Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

DRUG MANUFACTURERS’
 

NONCOMPLIANCE WITH 


AVERAGE MANUFACTURER PRICE 

REPORTING REQUIREMENTS
 




Daniel R. Levinson 
 

Inspector General 


September 2010
 

OEI-03-09-00060
 
 

 EXECUTIVE SUMMARY 

OBJECTIVES

1. To determine whether manufacturers submitted 2008 average 

manufacturer prices (AMP) to the Centers for Medicare & Medicaid 

Services (CMS) within the timeframes specified by Federal 

requirements. 

2. To determine whether CMS has taken action against manufacturers 

that did not submit AMP data within the timeframes specified by 

Federal requirements. 

BACKGROUND 

The Social Security Act sets forth price reporting obligations for certain 

manufacturers, including the obligation to report AMP data to CMS. 

During 2008, 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. 

Manufacturers must provide CMS with the AMP for each of their 

covered outpatient drugs within 30 days after the end of each month 

and each quarter. 

Manufacturer-reported AMPs play a critical role in Government 

payments for prescription drugs. Currently, AMPs provided by 

manufacturers on a quarterly basis are used to calculate the rebate 

amounts owed to States under the Medicaid drug rebate program. 

Quarterly AMPs are also used to establish ceiling prices in the 

340B program, which is a prescription drug discount program 

administered by the Health Resources and Services Administration. 

In addition, consistent with the Deficit Reduction Act of 2005 (DRA) and 

the Patient Protection and Affordable Care Act, AMPs reported on a 

monthly basis are to be used to establish Federal upper limit amounts 

in the Medicaid program. The DRA also requires CMS to disclose AMP 

data to State Medicaid programs, which would enable States to use 

monthly AMP data when setting Medicaid reimbursement rates for 

prescription drugs. Although an injunction currently prohibits CMS 

from using AMPs in a way that affects Medicaid reimbursement rates 

and from disclosing AMPs to States, AMP data could be used for these 

purposes in the future. 

According to statute, manufacturers that fail to provide timely AMP 

data may be subject to civil money penalties and/or termination from 

the drug rebate program. Because the responsibility to impose civil 

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EXECUTIVE SUMMARY 

money penalties has been delegated to the Office of Inspector General 

(OIG), CMS may refer noncompliant manufacturers to OIG for the 

purpose of imposing such penalties in appropriate cases. CMS also has 

authority to terminate the rebate agreements of drug manufacturers 

that fail to meet price reporting requirements. 

For this study, we obtained manufacturer-reported drug product data 

and AMP data for each month and quarter of 2008, including the dates 

on which the AMPs were initially certified by manufacturers. For each 

drug product included in our study, we determined the months and 

quarters for which AMPs were submitted late or not at all. We then 

summarized the results for each month and quarter to identify 

manufacturers that (1) had missing data, i.e., submitted no AMP data 

for any of their drug products; (2) had late AMP data, i.e., submitted 

AMP data for all of their drug products after the deadline; or (3) had 

incomplete AMP data, i.e., submitted at least some of their AMPs by the 

deadline but submitted the remaining AMPs either late or not at all or 

submitted a portion of their AMPs late and never submitted the 

remaining AMPs. 

We also determined whether manufacturers that failed to submit timely 

monthly or quarterly AMP data during 2008 were terminated by CMS 

or referred by CMS to OIG for potential civil money penalties. 

FINDINGS 

In 2008, more than half of manufacturers did not fully comply with 

quarterly submission requirements for AMP data. Of the 

592 manufacturers that were required to submit quarterly AMP data 

during 2008, 313 (53 percent) failed to provide pricing data by the 

statutorily defined due date. 

Sixteen of the manufacturers under review had missing AMP data for all 

of their drug products in multiple quarters. Forty-eight of the 

manufacturers under review submitted late AMP data for all of their 

drug products in multiple quarters. One hundred twenty of the 

manufacturers under review submitted incomplete AMP data in multiple 

quarters. 

In 2008, more than three-fourths of manufacturers did not fully 

comply with monthly submission requirements for AMP data. Of the 

579 manufacturers that were required to submit monthly AMP data 

during 2008, 453 (78 percent) failed to provide pricing data by the 

statutorily defined due date. 

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EXECUTIVE SUMMARY 

Forty of the manufacturers in our review had missing AMP data for all of 

their drug products in multiple months. One hundred forty-eight of the 

manufacturers under review had late AMP data for all of their drug 

products in multiple months. Two hundred twenty-seven of the 

manufacturers under review had incomplete AMP data in multiple 

months. 

CMS took action against some manufacturers for failure to comply 

with quarterly AMP reporting requirements but took no action for 

failure to comply with monthly reporting requirements. In total, 

78 manufacturers were referred to OIG and/or terminated by CMS for 

failure to comply with quarterly AMP reporting requirements in 2008. Of 

these 78 manufacturers, 52 were only referred to OIG, 4 were only 

terminated by CMS, and the remaining 22 were both referred to OIG and 

subsequently terminated by CMS. Although CMS tracks manufacturers 

that report either no monthly AMP data or less than 90 percent of their 

monthly AMP data, it does not refer or terminate those manufacturers. 

However, some noncompliant manufacturers are referred or terminated by 

CMS because they also have missing or late quarterly AMP data.

RECOMMENDATIONS 

Because AMP data currently play such a critical role in Government 

payments for prescription drugs and may play an even greater role in 

the future, CMS should ensure that action is taken against 

noncompliant manufacturers. Drug manufacturers must also do their 

part by reporting both quarterly and monthly AMP data to CMS in a 

timely and accurate way. 

To promote compliance with quarterly and monthly AMP reporting 

requirements and to help ensure that Medicaid and covered 340B 

entities do not overpay for prescription drugs, we recommend that CMS: 

Take action against manufacturers that submit incomplete quarterly 

AMP data. 

Take action against manufacturers that fail to submit monthly AMP 

data in a timely manner. 

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EXECUTIVE SUMMARY 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS concurred with both recommendations and stated that it will begin 

referring manufacturers that submit incomplete quarterly and monthly 

data to OIG for civil money penalty consideration. OIG looks forward to 

expanding its collaboration with CMS regarding administrative 

remedies for noncompliance with AMP reporting requirements. 
 TABLE OF CONTENTS 

EXECUTIVE SUMMARY .....................................i

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 

FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 

 In 2008, more than half of manufacturers did not fully comply 

with quarterly submission requirements for AMP data . . . . . . . . 10 

 In 2008, more than three-fourths of manufacturers did not fully 

comply with monthly submission requirements for AMP data . . . 12 

 CMS took action against some manufacturers for failure to 

comply with quarterly AMP reporting requirements but 

took no action for failure to comply with monthly reporting 

requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 

RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 

 Agency Comments and Office of Inspector General Response . . . 19 

APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 

 A: Current and Future Uses of Average Manufacturer Price 

Data in Federal Health Care Programs . . . . . . . . . . . . . . . . . . 20 

 B: Manufacturers With Missing and Late 

Quarterly Average Manufacturer Price Data . . . . . . . . . . . . . 24 

 C: Manufacturers With Missing and Late 

Monthly Average Manufacturer Price Data. . . . . . . . . . . . . . . 25 

 D: Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 

ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
 

INTRODUCTION INTRODUCTION 

OBJECTIVES 

1. To determine whether manufacturers submitted 2008 average 

manufacturer prices (AMP) to the Centers for Medicare & Medicaid 

Services (CMS) within the timeframes specified by Federal 

requirements. 

2. To determine whether CMS has taken action against manufacturers 

that did not submit AMP data within the timeframes specified by 

Federal requirements. 

BACKGROUND 

The Social Security Act (the Act) and Federal regulations set forth price 

reporting obligations for certain drug manufacturers, including the 

obligation to report AMP data to CMS on quarterly and monthly bases.1 

During 2008, 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.2, 3

Manufacturer-reported AMPs play a critical role in Government 

payments for prescription drugs. Currently, AMPs provided by 

manufacturers on a quarterly basis are used to calculate the rebate 

amounts owed to States under the Medicaid drug rebate program. 

