GAO-05-581R Medicare Hospital Outpatient Drug Prices

United States Government Accountability Office

Washington, DC 20548 

June 30, 2005 

The Honorable Michael O. Leavitt 

The Secretary of Health and Human Services 

Subject: Medicare: Drug Purchase Prices for CMS Consideration in Hospital 

Outpatient Rate-Setting 

Dear Mr. Secretary: 

Medicare pays hospitals for drugs that beneficiaries receive as part of their treatment 

in hospital outpatient departments. Specifically, the Centers for Medicare & Medicaid 

Services (CMS) in the Department of Health and Human Services (HHS) uses an 

outpatient prospective payment system (OPPS) to pay hospitals fixed, predetermined 

rates for services. These services include drugs given to beneficiaries in outpatient 

settings. When OPPS was first developed as directed by the Balanced Budget Act of 

1997,1

 the rates for hospital outpatient services and drugs were based on hospitals’ 

1996 median costs. However, these rates prompted concerns that payments to 

hospitals would not reflect the cost of newly introduced pharmaceutical products—

drugs, biologicals,2

 and radiopharmaceuticals3—used to treat, for example, cancer, 

rare blood disorders, and other serious conditions. In turn, congressional concerns 

were raised that beneficiaries might lose access to some of these products if hospitals 

avoided providing them because of a perceived shortfall in payments. 

In response to these concerns, the Medicare, Medicaid, and SCHIP Balanced Budget 

Refinement Act of 1999 authorized pass-through payments, which are a way to 

augment, on a temporary basis, the OPPS payments for newly introduced 

pharmaceutical products first used after 1996.4

 The Medicare Prescription Drug, 

 

1

Pub. L. No. 105-33, § 4523, 111 Stat. 251, 445—450. 

2

In this report, we use the term “drugs” to refer to both drugs and biologicals. Biologicals are products 

derived from living sources, including humans, animals, and microorganisms. 

3

Radiopharmaceuticals are radioactive drugs used for diagnostic or therapeutic purposes; for this 

report, radiopharmaceuticals are not included in the term “drugs.” 

4

Pub. L. No. 106-113, app. F, § 201(b), 113 Stat. 1501A-321, 1501A-337—1501A-339. 
2 GAO-05-581R Medicare Hospital Outpatient Drug Prices

Improvement, and Modernization Act of 2003 (MMA) modified this payment method 

for some of these pharmaceutical products.5 As part of the modification, the MMA 

defined a new payment category—specified covered outpatient drugs (SCOD)—

which includes many of these newly introduced pharmaceutical products. The MMA 

defined a SCOD as a drug or radiopharmaceutical used in hospital outpatient 

departments, covered by Medicare, and for which CMS has established a separate 

ambulatory payment classification (APC) group.6

 In addition to these criteria, the 

MMA required that, for a drug to be a SCOD, it must have been paid for on a passthrough basis on or before December 31, 2002. The MMA established a methodology 

for CMS to follow in setting payment rates for SCODs in 2004 and 2005. The MMA 

excluded, among other drugs, orphan drugs—certain drugs or biologicals that are 

used for rare diseases and conditions—from being paid as SCODs for 2004 and 2005 

and was not explicit about whether orphan drugs will be SCODs after 2005.7

 CMS 

defines SCODs by their Healthcare Common Procedure Coding System (HCPCS) 

codes, which CMS assigns to products, supplies, and services for billing purposes. 

Drug HCPCS are categories that include one or more component drugs with similar 

chemical entities. These drugs within a HCPCS can vary by manufacturer, strength, 

and package size. 

The MMA directed us to collect data on hospital acquisition costs of SCODs and to 

provide information based on these data to the Secretary of Health and Human 

Services for his consideration in setting 2006 Medicare payment rates.8

 The MMA 

directed us to collect these data by surveying a large sample of hospitals. 

In summary, we obtained from our survey data the average and median purchase 

prices for each of 53 SCOD drug categories. We report purchase price information 

for those SCOD categories containing more than one drug. Purchase price refers to 

the price that hospitals pay upon receiving the product and is the key component of 

hospital acquisition costs. The 53 SCOD categories represent 86 percent of all 

Medicare spending on SCODS in the first 9 months of 2004. The purchase price 

information takes account of discounts taken at the time hospitals received the 

 

5

Pub. L. No. 108-173, § 621(a), 117 Stat. 2066, 2307—2310. 

6

Under OPPS, CMS groups services into APCs on the basis of their clinical and cost similarities. All 

services that are grouped into the same APC have the same base payment rate. The MMA required 

CMS to establish a separate APC for a pharmaceutical product if the cost per administration is $50 or 

more. MMA 117 Stat. 2310. Drugs that cost less than $50 per administration are bundled with other 

services for payment purposes. CMS has interpreted the cost per administration as the median cost 

per day. 

7

MMA 117 Stat. 2308. 

8

MMA 117 Stat. 2308. In addition, the MMA required the Medicare Payment Advisory Commission, 

known as MedPAC, to report on hospitals’ overhead costs and related expenses for SCODs for the 

Secretary’s consideration in setting 2006 payment rates. MMA 117 Stat. 2309. Overhead costs are not 

part of acquisition costs. MedPAC’s mandated report is Chapter 6, “Payment for pharmacy handling 

costs in hospital outpatient departments,” in Issues in a Modernized Medicare Program (Washington, 

D.C.: MedPAC, June 2005). 
3 GAO-05-581R Medicare Hospital Outpatient Drug Prices

product but excludes any rebates paid to hospitals subsequent to the receipt of the 

product. 

Scope and Methodology 

This report presents results drawn from our survey data on 53 SCOD categories for 

the period July 1, 2003, through June 30, 2004.9 These 53 SCOD categories 

represented 86 percent of Medicare spending for SCODs during the first 9 months of 

2004.10 We report the average and median purchase prices for the SCOD categories 

containing more than one drug; we do not include purchase price information where 

there is only one drug in a category because of the potential proprietary sensitivity of 

such information.11 The purchase price information takes account of volume and 

other discounts, but it excludes rebates, which manufacturers may give after a 

hospital has paid for the drugs, and payments made to hospitals by group purchasing 

organizations, which negotiate prices with manufacturers on behalf of their member 

hospitals.

 In a subsequent report, we will provide information on the 

radiopharmaceuticals that constituted an additional 9 percent of Medicare spending 

on SCODs during the first 9 months of 2004. These two reports together provide 

purchase price information on SCODs that accounted for 95 percent of all Medicare 

spending on SCODs during the first 9 months of 2004. 

To produce average and median purchase prices, we conducted a survey of 1,400 

acute care, Medicare-certified hospitals,12 expecting that this would yield responses 

from about 1,000 hospitals.13 We conducted the survey from September 27, 2004, 

through February 22, 2005, and received usable information from 1,157 hospitals, 

which gave us a response rate of 83 percent. We asked the hospitals to provide price 

data for SCODs purchased from July 1, 2003, through June 30, 2004. Using our survey 

data, we calculated average and median purchase prices. To ensure the soundness of 

our approach to data collection and analysis, we obtained comments from an 

advisory panel of experts in pharmaceutical economics, pharmacy, medicine, survey 

sampling, and Medicare payment. To assess the reliability of our data, we checked 

for anomalies and outliers, asked hospitals for clarification as needed, and discussed 

technical issues with a hospital pharmacist. On this basis, we determined that the 

 

9

After September 2004, when we began collecting data, CMS divided two of these categories into two 

SCOD categories each, in effect adding two categories and resulting in a total of 55 SCOD categories. 

