Department of Health and Human Services 
OFFICE OF 
   
INSPECTOR GENERAL 
 
 
 
 
 
 
C   A S
OMPARISON OF  VERAGE  ALES 
 
P A
R ICES AND  VERAGE 
 
M P : 
ANUFACTURER  RICES
 
 
A O 2009 
N  VERVIEW OF 
 
 
 
 
 
Daniel R. Levinson  
Inspector General 
 
April 2011 
OEI-03-10-00380   
 
   
 E X E C U T I V E   S U M M A R Y  
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 2009. 
2.  To examine the impact of missing and unavailable AMP data on the 
Office of Inspector Generals (OIG) pricing comparisons in 2009. 
BACKGROUND 
By law, OIG must compare ASPs with AMPs.  As generally defined in 
statute, 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, net of 
any price concessions.  Generally, manufacturers must provide the 
Centers for Medicare & Medicaid Services (CMS) with the ASP for each 
of their national drug codes (NDC) on a quarterly basis.  For most Part 
B prescription drug Healthcare Common Procedure Coding System 
(HCPCS) codes, the Medicare reimbursement is equal to 106 percent of 
the volume-weighted ASPs for the associated NDCs.  
During 2009, the AMP was generally defined as 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.  Manufacturers 
that participate in the Medicaid drug rebate program must provide 
CMS with the AMP for each of their NDCs on a quarterly basis, with 
certain exceptions.   
If OIG finds that the ASP for a HCPCS code exceeds the AMP by a 
certain percentage (5 percent through 2011), the Secretary of Health & 
Human Services (the Secretary) may disregard the ASP for the drug 
when setting reimbursement and shall substitute the payment amount 
with the lesser of either the widely available market price or                           
103 percent of the AMP.  In July 2010, CMS published a proposed rule 
that, among other things, specified the circumstances under which 
AMP-based price substitutions would occur.  Generally, CMS proposed 
to lower reimbursement amounts only for HCPCS codes with complete 
AMP data that exceed the 5-percent threshold in two consecutive or 
three of four quarters.  However, the agency has opted not to finalize 
the price substitution policy from the proposed rule, thereby suspending 
any plans to lower reimbursement amounts based on the results of 
OIGs pricing comparisons.   
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  i   
 
   
E X E C U T I V E   S U M M A R Y  
To date, OIG has issued 19 reports comparing ASPs with AMPs.  This 
current overview examines data across all four quarters of 2009.  To 
identify HCPCS codes that exceeded the 5-percent threshold at least 
once during the year based on either complete or partial AMP data, we 
merged the results of our pricing comparisons for each quarter of 2009.  
To determine whether missing or unavailable AMPs unduly influenced 
the results of our pricing comparisons, we reanalyzed pricing data for 
HCPCS codes with partial AMP data after accounting for the missing 
values.  We also identified the number of HCPCS codes that were 
removed from OIGs pricing comparisons because they did not have 
AMP data in 2009.   
FINDINGS 
In 2009, 34 HCPCS codes with complete AMP data exceeded the                       
5-percent threshold in one or more quarters.  If reimbursement 
amounts for all 34 codes with complete AMP data had been lowered to                
103 percent of the AMPs during the applicable quarters, we estimate that 
Medicare expenditures would have been reduced by $4.4 million between 
the third quarter of 2009 and the second quarter of 2010. 
Of the 34 HCPCS codes, 11 would have been eligible for price reduction 
under CMSs proposed price substitution policy.  If reimbursement 
amounts for these 11 HCPCS codes had been substituted during the 
applicable quarters, we estimate that Medicare expenditures would have 
been reduced by $1.9 million over four quarters.   
In 2009, 34 HCPCS codes with partial AMP data exceeded the                      
5-percent threshold in one or more quarters.  When we accounted for 
missing and unavailable AMPs, 13 of the 34 HCPCS codes continued to 
exceed the threshold in at least one quarter of 2009, 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 13 HCPCS codes, 
price substitutions may be legitimately warranted in these cases. 
For the remaining 21 of 34 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. 
 
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  ii   
 
   
E X E C U T I V E   S U M M A R Y  
Because of NDCs without AMP data, the number of pricing 
comparisons performed in 2009 was reduced by at least                       
10 percent in each quarter.  In total, 89 HCPCS codes were excluded 
from OIGs pricing comparisons in one or more quarters of 2009 because 
none of the associated NDCs had AMP data.  For 46 of the 89 codes, we 
were unable to perform any pricing comparisons in 2009 because of NDCs 
without AMP data.  Over 70 percent of these HCPCS codes (33 of 46) 
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.  
RECOMMENDATIONS 
The Social Security Act provides the Secretary authority to lower 
reimbursement amounts for drugs with ASPs that exceed AMPs by at 
least 5 percent.  However, CMS has yet to adjust Part B reimbursement 
amounts based on the findings of OIGs pricing comparisons.  Although 
CMS outlined a price substitution policy in a July 2010 proposed rule, 
the agency has opted not to finalize that policy.   
OIG acknowledges that operational issues associated with potential 
price substitutions may be complex and that the concerns of relevant 
stakeholders, including beneficiaries and taxpayers, should be taken 
into consideration.  However, to ensure that Medicare and its 
beneficiaries are paying appropriately for Part B drugs, the gap between 
ASPs and AMPs for certain drugs should be addressed.  We therefore 
recommend that CMS:  
Finalize the price substitution policy from the proposed rule and 
subsequently lower Medicare reimbursement amounts for drugs that 
exceed the 5-percent threshold. 
Consider expanding the price substitution policy to include certain 
HCPCS codes with partial AMP data. 
Consider seeking a legislative change to directly require all 
manufacturers of Part B-covered drugs to submit both ASPs and 
AMPs. 
Continue to evaluate and pursue appropriate actions against 
manufacturers that fail to comply with price reporting requirements, 
including referring to OIG manufacturers that fail to submit timely 
ASP data. 
 
