Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

 

AVERAGE SALES PRICES: 

MANUFACTURER REPORTING 

AND CMS OVERSIGHT 

 

Daniel R. Levinson 

Inspector General 

February 2010 

OEI-03-08-00480 
 

 EXECUTIVE SUMMARY 

OBJECTIVES

1. To determine whether manufacturers that reported average sales 

price (ASP) data to the Centers for Medicare & Medicaid Services 

(CMS) did so within the timeframe required by Federal law. 

2. To review CMS’s oversight procedures for the submission of ASP 

data. 

3. To quantify the number of manufacturers that provided ASPs to 

CMS but were not required to do so under the current system. 

BACKGROUND 

CMS continues to cover a limited number of outpatient prescription 

drugs under its Part B benefit. Since January 2005, CMS has been 

paying for most Part B-covered drugs using a payment methodology 

based on ASP. ASP is defined as a manufacturer’s sales of a drug to all 

purchasers in the United States in a calendar quarter divided by the 

total number of units of the drug sold by the manufacturer in that same 

quarter. 

Section 1927 of the Social Security Act (the Act) sets forth ASP 

reporting requirements for manufacturers. Pursuant to section 1927 of 

the Act, manufacturers with Medicaid drug rebate agreements in effect 

must, among other things, provide CMS with pricing information, 

including the ASPs for their Part B-covered drugs. However, drug 

coverage under Medicaid differs from drug coverage under Medicare 

Part B. Therefore, Medicaid rebate agreements may not be applicable 

for certain manufacturers given the differences in coverage. 

Manufacturers that report ASPs are required to submit them to CMS no 

later than 30 days after the close of the previous quarter. As a result, 

there is a two-quarter lag between the time when sales reflected in the 

ASP occur and the time when these sales become the basis for Medicare 

payment amounts. 

To fulfill their reporting requirements, manufacturers typically mail a 

floppy or compact disc containing ASP data to CMS. CMS staff 

manually enter all ASP data received from manufacturers into 

quarterly ASP files prior to calculating the Medicare payment amounts 

for Part B-covered drugs. CMS posts the payment amounts on its public 

Web site 2 weeks before the start of the applicable quarter (i.e., 

approximately 6 to 7 weeks after the submission deadline). 

 OEI-03-08-00480 AVERAGE S ALES P RICES : M ANUFACTURER R EPORTING AND CMS OVERSIGHT i 
 

E X E C U T I V E S U M M A R Y XECUTIVE SUMMARY 

For 2007 and the first two quarters of 2008, we used CMS tracking 

spreadsheets, ASP pricing files, a list of labeler codes associated with 

manufacturers required to submit drug-pricing data, an interview with 

CMS, and a review of relevant documents to accomplish our three 

objectives. 

FINDINGS 

Each quarter, over 40 percent of manufacturers submitted ASPs 

late; most late submissions were within 10 days of the deadline. 

For each quarter under review, between 41 and 52 percent of 

manufacturers provided ASPs after the statutorily defined due date. 

However, at least 95 percent of manufacturers submitted ASP data to 

CMS within 10 days after the deadline. Further, no more than 

2 percent of manufacturer submissions each quarter were more than 

30 days late. Late submissions did not seem to have an effect on the 

Medicare payment amount because there is a 6- to 7-week period 

between the date ASP data are due and the publication of the payment 

amounts. 

CMS implemented oversight procedures for ASP data; however, 

CMS’s data collection and analysis methods introduce the 

potential for inefficiency and errors. CMS has implemented several 

oversight procedures related to payment for Part B-covered drugs. 

From the time it receives a manufacturer’s submission to the time 

payment amounts are posted on the Web site, CMS performs multiple 

quality assurance checks. CMS is also coordinating with the Office of 

Inspector General (OIG) to identify manufacturers that do not submit 

ASP data in a timely fashion. 

However, other CMS practices related to ASP data may inhibit 

efficiency and result in potential errors. For example, although CMS 

uses an automated system to collect average manufacturer prices (AMP) 

for the Medicaid program, it relies on manual processes for ASP data. 

In addition, CMS does not track which manufacturers are required to 

report ASPs, receives substantial amounts of ASP data for 

non-Part B-covered drugs, and does not receive the underlying data that 

form the basis of manufacturer ASP submissions. 

Almost one-fifth of labeler codes with reported ASPs were 

associated with manufacturers that were not required to provide 

these prices under the current system. Approximately 200 unique 

labeler codes were associated with ASP data submissions for 

 OEI-03-08-00480 AVERAGE S ALES P RICES : M ANUFACTURER R EPORTING AND CMS OVERSIGHT ii 
 

EXECUTIVE SUMMARY 

Part B-covered drugs during each of the quarters under review. Nearly 

one-fifth of these codes belonged to manufacturers that were not 

required to provide ASP data under the current system because they did 

not have Medicaid drug rebate agreements in effect for that quarter. 

Some drug codes were associated only with manufacturers that did not 

have Medicaid drug rebate agreements in place. If these manufacturers 

chose not to report ASPs, CMS would be unable to calculate ASP-based 

Medicare payment amounts for these drug codes. 

In addition, there were also manufacturers of Part B-covered drugs that 

did not have rebate agreements and did not provide ASP data to CMS. 

Because CMS does not have pricing or utilization data for these drugs, 

we are unable to quantify the impact this may have had on Medicare 

payment amounts. 