10For this report, the term SCOD includes both pharmaceutical products that currently meet the 

definition of SCODs and those that do not meet the definition now but that may be considered SCODs 

in the future. The pharmaceutical products in this report that do not meet the definition of SCODs 

include orphan drugs and drugs that are currently on pass-through status. 

11We have provided HHS with the average and median purchase prices from our survey for all 53 SCOD 

categories—both those included in and those excluded from this report—and their component drugs. 

12Forty-eight of these hospitals were in our pilot survey, which began on August 5, 2004. 

13We contracted for data collection and much of the data processing with a large survey firm with 

experience in conducting health care surveys. 
4 GAO-05-581R Medicare Hospital Outpatient Drug Prices

data were sufficiently reliable for our purposes. (For details on our methods, see 

enc. I.) 

Our results have certain limitations. First, despite a high survey response rate and a 

large sample size, our estimates of average and median purchase prices are more 

precise for drugs that were purchased by many hospitals than for drugs that were 

purchased by relatively few hospitals. Second, we limited our detailed results to 

hospitals’ purchase prices because we could not fully account for rebates or 

payments from group purchasing organizations. Third, the average and median 

purchase prices we report refer to a specific time period and might have increased or 

decreased since then. We performed our work according to generally accepted 

government auditing standards from March 2004 through June 2005. 

Hospitals’ Acquisition Costs 

for Selected SCOD Categories 

The following section presents detailed information on purchase prices—the key 

component of hospitals’ acquisition costs—for certain SCOD categories14 for the 

period July 1, 2003, through June 30, 2004. We also present limited information on 

rebates, another component of acquisition costs. 

Table 1 contains information on average and median purchase prices. We order the 

SCOD categories by their rank in Medicare spending for drug SCODs and have 

identified the SCOD categories by their HCPCS codes.15 These SCOD categories 

accounted for 86 percent of all Medicare spending on SCODs for the period January 1 

through September 30, 2004. For each SCOD category with more than one drug, we 

present both the average and the median purchase prices, as well as other 

information that provides context, including the CMS payment rate and average sales 

price (ASP). The CMS payment rate is the payment rate specified for each HCPCS for 

2005, and ASP is the average price for a drug based on a manufacturer’s sales to all 

purchasers in the United States, with certain exceptions. 

 

14Although SCODs by definition are used in hospital outpatient departments, the data we received from 

hospitals may represent drugs that were used for both inpatients and outpatients and for Medicare and 

non-Medicare patients. 

15For the specific drugs—identified by National Drug Code (NDC)—within each HCPCS, see enc. II. 
5 GAO-05-581R Medicare 

Table 1: Purchase Prices for Drugs Accounting for 86 Percent of Medicare Spending on SCODs Rank in Medicare spending on drug SCODs 

HCPCS code Description 

Medicare 

spending on SCOD, 2004a 

($ in 

millions) 

% of 

Medicare 

spending 

on 

SCODs, 

2004b

Number 

of 

hospitals 

in sample 

Total 

number 

of 

hospitalsc 

CMS 

payment 

rate for 

2005d ($) 

ASP 

(average 

sales 

price)e ($) 

Average 

purchase 

pricef ($) 

95% con

interv

average p

p

1 Q0136 Injection, Epoetin Alpha 

(for non-ESRD use), per 1,000 units 199.8 10.1 973 2,758 11.09 9.25 9.74 9.5

2 J9310 Rituximab, 100 mg 158.4 8.0 871 1,418 437.83 414.92 412.31 407.43–3 J2505 Injection, Pegfilgrastim, 

6 mg 144.8 7.3 759 1,177 2,448.50 2,017.55 i 

4j Q9941 Injection, Immune 

Globulin, Intravenous, Lyophilized, 1 g k k 626 l 80.68 36.54 36.50 36.37

4j Q9943 Injection, Immune 

Globulin, Intravenous, Non-Lyophilized, 1 g k k 281 l 80.68 53.04 50.63 50.11

5 J1745 Injection, Infliximab, 

10 mg 114.8 5.8 897 1,903 57.40 50.20 i 

6 Q0137 Injection, Darbepoetin 

alfa, 1 mcg (non-ESRD use) 100.6 5.1 743 1,117 3.66 3.04 3.00 2.9

7 J9170 Docetaxel, 20 mg 73.7 3.7 829 1,257 312.69 278.95 295.03 294.10–8 J9045 Carboplatin, 50 mg 70.7 3.6 893 1,482 129.96 71.46 132.10 131.65–9 C9205 Injection, Oxaliplatin, 

per 5 mg 67.0 3.4 708 1,172 82.53 77.86 75.91 74.90

10 J3487 Injection, Zoledronic 

Acid, 1 mg 66.9 3.4 862 1,316 197.87 187.47 185.27 183.71–

11 J9201 Gemcitabine Hcl, 

200 mg 55.0 2.8 855 1,317 105.73 108.79 105.69 105.13–

12 J9206 Irinotecan, 20 mg 39.4 2.0 786 1,109 127.33 119.56 116.31 113.87–13 J2324 Injection, Nesiritide, 

0.25 mg 37.6 1.9 892 1,619 66.23 69.64 i 

14 J9265 Paclitaxel, 30 mg 32.0 1.6 792 1,398 79.04 17.70 14.45 14.4415 J9355 Trastuzumab, 10 mg 31.4 1.6 679 1,089 50.79 49.99 46.72 45.9216 J9217 Leuprolide Acetate (for 

depot suspension), 7.5 mg 30.8 1.6 804 1,319 543.72 213.83 234.05 223.21–

17 J0256 Injection, Alpha 1 - 

Proteinase Inhibitor - Human, 10 mg 20.9 1.1 38 279 3.72 3.06 2.35 2.3
6 GAO-05-581R Medicare 

Rank in Medicare spending on drug SCODs 

HCPCS code Description 

Medicare 

spending on SCOD, 2004a 

($ in 

millions) 

% of 

Medicare 

spending 

on 

SCODs, 

2004b

Number 

of 

hospitals 

in sample 

Total 

number 

of 

hospitalsc 

CMS 

payment 

rate for 

2005d ($) 

ASP 

(average 

sales 

price)e ($) 

Average 

purchase 

pricef ($) 

95% con

interv

average p

p

18 J9035m Injection, Bevacizumab, 

10 mg 19.8 1.0 436 916 57.11 53.88 53.31 53.01

19 J1441 Injection, Filgrastim (GCSF), 480 mcg 17.1 0.9 928 1,679 274.40 261.46 257.21 253.46–20 J1950 Injection, Leuprolide 

Acetate (for depot suspension), per 3.75 mg 16.9 0.9 541 904 451.98 409.18 454.10 453.04–

21 J9001 Doxorubicin 

Hydrochloride, all lipid formulations, 10 mg 16.3 0.8 614 955 343.78 338.66 336.33 332.22–

22 J2353 Injection, Octreotide, 

depot form for intramuscular injection, 1 mg 15.7 0.8 545 852 69.44 80.95 71.13 69.63