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AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
Of the four recommendations included in our report, CMS concurred 
only with the recommendation intended to ensure timely reporting of 
pricing data.  Specifically, CMS stated that it will continue referring to 
OIG any manufacturers that repeatedly fail to submit timely and/or 
accurate ASPs.  However, CMS did not concur with OIGs two 
recommendations regarding the implementation of a price substitution 
policy, nor did it concur with our recommendation concerning the 
possible expansion of manufacturer reporting requirements for Part B 
drugs.  According to its comments, CMS will proceed cautiously with 
respect to any future price substitution policy, particularly as it assesses 
the impact of changes to the definition of AMP.  CMS also questioned 
whether the payoff associated with price substitution justifies the 
resources that OIG devotes to quarterly pricing comparisons, suggesting 
that OIG limit its efforts to a single annual report. 
Since the ASP payment methodology took effect in January 2005, OIG 
has fulfilled its statutory responsibility to monitor ASP-based payment 
amounts by issuing 19 pricing comparisons identifying Part B drugs 
that are eligible for price reduction under the law.  CMS has declined to 
take any action in response to OIGs findings and recommendations.   
At present, CMSs primary obstacle to finalizing a price substitution 
policy appears to be the uncertainty surrounding changes in the 
definition of AMP.  However, because AMPs are widely expected to 
increase under the new rule, CMS could proceed under the assumption 
that a drugs ASP may actually be less likely to exceed the 5-percent 
threshold, effectively making price substitution criteria more stringent.  
Once a price substitution policy has been implemented, OIGs quarterly 
pricing comparisons would enable CMS to make timely, responsive, 
short-term payment adjustments that prevent Medicare and its 
beneficiaries from overspending.  In fact, significant savings would have 
accrued if CMS had taken action immediately after OIG issued its first 
pricing comparison. 
Until the statutory mandate is changed or CMS complies with the law 
as written, OIG will continue to issue quarterly pricing comparisons, 
along with annual overviews that recommend price substitutions as 
warranted. 
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  iv   
 T A B L E   O F   C O N T E N T S  
EX ECUT I VE  SUM M ARY  .....................................i 
 
I NT RO DU CT I O N  ............................................ 1 
 
F I NDI NG S  .................................................  11 
In 2009, 34 HCPCS codes with complete AMP data                                     
exceeded the 5-percent threshold in one or more quarters ......  11 
In 2009, 34 HCPCS codes with partial AMP data                                                
exceeded the 5-percent threshold in one or more quarters ......  12 
Because of NDCs without AMP data, the number of pricing 
comparisons performed in 2009 was reduced by at least                       
10 percent in each quarter. ...............................  13 
 
RECO M M END AT I O N S  .....................................  15 
Agency Comments and Office of Inspector General Response ....  17 
 
APP EN DI X ES  .............................................  20 
A:  The Equation Used by the Centers for Medicare & Medicaid  
Services To Calculate Volume-Weighted Average Sales                      
Prices On or After April 1, 2008 ........................  20 
B:  Previous Office of Inspector General Reports Comparing                        
Average Sales Prices and Average Manufacturer Prices .....  21 
C:  Detailed Methodology for Calculating Volume-Weighted                        
Average Manufacturer Prices for 2009 ................... 24 
D:  Detailed Methodology for Estimating Savings for Drug                    
Codes That Exceeded the 5-Percent Threshold in 2009 ...... 26 
E:  Thirty-Four Drug Codes With Complete Average                       
Manufacturer Price Data That Exceeded the 5-Percent                      
Threshold in 2009 ................................... 27 
F:  Thirty-Four Drug Codes With Partial Average                          
Manufacturer Price Data That Exceeded the 5-Percent                  
Threshold in 2009 ................................... 28 
  G:  Agency Comments ...................................  30 
 
ACKNO WL E DG M E N T S .....................................  33   
 
   
 I N T R O D U C T I O N  
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 2009. 
2.  To examine the impact of missing and unavailable AMP data on the 
Office of Inspector Generals (OIG) pricing comparisons in 2009. 
BACKGROUND 
The Social Security Act (the Act) mandates that OIG compare ASPs 
with AMPs.1  If OIG finds that the ASP for a drug exceeds the AMP by a 
certain percentage (5 percent through 2011), the Act states that 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   
Medicare Part B Coverage of Prescription Drugs 
Medicare Part B covers only a limited number of outpatient prescription 
drugs.  Covered drugs include injectable drugs administered by a 
physician; certain self-administered drugs, such as oral anticancer 
drugs and immunosuppressive drugs; drugs used in conjunction with 
durable medical equipment; and some vaccines.  
Medicare Part B Payments for Prescription Drugs 
The Centers for Medicare & Medicaid Services (CMS) contracts with 
private companies, known as Medicare Administrative Contractors 
(MAC), to process and pay Medicare Part B claims, including those for 
prescription drugs.  To obtain reimbursement for covered outpatient 
prescription drugs, physicians and suppliers submit claims to their 
 
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 provides the Secretary with authority to adjust the 
applicable threshold percentage in 2006 and subsequent years; however, the threshold 
percentage has been maintained at 5 percent.   
4 Section 1847A(d)(3)(C) of the Act. 
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I N T R O D U C T I O N  
MACs using Healthcare Common Procedure Coding System (HCPCS) 
codes.  CMS established the HCPCS to provide a standardized coding 
system for describing the specific items and services provided in the 
delivery of health care.  In the case of prescription drugs, each HCPCS 
code defines the drug name and the amount of drug represented by the 
HCPCS code but does not specify the manufacturer or the package size.   
Medicare and its beneficiaries spent over $11 billion for Part B drugs in 
2009.5  Although Medicare paid for nearly 800 outpatient prescription 
drug HCPCS codes that year, most of the spending for Part B drugs was 
concentrated on a relatively small subset of those codes.  In 2009,                 
64 HCPCS codes accounted for 90 percent of the expenditures for                  
Part B drugs, with only 13 of these codes representing the majority              
(52 percent) 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.6  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 quarter.7  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.8  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.9, 10 
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 
 
5 Medicare expenditures for Part B drugs in 2009 were calculated using CMSs Part B 
Analytics and Reports (PBAR).  The PBAR data for 2009 were downloaded in March 2010. 
6 Several Part B drugs, including certain vaccines and blood products, are not paid for 
under the ASP methodology.  
7 Section 1847A(c) of the Act, as added by the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003, P.L. 108-173. 
8 Section 1847A(c)(3) of the Act.  
9 Section 1847A(c)(2) of the Act.  
10 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. 
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I N T R O D U C T I O N  
30 days after the close of each quarter.11  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 crosswalks manufacturers NDCs to HCPCS codes.  CMS uses 
information in this crosswalk file to calculate volume-weighted ASPs for 
covered HCPCS codes.     
Calculation of Volume-Weighted Average Sales Prices 
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.12  The amount of the drug contained in an 
NDC may differ from the amount of the drug specified by the HCPCS 
code that providers use to bill Medicare.  Therefore, the number of 
billing units in an NDC describes the number of HCPCS code units that 
are in that NDC.  For instance, an NDC may contain 10 milliliters of 
Drug A, but the corresponding HCPCS code may be defined as only                     
5 milliliters of Drug A.  In this case, there are two billing units in the 
NDC.  CMS calculates the number of billing units in each NDC when 
developing its crosswalk files.   
Under the ASP pricing methodology, the Medicare reimbursement for 
most Part B drugs is equal to 106 percent of the volume-weighted ASP 
for the HCPCS code.13  However, a two-quarter lag exists 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 
2009 were used to establish reimbursement amounts for the third 
quarter of 2009, and ASPs from the fourth quarter of 2009 were used to 
establish reimbursement amounts for the second quarter of 2010.       
 