RECOMMENDATIONS 

When setting payment amounts for drugs covered under Medicare 

Part B, CMS relies on ASP data reported by manufacturers. This report 

identifies several potential issues with the current ASP reporting 

process, including (1) the timeliness of manufacturer reporting, (2) the 

largely manual process used by CMS to collect and analyze 

manufacturer-reported data, and (3) the legal requirements for 

manufacturer reporting. Each of these issues introduces the potential 

for inefficiency and errors. To ensure that Medicare payments for Part 

B-covered drugs are accurate, timely, and reflective of all Part 

B-covered drug sales, we recommend that CMS: 

Develop an automated system for the collection of ASP data. CMS 

has developed an automated system for manufacturers to submit AMPs 

and could use that system as a template for establishing an automated 

ASP system. Many manufacturers that submit ASPs already submit 

AMPs; therefore, these manufacturers are familiar with the concept of an 

automated price-reporting system. An automated system would 

potentially limit the possibility of data entry errors, reduce the amount of 

time it takes to calculate ASP-based payment amounts and adjust ASP 

payment limits, and enable CMS to track ASPs with greater ease. 

Seek a legislative change to directly require all manufacturers of 

Part B-covered drugs to submit ASPs. CMS could work with Congress 

to develop legislation that would directly require all manufacturers of Part 

B-covered drugs to submit ASPs, regardless of whether the manufacturers 

 OEI-03-08-00480 AVERAGE S ALES P RICES : M ANUFACTURER R EPORTING AND CMS OVERSIGHT iii 
 

 OEI-03-08-00480 AVERAGE S ALES P RICES : M ANUFACTURER R EPORTING AND CMS OVERSIGHT iv 

EXECUTIVE SUMMARY 

have Medicaid drug rebate agreements. This would ensure that Medicare 

payment amounts were reflective of all Part B-covered drugs. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

In its comments on the draft report, CMS agreed that certain 

refinements to the ASP reporting process are desirable to ensure that 

Medicare payments for Part B-covered drugs are accurate and timely. 

CMS concurred with OIG’s recommendation that it develop an 

automated system for the collection of ASP data and agreed that an 

automated system would be an improvement over the present one. 

CMS also stated that it is working with contractors to improve the 

efficiency of ASP-related processes. 

CMS did not concur at this time with OIG’s recommendation that it 

seek a legislative change to directly require all manufacturers of 

Part B-covered drugs to submit ASPs. However, CMS stated that it will 

consider this recommendation as it continues to monitor the effects of 

current payment policies. We continue to support our recommendation 

that CMS seek a legislative change to the ASP reporting requirements 

as a way to ensure that Medicare payment amounts are reflective of all 

Part B-covered drugs. 

 
 TABLE OF CONTENTS 

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

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

FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 

Each quarter, over 40 percent of manufacturers submitted ASPs 

late; most late submissions were within 10 days of the deadline. . . . . . 11 

CMS implemented oversight procedures for ASP data; however, 

CMS’s data collection and analysis methods introduce the potential 

for inefficiency and errors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 

Almost one-fifth of labeler codes with reported ASPs were associated 

with manufacturers that were not required to provide these prices 

under the current system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 

RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 

Agency Comments and Office of Inspector General Response . . . . . . . 18 

APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 

Agency Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 

ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
 

 INTRODUCTION 

OBJECTIVES 

1. To determine whether manufacturers that reported average sales 

price (ASP) data to the Centers for Medicare & Medicaid Services 

(CMS) did so within the timeframe required by Federal law. 

2. To review CMS’s oversight procedures for the submission of ASP 

data. 

3. To quantify the number of manufacturers that provided ASPs to 

CMS but were not required to do so under the current system. 

BACKGROUND 

Medicare and its beneficiaries paid over $11 billion for Part B-covered 

drugs in 2008.1 ASPs serve as the basis of Medicare payment for 

Part B-covered drugs. Therefore, inaccurate, incomplete, and late ASP 

data could have adverse effects on beneficiary and Federal Government 

payments. This study examined the timeliness of manufacturer ASP 

submissions, CMS’s oversight as it relates to ASP data, and ASP 

reporting requirements. 

Medicare Part B Coverage of Prescription Drugs 

Although Medicare Part D covers most outpatient prescription drugs, 

CMS continues to cover a limited number of outpatient prescription 

drugs and biologicals (hereinafter referred to as drugs) under its Part B 

benefit. Part B-covered drugs generally fall into the following 

categories: drugs furnished incident to a physician’s services (e.g., 

injectable drugs used in connection with the treatment of cancer); drugs 

explicitly covered by statute (e.g., some vaccines and oral anticancer 

drugs); and drugs used in conjunction with durable medical equipment 

(e.g., inhalation drugs).2 

Medicare Part B Payments for Prescription Drugs 

To obtain Medicare payment for Part B-covered drugs, physicians and 

suppliers submit claims to claims-processing contractors using 

Healthcare Common Procedure Coding System (HCPCS) codes. The 

HCPCS codes provide a standardized system for describing the specific 

items and services provided in the delivery of health care. In the case of 

1 Medicare expenditures for Part B drugs in 2008 were calculated using CMS’s Part B 

Analytics and Reports (PBAR). PBAR data were downloaded on July 8, 2009. 

2 68 Fed. Reg. 50428, 50429 (Aug. 20, 2003). 

 OEI-03-08-00480 AVERAGE S ALES P RICES : M ANUFACTURER R EPORTING AND CMS OVERSIGHT 1 
 

INTRODUCTION 

prescription drugs, each HCPCS code defines the drug name and billing 

unit size but does not specify the manufacturer or package size. 

Payment Methodology for Part B Drugs and Biologicals 

CMS pays for most Part B-covered drugs using a methodology based 

on ASPs. Section 1847A(c) of the Social Security Act (the Act), as 

added by the Medicare Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA), P.L. No. 108-173, defines an ASP 

as a manufacturer’s sales of a drug to all purchasers in the United 

States in a calendar quarter divided by the total number of units of 

the drug sold by the manufacturer in that same quarter. The ASP is 

net of any price concessions, such as volume discounts, prompt pay 

discounts, cash discounts, free goods contingent on purchase 

requirements, chargebacks, and rebates other than those obtained 

through the Medicaid drug rebate program.3 Sales that are nominal 

in amount are exempted from the ASP calculation, as are sales 

excluded from the determination of “best price” in the Medicaid drug 

rebate program.4, 5 

Medicare payment amounts for most Part B-covered prescription 

drugs are equal to 106 percent of the volume-weighted ASPs for the 

HCPCS codes. Medicare beneficiaries are responsible for 20 percent 

of this amount in the form of coinsurance. 