Quarterly AMPs are also used to establish ceiling prices in the 340B 

program, which is a prescription drug discount program for covered 

entities that is administered by the Health Resources and Services 

Administration (HRSA). 

In addition, consistent with the Deficit Reduction Act of 2005 (DRA) and 

the Patient Protection and Affordable Care Act (Affordable Care Act),4

monthly AMPs are to be used to establish Federal upper limit (FUL) 

1 Section 1927(b)(3) of the Act and 42 CFR §§ 447.510(a) and (d). Price reporting obligations 

apply to manufacturers that participate in the Medicaid drug rebate program. 

2 Section 1927(k)(1) of the Act. 

3 The AMP is generally calculated as a weighted average of prices for a manufacturer’s 

package sizes of a drug sold during a given quarter and is reported for the lowest 

identifiable quantity of the drug as measured by one of eight unit types: capsule, tablet, 

milliliter, gram, each, suppository, transdermal patch, and injectable antihemophilic factor 

unit. For example, an AMP might be submitted for 1 tablet, 1 milliliter, or 1 gram. 

4 P.L. 109-171 and P.L. 111-148, respectively. 

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INTRODUCTION 

amounts in the Medicaid program.5 The DRA also requires CMS to 

disclose AMP data to State Medicaid programs, which would enable 

States to use monthly AMP data when setting Medicaid reimbursement 

rates for prescription drugs.6 Although a preliminary injunction from a 

Federal district court currently prohibits CMS from using AMPs in a 

way that affects Medicaid reimbursement rates and from disclosing 

AMPs to States, AMP data could be used for these purposes in the 

future.7

If quarterly and monthly AMPs are not reported in a timely manner, 

(1) CMS may not have complete data on which to base Medicaid rebates 

and future FUL amounts,8 (2) HRSA may be unable to establish ceiling 

prices under the 340B program, and (3) States may be unable to use 

AMPs for Medicaid reimbursement purposes.9 As a result, the Medicaid 

program and covered entities participating in the 340B program could 

potentially overpay for prescription drugs. 

For more detailed information about the current and future uses of 

AMP data in Federal health care programs, see Appendix A. 

AMP Reporting Requirements 

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 of Health & Human 

Services (the Secretary) and pay quarterly rebates to State Medicaid 

agencies.10 

5 Prior to the DRA, manufacturers were required to submit only quarterly AMPs. However, 

section 6001 of the DRA and section 2503(b)(1)(A) of the Affordable Care Act expanded 

manufacturers’ reporting requirements to include, respectively, monthly AMPs and the 

total number of units used to calculate those monthly AMPs. Section 2503(a)(1)(B) of the 

Affordable Care Act establishes monthly AMPs as the new basis for FUL amounts. 

6 Section 6001 of the DRA. 

7 National Association of Chain Drug Stores, et al., v. U.S. Department of Health & Human 

Services, et al., Civil Action No. 1:07cv02017, order dated December 19, 2007. 

8 If a manufacturer does not submit timely or complete AMP data, the manufacturer must 

manually calculate rebate amounts and send rebate payments to States. Therefore, 

although CMS cannot calculate a rebate amount, States may nonetheless receive rebate 

payments for drug products with missing AMPs. 

9 According to a 2007 Office of Inspector General (OIG) report entitled States’ Use of New 

Drug Pricing Data in the Medicaid Program (OEI-03-06-00490), most States had yet to 

decide as of October 2006 whether to use AMP data for Medicaid drug reimbursement. 

Some States raised concerns about missing AMP data, AMP outliers, and the correlation 

between AMPs and acquisition costs. Undecided States would like assurances from CMS 

that the AMP data are accurate and valid. 

10 Sections 1927(a)(1) and (b)(1) of the Act. 

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INTRODUCTION 

Under these rebate agreements and pursuant to the Act, manufacturers 

must make regular reports to CMS of the AMPs for each of their covered 

outpatient drugs.11, 12 Originally, manufacturers were required to 

calculate and report AMPs on a quarterly basis only, with submissions 

due 30 days after the end of each quarter. However, pursuant to the 

DRA, manufacturers must also calculate monthly AMPs, with 

submissions due 30 days after the end of each month.13, 14 If a drug 

product has been discontinued, the manufacturer must provide CMS 

with the product’s termination date and continue reporting quarterly 

AMPs for the product for 1 full year after the termination date.15, 16 The 

manufacturer may stop reporting monthly AMPs beginning the first 

month after the termination date of the drug.17 

Manufacturers transmit drug product data and AMP data for each 

reporting period to CMS using the Drug Data Reporting for Medicaid 

system (DDR). First, manufacturers must enter drug product data for 

their covered 11-digit national drug codes (NDC), each of which 

identifies a specific manufacturer, product, and package size. Once the 

drug product data have been accepted by the system, manufacturers are 

able to submit AMPs for the corresponding NDCs. The DDR reviews 

manufacturers’ AMP submissions for data errors, notifies 

manufacturers about potential problems, and may reject files with 

detected errors. The DDR also displays the number of NDCs entered 

11 Section 1927(b)(3) of the Act. 

12 Sections 1927(k)(2-3) of the Act provide the definition of a covered outpatient drug. 

13 Pursuant to section 6001(b)(1) of the DRA, manufacturers are required to report AMPs 

on a monthly basis. The applicable regulations at 42 CFR § 447.510 specify that quarterly 

pricing reports must include other information in addition to AMPs, such as customary 

prompt pay discounts and “best prices” for single-source or innovator multiple-source drugs. 

14 As specified in 42 CFR § 447.504(i), a quarterly AMP is now calculated as a weighted 

average of monthly AMPs in the quarter. However, the manufacturer must adjust the AMP 

for a quarter if cumulative discounts, rebates, or other arrangements subsequently adjust 

the prices actually realized. 

15 CMS, Medicaid Drug Rebate State Release Number 140 (March 15, 2006). 

16 According to CMS, a drug’s termination date depends on the reason it is being 

discontinued by the manufacturer. If a drug product is removed from the shelf immediately 

because of a health or safety concern, the termination date is the date removed. Otherwise, 

the termination date is the shelf life of the last batch sold. 

17 Specifically, 42 CFR § 447.510(d)(5) states that manufacturers should not report monthly 

AMPs for terminated drug products beginning with the first month after the expiration date 

of the last lot sold (i.e., the termination date). 

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INTRODUCTION 

into the system for which AMP data have yet to be reported.18 After 

resolving data errors (if any), manufacturers certify the AMP data in 

the DDR. 

AMP data must be certified within 30 days after the end of each month 

and each quarter. Certified monthly data are uploaded to CMS’s FUL 

database, whereas certified quarterly data are uploaded to the Medicaid 

Drug Rebate (MDR) database. Information about the dates on which 

AMPs were certified and uploaded is maintained in the DDR. 

Penalties for Failure To Report Timely AMP Data 

Manufacturers that fail to provide AMP data on a timely basis may be 

subject to civil money penalties and/or termination from the drug rebate 

program. Pursuant to section 1927(b)(3)(C)(i) of the Act, the Secretary 

is authorized to impose a civil money penalty that increases by 

$10,000 for each day that the required information (including quarterly 

and monthly AMP data) has not been provided after applicable 

deadlines. This section of the Act also specifies that if the required 

prices are not reported within 90 days of the deadline, the 

manufacturer’s rebate agreement will be suspended until the date that 

the pricing information is reported.19 

The responsibility to impose penalties pursuant to section 

1927(b)(3)(C)(i) of the Act has been delegated to OIG by the Secretary.20 

In the second quarter of 2006, CMS began referring noncompliant 

manufacturers to OIG for the purpose of imposing civil money 

penalties.21 In response to CMS’s referrals, OIG has proposed that civil 

money penalties be levied against manufacturers that fail to comply 

with price reporting requirements. 

