview found that 58 
Healthca re Common Procedure Coding S}'llte.m (HCPCS) codes wilh complete data (i. e., AMP 
data W& available for all national drug codes (NDC) used in th~ ASP calculation for a code) rnct 
the 5 pe rcent threshold in at leas t one qua rter of 201 J.  OI G ~tatcd that of these 51) codes, 24 
wo uld have been subject to the price substitution policy that CMS propo.~d in July 2012 . The 
applicati o n of the pi ice substitution policy to these 24 HCI"CS code~ would ha \e reduced 
Medicare expenditUf('.'S hy an est1  ted $6.9 million over a four-qua rter period. Th is is a much 
11 tgher amo unt than tbe 2010 suvings esti mate.1 010 also found that anothe r 24 HCPCS code~ 
with partial data ( i.e. , AM P data was only available fo r so  of the NDCs used in the ASP 
l~tlculation for a l:nde) met the 5 percent threshold. and 010 determined th ai missing dat a for 15 
or 
of the.c;e codes appe~red to have ltule influence on the outco me  th e com parison becau.~e the 
availabl e data !lccuratcly captured underlying market trt! nds  010 also noted that 55 HC PCS 
codes were excl uded fw m the compari son in one or more qultftcrl' due to missi ng or unavnilahlo.: 
AJ.,{Pdata. 
1 CMS believes that the higher value may I><> IIS!iOciatcd witt H  J1620. a lmln<.'lk><hhltor <"Cmbinauoo that is 
ad nu nisterd by ll(b ulizer for the treatment of chronic airway di~ase. wlricn is a !ltavily utilized drug 	 S..vcrnl 
other h<:a:vily utihu.d drHg\, i ndlldllli, l<l!71 doceta.xel-an injc:c:table cbemotllcrapeutic: agen t, at"' tx.:eedcd th<~ 
lhr<Shold lor al lt'.ISI one qu4rler. Wr, nute thai il ~.:~s been unusual fur heavllt u11II.Led drugs tn ex~the 
"U~Ii'ut(tiO thfl'"if'k.tld 
Comparison of ASPs and AMPs; An Overview of 2011 (OEI-03-12-00670)  27   
   
Agency Comments (continued)  
 
   
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  27 
   
   
Agency Comments (continued)  
 
   
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  28 
   
   
ACKNOWLEDGMENTS 
This report was prepared under the direction of Robert A. Vito, Regional 
Inspector General for Evaluation and Inspections in the Philadelphia 
regional office.   
Lauren McNulty served as the team leader for this study.  Central office 
staff who provided support include Kevin Manley and Debra Roush.  
 
 
 
Comparison of ASPs and AMPs:  An Overview of 2011 (OEI-03-12-00670)  29 
   
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 
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