There is a two-quarter lag between the time when sales reflected in 

the ASP occur and the time when these sales become the basis for 

Medicare payment amounts. For example, first-quarter 2008 ASP 

data from manufacturers served as the basis for third-quarter 2008 

Medicare payment amounts for most Part B-covered drugs. 

Manufacturer Reporting Requirements 

ASP data. Section 1927 of the Act sets forth ASP reporting 

requirements for manufacturers. This section originally pertained 

only to the Medicaid program but was modified by the MMA to 

include requirements under Medicare Part B as well. The current 

provisions of section 1927 of the Act thus link the ASP reporting 

3 Section 1847A(c)(3) of the Act. 

4 Pursuant to section 1927(c)(1)(C)(i) of the Act, “best price” is the lowest price available 

from the manufacturer during the rebate period to any wholesaler, retailer, provider, health 

maintenance organization, nonprofit entity, or governmental entity within the United 

States, with certain exceptions. 

5 Section 1847A(c)(2) of the Act. 

 OEI-03-08-00480 AVERAGE S ALES P RICES : M ANUFACTURER R EPORTING AND CMS OVERSIGHT 2 
 

INTRODUCTION 

requirements to a manufacturer’s entry into a Medicaid drug rebate 

agreement. More specifically, pursuant to section 1927(b)(3) of the 

Act, manufacturers with rebate agreements in effect must, among 

other things, provide CMS with pricing information, including the 

ASP for each of their Part B-covered drugs and average manufacturer 

price (AMP) for each of their Medicaid-covered drugs, on a quarterly 

basis.6 However, Medicare Part B and Medicaid cover different types 

of drugs. As a result, Medicaid rebate agreements may not be 

applicable for certain manufacturers given the differences in 

coverage. 

Manufacturers report ASPs for Part B-covered drugs by national drug 

codes (NDC), an 11-digit numeric code divided into three segments 

identifying (1) the firm that manufactures, distributes, or repackages7

the drug product (i.e., the labeler code); (2) the specific strength, 

dosage form, and formulation of the product; and (3) the product’s 

package size. According to section 1927(b)(3) of the Act and 

42 CFR § 414.804(a)(5), manufacturers are required to provide CMS 

with the ASP and volume of sales for each NDC on a quarterly basis, 

with submissions due 30 days after the close of each quarter. Because 

Medicare payment for Part B-covered drugs is based on HCPCS codes 

rather than NDCs and more than one NDC may meet the definition of 

a particular HCPCS code, CMS has developed a file that “crosswalks” 

manufacturers’ NDCs to HCPCS codes. CMS posts the payment 

amounts on its public Web site 2 weeks before the start of the 

applicable quarter (i.e., 6 to 7 weeks after the submission deadline).8 

CMS provides the Office of Inspector General (OIG) with quarterly 

ASP data 2 to 3 days after the payment files are posted to the Web 

site. See Table 1 on page 4 for details on the ASP reporting timeline. 

6 ASPs are not actually used in the calculation of Medicaid rebates. 

7 A repackager purchases drugs from the manufacturer and typically repackages them 

into smaller quantities. 

8 CMS posts the quarterly ASP files to 

http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/. 

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INTRODUCTION 

Table 1: ASP Reporting Timeline 

Sales Period ASP Data Due to 

CMS 

Payment Amounts 

Posted on CMS 

Web Site* 

Payment Amounts 

Provided to OIG and 

Sent to Contractors 

for Claims 

Processing and 

Payment* 

Payment Amounts Take 

Effect 

January 1–March 31 April 30 June 15 June 17 July 1 

April 1–June 30 July 30 September 15 September 17 October 1 

July 1–September 30 October 30 December 15 December 17 January 1 

October 1–December 31 January 30 March 15 March 17 April 1 

Source: OIG analysis of ASP reporting requirements. 

*Denotes approximate dates. 

CMS provides manufacturers a template to use when submitting ASP 

data for Part B-covered drugs. In this template, manufacturers 

provide data including the NDC, the manufacturer’s ASP for the 

drug, and the number of units sold.9 Manufacturers are not required 

to report the underlying data (e.g., total sales, rebates, and price 

concessions) or the exact methods used to calculate the ASP. Each 

ASP submission must be certified by the manufacturer’s Chief 

Executive Officer or Chief Financial Officer or an individual who has 

been delegated the authority.10 This certification verifies that the 

reported ASPs were calculated accurately and that all information 

and statements made in the submission are true, complete, and 

current to the best of the signatory’s knowledge.11 If a manufacturer 

determines that a previous quarter’s submission was in error, it may 

resubmit quarterly ASP data to CMS, which will, in turn, revise the 

Medicare payment amount.12 

Manufacturers typically mail a floppy or compact disc containing ASP 

data to CMS to fulfill their reporting requirements. CMS staff 

manually enter all ASP data received from manufacturers into the 

quarterly ASP files prior to calculating the Medicare payment 

amounts for Part B-covered drugs.13 

9 69 Fed. Reg. 17935, 17940 (Apr. 6, 2004). 

10 42 CFR § 414.804(a)(6). 

11 69 Fed. Reg. 17935, 17941 (Apr. 6, 2004). 

12 At times, CMS may make changes to Medicare payment amounts from past quarters 

based on revised data submissions from manufacturers. 