CMS also has authority to terminate the rebate agreements of 

manufacturers that fail to comply with AMP reporting requirements.22 

18 The DDR also allows the manufacturers themselves to run a missing data report, which 

lists the NDCs that have no pricing data in the current period or any other period going 

back to 1991. 

19 Pursuant to section 1927(b)(3)(C)(i) of the Act, rebate agreements must be suspended for 

no less than 30 days. 

20 59 Fed. Reg. 52967 (Oct. 20, 1994). 

21 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 manufacturers whose 

pricing data submissions do not comply with reporting requirements to OIG so that 

penalties could be imposed in appropriate cases. 

22 Section 1927(b)(4)(B) of the Act. 

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INTRODUCTION 

Specifically, CMS may terminate a rebate agreement “for violation of 

the requirements of the agreement or other good cause shown.”23 If a 

rebate agreement is terminated by CMS, the manufacturer may not 

enter into another rebate agreement for at least one quarter (with 

certain exceptions).24, 25 

Previous OIG Work 

Several OIG studies have found that some manufacturers may not be 

submitting quarterly AMP data for all of their NDCs by the statutory 

deadline. In one report, OIG found that almost 20 percent of 340B 

ceiling prices in the first quarter of 2005 could not be calculated because 

of missing AMP data.26 Another OIG report identified 1,431 NDCs with 

no AMP data during one or more quarters of 2008.27 Manufacturers for 

almost 60 percent of these NDCs participated in the MDR program in 

2008 and were therefore generally required to submit AMP data. 

METHODOLOGY 

Scope 

For this study, we examined both monthly and quarterly AMP data 

from 2008 as reported in the MDR and FUL databases. 

Rebate agreements are established by labeler code, which is a five-digit 

number that identifies the manufacturer of a given drug product. Drug 

companies and their subsidiaries may have one or more labeler codes. 

For the purposes of this report, we consider each labeler code to be a 

“manufacturer.” 

Data Sources and Data Collection 

We obtained from CMS a list of manufacturers that participated in the 

Medicaid drug rebate program during 2008, including the effective 

dates of the manufacturers’ rebate agreements and the termination 

23 Pursuant to section 1927(b)(4)(B) of the Act, such termination shall not be effective 

earlier than 60 days after the date of notice for the termination. 

24 Section 1927(b)(4)(C) of the Act. 

25 If, after one quarter, a manufacturer wants to reenter the program, CMS will begin the 

reinstatement process. As part of that process, manufacturers must report all missing 

pricing data to CMS and pay any outstanding rebate amounts (including interest) to States. 

26 OIG, Deficiencies in the Oversight of the 340B Drug Pricing Program, OEI-05-02-00072, 

October 2005. 

27 OIG, Comparison of Average Sales Prices and Average Manufacturer Prices: An 

Overview of 2008, OEI-03-09-00350, February 2010. 

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INTRODUCTION 

dates (if any).28 Using this list, we identified 592 manufacturers that 

should have submitted AMP data for one or more quarters of 2008, and 

579 manufacturers that should have submitted AMP data for 1 or more 

months of 2008. (In 2008, more manufacturers were required to submit 

quarterly AMPs than monthly AMPs because manufacturers of 

terminated NDCs must continue reporting quarterly AMPs for 1 year 

after the termination dates but need not report monthly AMPs after the 

termination dates.) The number of manufacturers that were required to 

submit AMP data in each individual month and quarter of 2008 is 

specified in Table 1. 

CMS also provided us with Medicaid drug product data for 2008, as 

reported by manufacturers with rebate agreements. The data include 

information such as the name and NDC of each covered outpatient drug, 

the date each drug entered the market, and the termination date for the 

drug (if applicable). Using the data provided by CMS, we identified 

active NDCs for each month and quarter of 2008. Because CMS 

requires manufacturers to report quarterly AMPs for a year after a 

drug’s termination date, we also identified NDCs that were terminated 

prior to 2008 but for which AMP data for one or more quarters of 2008 

were still required. Table 1 shows the number of NDCs in each month 

and quarter for which AMP data were required. 

CMS additionally provided us with AMP data for each month and 

quarter of 2008, including the dates on which the AMPs were initially 

certified by manufacturers. All AMP data were current as of 

July 16, 2009. 

To determine whether CMS has taken action against manufacturers 

that do not comply with AMP reporting requirements, we interviewed 

CMS staff members who are responsible for monthly and quarterly 

AMP data. We asked them to identify manufacturers that were either 

terminated or referred to OIG for failure to comply with AMP reporting 

requirements during 2008.29, 30 

28 Only manufacturers on CMS’s list are required to submit AMP data. Manufacturers 

with no valid drug product data on file with CMS were excluded from our review. 

29 Termination and referral data provided by CMS were current as of March 2010. 

30 CMS referred or terminated manufacturers based on quarterly AMP data that were 

available at the time of CMS’s own analyses. 

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INTRODUCTION 

Table 1: Number of NDCs in Each Month and Quarter for Which Average 

Manufacturer Price Data Were Required 

Quarter 

in 2008 

Number of 

Manufacturers 

Number of 

NDCs Month in 2008 Number of Manufacturers 

Number of 

NDCs 

January 546 35,515 

First 564 38,940 February 547 35,544 

March 549 35,545 

April 540 34,436 

Second 555 37,565 May 542 34,416 

June 545 34,426 

July 543 34,451 

Third 561 38,603 August 546 35,533 

September 551 35,579 

October 549 35,261 

Fourth 565 38,271 November 551 35,246 

December 555 35,252 

Source: OIG analysis of manufacturers, NDCs, and AMP data from all four quarters of 2008. 

Note: More manufacturers were required to submit quarterly AMPs for more NDCs than monthly AMPs because 

manufacturers of terminated NDCs must continue reporting quarterly AMPs for 1 year after the termination dates but 

need not report monthly AMPs after the termination dates. 

Analysis of AMP Submissions

For each NDC included in our study, we determined the months and 

quarters in 2008 for which AMPs were either not submitted or 

submitted late. To accomplish this, we compared the AMP certification 

date for each period to the due date of the data (i.e., 30 days after the 

end of each period). Data without certification dates were considered 

missing. Data certified after the due dates were considered late. If 

AMP data were submitted late, we calculated the number of days that 

elapsed between the due dates and the certification dates. We also 

identified NDCs with missing or late AMP data in multiple 

months/quarters. Using 2008 Medicaid utilization data posted on 

CMS’s Web site, we also calculated Medicaid’s total expenditures for 

each NDC during the period(s) for which that NDC’s AMP was missing 

or late.31 

For each month and quarter in 2008, we then summarized results at the 

NDC level to identify manufacturers with the following problems: 

31 To estimate Medicaid expenditures for an NDC without AMP data in a given month, we 

divided the total reimbursement amounts for the corresponding quarter by three. 

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INTRODUCTION 

 Missing AMP data. Manufacturers with missing AMP data 

submitted no AMP data for any of their NDCs during the 

month/quarter. 

 Late AMP data. Manufacturers with late AMP data submitted 

AMP data for all of their NDCs after the deadline. 

 Incomplete AMP data. Manufacturers with incomplete AMP data 

fell into one of two categories: (1) manufacturers that submitted 

at least some of their AMPs by the deadline but submitted the 

remaining AMPs for the month/quarter either late or not at all or 

(2) manufacturers that submitted a portion of their AMPs late and 

never submitted the remaining AMPs for the month/quarter. 

We then identified manufacturers that had missing, late, or incomplete 

AMPs in multiple months or quarters. 

We also identified manufacturers that CMS terminated or referred to 

OIG for failure to submit monthly or quarterly data by the statutory 

deadline. We then determined whether the manufacturers identified by 

our analysis as having missing, late, or incomplete quarterly or monthly 

AMP data were terminated by CMS or referred to OIG. 