23 J9055m Injection, Cetuximab, 

10 mg 15.1 0.8 286 506 49.66 46.85 i 

24 J9041m Injection, Bortezomib, 

0.1 mg 14.1 0.7 452 631 28.38 26.77 i 

25 J9350 Topotecan, 4 mg 13.9 0.7 585 858 697.76 699.75 674.91 656.60–26 J1440 Injection, Filgrastim (GCSF), 300 mcg 13.0 0.7 956 1,914 162.41 165.23 161.61 156.81–27 J1785 Injection, Imiglucerase, 

per unit 12.9 0.7 41 59 3.91 3.69 3.62 3.6

28 J3396 Injection, Verteporfin, 

0.1 mg 12.3 0.6 10 45 8.49 8.48 i 

29 J9202 Goserelin Acetate 

Implant, per 3.6 mg 11.4 0.6 392 529 390.09 181.78 201.76 193.30–

30 J1626 Injection, Granisetron 

Hydrochloride, 100 mcg 11.1 0.6 682 988 16.20 6.71 6.45 6.2

31 J0585 Botulinim Toxin Type A, 

per unit 10.8 0.5 480 1,062 4.32 4.44 i 

32 J0207 Injection, Amifostine, 

500 mg 10.5 0.5 477 705 395.75 403.84 i 

33 J2430 Injection, Pamidronate 

Disodium, per 30 mg 10.2 0.5 945 1,567 128.74 54.10 58.49 51.51

34 J9390 Vinorelbine Tartrate, per 

10 mg 9.3 0.5 568 833 52.78 58.20 48.15 48.13

35 J2993 Injection, Reteplase, 

18.1 mg 8.9 0.4 505 1,073 1,192.09 832.49 846.53 844.18–
7 GAO-05-581R Medicare 

Rank in Medicare spending on drug SCODs 

HCPCS code Description 

Medicare 

spending on SCOD, 2004a 

($ in 

millions) 

% of 

Medicare 

spending 

on 

SCODs, 

2004b

Number 

of 

hospitals 

in sample 

Total 

number 

of 

hospitalsc 

CMS 

payment 

rate for 

2005d ($) 

ASP 

(average 

sales 

price)e ($) 

Average 

purchase 

pricef ($) 

95% con

interv

average p

p

36 J9293 Injection, Mitoxantrone 

Hydrochloride, per 5 mg 8.4 0.4 672 1,181 313.96 305.36 297.00 296.19–

37 J9185 Fludarabine Phosphate, 

50 mg 7.6 0.4 669 891 311.09 243.05 293.99 291.43–

38 C1305 Apligraf®, per 44 square 

centimeters 7.0 0.4 63 450 1,130.88 1,114.74 i 

39 J9395 Injection, Fulvestrant, 

25 mg 6.9 0.3 468 778 79.65 76.78 74.63 74.45

40 J3100 Injection, Tenecteplase, 

50 mg 6.8 0.3 509 1,181 2,350.98 1,901.29 i 

41 J9305m Injection, Pemetrexed, 

10 mg 5.6 0.3 162 251 40.54 38.25 i 

42 J9160 Denileukin Diftitox, 

300 mcg 5.6 0.3 73 95 1,438.80 1,144.18 i 

43 J0180m Injection, Agalsidase 

Beta, 1 mg 5.3 0.3 29 49 121.11 114.26 111.33 111.08–

44 Q0166 Granisetron 

Hydrochloride, 1 mg, oraln 4.8 0.2 541 886 39.04 31.04 24.86 24.82

45 J2469m Injection, Palonosetron 

Hcl, 25 mcg 4.6 0.2 295 525 18.09 17.06 i 

46 J9010 Alemtuzumab, 10 mg 4.4 0.2 236 356 541.46 478.73 i 47o Q9942 Injection, Immune 

Globulin, Intravenous, Lyophilized, 10 mg p p 626 q 0.75 0.37 0.37 0.3

47o Q9944 Injection, Immune 

Globulin, Intravenous, Non-Lyophilized, 10 mg p p 281 q 0.75 0.53 0.51 0.5

48 J7190 Factor VIII 

(Antihemophilic Factor, Human) per I.U. 4.2 0.2 55 122 0.76 0.60 0.46 0.4

49 J0130 Injection, Abciximab, 

10 mg 4.0 0.2 570 797 448.22 417.35 i 

50 J0850 Injection, 

Cytomegalovirus Immune Globulin Intravenous (Human), per vial 3.8 0.2 156 260 622.13 632.67 i 

51 J1327 Injection, Eptifibatide, 

5 mg 3.7 0.2 911 1,661 11.21 11.79 12.49 12.35
8 GAO-05-581R Medicare 

Rank in Medicare spending on drug SCODs 

HCPCS code Description 

Medicare 

spending on SCOD, 2004a 

($ in 

millions) 

% of 

Medicare 

spending 

on 

SCODs, 

2004b

Number 

of 

hospitals 

in sample 

Total 

number 

of 

hospitalsc 

CMS 

payment 

rate for 

2005d ($) 

ASP 

(average 

sales 

price)e ($) 

Average 

purchase 

pricef ($) 

95% con

interv

average p

p

52 J9214 Interferon, Alfa-2B, 

Recombinant, 1 million units 3.6 0.2 619 954 13.00 12.25 11.20 11.02

53 C9201 Dermagraft®, per 37.5 

square centimeters 3.4 0.2 2 80 529.54 545.10 i 

Source: GAO survey and CMS. Notes: ESRD = end-stage renal disease, g = gram, I.U. = international unit, mcg = microgram, and mg = milligram. aMedicare spending is for the period January 1, 2004, through September 30, 2004. bThe percentage of Medicare spending is based on Medicare spending for all SCODs—both drugs and radiopharmaceuticals. cThis estimate of the total number of hospitals in the population is based on our sample. dThis is the payment rate specified for each HCPCS for 2005. It incorporates CMS’s April 2005 update. eCMS publishes the ASP plus 6 percent for certain drugs used in physicians’ offices. These amounts are based on data provided by manufacturers each quarter. We are 

April 2005. ASPs reported here do not include the 6 percent added by CMS. 

fThis price is based on data provided by the hospitals in our survey and does not reflect any other costs associated with purchasing or administering the product. We ask

purchased from July 1, 2003, through June 30, 2004. We weighted the prices by the volume purchased as well as by the sample weights. We have excluded prices undeprovides drug price discounts for certain health care entities, including those that provide health care services for low-income individuals and individuals in medically unde

gThe confidence interval measures the precision of the estimate. The narrower the interval, the greater the precision. hThe median purchase price is the midpoint of all prices reported by hospitals in our sample. Half of the prices reported by hospitals are above the median and half are be

purchased and by hospital sample weights. The average purchase price excludes prices paid under the 340B program. 

iFor HCPCS codes that contain only one National Drug Code (NDC), we do not include information on the average or median purchase price because of the potential projOn April 1, 2005, CMS replaced J1563, Injection, Immune Globulin, Intravenous, 1g, with two new codes: Q9941 and Q9943. J1563 was ranked fourth in total Medicare 

September 30, 2004. 