13 Manual data entry refers to both typing and using the “copy and paste” function. 

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INTRODUCTION 

Manufacturers may face civil money penalties or suspension of their 

rebate agreements if they knowingly provide false information about 

their ASPs or fail to report ASP data in the required timeframe.14 

The penalties associated with late submissions may be increased by 

up to $10,000 for each day the ASP data are not provided.15, 16 

AMP data. As part of their Medicaid rebate agreements, and for 

Federal payments to be authorized for covered outpatient drugs 

provided under Medicaid, manufacturers must report AMPs to CMS. 

As generally defined in section 1927(k)(1) of the Act, AMP is the 

average price paid to the manufacturer for the drug in the United 

States by wholesalers for drugs distributed to the retail pharmacy 

class of trade. The AMP is generally calculated as a weighted average 

of prices for a manufacturer’s package sizes of a drug sold during a 

given quarter and is reported for the lowest identifiable quantity of 

the drug. 

Manufacturers electronically transmit AMP pricing and product data 

for each reporting period to CMS using the automated Drug Data 

Reporting for Medicaid system (DDR). First, manufacturers must 

enter drug product data for each of their covered NDCs into the 

system. Once the drug product data have been accepted by the 

system, manufacturers are able to submit AMPs for those drugs. The 

DDR electronically reviews manufacturers’ pricing submissions for 

data errors, notifies manufacturers about potential problems, and 

may reject files with detected errors. After resolving data errors (if 

any), manufacturers certify the pricing data in the DDR. CMS 

provides OIG with quarterly AMP data approximately 2 weeks after 

the submission deadline (i.e., approximately 6 to 7 weeks before the 

next quarter). 

OIG Mandate To Monitor ASP 

Sections 1847A(d)(1) and (2) of the Act, as added by the MMA, direct 

OIG to undertake studies that compare ASPs to AMPs and widely 

14 Sections 1927(b)(3)(C)(i) and (ii) of the Act. 

15 Section 1927(b)(3)(C)(i) of the Act. 

16 OIG is coordinating with CMS to identify manufacturers that do not submit ASP or 

other required drug pricing data (e.g., AMP) in a timely fashion. OIG has initiated actions 

against certain manufacturers that fail to satisfy their pricing data submission 

requirements. 

 OEI-03-08-00480 AVERAGE S ALES P RICES : M ANUFACTURER R EPORTING AND CMS OVERSIGHT 5 
 

INTRODUCTION 

available market prices.17 Related to this requirement, OIG has 

completed numerous reports comparing ASPs to AMPs, two reports 

comparing ASPs to widely available market prices, and one report 

examining Medicare payment for drugs with newly available generic 

versions.18, 19 Although CMS has acknowledged the authority of the 

Secretary of the Department of Health and Human Services (the 

Secretary) to adjust ASP-based payment limits based on the results of 

these studies, the agency has yet to make any changes as a result of 

OIG’s work. Additionally, OIG had completed eight audits of 

manufacturer ASP data submissions as of December 2009. 

METHODOLOGY 

Scope and Data Collection 

For this study, we used CMS tracking spreadsheets, ASP pricing files, a 

list of labeler codes associated with manufacturers required to submit 

drug-pricing data, an interview with CMS, and a review of relevant 

documents for 2007 and the first two quarters of 2008. 

CMS uses one system (i.e., the tracking spreadsheet) to track the 

submission of ASP data by manufacturers and a different system (i.e., 

the background file) to compile the actual ASPs. For the purposes of 

this study, we conducted separate analyses on each of these files. To 

examine the timeliness of ASP submissions, we analyzed the tracking 

spreadsheets. To determine how many labeler codes were associated 

with manufacturers that actually reported ASPs but were not required 

to provide these prices under the current system, we analyzed the 

quarterly ASP background files in conjunction with the Medicaid 

participating drug manufacturer files. 

CMS tracking spreadsheets. CMS provided us with tracking 

spreadsheets containing the manufacturer names, the dates the ASP 

17 Section 1847A(d)(5) of the Act generally defines widely available market price to be the 

price that a prudent physician or supplier would pay for the drug, net of any routinely 

available price concessions. 

18 OEI-03-04-00430, April 2006; OEI-03-06-00370, July 2006; OEI-03-07-00140, 

July 2007; OEI-03-07-00530, September 2007; OEI-03-08-00010, December 2007; 

OEI-03-08-00130, May 2008; OEI-03-08-00340, August 2008; OEI-03-08-00450, December 

2008; OEI-03-08-00530, December 2008; OEI-03-09-00050, February 2009; 

OEI-03-09-00150, April 2009; OEI-03-09-00340, August 2009; OEI-03-09-00490, August 

2009; OEI-03-09-00640, January 2010. 

19 OEI-03-05-00430, June 2006; OEI-03-07-00190, July 2008; OEI-03-08-00310, August 

2008. 

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INTRODUCTION 

submissions were recorded as received by CMS, and manufacturer 

contact information. The tracking spreadsheets are organized by 

manufacturer name and do not contain ASPs or NDCs (or, therefore, 

labeler codes); they are files compiled by CMS and used primarily to 

document the status of manufacturer submissions and to identify 

manufacturers that require follow-up calls to request data. 

We collected tracking spreadsheets from CMS that recorded 

manufacturer submission dates for 175 manufacturers. However, seven 

manufacturers listed on these spreadsheets did not provide ASP 

submissions to CMS during any of the quarters under review and were 

excluded from our analysis. These manufacturers did not submit ASPs 

during the period under review because they either merged with or were 

purchased by other manufacturers or do not sell Part B-covered drugs. 

Therefore, 168 manufacturers submitted ASPs during at least one of the 

quarters under review and were included in our analysis. 

However, not all of these 168 manufacturers submitted ASP data in 

each of the quarters under review. Manufacturers without a submission 

date for a quarter were excluded from that quarter’s analysis. 