Limitations 

We did not verify whether the NDCs provided by manufacturers for 

each reporting period and subsequently listed in CMS’s drug product 

file met the definition of a covered outpatient drug.32 We also did not 

examine whether AMP data initially reported by the applicable deadline 

were later corrected and resubmitted by the manufacturers. 

For NDCs with missing and late AMPs, we did not determine whether 

manufacturers manually calculated rebate amounts and paid rebates to 

States accordingly.33 States may have received appropriate rebates 

from manufacturers, even when those manufacturers did not comply 

with quarterly reporting requirements. We also did not determine 

whether NDCs with missing and late AMPs had Medicaid utilization in 

2008. 

Furthermore, we did not contact the manufacturers of NDCs with 

missing AMPs to determine whether they discontinued the NDCs but 

neglected to report termination dates to CMS. If NDCs with missing 

32 As defined by sections 1927(k)(2-3) of the Act. 

33 See Appendix A for a more detailed description of rebate calculations. 

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INTRODUCTION 

AMPs were, in fact, discontinued and no longer required AMPs, the 

number of manufacturers with missing and incomplete data in our 

report may be overestimated. 

OIG’s determinations of missing and late AMP data for a given period 

were not always the same as those made by CMS for that same period. 

This may have resulted from a number of factors. For instance, OIG 

identified manufacturers as having late data if the data were submitted 

any time after the due dates, whereas CMS identified manufacturers as 

having late data if the data were submitted after the rebate amounts 

were calculated. Also, CMS terminated or referred manufacturers 

based on AMP data that were current at the time of CMS’s analysis, 

whereas OIG analyzed more recently updated data. 

Standards 

This study was conducted in accordance with the Quality Standards for 

Inspections approved by the Council of the Inspectors General on 

Integrity and Efficiency. 

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FINDINGS 

In 2008, 53 percent of 

manufacturers that participated in 

the Medicaid drug rebate program 

(313 of 592) failed to submit at least 

some of their quarterly AMPs within the timeframes specified by 

Federal requirements. These manufacturers had missing, late, or 

incomplete AMP data during one or more quarters of 2008. When 

manufacturers do not comply with quarterly reporting requirements, 

CMS does not have complete data on which to base Medicaid rebates 

and HRSA may be unable to establish ceiling prices under the 340B 

program. 

In 2008, more than half of manufacturers 

did not fully comply with quarterly 

submission requirements for AMP data 

 FINDINGS 

Manufacturers that repeatedly failed to comply with quarterly AMP 

requirements did not always have the same problems (i.e., missing, late, 

and incomplete data) with the same NDCs in each period. Some 

manufacturers had different problems in different quarters. As a result, 

those manufacturers were included in more than one of the missing, 

late, and incomplete quarterly AMP categories described below.34 

Five percent of manufacturers failed to submit any quarterly AMP data in 

one or more quarters of 2008 

Of the 592 manufacturers under review, 31 (5 percent) did not submit 

AMP data for any of their NDCs during at least one quarter of 2008. 

More than half of these 31 manufacturers repeatedly failed to provide 

the required AMP data during 2008. Specifically, 2 manufacturers did 

not submit AMP data in 2 quarters, 11 did not submit AMP data in 

3 quarters, and an additional 3 did not submit AMP data in all 

4 quarters. Medicaid paid $3.8 million during the applicable quarters of 

2008 for NDCs belonging to the 31 manufacturers that did not submit 

the required AMP data. 

Table B-1 in Appendix B lists the number and percentage of 

manufacturers with no AMP data in each quarter, as well as the 

number of NDCs associated with those manufacturers. 

Almost one-fourth of manufacturers submitted all of their quarterly AMP 

data after the deadline in one or more quarters of 2008 

In 2008, 24 percent of manufacturers (144 of 592) submitted quarterly 

AMP data for all of their NDCs after the deadline in at least one 

34 Because manufacturers could have different problems in different quarters, the number 

of manufacturers in each subfinding sums to more than the total number of manufacturers 

that did not fully comply with quarterly AMP reporting requirements. 

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FINDINGS 

quarter. One-third of these manufacturers (48 of 144) submitted late 

AMP data in multiple quarters, with one manufacturer submitting 

prices after the deadline in all four quarters. 

The amount of time that passed before overdue AMPs were submitted 

by these manufacturers varied by quarter. In the second and third 

quarters of 2008, at least 80 percent of overdue AMPs were submitted 

within 5 days of the deadline and no more than 5 percent of overdue 

AMPs were more than 30 days late. However, manufacturers with late 

AMPs in the first and last quarters of 2008 were slower to provide their 

outstanding data. A little more than half of the overdue AMPs in the 

first quarter were submitted within 5 days of the deadline, and only 

20 percent of overdue AMPs in the fourth quarter were submitted 

within 5 days. Furthermore, over one-third of the overdue AMPs in 

each of these quarters were more than 30 days late. 

CMS typically calculates Medicaid rebate amounts about 3 to 5 days 

after the due date for the AMP data. If manufacturers submit AMP 

data beyond that point, CMS cannot calculate the quarterly rebate 

amounts for the corresponding NDCs.35 It then becomes the 

responsibility of the manufacturers to manually calculate the rebate 

amounts and send the rebate payments to the States. 

Table B-2 in Appendix B lists the number and percentage of 

manufacturers that submitted all of their AMP data after the deadline 

in each quarter, as well as the number of NDCs associated with those 

manufacturers. 

Almost one-third of manufacturers submitted incomplete quarterly AMP data 

in one or more quarters of 2008 

In 2008, 30 percent of manufacturers (180 of 592) submitted incomplete 

AMP data in at least one quarter of 2008. Two-thirds of these 

manufacturers (120 of 180) submitted incomplete data in multiple 

quarters. As mentioned previously, manufacturers with incomplete 

AMP data fell into one of two categories: (1) manufacturers that 

submitted at least some of their AMPs by the deadline but submitted 

the remaining AMPs for the quarter either late or not at all or 

(2) manufacturers that submitted a portion of their AMPs late and 

never submitted the remaining AMPs. For manufacturers in the first 

category, an average of 60 percent of the outstanding AMPs in each 

35 Overdue AMP data submitted after rebate amounts have been calculated for the quarter 

are included with the following quarter’s transmission of rebate data from CMS to States. 

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FINDINGS 

quarter were never submitted. However, for manufacturers in the 

second category, an average of only 3 percent of the outstanding AMPs 

in each quarter were never submitted. Overall, the vast majority of 

AMPs associated with manufacturers in the second category were 

eventually provided to CMS. 

In 2008, 78 percent of the 

manufacturers that were 

required to submit monthly AMP 

data (453 of 579) failed to do so 

within the timeframes specified 

by Federal requirements. These manufacturers had missing, late, or 

incomplete AMP data during 1 or more months of 2008. Because CMS 

is currently prohibited from disclosing AMPs to States and from using 

AMPs in a way that affects Medicaid reimbursement, problematic 

monthly AMP submissions have little effect at this time.36 In the 

future, however, monthly AMPs may be used by CMS to establish FUL 

amounts and by States to set Medicaid reimbursement amounts. If 

manufacturers continue to report monthly AMPs either late or not at 

all, CMS may be unable to establish appropriate future FUL amounts 

and States may be unable to use AMPs to set future Medicaid 

reimbursement rates. 

In 2008, more than three-fourths of 

manufacturers did not fully comply with 

monthly submission requirements for AMP data 

Manufacturers that repeatedly failed to comply with monthly reporting 

requirements did not always have the same problems for the same 

NDCs in each period. Some manufacturers had different problems in 

different months. As a result, those manufacturers were included in 

more than one of the missing, late, and incomplete monthly AMP 

categories described below.37 

Ten percent of manufacturers failed to submit any monthly AMP data in 1 or 

more months of 2008 

Of the 579 manufacturers under review, 57 (10 percent) did not submit 

AMP data for any of their NDCs during at least 1 month of 2008. Forty 

of these fifty-seven manufacturers repeatedly failed to provide the 

36 Currently, CMS uses monthly AMP data only for internal calculations of AMP-based 

FUL amounts. 