11 Section 1927(b)(3) of the Act.  
12 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. 
13 Medicare beneficiaries are responsible for 20 percent of this amount in the form of 
coinsurance. 
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The Medicaid Drug Rebate Program and Average Manufacturer Prices 
For Federal payment to be available for covered outpatient drugs 
provided under Medicaid, the Act mandates that drug manufacturers 
enter into rebate agreements with the Secretary and pay quarterly 
rebates to State Medicaid agencies.14  Under these rebate agreements 
and pursuant to the Act, manufacturers must provide CMS with the 
AMPs for each of their NDCs.15  As further explained in the regulation, 
manufacturers are required to submit AMPs within 30 days after the 
end of each month and each quarter.16   
During 2009, the AMP was generally defined by statute to be 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.17, 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).19   
 
Penalties for Failure To Report Timely Drug Pricing Data
Pursuant to the Act, manufacturers that fail to provide ASP and AMP 
by the statutory deadline may be subject to civil money penalties 
and/or termination from the drug rebate program.20, 21  Accordingly, 
CMS has terminated rebate agreements with a number of 
manufacturers for failure to report AMP data and, for the purposes of 
evaluating potential civil money penalties, has provided OIG with 
information about manufacturers that failed to submit timely
 
14 Sections 1927(a)(1) and (b)(1) of the Act. 
15 Section 1927(b)(3) of the Act. 
16 42 CFR  447.510.   
17 Section 1927(k)(1) of the Act. 
18 Effective October 2010, section 2503 of the Patient Protection and Affordable Care Act 
(Affordable Care Act), P.L. 111-148, changes the definition of AMP in a way that is not 
relevant to the findings of this report.  However, it may affect pricing comparisons between 
ASPs and AMPs for the fourth quarter of 2010 and beyond. 
19 During 2009, 42 CFR  447.504(i) specified that a quarterly AMP should be calculated as 
a weighted average of monthly AMPs in the quarter.  
20 Sections 1927(b)(3)(C)(i) and (4)(B)(i) of the Act. 
21 The Secretary delegated to OIG the responsibility to impose civil money penalties for 
violations of section 1927(b)(3)(C) of the Act in 59 Fed. Reg. 52967 (Oct. 20, 1994). 
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  4   
 
   
I N T R O D U C T I O N  
AMPs.22  Recently, CMS also referred a manufacturer to OIG for 
failure to report timely ASP data.23  In September 2010, OIG 
announced a new enforcement initiative under which OIG would 
begin imposing civil money penalties on manufacturers that failed to 
report timely ASPs and/or AMPs. 
Office of Inspector Generals Monitoring of ASPs and AMPs 
In accordance with its statutory mandate, OIG has issued 17 quarterly 
pricing comparisons since the ASP reimbursement methodology for Part B 
drugs was implemented in January 2005.  In addition, OIG completed two 
annual overviews of ASPs and AMPs, which examined data across all four 
quarters of 2007 and 2008, respectively.  A list of all 19 reports is provided 
in Appendix B.   
Although OIG has consistently recommended that CMS develop a price 
substitution policy and subsequently lower reimbursement for drugs 
that exceed the 5-percent threshold, no price substitutions have been 
made to date.  In July 2010, CMS published a proposed rule that, 
among other things, specified the circumstances under which AMP-
based price substitutions would occur.24  However, the agency recently 
announced that it will not finalize the price substitution policy from the 
proposed rule, thereby suspending any plans to lower reimbursement 
amounts based on the results of OIGs pricing comparisons.25   
CMSs price substitution policy in the July 2010 proposed rule.  Under the 
unimplemented price substitution policy initially outlined in the               
July 2010 proposed rule, CMS would have substituted 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.  Because CMS believes 
that substituted prices based on partial AMP data may not adequately 
 
22 CMS began referring noncompliant manufacturers to OIG in response to a 2005 report 
entitled Deficiencies in the Oversight of the 340B Drug Pricing Program (OEI-05-02-00072).  
As part of this report, OIG recommended that CMS consider referring to OIG 
manufacturers whose pricing data submissions do not comply with reporting requirements 
so that penalties could be imposed in appropriate cases. 
23 In a February 2010 report entitled Average Sales Prices:  Manufacturer Reporting and 
CMS Oversight, OIG found that, from the first quarter of 2007 through the second quarter 
of 2008, between 41 and 52 percent of manufacturers in each quarter provided ASPs after 
the statutorily defined due date.  In November 2010, CMS referred a manufacturer to OIG 
for failure to comply with ASP reporting requirements. 
24 75 Fed. Reg. 40040, 40259 (July 13, 2010).   
25 75 Fed. Reg. 73170, 73471 (Nov. 29, 2010).    
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I N T R O D U C T I O N  
reflect market trends, the agency would have lowered reimbursement 
amounts for HCPCS codes only if ASP and AMP comparisons were 
based on the same set of NDCs (i.e., based on complete AMP data).  
HCPCS codes that exceeded the 5-percent threshold based on partial 
AMP data would not have been eligible for price substitution.   
Price substitutions would have taken effect in the quarter after OIG 
shared the results of its most recent pricing comparison and would 
have remained in effect for one quarter.  To prevent CMSs proposed 
policy from inadvertently raising the Medicare reimbursement 
amount, a price substitution would not have been applied if the 
substituted amount were greater than the ASP-based payment 
amount calculated for the quarter in which the price substitution 
would take effect.  Although CMS planned to implement its price 
substitution policy beginning in 2011, no price adjustments would 
have occurred before a preliminary injunction issued on                      
December 19, 2007, by the U.S. District Court for the District of 
Columbia had been vacated.26  This injunction prohibits CMS from 
using AMPs in a way that affects Medicaid reimbursement rates and 
from disclosing AMPs to States and the public.   
CMSs price substitution policy in the November 2010 final rule.  In a 
November 2010 final rule, CMS stated that it would not finalize the 
price substitution policy outlined in the July 2010 proposed rule.27  
CMS cited a number of factors in making this decision, including the 
ongoing preliminary injunction and upcoming regulations that will 
implement section 2503 of the Affordable Care Act, which amended 
the definition of AMP.28  According to the final rule, CMS remains 
committed to proceeding cautiously as it continues to evaluate the 
impact of any future policy developments in this area.  About 2 weeks 
after CMS published its final rule, the preliminary injunction was 
vacated. 
METHODOLOGY 
We obtained files from CMS containing NDC-level ASP data from the 
first through fourth quarters of 2009, which were used to establish               
 