kJ1563, Injection, Immune Globulin, Intravenous, 1g, accounted for $127.1 million in Medicare spending from January 1, 2004, through September 30, 2004, which was 6

SCODs for that time period.

lOn April 1, 2005, CMS replaced J1563, Injection, Immune Globulin, Intravenous, 1g, with two new codes: Q9941 and Q9943. Because J1563 was replaced by two codes

hospitals in the population for these new codes individually. 

mOn January 1, 2005, CMS replaced C9214, C9215, C9207, C9213, C9208, and C9210 with J9035, J9055, J9041, J9305, J0180, and J2469, respectively. The ranks for 

total Medicare spending on SCODs from January 1, 2004, to September 30, 2004, for the former codes. 

nThe complete description for HCPCS Q0166 is “Granisetron Hydrochloride, 1 mg, Oral, Food and Drug Administration (FDA) Approved Prescription Anti-Emetic, for Use 

IV (intravenous) Anti-Emetic at the Time of Chemotherapy Treatment, Not to Exceed a 24 Hour Dosage Regimen.” 
9 GAO-05-581R Medicare 

oOn April 1, 2005, CMS replaced J1564, Injection, Immune Globulin, Intravenous, 10 mg, with two new codes: Q9942 and Q9944. J1564 was ranked 47th in total Medica

to September 30, 2004. 

pJ1564, Injection, Immune Globulin, Intravenous, 10 mg accounted for $4.4 million in Medicare spending from January 1, 2004, through September 30, 2004, which was 0

SCODs for that time period. 

qOn April 1, 2005, CMS replaced J1564, Injection, Immune Globulin, Intravenous, 10 mg, with two new codes: Q9942 and Q9944. Because J1564 was replaced by two c

of hospitals in the population for these new codes individually. 

rFor this SCOD, our sample data cannot be extrapolated to compute a confidence interval for the median. 
10 GAO-05-581R Medicare Hospital Outpatient Drug Prices 

In contrast to the detailed purchase price information in table 1, our information on 

the rebate component of hospitals’ acquisition costs is limited. Nearly 60 percent of 

our sample hospitals reported receiving one or more rebates. Over half of those 

hospitals received one or more rebates for a specific SCOD category, while the others 

received rebates for a set of drugs (and sometimes other products). In the latter case, 

it is generally not feasible to allocate rebates to specific drugs. 

Rebates were not spread uniformly across SCOD categories. For example, for 14 

SCOD categories, no hospital reported receiving a rebate. For nearly all other SCOD 

categories, rebates were reported by a small number of hospitals. However, the 

effect of rebates on hospital acquisition costs may be significant for some hospitals 

purchasing certain drugs. For one high-volume drug, rebates were reported by onefifth of all hospitals that purchased drugs in at least one SCOD category. For some 

hospitals, these rebates were as high as 29 percent of the drug’s purchase price. 

Averaged over all hospitals, rebates for this drug relative to its purchase price were 

likely to be considerably smaller, since most hospitals did not report receiving large 

rebates. 

Agency Comments and Our Evaluation 

We received comments on a draft of this report from HHS (see enc. III). HHS 

commended our efforts and acknowledged the challenges of accurately surveying 

hospitals for drug acquisition costs. HHS also stated that it had concerns regarding 

the limitations of our study. For example, HHS cited the difficulties that hospitals 

had in attributing rebates from manufacturers and payments from group purchasing 

organizations to hospitals’ purchases of individual drug products. In addition, HHS 

anticipated concerns that purchase prices of drugs might have changed after the 

sample period for which we collected price data. HHS stated that it would take 

account of our data on hospital purchase prices in developing 2006 Medicare 

payment rates for SCODs. HHS added that, in developing payment rates for 2006 and 

future years, it considered it important to have a methodology that can be updated 

appropriately and that reflects rebates and other components of drug acquisition 

costs. 

Despite the limitations that CMS noted, we believe our estimates of average purchase 

price for each SCOD category that we report are sufficiently accurate for use in 

developing Medicare rates for SCOD categories. Moreover, these data are the only 

publicly available source of information on what hospitals are paying for these drugs. 

As HHS pointed out, our draft report indicated that the lack of comprehensive rebate 

data was a limitation of our study. However, hospitals reported no rebates for 14 of 

the 53 SCOD categories. In addition, we found that, for nearly all other SCOD 

categories, rebates were reported by a small number of hospitals; consequently, the 

effect of rebates on acquisition cost averaged across all hospitals is likely to be small. 

We have revised the report to clarify this point. While we believe that purchase price 

is currently an adequate measure of hospitals’ acquisition costs, this measure could 

be improved by adjusting purchase price for rebates if a different rebate data source 

or estimating method were available. HHS also expressed concerns about whether 

our data are sufficiently current for use in Medicare rate-setting. If HHS uses our 
11 GAO-05-581R Medicare Hospital Outpatient Drug Prices

purchase price data in developing SCOD payment rates, it can mitigate the effect of 

time lags by adjusting drug purchase prices in line with the expected increase or 

decrease in hospital drug prices for the coming year. HHS regularly uses a similar 

approach in other payment systems, including the hospital inpatient payment system. 

- - - - - 

We are sending copies of this report to the Senate Committee on Finance, the House 

Committee on Energy and Commerce, and the House Committee on Ways and Means. 

We will also make copies available to others on request. The report is available at no 

charge on GAO’s Web site at http://www.gao.gov. 

If you or your staff have any questions about this report, please call me at (202) 512-

7119. Another contact and key contributors are listed in enclosure IV. 

Sincerely yours, 

A. Bruce Steinwald 

Enclosures - 4 
Enclosure I Enclosure I 

12 GAO-05-581R Medicare Hospital Outpatient Drug Prices 

Methodology

This enclosure summarizes the sample design, methods for conducting the survey 

and processing data submissions, and the methods we used for estimating average 

and median drug purchase prices of specified covered outpatient drugs (SCOD). It 

also names the members of the advisory panel that commented on our approach to 

data collection and analysis. We did our work in accordance with generally accepted 

government auditing standards from March 2004 through June 2005. 

Sample Design 

We developed a stratified random sample of hospitals. The population consisted of 

3,450 hospitals (1) that had charged Medicare for SCODs during the first half of 2003 

and (2) that were still Medicare providers on July 1, 2004. To achieve a sample of 

1,000 hospitals, which we determined would meet the Medicare Prescription Drug, 

Improvement, and Modernization Act of 2003’s (MMA) requirement for a large 

sample, we drew a sample of 1,400 hospitals from the population, on the basis of an 

expected response rate of 71 percent. A pilot sample of 48 hospitals was included in 

the 1,400. 