37 Because manufacturers could have different problems in different months, the number of 

manufacturers in each subfinding sums to more than the total number of manufacturers 

that did not fully comply with monthly AMP reporting requirements. 

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FINDINGS 

required AMP data during 2008, with 21 failing to submit AMP data in 

7 or more months and 5 failing to submit monthly AMP data for all 

12 months. Medicaid paid $29.4 million during the applicable months of 

2008 for NDCs belonging to manufacturers that did not submit any of 

the required AMP data. 

Table C-1 in Appendix C lists the number and percentage of 

manufacturers with no AMP data in each month, as well as the number 

of NDCs associated with those manufacturers. 

Over 40 percent of manufacturers submitted all of their monthly AMP data 

after the deadline in 1 or more months of 2008 

In 2008, 41 percent of manufacturers (235 of 579) submitted monthly 

AMP data for all of their NDCs after the deadline in at least 1 month. 

Almost two-thirds of these manufacturers (148 of 235) submitted late 

AMP data in multiple months, with 23 manufacturers submitting prices 

after the deadline in 6 or more months. 

The amount of time that passed before these manufacturers submitted 

their overdue AMPs varied from month to month. During 2008, the 

percentage of late AMPs submitted within 5 days of each month’s 

deadline ranged from 4 percent to 74 percent, with an average of 

48 percent. The percentage of late AMPs submitted more than 30 days 

after each month’s deadline ranged from 5 percent to 64 percent, with 

an average of 31 percent. 

Table C-2 in Appendix C lists the number and percentage of 

manufacturers that submitted all of their AMP data after the deadline 

in each month, as well as the number of NDCs associated with those 

manufacturers. 

Almost half of manufacturers submitted incomplete monthly AMP data in 

1 or more months of 2008 

In 2008, 46 percent of manufacturers (268 of 579) submitted incomplete 

AMP data in at least 1 month. Of these manufacturers, 85 percent 

(227 of 268) submitted incomplete AMP data in multiple months. As 

with the quarterly data, manufacturers with incomplete monthly AMP 

data fell into one of two categories: (1) manufacturers that submitted at 

least some of their AMPs by the deadline but submitted the remaining 

AMPs for the month either late or not at all or (2) manufacturers that 

submitted a portion of their AMPs late and never submitted the 

remaining AMPs. For manufacturers in the first category, an average 

of 77 percent of the outstanding AMPs in each month were never 

submitted. However, for manufacturers in the second category, an 

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FINDINGS 

average of only 6 percent of the outstanding AMPs in each month were 

never submitted. Typically, the vast majority of monthly AMPs 

associated with manufacturers in the second category were eventually 

provided to CMS. 

Although CMS has instituted 

procedures to penalize 

manufacturers with 

consistently missing and late 

quarterly AMP data, CMS has 

no such procedures to penalize manufacturers with consistently missing 

and late monthly AMP data. 

CMS took action against some manufacturers for 

failure to comply with quarterly AMP reporting 

requirements but took no action for failure to 

comply with monthly reporting requirements 

CMS referred to OIG and/or terminated 78 manufacturers that failed to 

comply with quarterly AMP reporting requirements in 2008 

CMS staff take a number of actions against manufacturers with missing 

and late quarterly AMP data. About 1 to 2 weeks after the due date, a 

staff member emails manufacturers that missed the quarterly deadline, 

prompting them to report the outstanding prices. Manufacturers with 

missing data in at least two of the four previous quarters are 

terminated by CMS. Manufacturers with late AMP submissions in at 

least two of the four previous quarters are referred to OIG for potential 

civil money penalties.38 According to staff, CMS has the resources to 

pursue only manufacturers that have missing or late data for all of their 

NDCs. Although staff can compile reports identifying manufacturers 

with incomplete AMP data, they do not currently have the resources to 

pursue those manufacturers. 

In total, 78 manufacturers were referred to OIG and/or terminated by 

CMS for failure to comply with AMP reporting requirements in 2008. 

Of these 78 manufacturers, 52 were only referred to OIG, 4 were only 

terminated by CMS, and the remaining 22 were both referred to OIG 

and subsequently terminated by CMS.39 

CMS effectively took action against manufacturers identified by OIG as 

having missing quarterly AMP data. As shown in Table 2, CMS referred 

38 CMS considers late data to be data submitted after the MDR database has been shut 

down for the calculation of rebate amounts. 

39 CMS’s actions were based on missing and late AMP submissions during all of the 

four-quarter periods between the second quarter of 2007 and the third quarter of 2009. 

Each of these four-quarter periods included at least one quarter of 2008. 

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FINDINGS 

or terminated a large majority of the manufacturers that OIG identified 

as having no AMP data in at least one quarter of 2008. In fact, CMS 

took action against all but one of the manufacturers we identified as 

having no AMP data in multiple quarters. 

CMS also took action against manufacturers identified by OIG as having 

late quarterly data, but to a lesser extent. Consistent with its policy to 

penalize manufacturers that repeatedly submit late AMPs, CMS was 

more likely to refer manufacturers identified by OIG as having multiple 

quarters of late data. CMS penalized only 16 percent of the 

manufacturers with late data in just one quarter. However, as shown in 

Table 2, it took action against 48 percent of manufacturers with late 

data in multiple quarters. 

CMS took action against few manufacturers identified by OIG as having 

incomplete data. Because CMS does not specifically pursue 

manufacturers that submit incomplete quarterly AMPs, most of the 

manufacturers that we identified as having incomplete quarterly data 

were not penalized. However, as shown in Table 2, a small portion of 

these manufacturers were nonetheless referred or terminated.40 

Table 2: Manufacturers With Problematic Quarterly AMP Data That Were 

Referred or Terminated by CMS 

 Action 

Description of Problematic 

Quarterly AMP Data 

According to OIG Analysis 

Total 

Number of 

Manufacturers 

Total 

Number 

Penalized 

Percentage 

Penalized 

Number 

Referred 

Only 

Number 

Terminated 

Only 

Number 

Referred, 

Then 

Terminated 

Missing AMP data 31 27 87% 5 3 19 

 In multiple quarters 16 15 94% 1 2 12 

Late AMP data 144 38 26% 34 0 4 

 In multiple quarters 48 23 48% 22 0 1 

Incomplete AMP data 180 19 11% 14 1 4 

 In multiple quarters 120 12 10% 10 1 1 

Source: OIG analysis of AMP data from the first through fourth quarters of 2008 and CMS data regarding terminated and 

referred manufacturers, 2009. Note: Because manufacturers could have different problems in different quarters and because the problems for which CMS 

terminated or referred manufacturers may not be the same as those identified by OIG in this study, the number of manufacturers 

that were terminated or referred in each problem category does not sum to the total number of manufacturers that were 

terminated or referred by CMS. 

40 These manufacturers may have been referred or terminated because they had untimely 

data in other quarters of 2008 or because CMS had different product or pricing information 

at the time it conducted its analysis. 

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FINDINGS 

CMS took no direct action against manufacturers that failed to comply with 

monthly AMP reporting requirements in 2008 

CMS staff track manufacturers that report less than 90 percent of their 

monthly AMP data; however, staff do not follow up with noncompliant 

manufacturers unless those manufacturers contact CMS for another 

reason.41 If a manufacturer contacts CMS, staff will check to see 

whether that manufacturer has been reporting monthly AMPs. 

Manufacturers that have reported less than 90 percent of their AMP 

data during at least 2 months are then instructed to report the 

outstanding data.42 CMS does not refer or terminate manufacturers 

that fail to comply with monthly AMP reporting requirements. 

Because monthly AMP data are currently used only for internal 

calculations, CMS staff stated that they see no immediate need to 

terminate manufacturers that fail to comply with monthly reporting 

requirements. 