26 75 Fed. Reg. 40040, 40158 (July 13, 2010). 
27 75 Fed. Reg. 73170, 73471 (Nov. 29, 2010).    
28 The Affordable Care Act was enacted on March 23, 2010.  Section 2503 of the Affordable 
Care Act changes the definition of AMP, effective October 2010. 
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I N T R O D U C T I O N  
Part B drug reimbursement amounts for the third quarter of 2009 
through the second quarter of 2010, 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 2009.29 
Calculating Volume-Weighted ASPs and Volume-Weighted AMPs for 2009 
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 2009 quarterly reports, 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 C provides a more detailed description of the methods 
used to calculate volume-weighted AMPs for HCPCS codes using 
complete or partial AMP data. 
Comparing Volume-Weighted ASPs to Volume-Weighted AMPs for 2009 
In each of our 2009 quarterly reports, we compared the                 
volume-weighted ASPs and AMPs and identified HCPCS codes with 
ASPs that exceeded the AMPs by at least 5 percent using either 
 
29 ASP and crosswalk data from the first through fourth quarters of 2009 were current as of 
June 2009, October 2009, December 2009, and April 2010, respectively.  AMP data from the 
first through fourth quarters of 2009 were current as of May 2009, September 2009, 
November 2009, and February 2010, respectively.  
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I N T R O D U C T I O N  
complete or partial AMP data.  For those HCPCS codes that exceeded 
the 5-percent threshold, we conducted a review of 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. 
As part of our 2009 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 2009.  
For each of the HCPCS codes we identified, we conducted additional 
analyses that differed depending on whether the HCPCS code had 
complete or partial AMP data. 
Additional analysis of HCPCS codes with complete AMP data.  For each of 
the HCPCS codes with complete AMP data that exceeded the 5-percent 
threshold in at least one quarter of 2009, we estimated the monetary 
impact of lowering reimbursement to 103 percent of the AMP.30  In our 
separate quarterly pricing comparisons for 2009, savings estimates for 
codes that exceeded the threshold in the first through third quarters 
were based on CMSs PBAR data from 2008, whereas savings estimates 
for codes in the fourth quarter were based on PBAR data from 2009.  To 
ensure that the savings estimates were consistent and reflective of the 
most current Medicare expenditures, we recalculated the savings 
estimates for the codes that exceeded the threshold in one or more 
quarters of 2009 using updated PBAR data for 2009.  As a result, the 
estimated savings presented in this annual overview may differ from 
the savings presented in each of the separate quarterly reports 
previously published by OIG.  Appendix D provides a more detailed 
description of the methods we used to estimate savings for HCPCS 
codes that exceeded the 5-percent threshold using complete AMP data. 
At the time of our analysis, CMS had yet to publish its November 2010 
final rule stating that the proposed price substitution policy would not 
be finalized.  Because we assumed at the time that the price 
substitution policy would likely be implemented, we examined the 
 
30 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. 
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potential effect of the policy as part of our annual overview.  To 
determine which HCPCS codes would have been subject to price 
reduction if CMSs proposed price substitution policy had been in effect 
during 2009, we identified codes with complete AMP data that exceeded 
the 5-percent threshold in two consecutive quarters or three of four 
quarters in 2009.  We then totaled the estimated savings for that subset 
of codes. 
Additional analysis of HCPCS codes with partial AMP data.  For each of the 
HCPCS codes with partial AMP data that exceeded the 5-percent 
threshold in at least one quarter of 2009, we determined whether 
missing or unavailable AMP unduly influenced the results of our pricing 
comparisons.31  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. 
As part of our annual overview, we identified HCPCS codes with 
partial AMP data that exceeded the 5-percent threshold in 2009 only 
because AMP data were missing or unavailable.  To do this, we 
reanalyzed pricing data after accounting for the missing values.  
Specifically, we replaced each missing value with its corresponding 
ASP and recalculated the volume-weighted AMPs using those 
imputed prices.32  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 or unavailable AMPs 
 
31 For the purposes of this study, an AMP was considered missing if the manufacturer 
had a Medicaid rebate agreement in 2009 but did not submit a price 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 to 
CMS.  To determine whether a manufacturer participated in the Medicaid drug rebate 
program in 2009, we consulted the list of participating drug companies posted on CMSs 
Web site. 
32 Although an NDCs ASP is not usually the same as its AMP, it is generally within about 
5 percent of the AMP on average.  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.   
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  9   
 
   
II NN TT RR OO DD UU CC TT II OO NN   
were likely responsible for the HCPCS code initially exceeding 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.  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.  We also 
determined which of these codes exceeded the threshold in two 
consecutive or three of four quarters in 2009 and totaled the 
estimated savings for that subset of codes. 
Analyzing HCPCS Codes With No AMP Data in 2009 
In each of our pricing comparisons for 2009, 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 2009, 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 2009 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 
revised and/or missing 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. 
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  10  ...  FINDINGS 

In 2009, 34 HCPCS codes with complete  Consistent with sections 
1847A(d)(2)(B) and 1847A(d)(3) of 
AMP data exceeded the 5-percent threshold 
the Act, OIG compared ASPs 
in one or more quarters 
with AMPs to identify instances 
in which the ASP for a particular drug exceeded the AMP by a threshold 
of 5 percent.  Of the 493 HCPCS codes examined during 2009, 
34 exceeded this 5"percent threshold in at least one quarter based on 
complete AMP data only.  Appendix E presents a list of the 34 HCPCS 
codes, including the quarter(s) during which the codes exceeded the 
5"percent threshold. 
Pursuant to sections 1847A(d)(3) ofthe 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 
WA  MP or 103 percent ofthe AMP.  Ifreimbursement amounts for all 
34 codes with complete AMP data had been lowered to 103 percent of 
the AMPs during the applicable quarters, we estimate that Medicare 
expenditures would have been reduced by $4.4 million between the 
third quarter of 2009 and the second quarter of 2010.33 
Under CMS's proposed price substitution policy, reimbursement amounts 
for almost one-third of the 34 HCPCS codes would have been reduced, 
resulting in an estimated savings of almost $2 million over 1 year 
IfCMS's proposed price substitution policy had been in effect during 
2009, reimbursement amounts for 11 ofthe 34 HCPCS codes would 
have been reduced in at least one quarter.  These 11 HCPCS codes had 
complete AMP data and exceeded the 5"percent threshold in either two 
consecutive quarters or three of the four quarters in 2009.  If 
reimbursement amounts for these 11 codes had been based on 
103 percent of the AMPs during the applicable quarters, Medicare 
expenditures would have been reduced by an estimated $1.9 million 
between the third quarter of 2009 and the second quarter of 2010. 
A list ofthe 11 HCPCS codes is included in Appendix E. 
33 ASP data from the first through fourth quarters of 2009 were used to establish 
reimbursement amounts for the third quarter of 2009 through the second quarter of 2010, 
respectively. 
OEI031000380  COMPARISON OF ASPs AND AMPs:  AN OVERVIEW OF 2009  11   
 