To improve the precision of our estimates of average and median purchase price, we 

stratified the sample of hospitals. The objective was to select strata that would 

represent very different average purchase prices for SCODs. Because we did not 

have a measure of purchase price at the time we selected the sample, we used total 

hospital outpatient drug charges to Medicare as a proxy for purchase price. We used 

a regression model to identify stratification factors (such as teaching hospital status) 

that would maximize the difference in average purchase price (as proxied by 

Medicare charges) among strata. We selected the strata of hospitals as follows. First, 

we grouped them into major teaching hospital, nonmajor teaching hospital, urban 

nonteaching hospital, and rural nonteaching hospital strata. Second, within each of 

these strata, we further divided the hospitals into several strata depending on the 

number of unique SCODs that the hospitals billed for. For example, one stratum 

contains major teaching hospitals that billed for fewer than 20 unique SCODs. Third, 

we placed small hospitals in a separate stratum to ensure that hospitals with no or 

minimal charges for SCODs during the first 6 months of 2003 were appropriately 

represented.1

In our sample design, we defined a major teaching hospital as a hospital for which the 

ratio of residents to the average number of patients was at least 1 to 4 and a nonmajor 

teaching hospital as one having a ratio of residents to patients of less than 1 to 4. We 

defined an urban hospital as one located in a county that was considered a 

metropolitan statistical area (as defined by the Office of Management and Budget) 

and a rural hospital as one located in a county that was not considered a metropolitan 

statistical area. We defined a small hospital as a hospital for which the total charge 

 

1

Even if these hospitals did not have charges for SCODs in the first 6 months of 2003, they might have 

made purchases for SCODs after that time period. Therefore, it was important to include them in the 

sample. 
Enclosure I Enclosure I 

13 GAO-05-581R Medicare Hospital Outpatient Drug Prices

amount to Medicare for SCODs during the first 6 months of 2003 was less than 

$10,000. The number of unique SCODs refers to the number of SCODs for which each 

hospital submitted Medicare claims during the first 6 months of 2003. (See table 2.) 

Table 2: Characteristics of Sample Strata 

Stratum 

Hospitals 

in the 

populationa 

Average 

total 

chargesb ($)

Standard 

deviation of 

total 

chargesc ($)

Neyman 

allocation 

for total 

sample of 

1,400d

Target 

sample of 

1,000e 

Target 

response 

rate in %f

Major teaching hospitals 

< 20 unique SCODs 75 238,949 320,349 21 11 52

20-39 unique SCODs 111 861,415 1,805,586 111 96 86

40-59 unique SCODs 96 2,297,626 1,985,026 96 91 95

60+ unique SCODs 73 6,034,849 3,703,998 73 73 100

Nonmajor teaching hospitals 

< 20 unique SCODs 143 196,875 241,523 29 16 55

20-39 unique SCODs 313 714,043 630,105 151 94 62

40-59 unique SCODs 137 1,952,405 1,222,357 129 80 62

60+ unique SCODs 34 5,242,311 3,410,652 34 34 100

Urban nonteaching hospitals 

< 20 unique SCODs 609 161,797 210,080 99 61 62

20-39 unique SCODs 428 735,416 728,106 238 149 63

40+ unique SCODs 126 2,232,851 1,837,833 126 110 87

Rural nonteaching hospitals 

< 20 unique SCODs 730 136,618 141,370 80 49 61

20-39 unique SCODs 321 672,290 560,202 140 86 61

40+ unique SCODs 53 2,072,873 1,382,985 53 35 66

Small hospitals 201 3,679 3,116 20 15 75

Total 3,450 1,400 1,000 71

Source: GAO. 

a

Hospitals in the population refers to the number of hospitals that made any claims to Medicare for outpatient 

drugs from January 1, 2003, through June 30, 2003, and were still Medicare-certified hospitals on July 1, 2004. 

b

Total charges are the hospital outpatient charges to Medicare from January 1, 2003, through June 30, 2003. 

Average total charges are average total charges per hospital. 

c

The standard deviation is a measure of variation around the average. 

d

The Neyman allocation is a method for determining the optimum sample size, that is, the sample size that 

results in the greatest precision. 

e

We expected an achieved sample of 1,000 (an overall response rate of 71 percent), and we applied the Neyman 

allocation to determine the optimum number of hospitals in each stratum. In some strata, the optimum allocation 

exceeded the number of hospitals in the population. In these instances, the excess hospitals were reallocated to 

the remaining strata according to the Neyman allocation. 

f

The target response rate is the ratio of the target sample to the total sample for each stratum.
Enclosure I Enclosure I 

14 GAO-05-581R Medicare Hospital Outpatient Drug Prices

To determine whether we had selected strata that represented substantially different 

average purchase prices for SCODs, we examined other possible stratification factors 

and compared the efficiency of our stratified sample with a simple random sample.2

 

Other factors that we examined included hospital size (measured by both annual 

discharges and average number of patients), ownership status (for-profit, nonprofit), 

whether the hospital billed Medicare for radiopharmaceuticals, and whether the 

hospital billed Medicare for blood products. However, these other factors were 

highly correlated with the factors that we had selected and did not significantly 

improve the model. Stratification made the sample about 10 times more efficient 

than a simple random sample. 

To determine the appropriate number of hospitals in each stratum, we used the 

Neyman allocation—a method for determining the optimum sample size, that is, the 

sample size that results in the greatest precision. After the sample was selected, we 

established the optimal allocation of 1,000 hospitals—our target response—among 

strata, using another Neyman allocation. We used the results of this second 

allocation to establish target response rates by stratum. 

Data Collection and Data Processing 

We developed a survey instrument and tested it before sending it to the entire sample 

of 1,400 hospitals. We gave hospitals several options for submitting data, which we 

extracted from their submissions and put in a standard format. 

After consulting a number of experts, including pharmacists, hospital administrators, 

and representatives from industry groups, on methods of developing and 

administering the survey, we developed and pretested the survey instrument with 12 

hospitals in June 2004. This initial instrument was limited to 22 products. As a result 

of responses to the pretest, we modified the data collection instrument, and Westat, 

our data collection contractor, piloted the revised instrument with 48 hospitals 

beginning on August 5, 2004. As a result of the pilot, we clarified certain instructions 

and made changes in our procedures but did not significantly change the instrument. 

Westat began data collection from the 1,352 hospitals in the sample on September 27, 

2004.3

 Key components of the data collection protocol were as follows: 

• a first mailing to the chief executive officer or chief financial officer of each 

hospital explaining the survey, followed by a telephone call to identify the 

main point of contact; 

• a second mailing to the main contact outlining the data that were needed and 

describing the options for submitting the data; 

 

2

We measured efficiency by the size of the reduction in sample variation. 

3

We also used data from the 48 hospitals in the pilot survey, for a total sample of 1,400 hospitals. 
Enclosure I Enclosure I 

15 GAO-05-581R Medicare Hospital Outpatient Drug Prices

• a follow-up telephone call to facilitate the main contact’s understanding of the 

data collection, provide technical assistance as needed, and obtain some basic 

information about the hospital, such as whether the hospital participated in 

the 340B program; and 

• telephone calls at regular intervals to remind the hospitals to submit their data 

and to provide assistance as needed. 

Hospitals could submit data in one of three ways: by uploading electronic files 

through the study Web site, by sending an e-mail to the study address with data 

attached, or by sending electronic media or paper submissions through the mail. 

Electronic submissions took three forms: downloads from distributors’ ordering and 

order management systems,4

 extracts from hospitals’ own databases, and entries 

made in a worksheet form we supplied. Paper submissions were most often copies of 

invoices. 

The contractor performed extensive follow-up. On average, Westat interviewers 

called each hospital 8 times before receiving a complete data submission. Hospitals 

that were late in responding received 15 calls, on average. Follow-up calls were most 

extensive for hospitals in strata with high target response rates. We obtained an 

overall response rate of 83 percent and met our target response rate in 11 of 15 strata. 