Although CMS does not directly penalize manufacturers with missing, 

late, or incomplete monthly AMPs, some of these noncompliant 

manufacturers were referred or terminated by CMS because they also 

had missing or late quarterly AMP data. 

As shown in Table 3, more than half of manufacturers identified by OIG 

as having missing monthly AMP data were referred or terminated by 

CMS. Manufacturers with late and incomplete monthly data were 

much less likely to be penalized. 

41 Although CMS receives monthly reporting data on all manufacturers, it tracks only 

manufacturers that have 30 or more NDCs. 

42 Months of missing data do not need to be consecutive. They can be any 2 months of data 

since October 2007, when manufacturers first started reporting monthly AMPs. 

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FINDINGS 

Table 3: Manufacturers With Problematic Monthly AMP Data That Were Referred 

or Terminated Because They Also Had Problematic Quarterly Data 

 Action 

Description of Problematic 

Monthly AMP Data According 

to OIG Analysis 

Total 

Number of 

Manufacturers 

Total 

Number 

Penalized 

Percentage 

Penalized 

Number 

Referred 

Only 

Number 

Terminated 

Only 

Number 

Referred, 

Then 

Terminated 

No AMP data 57 33 58% 11 3 19 

 In multiple months 40 28 70% 7 3 18 

Late AMP data 235 38 16% 29 3 6 

 In multiple months 148 28 19% 23 1 4 

Incomplete AMP data 268 22 8% 19 0 3 

 In multiple months 227 17 7% 15 0 2 

Source: OIG analysis of AMP data from all 12 months of 2008 and CMS data regarding terminated and referred 

manufacturers, 2009. Note: Because manufacturers could have different problems in different months, the number of manufacturers that were 

terminated or referred in each problem category does not sum to the total number of manufacturers that were terminated or 

referred by CMS. 

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RECOMMENDATIONS RECOMMENDATIONS 

In 2008, more than half of the manufacturers that were required to 

submit quarterly AMP data failed to comply with reporting 

requirements in at least one quarter. Manufacturers were even less 

likely to comply with monthly AMP reporting requirements, with more 

than three-quarters having missing, late, or incomplete AMPs in at 

least 1 month of 2008. 

CMS takes action against manufacturers with missing and late 

quarterly AMP data, including reminding noncompliant manufacturers 

to submit quarterly data, terminating manufacturers that repeatedly 

fail to submit quarterly AMPs, and referring manufacturers with 

consistently late quarterly data to OIG for potential civil money 

penalties. 

However, CMS does not take any such action against manufacturers 

with missing and late monthly AMPs. Although CMS tracks 

manufacturers with no monthly AMP data, staff remind noncompliant 

manufacturers to submit overdue data only if those manufacturers 

initiate contact. Furthermore, CMS has yet to terminate or refer any 

manufacturer for failure to comply with monthly AMP reporting 

requirements. 

Because AMP data play such a critical role in Government payments for 

prescription drugs, CMS must ensure that action is taken against 

noncompliant manufacturers. Drug manufacturers must also do their 

part by reporting both quarterly and monthly AMP data to CMS in a 

timely and accurate way. 

To promote full compliance with quarterly and monthly AMP reporting 

requirements and to help ensure that Medicaid and covered 340B 

entities do not overpay for prescription drugs, we recommend that CMS: 

Take action against manufacturers that submit incomplete quarterly AMP 

data 

Although CMS staff acknowledge that incomplete data are a problem, 

they state that they do not currently have the resources to pursue 

manufacturers that submit only some of their AMPs. CMS should 

ensure that action is taken against manufacturers with incomplete 

quarterly AMP data. To that end, we will provide CMS with more 

detailed information about the manufacturers in this study with 

incomplete quarterly AMP data. 

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RECOMMENDATIONS 

Take action against manufacturers that fail to submit monthly AMP data in a 

timely manner 

Shortly after each monthly deadline, CMS should contact 

manufacturers that fail to comply with monthly reporting requirements 

and ask them to submit outstanding data. If manufacturers repeatedly 

fail to report monthly AMP data or repeatedly submit them late, those 

manufacturers should be either terminated by CMS or referred to OIG 

for potential civil money penalties. Manufacturers with incomplete 

monthly AMPs should also be addressed. These proactive steps will 

signal the importance of complying with monthly AMP requirements 

and help to ensure that CMS has complete monthly AMP data. This in 

turn will enable CMS to better gauge the potential impact of 

AMP-based FULs and to ensure the integrity of future FUL amounts. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS concurred with both recommendations and stated that it will begin 

referring manufacturers that submit incomplete quarterly and monthly 

data to OIG for civil money penalty consideration. OIG looks forward to 

expanding its collaboration with CMS regarding administrative 

remedies for noncompliance with AMP reporting requirements. 

For the full text of CMS’s comments, see Appendix D. 

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 APPENDIX ~ A 

Current and Future Uses of Average Manufacturer Price Data in 

Federal Health Care Programs 

Average manufacturer price (AMP) data play a critical role in 

Government payments for prescription drugs. Quarterly AMPs are 

currently used in both the Medicaid drug rebate program and the 340B 

drug discount program, and monthly AMPs may be used in the future 

for the purposes of Medicaid reimbursement. 

The Medicaid Drug Rebate Program and AMPs 

The Medicaid rebate amount for any given drug generally depends on 

the quarterly AMP submitted by the manufacturer, as well as on 

whether the drug is a brand-name or generic. For the purposes of the 

Medicaid drug rebate program, drugs are classified as one of 

three types: single-source, innovator multiple-source, or noninnovator 

multiple-source. Manufacturers provide the Centers for Medicare & 

Medicaid Services (CMS) with the drug type for each of their national 

drug codes (NDC), in conjunction with AMP data. Manufacturers must 

also provide a “best price” for each of their single-source and innovator 

multiple-source drugs on a quarterly basis.43 Using these data, CMS 

calculates a unit rebate amount (URA) for each NDC and transmits that 

information to States.

Manufacturers pay a higher Medicaid rebate for innovator drugs 

(i.e., brands) than for noninnovator drugs (i.e., generics). From 1996 

through 2009, the URA for single-source and innovator multiple-source 

drugs was the greater of 15.1 percent of the AMP or the difference 

between the AMP and best price.44, 45 For noninnovator multiple-source 

drugs, the URA was 11 percent of the AMP.46 

43 Sections 1927(b)(3)(A)(i)(II) and (c)(1)(C) of the Social Security Act (the Act). Generally 

speaking, best price is defined as the lowest price available from the manufacturer to any 

purchaser in the United States, with certain exceptions. 

44 Section 1927(c) of the Act. 

45 Effective January 2010, section 2501(a) of the Patient Protection and Affordable Care Act 

(Affordable Care Act), P.L. 111-148, increases the URA for single-source and innovator 

multiple-source drugs to the greater of 23.1 percent of the AMP or the difference between 

AMP and best price (with certain exceptions). 

46 Effective January 2010, section 2501(b) of the Affordable Care Act increases the URA for 

noninnovator multiple-source drugs to 13 percent. 

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APPENDIX ~ A 

If the pricing data result in a URA of zero47 or if a manufacturer does 

not submit timely or complete pricing data, the manufacturer must 

manually calculate the URA and send a rebate payment to the States.48

The 340B Drug Discount Program and AMPs 

In 1992, Congress amended the Public Health Service Act (PHS Act) to 

include a new section entitled Limitation on Prices of Drugs Purchased 

by Covered Entities. This change created the 340B program, which is a 

discount drug program administered by the Health Resources and 

Services Administration (HRSA). Under the 340B program, a 

manufacturer agrees to sell covered outpatient drugs at or below a 

specified ceiling price to qualified entities. These entities include 

federally qualified health centers, Ryan White grantees, and 

disproportionate share hospitals, among others.49 

The 340B discount is calculated using the same component information 

that Medicaid uses to calculate rebates.50 Specifically, the 340B 

discount is equal to the AMP reduced by Medicaid’s URA.51 Under an 

intraagency agreement with CMS, HRSA calculates 340B ceiling prices 

using quarterly AMP and URA data supplied by CMS. 