According to CMS, some reasons manufacturers did not submit ASP 

data every quarter include the following: manufacturers merged with 

or were purchased by other manufacturers (as previously mentioned), 

manufacturers did not have Medicaid rebate agreements in effect, and 

manufacturers did not sell Part B-covered drugs during a particular 

quarter. See Table 2 for the number of manufacturers that submitted 

ASP data each quarter, according to CMS’s tracking spreadsheets. 

Table 2: ASP Submissions From CMS’s Tracking Spreadsheets 

Quarter and Year Number of Manufacturers That Submitted ASP Data 

1st Quarter 200720 152 

2nd Quarter 2007 152 

3rd Quarter 2007 151 

4th Quarter 2007 154 

1st Quarter 2008 157 

2nd Quarter 2008 157 

Source: OIG analysis of CMS tracking spreadsheets. 

20 We excluded one manufacturer from our analysis of first quarter 2007 ASP data 

because we could not determine the manufacturer’s submission date. However, CMS’s 

background file indicates that the manufacturer did submit ASP data to CMS. 

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INTRODUCTION 

CMS interview and document review. We conducted an interview with 

CMS staff and reviewed relevant policy documents to gather 

information about oversight procedures regarding ASP data 

submissions. The interview and document review sought to identify the 

way in which CMS collects, verifies, and analyzes data; CMS oversight 

procedures; potential vulnerabilities to the ASP system; and the way in 

which ASP reporting requirements relate to AMP reporting 

requirements.

ASP data. CMS uses the tracking spreadsheets to record ASP 

submission dates; it uses a different set of files (called background files) 

to compile ASPs. The background files contain manufacturer 

submissions for Part B-covered drugs, their billing codes, and ASPs; 

they are updated each quarter. CMS provided us with the background 

files for 2007 and the first two quarters of 2008. Data in these files 

include the NDC; the manufacturer’s ASP for the drug (which factors in 

total sales, price concessions, and sales volume); and the number of 

units sold. These files also contain information on which NDCs are 

included in the calculation of Medicare payment amounts. See 

Table 3 for the number of labeler codes associated with ASP data 

submissions for each quarter under review. 

Table 3: Labeler Codes Associated With ASP Data Submissions 

Quarter and Year Number of Labeler Codes Associated With ASP Data 

Submissions 

1st Quarter 2007 198 

2nd Quarter 2007 192 

3rd Quarter 2007 193 

4th Quarter 2007 199 

1st Quarter 2008 202 

2nd Quarter 2008 207 

Source: OIG analysis of NDC-level ASP submissions and participating drug manufacturer file. 

 

We also collected CMS’s crosswalk files for the quarters under review. 

These files link NDCs to HCPCS billing codes and could help identify 

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INTRODUCTION 

Part B-covered drugs for which manufacturers did not submit ASP 

data.21 

Medicaid participating drug manufacturer file. We obtained the list of 

manufacturers that participated in the Medicaid drug rebate program 

during the quarters under review from CMS. This list contains 

participating manufacturer information, including the manufacturer’s 

name; the labeler code (i.e., the first five digits of the NDC); and the 

date the rebate agreement went into effect. Manufacturers of Part 

B-covered drugs that have rebate agreements in effect are required to 

report ASP data. One manufacturer may have multiple labeler codes. 

Data Analysis 

Timeliness of ASP submissions. Using CMS’s tracking spreadsheets, we 

compared manufacturer submission dates to the statutorily defined 

deadline to determine the number of manufacturers that submitted late 

ASP data. In addition, we calculated the number of days that elapsed 

before each manufacturer submitted ASP data. 

CMS oversight. We reviewed the transcript from our interview with 

CMS as well as relevant policy documents to determine how CMS 

collects ASP data, how CMS verifies and analyzes ASP data, how CMS 

implements oversight processes for ASP data, and to what extent 

vulnerabilities exist in the ASP system. 

Manufacturer submission requirements. Using NDC-level ASP data from 

the background files, we identified all labeler codes (i.e., the first five 

digits of the NDC) associated with data submissions during each of the 

quarters under review. We identified the labeler codes only for NDCs 

deemed valid by CMS (i.e., the NDCs included in the calculation of the 

Medicare payment amount). For each quarter under review, we 

compared these labeler codes to the list of labeler codes associated with 

manufacturers that participate in the Medicaid drug rebate program 

and were required to provide ASPs under the current system (see 

Table 3 on page 8 for the number of labeler codes associated with ASP 

data submissions). 

From this comparison, we determined how many labeler codes with 

reported ASPs were associated with manufacturers that were not 

required to provide these prices under the current system. We also 

21 In several of its ASP files, CMS notes that the absence or presence of a particular drug 

does not indicate whether the drug is actually covered by Medicare Part B. 

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I NTRODUCTION T RODUCTION 

determined whether any HCPCS codes had Medicare payment amounts 

that were based solely on NDCs from manufacturers without rebate 

agreements. In addition, using the crosswalk files, background files, 

and files containing labeler codes of manufacturers that participate in 

the Medicaid drug rebate program, we identified manufacturers of Part 

B-covered drugs that did not provide ASPs and also did not have rebate 

agreements during the quarters under review. 

Limitations 

We did not verify the accuracy or completeness of CMS’s pricing data, 

tracking file, or the list of manufacturers participating in the Medicaid 

drug rebate program. In addition, we did not analyze the background 

files to determine whether there were specific data entry errors. 

Standards 

This study was conducted in accordance with the “Quality Standards for 

Inspections” approved by the Council of the Inspectors General on 

Integrity and Efficiency. 

 OEI-03-08-00480 AVERAGE S ALES P RICES : M ANUFACTURER R EPORTING AND CMS OVERSIGHT 10 
 

Each quarter, over 40 percent of manufacturers 

submitted ASPs late; most late submissions were 

within 10 days of the deadline 

For each quarter under review, 

between 41 and 52 percent of 

manufacturers provided ASPs 

after the statutorily defined due 

date. However, at least 

95 percent of manufacturers submitted ASP data to CMS within 

10 days after the deadline. Further, no more than 2 percent of 

manufacturer submissions each quarter were more than 30 days late. 