(See table 3.) 

 

4

Distributors are intermediaries that buy drugs from manufacturers and sell them to hospitals. 
Enclosure I Enclosure I 

16 GAO-05-581R Medicare Hospital Outpatient Drug Prices

Table 3: Target and Actual Response Rates by Stratum 

Stratum Target response rate in % Actual response ratea in %

Major teaching hospitals 

< 20 unique SCODs 52 71

20-39 unique SCODs 86 82b 

40-59 unique SCODs 95 79b

60+ unique SCODs 100 85b

Nonmajor teaching hospitals 

< 20 unique SCODs 55 79

20-39 unique SCODs 62 84

40-59 unique SCODs 62 88

60+ unique SCODs 100 85b

Urban nonteaching hospitals 

< 20 unique SCODs 62 80

20-39 unique SCODs 63 84

40+ unique SCODs 87 90b

Rural nonteaching hospitals 

< 20 unique SCODs 61 66

20-39 unique SCODs 61 81

40+ unique SCODs 66 85

Small hospitals 75 80

Total 71 83

Source: GAO. 

a

Except where otherwise indicated, we counted as responses all hospitals that sent usable data on or before 

January 15, 2005. 

b

We continued to process data received through February 22, 2005, for strata where we had not yet reached our 

target response rate as of January 15, 2005. 

We extracted data from hospitals’ submissions and placed those data in a standard 

format for analysis. In many cases, hospitals submitted data on all drugs 

purchased—not just SCODs—and consequently we needed to extract the SCOD data. 

Most data were submitted for periods of a day or a month, as we requested, but 106 

hospitals submitted annual data, which we also accepted. 

Westat technical staff checked the data for consistency and completeness and 

followed up with 71 hospitals to resolve specific issues. We trimmed the data to 

exclude outliers. On average, 2.6 percent of purchase records were excluded. 

Estimates of SCOD Average and Median Purchase Prices 

This section describes the rationale and method for weighting the hospital sample 

data, calculating average purchase price, calculating median purchase price, and 

calculating their confidence intervals. 
Enclosure I Enclosure I 

17 GAO-05-581R Medicare Hospital Outpatient Drug Prices

Weighting the Hospital Sample Data

To estimate hospitals’ average and median purchase prices for SCODs, the sample 

hospitals’ purchase price data are weighted to make them representative of the 

population of hospitals from which the sample is drawn. A survey sample is drawn 

from a population. To enable data from the sample to represent data from the 

population on purchase prices and other variables, the sample data are weighted: the 

less likely that a hospital will be sampled, the larger its weight. For example, if each 

hospital has a 1 in 10 probability of being sampled, its sample weight is 10. That is, 

each hospital in the sample represents 10 hospitals in the population. Consequently, 

if 5 hospitals in a sample buy a particular drug, and the sample weight is 10, we 

estimate that 50 hospitals in the population bought that drug. In this report, we refer 

to sample weights as “hospital weights.” Our sample is stratified, so all hospitals in a 

particular stratum (for example, major teaching hospitals) have the same weight. 

Since in our sample the probability of a hospital’s being selected varied by stratum, 

hospitals in different strata have different weights. 

In calculating weights, we took account of two distinctive facts about our survey: 

First, our sample is unusual in that we must treat it as a set of separate samples—one 

for each SCOD—since the population of hospitals that buy a drug or 

radiopharmaceutical in a particular HCPCS varies depending on the SCOD. Some 

SCODs are bought by many hospitals, while others are bought by relatively few 

hospitals. Second, we lacked a direct measure of the number of hospitals in the 

population that bought a particular SCOD; consequently, we used the number of 

hospitals that billed for that SCOD, according to Medicare outpatient claims data, as a 

proxy or indirect measure of the population’s size. 

We calculated the hospital weight as 

where 

• Wjh denotes the hospital weight for the jth SCOD in the hth stratum, 

• Njh denotes the population (the total number of hospitals) that, 

according to Medicare outpatient claims, billed for the jth SCOD in the 

hth stratum, and 

• Rjh denotes the total number of hospitals in the hth stratum that 

purchased the jth SCOD, according to their survey submissions. 

This weight recognizes that not all hospitals responded to our survey, since the 

weight’s denominator is Rjh—the number of hospitals that responded to the survey 

and indicated that they bought the jth drug.5

 

5

Our formulation of the hospital weight is an adaptation of the usual formulation, in which Njh is 

divided by njh , the number of hospitals in the hth stratum that purchased the jth SCOD. Unlike Rjh, njh 

includes hospitals that did not respond to the survey and consequently is not appropriate for our 

purpose. 
Enclosure I Enclosure I 

18 GAO-05-581R Medicare Hospital Outpatient Drug Prices

We made one adjustment to the hospital weight to take account of unusual 

circumstances. In some cases, the total number of hospitals in a stratum that 

reported purchasing a particular SCOD exceeded our population estimates. This 

situation resulted from imperfections in the Medicare claims data used as a proxy for 

purchase price. That is, in these cases Rjh exceeds Njh. Since that situation is 

implausible, we adjusted the size of the population derived from Medicare claims, as 

follows: 

N ’

jh = Njh * 

jh

jh

M

R

where 

• N ’

jh denotes the adjusted population and 

• Mjh represents the number of hospitals in the hth stratum that purchased 

the jth SCOD, according to their survey submissions, and that submitted 

an outpatient claim to Medicare for that drug. 

This adjustment makes the size of the adjusted population larger than the unadjusted 

population—the number of hospitals that billed Medicare for the drug. Sampling 

statisticians call this adjustment “post-stratification.” 

Average Purchase Price Using Volume and Hospital Weights 

To summarize hospitals’ purchase prices for each SCOD—reflecting purchases made, 

in many cases, at different prices and in different quantities—we calculated an 

average purchase price for each SCOD. This average purchase price for a particular 

SCOD is in effect a weighted average. To reflect the differences among hospitals in 

purchase prices and purchase volumes, we used both the hospital weights and 

purchase volume as weighting variables in estimating the average purchase price. 

The average purchase price is estimated from our sample data, based on the 

following equation: 

where 

• Nh represents the total number of hospitals in the hth stratum, 

• nh represents the size of the sample of hospitals in the hth stratum, 

• y*jhi = Σk yjhik , which represents the total dollar amount of the jth SCOD 

purchased by the ith hospital in the hth stratum, and 

• x*jhi = Σk xjhik , which represents the total number of units of the jth SCOD 

purchased by the ith hospital in the hth stratum. 

The equation estimates the average purchase price of a SCOD as the ratio of the total 

amount purchased in dollars to the total number of units purchased. For example, a 

total purchase amount of $50,000 and a total number of units purchased of 1,000 

milligrams yields an average purchase price of $50 per milligram. 
Enclosure I Enclosure I 

19 GAO-05-581R Medicare Hospital Outpatient Drug Prices

Median Purchase Price Using Volume and Hospital Weights

In addition to the average purchase price, we calculated the estimated median of 

each SCOD’s purchase price. To calculate this median, we first applied volume and 

hospital weights to each hospital’s purchases of a given SCOD; we then ranked the 

weighted hospitals’ purchase prices from lowest to highest and selected the midpoint 

of these prices. 