Potential Uses of Monthly AMPs in the Medicaid Program 

Currently, all 50 States and the District of Columbia (hereinafter 

referred to as States) offer prescription drug coverage under Medicaid. 

Medicaid beneficiaries typically obtain covered drugs from pharmacies, 

which bill and are reimbursed by State Medicaid agencies using NDCs. 

In 2008, Medicaid payments for prescription drugs totaled 

approximately $24 billion.52

47 According to CMS staff, if the quarterly AMP submitted by a manufacturer is 

400 percent greater or 400 percent less than the previous quarter’s AMP, then an alert is 

sent to the manufacturer and the URA is sent to the States as zero. 

48 CMS, Medicaid Drug Rebate Data Guide for Labelers, p. 15. 

49 For more information about covered entities, see HRSA, Introduction to 340B Drug 

Pricing Program, accessed at http://www.hrsa.gov on December 11, 2009.

50 HRSA, Glossary of Pharmacy-Related Terms, accessed at http://www.hrsa.gov on 

December 11, 2009. 

51 Sections 340B(a)(1-2) of the PHS Act. 

52 This total was calculated using national summary data for 2008, which were downloaded 

from CMS’s Web site on July 30, 2009. This amount includes both Federal and State 

payments. Rebates collected by States under the Medicaid drug rebate program were not 

subtracted from this figure. Data for some States may not have been complete at the time 

of extraction. Therefore, the 2008 drug expenditures presented in this report may 

underestimate Medicaid’s actual expenditures. 

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APPENDIX ~ A 

Federal regulations require, with certain exceptions, that each State 

Medicaid agency’s reimbursement for covered outpatient drugs not 

exceed (in the aggregate) the lower of the estimated acquisition cost 

plus a reasonable dispensing fee or the provider’s usual and customary 

charge to the public for the drugs.53 CMS allows States the flexibility to 

define estimated acquisition cost, with most States basing their 

calculations on a drug’s average wholesale price discounted by a certain 

percentage. For certain drugs, States also use the Federal upper limit 

(FUL) or State maximum allowable cost programs in setting 

reimbursement amounts.54 

To reduce Medicaid prescription drug expenditures, the Deficit 

Reduction Act of 2005 (DRA)55 and the Affordable Care Act enacted a 

number of changes that expand the role of AMPs in Medicaid payments 

for prescription drugs. For example, the DRA requires CMS to disclose 

AMP data to State Medicaid programs on a monthly basis, which would 

enable States to use AMP data when setting Medicaid reimbursement 

rates for prescription drugs.56 In addition, the DRA and the Affordable 

Care Act specify that AMPs are to be used to establish FUL amounts for 

certain multiple-source drugs in the Medicaid program. Specifically, 

FUL amounts under the Affordable Care Act are to be no less than 

175 percent of the weighted average of the most recently reported 

monthly AMPs.57, 58

However, CMS has yet to disclose AMP data to States or use those 

prices when establishing FUL amounts. On December 19, 2007, the 

U.S. District Court for the District of Columbia preliminarily enjoined 

CMS from disclosing AMP data to States and from using AMP for 

purposes of Medicaid reimbursement. Although CMS may not currently 

53 42 CFR § 447.512(b). 

54 The FUL and State maximum allowable cost programs serve to control spending for 

multiple-source drugs. CMS has established FUL amounts for more than 700 drugs. In 

addition, almost all States have implemented maximum allowable cost programs to limit 

reimbursement amounts for certain drugs. 

55 P.L. 109-171. 

56 Section 6001(b) of the DRA. Prior to the DRA, section 1927(b)(3)(D) of the Act broadly 

guaranteed the confidentiality of AMP data reported by manufacturers (with certain limited 

exceptions). 

57 Section 2503(a)(1)(B) of the Affordable Care Act. 

58 Section 6001(a)(2) of the DRA included a provision setting the FUL amount at 

250 percent of the lowest reported AMP. The Affordable Care Act revised this provision, 

setting the FUL amount at no less than 175 percent of the weighted average of the most 

recently reported monthly AMPs. 

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APPENDIX ~ A 

implement AMP-based FULs, it calculates AMP-based FULs each 

month for internal purposes. 

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APPENDIX ~ A APPENDIX ~ B 

Manufacturers With Missing and Late Quarterly Average Manufacturer Price Data

Table B-1: Manufacturers That Failed To Submit Any Quarterly AMP Data 

Manufacturers Corresponding NDCs 

Quarter 

in 2008 Number With 

No AMP Data 

Percentage 

With 

No AMP Data 

Number of 

NDCs 

Average 

per 

Manufacturer 

Median 

per 

Manufacturer 

Total 

Reimbursed 

First 13 2.3% 331 25 10 $670,141 

Second 16 2.9% 373 23 11 $924,055 

Third 16 2.9% 382 24 11 $728,141 

Fourth 19 3.4% 204 11 7 $1,511,500 

 Total $3,833,836 

Source: Office of Inspector General (OIG) analysis of average manufacturer price (AMP) data from the first through 

fourth quarters of 2008. 

Note: Reimbursement totals and average national drug codes (NDC) were rounded to the nearest whole number. Percentages 

were rounded to the nearest tenth. 

Table B-2: Manufacturers That Submitted Late Quarterly AMP Data for All of Their NDCs 

Manufacturers Corresponding NDCs 

Quarter 

in 2008

Number 

With Late 

AMP Data 

Percentage 

With Late 

AMP Data 

Number 

of NDCs 

Average 

per 

Manufacturer 

Median 

per 

Manufacturer 

Up to 5 

Days 

Late 

Between 

6 and 30 

Days 

Late 

More 

Than 30 

Days 

Late 

Total 

Reimbursed 

First 48 8.5% 1,232 26 9.5 51.6% 9.8% 38.6% $88,758,970 

Second 54 9.7% 2,008 37 11 81.8% 16.5% 1.7% $144,625,672 

Third 56 10.0% 1,792 32 11.5 90.1% 5.1% 4.9% $250,565,315 

Fourth 47 8.3% 1,629 35 11 20.0% 44.6% 35.5% $145,141,051 

 Total $629,091,008 

Source: OIG analysis of AMP data from the first through fourth quarters of 2008. 

Note: Reimbursement totals and average NDCs were rounded to the nearest whole number. Percentages were rounded to the nearest tenth. 

Totals may not add to 100 percent because of rounding. 

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 APPENDIX ~ C 

Manufacturers With Missing and Late Monthly Average Manufacturer Price Data

Table C-1: Manufacturers That Failed To Submit Any Monthly AMP Data 

Manufacturers Corresponding NDCs 

Month 

in 2008 Number 

With No 

AMP Data 

Percentage 

With 

No AMP Data 

Number of 

NDCs 

Average 

per 

Manufacturer 

Median 

per 

Manufacturer 

Total 

Reimbursed 

January 21 3.8% 2,721 130 10 $491,470 

February 19 3.5% 464 24 10 $341,543 

March 15 2.7% 409 27 10 $255,732 

April 25 4.6% 854 34 10 $3,249,378 

May 22 4.1% 547 25 9.5 $2,472,201 

June 23 4.2% 545 24 10 $2,440,754 

July 24 4.4% 556 23 10 $3,932,949 

August 26 4.8% 579 22 10.5 $2,171,715 

September 24 4.4% 569 24 10.5 $2,135,650 

October 24 4.4% 336 14 8.5 $4,677,283 

November 26 4.7% 398 15 9 $4,375,819 

December 21 3.8% 384 18 10 $2,809,279 

 Total $29,353,773 

Source: Office of Inspector General (OIG) analysis of average manufacturer price (AMP) data from all 12 months of 2008. Note: Reimbursement totals and average national drug codes (NDC) were rounded to the nearest whole number. Percentages 

were rounded to the nearest tenth. 