See Table 4 for a description of manufacturer submissions according to 

the dates recorded by CMS in its tracking spreadsheets. Late 

submissions did not seem to have an effect on the Medicare payment 

amount because there is a 6- to 7-week period between the ASP due 

date and the publication of the payment amounts. 

Table 4: Manufacturer ASP Data Submissions From CMS’s Tracking Spreadsheets 

 FINDINGS 

Late Manufacturer Submissions* 

Quarter and Year 

Percentage of 

Manufacturer 

Submissions Received 

Before the Deadline* 

Percentage of 

Manufacturer 

Submissions 10 or 

Fewer Days Late 

Percentage of 

Manufacturer 

Submissions More 

Than 10 Days Late and 

Fewer Than 30 Days 

Late 

Percentage of 

Manufacturer 

Submissions 30 or More 

Days Late 

1st Quarter 2007 53 43 3 2 

2nd Quarter 2007 53 44 3 1** 

3rd Quarter 2007 48 47 5 1** 

4th Quarter 2007 48 50 2 0 

1st Quarter 2008 59 38 2 1 

2nd Quarter 2008 48 52 1 0 

Source: OIG analysis of CMS ASP tracking spreadsheets. 

*Between 151 and 157 manufacturers submitted ASP data according to CMS’s tracking spreadsheet. See Table 2 on page 7 for additional detail. 

**These late submissions were from the same manufacturer. 

Note: Totals may not add up to 100 because of rounding. 

CMS implemented oversight procedures for ASP 

data; however, CMS’s data collection and 

analysis methods introduce the potential for 

inefficiency and errors 

CMS has implemented several 

oversight procedures related to 

payment for Part B-covered 

drugs. From the time it receives 

a manufacturer’s submission of 

ASP data to the time payment 

amounts are posted on its Web site, CMS performs multiple quality 

assurance checks, including: 

 monitoring when manufacturers submit data, 

 contacting late manufacturers to remind them to submit ASP 

data, 

 OEI-03-08-00480 AVERAGE S ALES P RICES : M ANUFACTURER R EPORTING AND CMS OVERSIGHT 11 
 

FINDINGS 

 identifying the appropriate ASP data to be included in the 

Medicare payment amount, 

 identifying new drugs or billing codes that may be needed for the 

upcoming quarter, and 

 determining whether the Medicare payment amount for specific 

HCPCS codes underwent dramatic changes from quarter to 

quarter. 

CMS also posts the quarterly Medicare payment amounts to its Web 

site several days before providing the payment files to the 

claims-processing contractor. This step allows manufacturers to review 

the Medicare payment amounts and resubmit pricing data if 

manufacturers identify errors before the contractor can download the 

new prices to its payment system. CMS believes this process has 

reduced the need to revise and retract payment files because 

manufacturers can identify errors before the prices go into effect. 

Finally, CMS is coordinating with OIG to identify manufacturers that 

do not submit ASP or other required drug pricing data (e.g., AMP) in a 

timely fashion. 

CMS’s methods for collecting and analyzing ASP data could reduce 

efficiency and lead to potential errors 

Although CMS has implemented oversight procedures related to 

payment for Part B-covered drugs, it relies on manual data entry, does 

not proactively identify which manufacturers are required to report 

ASPs, receives substantial amounts of ASP data for non-Part B-covered 

drugs, and does not receive the underlying data that form the basis of 

manufacturer ASP submissions.22 These factors may inhibit efficiency 

and result in potential errors. 

Manual data entry. Unlike its system for reporting AMP data, CMS does 

not have an automated system for entering ASP data; staff manually 

enter every data element from manufacturer submissions into the ASP 

files, a process that could introduce errors. Previous OIG work with 

ASP data identified multiple errors that needed to be corrected before 

any analysis could be conducted, including: 

 NDCs missing the first few digits (generally this applies only to 

NDCs where the first digit is zero), 

22 Manufacturers are not obligated to report the underlying data used to arrive at their 

ASPs. 

 OEI-03-08-00480 AVERAGE S ALES P RICES : M ANUFACTURER R EPORTING AND CMS OVERSIGHT 12 
 

FINDINGS 

 NDCs with extra or missing digits, and 

 NDCs that contain a dash or other incorrect text.23

In addition, manual data entry is time consuming and increases the 

amount of time between when manufacturers submit ASPs and when 

CMS calculates the Medicare payment amounts. 

Tracking methods. CMS does not maintain a comprehensive list of 

manufacturers that are required to submit ASP data; it tracks only 

those that actually make submissions. The tracking spreadsheets 

include only manufacturers that made at least one quarterly ASP 

submission. This method of tracking is based on previous submissions; 

it does not take into account the manufacturers that are required to 

submit ASPs. In addition, CMS would not have any information in its 

tracking spreadsheet on manufacturers without a rebate agreement 

that did not submit ASP data. 

Data for non-Part B-covered drugs. According to CMS, drug 

manufacturers submitted ASP data for over 8,100 NDCs each quarter; 

in any given quarter, 3,000 of these NDCs were not actually included in 

the calculation of Medicare payment amounts. These extra data further 

complicate the process because CMS staff spend substantial time 

determining which of these NDCs are Part B-covered drugs (typically 

using manual methods). In contrast, the automated system used to 

collect AMP data requires manufacturers to submit and certify valid 

product data for NDCs prior to providing pricing data. 

Data transparency. Manufacturers are under no obligation to report to 

CMS the underlying data that form their ASP submissions. CMS 

receives only the ASP, the NDC, the number of units, and some product 

information. Manufacturers are not required to provide any data on 

total sales, price concessions, or type of customer. Therefore, CMS is 

unable to verify how manufacturers arrive at the ASPs they submit. 