More precisely, the estimated median—based on the population cumulative density 

function F for hospital purchase prices—is given by 

X0.5 = inf { yjhik : F(yjhik ) ≥ 0.5 } , 

where 

 

• X0.5 denotes the median estimate of hospital purchase price for a 

particular SCOD, 

• yjhikdenotes the unit purchase price listed in the kth invoice record 

submitted in our survey by the ith hospital in the hth stratum, 

• F, the cumulative density function, is the probability that the variable Y 

takes on a value less than or equal to a particular value (in this case, 

yjhik), 

• inf { a :b } refers to the minimum value of a, which satisfies the 

condition specified in b (in this case b is the condition that F(yjhik ) ≥

0.5), and 

• the estimated population cumulative density function, F, is defined as 

 

F(x) = { Σh

h

h

n

N Σi Σk I(yjhik ≤ x) } / { Σh

h

h

n

N Σi Σk } 

In this equation for F(x), the hospital weights,

h

h

n

N , enter in both the 

numerator and the denominator. The term I (yjhik ≤ x) equals 1 if yjhik ≤ x

and is zero otherwise; that is, if the purchase price of a SCOD by a 

hospital in the hth stratum is less than or equal to x (any specific value), 

this term takes on the value of 1. 
Enclosure I Enclosure I 

20 GAO-05-581R Medicare Hospital Outpatient Drug Prices

Confidence Intervals for Average Purchase Price 

and Median Purchase Price

To help assess the precision of our estimates of average and median purchase prices, 

we calculated confidence intervals for each measure. A confidence interval gives an 

estimated range of values, calculated from sample data (our survey), that is likely to 

include the true average of the population (in this case, the average purchase price 

for a particular SCOD). As is commonly done, we calculated 95 percent confidence 

intervals.6

 The narrower the confidence interval around the average calculated from 

sample data, the more precise the estimated average is considered to be. 

We obtained the 95 percent confidence intervals of our estimated average purchase 

prices by using methods detailed in Cochran7 and Hansen, Hurwitz, and Madow,8

since our estimates were calculated from our survey—that is, from a stratified 

sample.9

 To calculate the confidence interval for our estimates of median prices, we 

used the equations presented in Binder10 and Francisco and Fuller.11 We estimated 

the average purchase prices, median purchase prices, and the confidence intervals of 

both these averages and medians using specialized software for survey data 

analysis—SUDAAN®

.

12

 

6

If independent samples are taken repeatedly from the same population, and a confidence interval 

calculated for each sample, then a certain percentage of the intervals will include the unknown 

average for the population. The confidence level is often calculated so that the percentage is 95 

percent. 

7

W.G. Cochran, Sampling Techniques, 3rd ed., Wiley Series in Probability and Mathematical Statistics, 

section 11.7 (New York, N.Y.: John Wiley & Sons, 1977), 303. 

8

M.H. Hansen, W.N. Hurwitz, and W.G. Madow, Sample Survey Methods and Theory, vol. I, Methods 

and Applications, Wiley Publications in Statistics, sections 6.6 and 6.7 (New York, N.Y.: John Wiley & 

Sons, Inc., 1953), 252-259. 

9

More precisely, this is a stratified cluster sample. “Cluster” refers to the set of invoice records (for a 

given SCOD) reported by a hospital. The size of a cluster varied widely among hospitals—from 1 

invoice record for a given SCOD to over 800 records. 

10D.A. Binder, “Use of Estimating Functions for Interval Estimation from Complex Surveys,” 

Proceedings of the Survey Research Methods Section, American Statistical Association (1991). 

11C.A. Francisco and W.A. Fuller, “Quantile Estimation with a Complex Survey Design,” Annals of 

Statistics, 19 (1991), 454-469. 

12B.V. Shah, B.B. Barnwell, and G.S. Bieler, SUDAAN: User’s Manual, Release 7.5, vols. 1 and 2 

(Research Triangle Park, N.C.: Research Triangle Institute, 1997). SUDAAN®

 is a registered trademark 

of the Research Triangle Institute. 
Enclosure I Enclosure I 

21 GAO-05-581R Medicare Hospital Outpatient Drug Prices

Advisory Panel 

To provide us with advice on our methodology for collecting and analyzing 

acquisition cost data concerning SCODs, we convened a panel of experts with 

experience in pharmaceutical issues or in technical fields relevant to our survey. The 

panel met twice: first, to consult with us on sample design and the survey, and later to 

review our preliminary results. The panelists included the chairman, Joseph P. 

Newhouse, PhD—John D. MacArthur Professor of Health Policy and Management, 

Harvard University; Robert A. Berenson, MD—Senior Fellow, Urban Institute; Ernst 

R. Berndt, PhD—Professor of Applied Economics, Sloan School of Management, 

Massachusetts Institute of Technology; Andrea G. Hershey, PharmD—Clinical 

Coordinator, Pharmacy Residency Program Director, Union Memorial Hospital 

(Baltimore, Md.); and Richard L. Valliant, PhD—Senior Research Scientist, University 