   
F I N D I N G S  
In 2009, 34 HCPCS codes with partial          O  f   t h  e    4  9  3   H   C  PCS codes 
AMP data exceeded the 5-percent threshold          e x  a  m   i n  e d    d  u  ring 2009, 34 were 
eligible for price substitution in 
in one or more quarters 
at least one quarter based on 
partial AMP data.  Thirty-two of these 34 HCPCS codes exceeded the                    
5-percent threshold in any given quarter using only partial AMP data, 
whereas the remaining two codes exceeded the 5-percent threshold 
based on a mix of partial and complete AMP data.  Appendix F presents 
a list of the 34 HCPCS codes, including the quarter(s) during which the 
codes exceeded the 5-percent threshold. 
For over one-third of the HCPCS codes (13 of 34), missing and unavailable 
AMPs likely had little influence on the outcome of the pricing comparisons  
When we accounted for missing and unavailable AMPs, 13 of the                   
34 HCPCS codes continued to exceed the threshold in at least one 
quarter of 2009, 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 13 HCPCS 
codes, price substitutions may be legitimately warranted in these 
cases.  If reimbursement amounts for the 13 codes had been based on                       
103 percent of the AMPs during the applicable quarters, we estimate 
that Medicare expenditures would have been reduced by                       
$54,000 between the third quarter of 2009 and the second quarter of 
2010.  A list of the 13 HCPCS codes is included in Appendix F.  
For the remaining 21 of 34 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. 
Of the 13 HCPCS codes on which missing and unavailable AMPs likely had 
little influence, 7 exceeded the 5-percent threshold in two consecutive or 
three of the four quarters in 2009 
ASPs for 7 of 13 HCPCS codes repeatedly exceeded the AMPs by at 
least 5 percent.  In 2009, one of these HCPCS codes exceeded the               
5-percent threshold in every quarter.  An additional three HCPCS 
codes exceeded the 5-percent threshold in three of the four quarters.  
If reimbursement amounts for all seven codes had been lowered to              
103 percent of the AMPs during the applicable quarters, we estimate  
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  12   
 
   
FF II NN DD II NN GG SS   
that Medicare expenditures would have been reduced by           
$33,000 between the third quarter of 2009 and the second quarter of 
2010. 
 
Because of NDCs without AMP data, the number  If a HCPCS code had no AMPs 
of pricing comparisons performed in 2009 was  for any of its associated NDCs, 
we could not evaluate that code 
reduced by at least 10 percent in each quarter  
pursuant to sections 
1847A(d)(2)(B) and 1847A(d)(3) of the Act.  In 2009, from 10 to             
12 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.34, 35  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, 89 HCPCS codes were excluded from OIGs pricing comparisons 
in one or more quarters of 2009 because AMP data were missing or 
unavailable for all of the NDCs that CMS used to calculate Medicare 
reimbursement for that quarter.  For 46 of the 89 codes, we were never 
able to perform pricing comparisons in 2009 because AMPs were always 
missing or unavailable for all of the associated NDCs.   Over 70 percent 
of these HCPCS codes (33 of 46) 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 2009, Medicare and its beneficiaries spent $100 million on these             
33 drugs.36 
 
34 Relative to the total number of HCPCS codes in each quarter with Medicare 
reimbursement amounts based on the ASP payment methodology.  
35 For the purposes of this study, an AMP was considered missing if the manufacturer 
had a Medicaid rebate agreement in 2009 but did not submit a price 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.   
36 One of the 33 HCPCS codes had no expenditures listed in the 2009 PBAR file.  Therefore, 
that code was not included in the $100 million total. 
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  13   
 
   
F I N D I N G S  
Table 1:  HCPCS Codes That Were Excluded From 2009 Pricing Comparisons  
  Number of HCPCS Codes  Percentage of  
  Excluded Because   HCPCS Codes Excluded 
  None of the Corresponding  Because of  
Quarter in 2009  NDCs Had AMP Data  NDCs Without AMP Data 
First Quarter  61  12% 
Codes with unavailable AMPs only  39 
Codes with missing AMPs only  17   
Codes with a mix of missing and unavailable AMPs  5 
Second Quarter  51  10% 
Codes with unavailable AMPs only  36 
Codes with missing AMPs only  11   
Codes with a mix of missing and unavailable AMPs  4 
Third Quarter   66   12% 
Codes with unavailable AMPs only  39 
Codes with missing AMPs only  21   
Codes with a mix of missing and unavailable AMPs  6 
Fourth Quarter  62  12% 
Codes with unavailable AMPs only  38 
Codes with missing AMPs only  17   
Codes with a mix of missing and unavailable AMPs  7 
Source:  OIG analysis of ASP and AMP data from the first through fourth quarters of 2009. 
   