Almost one-fifth of labeler codes with reported 

ASPs were associated with manufacturers that 

were not required to provide these prices under the 

current system

Approximately 200 unique 

labeler codes were associated 

with ASP data submissions for 

Part B-covered drugs during 

each of the quarters under 

review. Nearly one-fifth of these 

23 OIG identified these errors during analysis for the reports comparing ASPs to AMPs. 

See page 6 for these reports. 

 OEI-03-08-00480 AVERAGE S ALES P RICES : M ANUFACTURER R EPORTING AND CMS OVERSIGHT 13 
 

FINDINGS 

codes belonged to manufacturers that did not have to provide ASP data 

under the current system because they did not have a Medicaid drug 

rebate agreement in effect for that quarter. See Table 5 for the 

percentage of labeler codes associated with manufacturers that 

submitted ASP data but were not required to do so under the current 

system. 

 Table 5: Manufacturer Requirements for Reporting ASPs 

Quarter and Year 

Percentage of Labeler Codes Associated With 

Manufacturers That Submitted ASPs but Were Not 

Required To Do So Under the Current System* 

1st Quarter 2007 17 

2nd Quarter 2007 17 

3rd Quarter 2007 17 

4th Quarter 2007 18 

1st Quarter 2008 18 

2nd Quarter 2008 17 

*There were between 192 and 207 labeler codes with ASP data submissions for the quarters under review. 

See Table 3 on page 8 for additional detail. 

Source: OIG analysis of manufacturers participating in the Medicaid drug rebate program and ASP data. 

Some HCPCS codes were crosswalked only to NDCs of manufacturers that 

were not required to report ASPs under the current system 

Medicare payment amounts in the third quarter of 2008 for some 

HCPCS codes (one version of immune globulin, for example) were based 

solely on NDCs from manufacturers that did not have rebate 

agreements in effect in the first quarter of 2008. If these manufacturers 

chose not to report ASPs, CMS would be unable to calculate ASP-based 

Medicare payment amounts for these HCPCS codes.24 

A number of manufacturers of Part B-covered drugs were not required to 

report ASPs and did not provide ASP data to CMS 

We identified between 66 and 82 labeler codes during the quarters 

under review that were associated with manufacturers that had 

products listed in the background and crosswalk files (i.e., were Part 

B-covered drugs) but (1) did not report ASP data for a particular quarter 

and (2) did not have a rebate agreement in effect for that quarter. 

Approximately one-third of these labeler codes were associated with 

repackagers (i.e., companies that repackage drugs purchased from 

24 According to CMS, in the absence of reported ASP data, it still calculates a Medicare 

payment amount to ensure timely and efficient claims processing. In these cases, CMS uses 

other published sources of pricing data. 

 OEI-03-08-00480 AVERAGE S ALES P RICES : M ANUFACTURER R EPORTING AND CMS OVERSIGHT 14 
 

FINDINGS 

manufacturers into smaller quantities). Because CMS does not have 

pricing or utilization data for these drugs, we are unable to quantify the 

impact this may have had on Medicare payment amounts. 

 OEI-03-08-00480 AVERAGE S ALES P RICES : M ANUFACTURER R EPORTING AND CMS OVERSIGHT 15 
 

 RECOMMENDATIONS 

When setting payment amounts for drugs covered under Medicare 

Part B, CMS relies on ASP data reported by manufacturers. This report 

identifies several potential issues with the current ASP reporting 

process, including (1) the timeliness of manufacturer reporting, (2) the 

largely manual process used by CMS to collect and analyze 

manufacturer-reported data, and (3) the legal requirements for 

manufacturer reporting. 

For example, over 40 percent of manufacturers failed to submit ASPs by 

the statutorily defined deadline each quarter. Although this did not 

seem to have a significant impact on Medicare payment amounts during 

the quarters under review, CMS’s ability to calculate appropriate 

payment amounts is reliant upon timely manufacturer data 

submissions. 

In addition, CMS’s process for data collection and analysis could lead to 

inefficiency and errors. Unlike the system CMS uses to collect AMP 

data, the agency does not have an automated process to collect ASPs. 

An automated system could reduce the time required to calculate 

payment amounts, validate that manufacturers are submitting data for 

Part B-covered drugs, and develop a more comprehensive list of 

manufacturers required to report ASPs. 

Finally, a number of manufacturers that currently report ASPs do not 

have Medicaid rebate agreements in place and therefore are not 

required to do so under the current system. Other manufacturers with 

Part B-covered drugs are not reporting ASPs at all. Therefore, for 

certain drugs, Medicare payment amounts may not include ASPs for all 

drugs on the market. 

Each of these issues introduces the potential for inefficiency and errors. 

To ensure that Medicare payment for Part B-covered drugs is accurate, 

timely, and reflective of all Part B-covered drug sales, we recommend 

that CMS: 

Develop an automated system for the collection of ASP data 

CMS has developed an automated system for manufacturers to submit 

AMPs and could use that system as a template for establishing an 

automated ASP system. Many manufacturers that submit ASPs 

already submit AMPs; therefore, these manufacturers are familiar with 

the concept of an automated price-reporting system. An automated 

system could limit the possibility of data entry errors, reduce the 

 OEI-03-08-00480 AVERAGE S ALES P RICES : M ANUFACTURER R EPORTING AND CMS OVERSIGHT 16 
 

RECOMMENDATIONS 

amount of time it takes to calculate ASP-based payment amounts and 

adjust ASP payment limits, and enable CMS to track ASPs with greater 

ease. 

An automated system would make the process more efficient and could 

help ensure data quality. Similar to the AMP system, an automated 

system for ASP collection would include manufacturer submission and 

certification of NDCs prior to accepting the associated pricing data. 