Table C-2: Manufacturers That Submitted Late Monthly AMP Data for All of Their NDCs 

Manufacturers Corresponding NDCs 

Month 

in 2008

Number 

With 

Late 

AMP 

Data 

Percentage 

With Late 

AMP Data 

Number 

of NDCs 

Average 

per 

Manufacturer 

Median 

per 

Manufacturer 

Up to 

5 

Days 

Late 

Between 

6 and 30 

Days 

Late 

More 

Than 30 

Days 

Late 

Total 

Reimbursed 

January 74 13.6% 3,101 42 13.5 73.0% 6.2% 20.8% $152,026,066 

February 102 18.6% 2,552 25 7.5 73.6% 5.4% 21.0% $111,996,285 

March 30 5.5% 539 18 9 48.4% 19.7% 31.9% $3,817,121 

April 42 7.8% 1,188 28 6 29.7% 6.3% 64.0% $28,587,091 

May 41 7.6% 1,052 26 8 3.9% 35.6% 60.6% $24,665,287 

June 32 5.9% 1,118 35 9.5 68.6% 17.7% 13.7% $24,430,127 

July 79 14.5% 2,472 31 9 70.7% 4.1% 25.2% $142,456,629 

August 40 7.3% 1,438 36 8 34.9% 60.0% 5.1% $13,982,617 

September 28 5.1% 433 15 10 64.9% 19.9% 15.2% $52,592,634 

October 83 15.1% 2,334 28 11 61.0% 11.2% 27.8% $89,580,991 

November 35 6.4% 1,398 40 11 24.3% 42.9% 32.8% $14,785,657 

December 35 6.3% 1,098 31 8 21.7% 29.7% 48.6% $42,879,873 

 Total $701,800,378 

Source: OIG analysis of AMP data from all 12 months of 2008. 

Note: Reimbursement totals and average NDCs were rounded to the nearest whole number. Percentages were rounded to the nearest tenth. 

Totals may not add to 100 percent because of rounding. 

 O E I - 0 3 - 0 9 - 0 0 0 6 0 DRUG MANUFACTURERS ’ N ONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS 25
A P PEN 0 x o

Agency Comments

DEPARTMENT OF HEALTH & HUMAN SERVICES Centers for Medicare & Medioaid Services

Office at the Administrator

Washinglon, DC 20201

jUL 0 7 2010

DATE:

TO: Daniel R. Levinson

lnswector General

FROM: !V:IikifYif'Eavenn~

Actlng""\(\@ninistrator and Chief Operating Officer

SUB.TEeT: Office of Inspector General {OlG} Draft Report: "Timely Submission of Average

Manufacturer Price Data" (OEI-03-09-00060)

Thank you for the opportunity to review and comment on the sub] ect OlG draft report. In this

report, the 010 sought to determine whether manufacturers submitted 2008 Average

ManufacturerPrices (AMPs) to the Centers for Medicare & Medicaid Services (CMS) within the

time frames specified by Federal requirements, and whether CMS has taken action against

manufacturers that did not submit AMP data within those specified tirneframes.

Section 1927 of the Social Security Act (the Act) sets forth price reporting requirements for

manufacturers that participate in the Medicaid Drug Rebate Program, including the requirement

for manufacturers to report both quarterly and monthly AMPs to,CMS, Quarterly AMPs are

used to calculate rebate amounts that are owed to the States by the manufacturers, and are also

used to establish ceiling prices in the 340B program administered by the Health Resources and

Services Administration. Although the use of monthly AMPs to calculate the Federal Upper

Limits (FULs) under 42 CFR 447.514 is currently prohibited by a court injunction, the

Affordable Care Act revises the methodology ofthe FULs program, but continues to use

manufacturer submitted monthly AMPs to calculate the FUL.

Section 1927 of the Act states that manufactures that fail to pl'oviclc therequired AMP data by

the specified deadlines may be subject to ciVil monetary penalttes and/or termination from the

Medicaid Drug Rebate Program. The report notes that the.authority to issue civil monetary

penalties against non-compliant manufacturers has heen-delegated to the OIG.

om Findings

The orG found that, in 2008, more than half of manufacturers did not fully comply with

quarterly submission requirements for AMP data and more than three-fourths of manufacturers

did not fuJly comply with monthly AMP submission requirements.

In addition, the OlG found that CMS took action again::>tsome.manufacturers for failing to

comply with quarterly AMP reporting requirements, but took no action for failing to comply

with monthly reporting requirements. In total, 78rnanufacturers were referred to the DIG and/or

terminated by CMS forfailing to comply with quarterly reporting requirernents in 2008.

OEI·03·09·00060 DRUG MANUFACTURERS' NONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS

26

A P PEN 0 x o

Agency Comments

~~""'.4"'""C"'''",

.~ 'n ~ L. \;,,,..~

DEPARTMENT OF HEALTH & HUMAN SERVICES Centers for Medicare & Medicaid Services

Office at the Administrator

Washing1on, DC 20201

jUL 0 7 2010

DATE:

TO:

FROM: V"d inistrator and Chief Operating Officer

SUB.TEeT: Office of InspectoJ: General (OlG) Draft Report: "Timely Submission of Average

Mamlfacturer Price Data" (OEI-03-09-00060)

Thank you for the opportunity to reviewimd comment on the subj ect OlG draf report. In this

report, the OIG sought to determine whether manufacturers submitted 2008 Average

ManufacturePdces (AMPs) to the Centers for Medìcare & Medicaid Services (CMS) within the time frames specifed by Federal requirements, and whether CMS hasrakenaction against

manufàcturers that did not submit AMP data within those specifed timeftanies.

Section i 927 of the Social Security Act (the Act) sets forth price reporting rcquirements for

manufacturers that paiticipate in the Medicaid Drug Rebate Program, including the requirement

for manufactUlcl's tò report both quartcrly and monthly AMPs to.CMS. Quarterly AMPs are

used to calculate rebate amounts that are owed to the States by the manufacturers, and are also

used to establish ceilng prices in the 3408 program administered by the Health Resourecs and

Services Administration. Although the use of monthly AMPs to calculate the Pederal Upper

Limits (FULs) LUider 42 CFR 447.514 is currently prohibited by a court injunction, the

Affordable Care Act revises the methodology otthe FULs program, but continues to use

manufacturer submitted monthly AMPs to calculate the FUL.

Section 1927 of the Act states that manufactures that fail to pl'ovice tlerequired AMP data by

the specified deadLines may be subject to civil monetary peri/dties and/or termination from the

Mcdicaid I)nig Rebate Program. The report notes that theatithodty to issue civil monetary

penalties against non-compliant manutàcturcrs has been.delegated to the OIG.

om Findings

The orG found that, in 2008, more t1an half of manufacturel's did not fully comply with

quarerly submission requirements far AMP data and mOre t1anthrce-fourhs of manufacturers

did not fully comply with montlly AMP submissiOn requirements.

In addition, the OlG found that CMS took action against somemanutacturers for failng to

comply with quarerly AMP reporting requirements, but took no action for faìlng to comply

with moiithly repörting requirements. 1n total, 78 manufacturers were referred to the OIG and/or

terminated by CMS. for failing to comply with quarerly l'eporting requirements in 2008.

OEI.03.09.00060 DRUG MANUFACTURERS' NONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS 26

~
 

 O E I - 0 3 - 0 9 - 0 0 0 6 0 DRUG MANUFACTURERS ’ N ONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS 27

APPENDIX ~ D 
 

 O E I - 0 3 - 0 9 - 0 0 0 6 0 DRUG MANUFACTURERS ’ N ONCOMPLIANCE WITH AMP REPORTING REQUIREMENTS 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, and David E. Tawes, Director, Prescription Drug Pricing 

Unit. 

Lauren McNulty served as the team leader for this study. Central office 

staff who contributed include Natasha Franklin and Rita Wurm. 
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 OIG’s 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.