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  14   
 
   
 R E C O M M E N D A T I O N S  
Section 1847A(d)(3)(C) of the Act directs the Secretary to lower 
reimbursement amounts for drugs with ASPs that exceed AMPs by at 
least 5 percent.  However, CMS has yet to adjust Part B reimbursement 
amounts based on the findings of OIGs pricing comparisons.  Although 
CMS outlined a price substitution policy in a July 2010 proposed rule, 
the agency has opted not to finalize that policy.  In other words, CMS 
has suspended its plans to lower reimbursement amounts based on 
OIGs findings. 
This current overview, which summarizes data across all four quarters 
of 2009, identified 34 drug codes that exceeded the 5-percent threshold 
using complete AMP data.  If CMSs proposed price substitution policy 
had been in effect during 2009, reimbursement amounts for 11 of the                      
34 HCPCS codes would have been lowered to 103 percent of the AMPs, 
thereby saving Medicare and its beneficiaries an estimated $1.9 million.  
An additional 34 HCPCS codes exceeded the 5-percent threshold using 
partial AMP data.  We found that missing and unavailable AMPs for 
certain codes likely had little influence on the outcome of the pricing 
comparisons.  Therefore, price substitution may be legitimately 
warranted for those HCPCS codes. 
Furthermore, 10 to 12 percent of HCPCS codes were excluded from 
OIGs pricing comparisons in each quarter of 2009 because AMPs were 
missing or unavailable for all of the associated NDCs.  Thirty-three 
HCPCS codes were never subject to our 2009 pricing comparisons 
because they were associated exclusively with NDCs for which 
manufacturers were not required to report AMP data. 
OIG acknowledges that the operational issues associated with potential 
price substitutions may be complex and that the concerns of relevant 
stakeholders, including beneficiaries and taxpayers, should be taken 
into consideration.  However, to ensure that Medicare and its 
beneficiaries are paying appropriately for Part B drugs, the gap between 
ASPs and AMPs for certain drugs should be addressed.  We therefore 
recommend that CMS:  
Finalize the price substitution policy from the proposed rule and 
subsequently lower Medicare reimbursement amounts for drugs that exceed 
the 5-percent threshold 
CMSs proposed policy represented a positive 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. 
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  15   
 
   
R E C O M M E N D A T I O N S  
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 using partial AMP data would not have 
been eligible for price reduction under CMSs proposed price 
substitution policy.  However, for 13 HCPCS codes with partial AMP 
data in 2009, missing and unavailable AMPs likely had little influence 
on the outcome of the pricing comparisons.  When we accounted for 
missing AMPs, these 13 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 expand any future price substitution policy to include HCPCS 
codes identified by OIG as exceeding the threshold when missing AMPs 
have been imputed.   
We recognize that substituting ASP-based reimbursement amounts for 
these particular HCPCS codes would not have resulted in substantial 
savings between the third quarter of 2009 and the second quarter of 
2010; however, by including in any future policy at least certain codes 
with partial AMP data, CMS can avoid inadvertently providing drug 
manufacturers with a disincentive to submit timely AMPs.   
Consider seeking a legislative change to directly require all manufacturers 
of Part B-covered drugs to submit both ASPs and AMPs 
During 2009, between 36 and 39 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-three of these drugs had unavailable AMP data in all four 
quarters of 2009.  Although Medicare and its beneficiaries spent                     
$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 Part B reimbursement reflects market trends for all 
covered drugs and is subject to regular price monitoring, CMS could 
seek a legislative change requiring all manufacturers of Part B-covered 
drugs to submit ASPs and AMPs, regardless of whether those 
manufacturers have rebate agreements.   
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  16   
 
   
R E C O M M E N D A T I O N S  
Continue to evaluate and pursue appropriate actions against manufacturers 
that fail to comply with price reporting requirements, including referring to 
OIG manufacturers that fail to submit timely ASP data 
We recognize that CMS has taken steps to ensure that certain pricing 
data are reported in a timely manner, including terminating 
manufacturers rebate agreements for failure to report AMPs and 
referring manufacturers with untimely AMPs to OIG to face possible 
civil money penalties.  Recently, CMS also referred a manufacturer to 
OIG for failure to report timely ASP data.  If manufacturers 
repeatedly fail to report ASP data or repeatedly submit such data 
late, those manufacturers should face possible penalties.   
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
Of the four recommendations included in our report, CMS concurred 
only with the recommendation intended to ensure timely reporting of 
pricing data.  Specifically, CMS stated that it will continue referring to 
OIG any manufacturers that repeatedly fail to submit timely and/or 
accurate ASPs.   
CMS did not concur with our recommendation regarding the possible 
expansion of manufacturers reporting requirements for Part B drugs.  
However, the Agency stated that it will continue to monitor 
manufacturer reporting trends and their effects on current payment 
policies. 
CMS also did not concur with OIGs two recommendations regarding the 
implementation of a price substitution policy.  In its comments, CMS 
reiterated that the proposed policy had not been finalized because of 
both the preliminary injunction and amendments to the definition of 
AMP required by the Affordable Care Act.  Although the injunction has 
been recently vacated, CMS indicated that it will proceed cautiously 
with respect to any future price substitution policy, particularly as it 
assesses the impact of changes to the AMP definition.   
In addition, CMS questioned whether the payoff associated with price 
substitution justifies the resources that OIG devotes to quarterly pricing 
comparisons, noting that the proposed price substitution policy would 
have saved only about $2 million in 2009.  Because the Act provides 
discretion in determining the frequency of pricing comparisons, CMS 
suggested that OIG limit its efforts to a single annual report and pursue 
activities with higher potential rates of return. 
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  17   
 
   
R E C O M M E N D A T I O N S  
OIG notes that when Congress established ASP as the basis for 
Medicare Part B drug reimbursement, it also provided a mechanism for 
ensuring that the new reimbursement methodology did not result in 
excessive payments.  Specifically, Congress mandated that OIG monitor 
ASPs by comparing them with AMPs and WAMPs and directed CMS to 
lower reimbursement for certain drugs based on 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 19 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 declined to take any 
action in response to OIGs findings and recommendations.  
During the past six years, CMS has offered differing reasons for not 
complying with its statutory requirement to adjust reimbursement 
based on OIGs studies.  At present, CMSs primary obstacle to 
finalizing a price substitution policy appears to be the uncertainty 
surrounding changes to the definition of AMP required by the 
Affordable Care Act.  However, the impact of these changes is not so 
unpredictable as to warrant suspension of CMSs plans to lower 
reimbursement for eligible drugs.  In response to a report issued by the 
Government Accountability Office (GAO), the Department of Health & 
Human Services acknowledged that the new AMPs, which are expected 
to be based on higher-priced sales, are likely to be higher than the 
AMPs calculated before October 2010.37  This anticipated increase in 
AMPs may lessen the likelihood that a drugs ASP will exceed the                
5-percent threshold, effectively making price substitution criteria more 
stringent. 
Furthermore, if no payoff has been realized based on OIGs quarterly 
studies, it is only because CMS has yet to lower Part B reimbursement 
amounts for eligible drugs.  Once a price substitution policy has been 
implemented, quarterly pricing comparisons would enable CMS to make 
responsive, short-term payment adjustments (as required by Federal 
law) that prevent Medicare and its beneficiaries from overspending.  
Such timely adjustments would not be possible with only annual OIG 
pricing comparisons. 
 