The increased efficiency resulting from the implementation of an 

automated system could facilitate the adjustment of Medicare payment 

amounts based on the results of OIG ASP-to-AMP price comparisons. 

CMS has acknowledged the Secretary’s authority to adjust ASP-based 

payment limits based on the results of these studies.25 However, the 

agency has yet to make any changes as a result of OIG’s work, citing the 

timing of OIG pricing comparisons as one potential obstacle to adjusting 

payment amounts.26 Therefore, if OIG can provide the results of its 

pricing comparisons to CMS sooner, it could enable the adjustment of 

Medicare payment amounts based on these comparisons. 

Seek a legislative change to directly require all manufacturers of 

Part B-covered drugs to submit ASPs 

During the quarters under review, almost one-fifth of labeler codes with 

reported ASP data were associated with manufacturers that were not 

required to provide ASPs under the current system because they did not 

have Medicaid rebate agreements in place. Also, there may be 

additional manufacturers of Part B-covered drugs that are not 

submitting ASP data because they do not have a rebate agreement in 

effect, yet their products are potentially eligible for Part B payments. 

CMS could work with Congress to develop legislation that would 

directly require all manufacturers of Part B-covered drugs to submit 

ASPs, regardless of whether the manufacturers have Medicaid drug 

rebate agreements. This would ensure that Medicare payment amounts 

were reflective of all Part B-covered drugs. 

25 OEI-03-04-00430, April 2006. 

26 OEI-03-07-00140, July 2007. 

 OEI-03-08-00480 AVERAGE S ALES P RICES : M ANUFACTURER R EPORTING AND CMS OVERSIGHT 17 
 

RECOMMENDATIONS 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

In its comments on the draft report, CMS agreed that certain 

refinements to the ASP reporting process are desirable to ensure that 

Medicare payments for Part B-covered drugs are accurate and timely. 

CMS concurred with OIG’s recommendation that it develop an 

automated system for the collection of ASP data and agreed that an 

automated system would be an improvement over the present one. 

CMS noted that it recognized the risks with the current system and 

understands the need to develop an automated solution. CMS also 

stated that it is working with contractors to improve the efficiency of 

ASP-related processes. 

CMS did not concur at this time with OIG’s recommendation that it 

seek a legislative change to directly require all manufacturers of 

Part B-covered drugs to submit ASPs. However, CMS stated that it will 

consider this recommendation as it continues to monitor the effects of 

current payment policies. We continue to support our recommendation 

that CMS seek a legislative change to the ASP reporting requirements 

as a way to ensure that Medicare payment amounts are reflective of all 

Part B-covered drugs. 

CMS also provided several technical comments. Based on these 

comments, we made a few minor revisions to the report, where 

appropriate. CMS’s comments are provided in the Appendix. 

 OEI-03-08-00480 AVERAGE S ALES P RICES : M ANUFACTURER R EPORTING AND CMS OVERSIGHT 18 
A P PEN D x 

Agency Comments 

r.p.'1Ir:~., 

( ~ 

,S~ 

DEPARTMENT OF HEALTH: & HUMAN SERVICES Centers for Medlcar. & Medicaid Service. 

Administrator 

Washington. DC 20201 

TO: Daniel R. Levinson 

Inspector General 

FROM: Charlen~ Frizzera 

Acting Administraior 

SUBJECT: Office of1nsp~ctor General Draft Report (OIG): "Average Sales Prices: 

Manufacturer Reporting and CMS Oversight" (OEI-03-08-00480) 

The.Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to r~view and 

comment on the OIG report entitled, "Average Sales Prices: Manufacturer Reporting and eMS 

Ov~rsight." We appreciate the OIG'& continuing efforts to examine payments made under the 

average sales price (ASP) methodology. TIle OIG report presents findings from a review of 

manufacturer submitted ASP data and of eMS internal procedures .used to collect, array, -and 

manage that data irt order to calculate quarterly Part B drug payment limits. 

The report had three objectives: J) to determine whether manufacturers that reported ASP data to 

eMS did so within the timeframe required by Feilerallaw; 2) to review eMS' oversight 

procedures for the submission of ASP data; and 3) to quantify the number ofmanufacturers that 

provided ASPs to eMS but were not required to do so under the current system. 

The report had three major findings: 1) each quarter over 40 percent of manufacturers submitted 

ASPs late although most late submissions were submitted within 10 days ofthe deadline; 

2) CMS implemented oversight procedures for ASP, data but CMS' data collection and analysis 

methods introduce the potential for inefficiency and errors; and 3) almost one-fifth of labeler 

codes with reported ASPs were associated with manufacturers that were not required to provide 

these prices under the current system. 

The OIG expressed concerns about the following aspects ofthe ASP reporting process: 1) the 

timeliness of manufacturer reporting; 2) the largely manual process used by CMS to collect and 

analyze manufacturer-reported data; and 3) the legal requirements for manufacturer reporting. 

The report finds that each of these issues introduces the potential for inefficiency and errors. To 

ensure that Medicare payments for Part B-covered drugs are accurate and timely, we agree that 

certain refinements to the process are desirable. 

OEI-03-0S-004S0 AVERAGE SALES PRICES: MANUFACTURER REPORTING AND eMS OVERSIGHT 19 
 

 OEI-03-08-00480 AVERAGE S ALES P RICES : M ANUFACTURER R EPORTING AND CMS OVERSIGHT 20 

A PPENDIX 
 

 OEI-03-08-00480 AVERAGE S ALES P RICES : M ANUFACTURER R EPORTING AND CMS OVERSIGHT 21 

A PPENDIX~A A PPENDIX ~ A 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. 

Edward K. Burley served as the team leader for this study. Other 

principal Office of Evaluation and Inspections staff from the 

Philadelphia regional office who contributed to the report include 

Eric M. Biersmith; other central office staff who contributed include 

Scott Manley. 
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.