37 GAO, Medicaid Outpatient Prescription Drugs:  Estimated Changes to Federal Upper 
Limits Using the Formula under the Patient Protection and Affordable Care Act,                        
GAO-11-141R. 
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  18   
 
   
R E C O M M E N D A T I O N S  
Finally, OIG believes that CMSs comments regarding the $2 million in 
savings identified in this report fail to recognize the broader impact of 
price substitution over time.  Although the savings from any single OIG 
report may have been small 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.  OIG 
remains concerned that CMS has yet to lower ASP-based payment 
amounts as directed. 
Until the statutory mandate is changed or CMS complies with the law 
as written, OIG will continue to issue quarterly pricing comparisons, 
along with annual overviews that recommend price substitutions as 
warranted. 
For the full text of CMSs comments, please see Appendix G. 
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  19   
 
   
 AAA PPP PPP EEE NNN DDD III XXX     ~~~     AAA    
The Equation Used by the Centers for Medicare & Medicaid Services To 
Calculate Volume-Weighted Average Sales Prices on or After April 1, 2008 
A volume-weighted average sales price (ASP) is calculated for the dosage amount 
associated with the Healthcare Common Procedure Coding System (HCPCS) 
code.  In the following equation, the number of billing units represents the 
number of HCPCS code doses that are contained in a national drug code (NDC).   
 
 
 
Volume-Weighted ASP   Sum of  (ASP for NDC * Number of NDCs Sold) 
 
for Dosage Amount       =              
  of HCPCS Code  Sum of   (Number of NDCs Sold * Number of Billing Units in NDC) 
 
 
 
 
 
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  20   
 
   
 A P P E N D I X   ~   B  
Previous Office of Inspector General Reports Comparing Average Sales 
Prices and Average Manufacturer Prices 
 
  Monitoring Medicare Part B Drug Prices:  A Comparison of Average Sales 
Prices to Average Manufacturer Prices, OEI-03-04-00430, April 2006 
 
  Comparison of Fourth-Quarter 2005 Average Sales Prices to Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Second 
Quarter 2006, OEI-03-06-00370, July 2006 
 
  Comparison of Third-Quarter 2006 Average Sales Prices to Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for First Quarter 
2007, OEI-03-07-00140, July 2007 
 
  Comparison of First-Quarter 2007 Average Sales Prices to Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Third Quarter 
2007, OEI-03-07-00530, September 2007 
 
  Comparison of Second-Quarter 2007 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Fourth 
Quarter 2007, OEI-03-08-00010, December 2007 
 
  Comparison of Third-Quarter 2007 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for First Quarter 
2008, OEI-03-08-00130, May 2008 
 
  Comparison of Fourth-Quarter 2007 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Second 
Quarter 2008, OEI-03-08-00340, August 2008 
 
  Comparison of Average Sales Prices and Average Manufacturer Prices:  An 
Overview of 2007, OEI-03-08-00450, December 2008 
 
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  21   
 
   
A P P E N D I X   ~   B  
  Comparison of First-Quarter 2008 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Third Quarter 
2008, OEI-03-08-00530, December 2008 
 
  Comparison of Second-Quarter 2008 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Fourth 
Quarter 2008, OEI-03-09-00050, February 2009 
 
  Comparison of Third-Quarter 2008 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for First Quarter 
2009, OEI-03-09-00150, April 2009 
 
  Comparison of Fourth-Quarter 2008 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Second 
Quarter 2009, OEI-03-09-00340, August 2009 
 
  Comparison of First-Quarter 2009 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Third Quarter 
2009, OEI-03-09-00490, August 2009 
 
  Comparison of Second-Quarter 2009 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Fourth 
Quarter 2009, OEI-03-09-00640, January 2010 
 
  Comparison of Average Sales Prices and Average Manufacturer Prices:  An 
Overview of 2008, OEI-03-09-00350, February 2010 
 
  Comparison of Third-Quarter 2009 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for First Quarter 
2010, OEI-03-10-00150, April 2010 
 
  Comparison of Fourth-Quarter 2009 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Second 
Quarter 2010, OEI-03-10-00350, July 2010 
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  22   
 
   
AA PP PP EE NN DD II XX    ~~    BB   
  Comparison of First-Quarter 2010 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Third Quarter 
2010, OEI-03-10-00440, November 2010 
 
  Comparison of Second-Quarter 2010 Average Sales Prices and Average 
Manufacturer Prices:  Impact on Medicare Reimbursement for Fourth 
Quarter 2010, OEI-03-11-00030, February 2011 
 
 
 
 
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  23   
 
   
I N TA RP OP DE UN CDTI I XO   N~     C  
Detailed Methodology for Calculating Volume-Weighted Average 
Manufacturer Prices for 2009 
Before computing quarterly volume-weighted average manufacturer 
prices (AMP) for 2009, 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 is subject to the Office of 
Inspector Generals (OIG) 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).38 
Calculating Converted Average Manufacturer Prices  
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 the 
Centers for Medicare & Medicaid Services 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 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. 
 
38 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 CMS.  Volume-weighted 
ASPs remained the same, regardless of the availability of AMP data.   
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  24   
 
   
A P P E N D I X   ~   C  
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.   
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 Average Manufacturer Prices 
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. 
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  25   
 
   
 A P P E N D I X   ~   D  
Detailed Methodology for Estimating Savings for Drug Codes That Exceeded 
the 5-Percent Threshold in 2009 
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 2009, we estimated the 
savings associated with substituting the reimbursement amount for 
that code with 103 percent of the AMP.   
A two-quarter lag exists between the sales period for which ASPs are 
reported and the effective date of the reimbursement amounts.  As a 
result of this lag period, estimated savings for HCPCS codes that 
exceeded the 5-percent threshold during the first through fourth 
quarters of 2009 were applied to the third quarter of 2009 through the 
second quarter of 2010, respectively.  We estimated savings only for the 
time period(s) during which a HCPCS code exceeded the 5-percent 
threshold.   
For each of the HCPCS codes that exceeded the 5-percent threshold in a 
given quarter of 2009, we calculated 103 percent of the volume-weighted 
AMP and subtracted this amount from the reimbursement amount for 
the HCPCS code, which is equal to 106 percent of the volume-weighted 
ASP.  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 2009, as reported in the Centers for Medicare & Medicaid Services 
Part B Analytics and Reports (PBAR).39   
 
 
 
 
39 The PBAR data for 2009 were downloaded in March 2010.     
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  26   
 
   
 AA PP PP EE NN DD II XX    ~~    EE   
Thirty-Four Drug Codes With Complete Average Manufacturer Price 
D  ata That Exceeded the 5-Percent Threshold in 2009  
Quarter(s) in Which the Codes Exceeded the 5-Percent Threshold  
Drug           First                      Second                 Third                   Fourth              
Code  Quarter                      Quarter   Quarter                      Q uarter            
J0210*      X  X 
J0270    X     
J0475*  X  X     
J0476      X   
J0735    X    X 
J1230  X       
J1327*      X  X 
J1364*  X  X  X   
J1655  X       
J1955  X       
J2020    X     
J2597*  X  X  X   
J2675        X 
J2690    X     
J2792*    X  X  X 
J2820    X     
J2993*    X  X   
J3470  X    X   
J7500*  X  X     
J7606      X   
J8515  X       
J9155      X   
J9178    X     
J9214*      X  X 
J9225  X       
J9280        X 
J9290        X 
J9291        X 
J9340*      X  X 
Q0166*      X  X 
Q0169  X       
Q0171      X   
Q0175  X       
Q0176  X       
* These codes would have exceeded the Centers for Medicare & Medicaid Services criteria for price substitution in at least 
one quarter if the price substitution policy had been in effect during 2009. 
Source:  Office of Inspector General analysis of average sales price and average manufacturer price data from 2009. 
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  27   
 
   
 A P P E N D I X   ~   F  
 
Thirty-Four Drug Codes With Partial Average Manufacturer Price Data 
That Exceeded the 5-Percent Threshold in 2009  
Quarter(s) in Which the Codes Exceeded the 5-Percent Threshold 
Drug           First                      Second                 Third                   Fourth              
Code  Quarter                      Quarter   Quarter                      Q uarter            
90376        X 
90586        X 
J0170*  X      X 
J0461        X 
J0560*  X  X  X  X 
J0592        X 
J1170        X 
J1190  X  X  X  X 
J1642  X       
J1885*      X   
J1940*        X 
J2175        X 
J2310*  X  X     
J2360*        X 
J2590*    X     
J2700      X  X 
J2765*  X  X  X  X 
J3010        X 
J7506*  X  X  X   
J7509*    X  X  X 
J7613      X   
J9027    X     
J9031        X 
J9100        X 
J9185        X 
J9250        X 
J9260        X 
Q0163*    X  X   
Q0165*    X     
Q0170*      X  X 
Q0179        X 
                        
continued on next page 
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  28   
 
   
A P P E N D I X   ~   F  
Thirty-Four Drug Codes With Partial Average Manufacturer Price Data 
That Exceeded the 5-Percent Threshold in 2009 (Continued) 
Quarter(s) in Which the Codes Exceeded the 5-Percent Threshold 
Drug           First                      Second                 Third                   Fourth              
Code  Quarter                     Quarter   Quarter                      Q uarter            
Q9965  X  X  X  X 
Q9966  X  X  X  X 
Q9967  X       
* For these codes, missing average manufacturer prices (AMP) likely had little influence on the outcomes of the pricing 
comparisons.                             
 These codes exceeded the 5-percent threshold based on complete AMPs in some quarters and partial AMPs in others.    
Source:  Office of Inspector Generals analysis of average sales price data and AMP data from 2009. 
 
   
 
 
 
 
 
 
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  29  x 
A  P  PEN  D  G 
Agency Comments 
(:"J-	
:_ed_n:_:9_n:_:r_t~-:t-:-ra-re-&-M-e-di-ca~_ld_s_erv_ic_es 
DEPARTMENT OF HEAJXH & HUMAN SERVJCES_______
Washington, DC 20201 
DATE: 	 FEB  0 3 2011 
TO: 	 Daniel R. Levinson 

Inspector General 

FROM: 	 DOnalOrYr BerWiCK, rtIl>. 

Administrator 

SUBJECT: 	 Office of Inspector General Draft Report: Comparison of Average Sales Prices 
and Average Manufacturer Prices: An Overview of2009 (OEI-03-10-00380) 
The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to review and 
respond to the Office oflnspector General's (OIG) draft report titled "Comparison of Average 
Sales Prices and Average Manufacturer Prices: An Overview of 2009". This report is part of a 
series of average sales price (ASP) and average manufacturer price (AMP) comparisons required 
under section 1847 A(d) of the Social Security Act (the Act). 
The OIG stated two objectives for the 2009 overview:  to identify drugs with an ASP that 
exceeded AMP by at least 5-percent in any quarter of 2009, and to examine the impact of 
missing and unavailable data on the OIG's 2009 pricing comparisons. The 2009 overview found 
that 34 of 439 Healthcare Common Procedure Coding System (HCPCS) codes with complete 
data (i.e., AMP data was available for all national drug codes (NDC) used in the ASP calculation 
for a code) met the 5-percent threshold in at least one quarter.  Of these 34 codes, 11 would have 
been subject to the price substitution policy that was proposed but not finalized in the 2011 
Physician Fee Schedule Rule and would have reduced Medicare expenditures by an estimated 
$1.9 million over a four-quarter period. Another 34 HCPCS codes with partial data (I.e., AMP 
data was available only for some of the NDCs used in the ASP calculation for a code) met the 
5-percent threshold, and the OIG determined that missing data for 13 of these codes appeared to 
have little influence on the outcome of the comparison since the available data accurately 
captured underlying market trends. The OIG also noted that at least 10 percent of HCPCS codes 
were excluded from the comparison each quarter due to missing or unavailable AMP data. 
While we appreciate the OIG's continuing efforts to examine payment made under the ASP 
methodology, we are uncertain of the payoff from quarterly reports on ASP and AMP 
comparisons.  We note that the price substitution policy in the CMS proposed rule (based on 
OIG quarterly studies for 2009) would save roughly $2 million in Medicare allowed charges. 
While the statute requires the OIG to conduct studies to determine the widely available market 
price of Part B drugs, it also provides discretion in determining the frequency of the 
OEI031000380  COMPARISON OF ASPs AND AMPs:  AN OVERVIEW OF 2009  30   
 
   
A P P E N D I X   ~   G  
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  31   
 
   
A P P E N D I X   ~   G  
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  32   
 
   
 AA CC KK NN OO WW LL EE DD GG MM EE NN TT SS   
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 of the Medicare and 
Medicaid Prescription Drug Unit.   
Lauren McNulty served as the team leader for this study.  Central office 
staff who contributed to this report include Kevin Manley and Natasha 
Franklin.  
 
OEI-03-10-00380    COMPARISON OF ASPS AND AMPS:  AN OVERVIEW OF 2009  33   
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.