of Michigan. 
Enclosure II Enclosure II 

22 GAO-05-581R Medicare Hospital Outpatient Drug Prices 

Naional Drug Codes and Their Names, Grouped by HCPCS

Rank in Medicare 

spending on drug 

SCODs HCPCS and description National Drug Code National Drug Code name 

1 Q0136, Injection, Epoetin Alpha (for 

non-ESRD use), per 1,000 units 

59676-0302-01 Procrit® 2,000 unit/mL 

59676-0302-02 Procrit® 2,000 unit/mL 

59676-0303-01 Procrit®

 3,000 unit/mL 

59676-0303-02 Procrit®

 3,000 unit/mL 

59676-0304-01 Procrit®

 4,000 unit/mL 

59676-0304-02 Procrit®

 4,000 unit/mL 

59676-0310-01 Procrit®

 10,000 unit/mL 

59676-0310-02 Procrit®

 10,000 unit/mL 

59676-0312-01 Procrit®

 10,000 unit/mL 

59676-0320-01 Procrit®

 20,000 unit/mL 

59676-0340-01 Procrit®

 40,000 unit/mL 

2 J9310, Rituximab, 100 mg 50242-0051-21 Rituxan®

 10 mg/mL 

50242-0053-06 Rituxan® 10 mg/mL 

3 J2505, Injection, Pegfilgrastim, 

6 mg 

55513-0190-01 Neulasta® 6 mg/0.6 mL 

4a Q9941, Injection, Immune Globulin, 

Intravenous, Lyophilized, 1 g 

00053-7486-05 Gammar®-P IV 5 g 

00053-7486-06 Gammar®-P IV 5 g 

00053-7486-10 Gammar®

-P IV 10 g 

00078-0124-96 Sandoglobulin®

 6 g 

00944-2620-01 Gammagard®

 S/D 0.5 g 

00944-2620-02 Gammagard®

 S/D 2.5 g 

00944-2620-03 Gammagard®

 S/D 5 g 

00944-2620-04 Gammagard®

 S/D 10 g 

44206-0416-03 Carimune®

 NF 3 g 

44206-0417-06 Carimune®

 NF 6 g 

44206-0418-12 Carimune®

 NF 12 g 

44206-0505-51 Carimune®

 1 g 

44206-0507-56 Carimune®

 6 g 

44206-0508-62 Carimune®

 12 g 

52769-0268-66 Panglobulin®

 6 g 

52769-0269-72 Panglobulin®

 12 g 

52769-0417-06 Panglobulin®

 NF 6 g 

52769-0417-12 Panglobulin®

 NF 12 g 

52769-0418-12 Panglobulin®

 NF 12 g 

52769-0471-75 Polygam®

 S/D 5 g 

52769-0471-80 Polygam®

 S/D 10 g 

54129-0233-50 Iveegam®

 5 g 

64193-0250-50 Iveegam®

 EN 5 g 

4a Q9943, Injection, Immune Globulin, 

Intravenous, Non-Lyophilized, 1 g 

00026-0646-24 Gamimune®

 N 5% 10 g 

00026-0646-25 Gamimune® N 5% 12.5 g 

00026-0646-71 Gamimune®

 N 5% 5 g 

00026-0648-12 Gamimune®

 N 10% 1 g 

00026-0648-15 Gamimune®

 N 10% 2.5 g 
Enclosure II Enclosure II 

23 GAO-05-581R Medicare Hospital Outpatient Drug Prices

Rank in Medicare 

spending on drug 

SCODs HCPCS and description National Drug Code National Drug Code name 

00026-0648-20 Gamimune® N 10% 5 g 

00026-0648-24 Gamimune® N 10% 20 g 

00026-0648-71 Gamimune®

 N 10% 10 g 

49669-1613-01 Venoglobulin®

-S 5% 5 g 

49669-1614-01 Venoglobulin®

-S 5% 10 g 

49669-1622-01 Venoglobulin®

-S 10% 5 g 

49669-1623-01 Venoglobulin®

-S 10% 10 g 

49669-1624-01 Venoglobulin®

-S 10% 20 g 

61953-0003-03 Flebogamma®

 5% 5 g 

61953-0003-04 Flebogamma®

 5% 10 g 

68516-1623-01 Venoglobulin®

-S 10% 10 g 

68516-1624-01 Venoglobulin®

-S 10% 20 g 

5 J1745, Injection, Infliximab, 10 mg 57894-0030-01 Remicade®

 100 mg 

6 Q0137, Injection, Darbepoetin alfa, 

1 mcg (non-ESRD use) 

55513-0010-01 Aranesp® 25 mcg/mL 

55513-0010-04 Aranesp® 25 mcg/mL 

55513-0011-04 Aranesp®

 40 mcg/mL 

55513-0012-04 Aranesp®

 60 mcg/mL 

55513-0013-01 Aranesp®

 100 mcg/mL 

55513-0013-04 Aranesp®

 100 mcg/mL 

55513-0014-01 Aranesp®

 200 mcg/mL 

55513-0014-04 Aranesp®

 200 mcg/mL 

55513-0015-01 Aranesp®

 300 mcg/mL 

55513-0037-01 Aranesp®

 40 mcg/0.4 mL 

55513-0037-04 Aranesp®

 40 mcg/0.4 mL 

55513-0039-01 Aranesp®

 60 mcg/0.3 mL 

55513-0039-04 Aranesp®

 60 mcg/0.3 mL 

55513-0041-01 Aranesp®

 100 mcg/0.5 mL 

55513-0041-04 Aranesp®

 100 mcg/0.5 mL 

55513-0043-04 Aranesp®

 150 mcg/0.3 mL 

55513-0044-01 Aranesp®

 200 mcg/0.4 mL 

55513-0046-01 Aranesp®

 300 mcg/0.6 mL 

55513-0048-01 Aranesp®

 500 mcg/mL 

55513-0054-01 Aranesp®

 150 mcg/0.75 mL 

55513-0054-04 Aranesp®

 150 mcg/0.75 mL 

55513-0058-04 Aranesp®

 25 mcg/0.42 mL 

7 J9170, Docetaxel, 20 mg 00075-8001-20 Taxotere®

 20 mg/0.5 mL 

00075-8001-80 Taxotere® 80 mg/2 mL 

8 J9045, Carboplatin, 50 mg 00015-3210-30 Paraplatin® 50 mg/5 mL 

00015-3210-76 Paraplatin® 50 mg/5 mL 

00015-3211-30 Paraplatin®

 150 mg/15 mL 

00015-3211-76 Paraplatin®

 150 mg/15 mL 

00015-3212-30 Paraplatin®

 450 mg/45 mL 

00015-3212-76 Paraplatin®

 450 mg/45 mL 

00015-3213-29 Paraplatin®

 50 mg 

00015-3213-30 Paraplatin®

 50 mg 

00015-3214-29 Paraplatin®

 150 mg 

00015-3214-30 Paraplatin®

 150 mg 
Enclosure II Enclosure II 

24 GAO-05-581R Medicare Hospital Outpatient Drug Prices

Rank in Medicare 

spending on drug 

SCODs HCPCS and description National Drug Code National Drug Code name 

00015-3215-29 Paraplatin® 450 mg 

00015-3215-30 Paraplatin® 450 mg 

00015-3216-30 Paraplatin®

 600 mg/60 mL 

00703-3244-11 Carboplatin 50 mg/5 mL 

00703-3246-11 Carboplatin 150 mg/15 mL 

00703-3248-11 Carboplatin 450 mg/45 mL 

00703-3266-01 Carboplatin 150 mg 

00703-3268-01 Carboplatin 450 mg 

63323-0167-20 Carboplatin 150 mg 

9 C9205, Injection, Oxaliplatin, per 

5 mg 

00024-0596-02 EloxatinTM 50 mg 

00024-0597-04 EloxatinTM 100 mg 

10 J3487, Injection, Zoledronic Acid, 

1 mg 

00078-0350-84 Zometa®

 4 mg 

00078-0387-25 Zometa® 4 mg/5 mL 

11 J9201, Gemcitabine Hcl, 200 mg 00002-7501-01 Gemzar®

 200 mg 

00002-7502-01 Gemzar® 1 g 

12 J9206, Irinotecan, 20 mg 00009-7529-01 Camptosar® 20 mg/mL 

00009-7529-02 Camptosar® 20 mg/mL 

13 J2324, Injection, Nesiritide, 0.25 mg 65847-0205-25 Natrecor®

 1.5 mg 

14 J9265, Paclitaxel, 30 mg 00074-4335-01 Paclitaxel 100 mg/16.7 mL 

00074-4335-02 Paclitaxel 100 mg/16.7 mL 

00074-4335-04 Paclitaxel 300 mg/50 mL 

00172-3753-77 Onxol® 6 mg/mL 

00172-3753-96 Onxol®

 6 mg/mL 

00172-3754-73 Onxol®

 6 mg/mL 

00172-3754-94 Onxol®

 6 mg/mL 

00172-3755-31 Onxol®

 100 mg/16.7 mL 

00172-3756-75 Onxol®

 6 mg/mL 

00172-3756-95 Onxol®

 6 mg/mL 

51079-0961-01 Paclitaxel 30 mg/5 mL 

51079-0962-01 Paclitaxel 100 mg/16.7 mL 

51079-0963-01 Paclitaxel 300 mg/50 mL 

55390-0114-05 Paclitaxel 30 mg/5 mL 

55390-0114-20 Paclitaxel 30 mg/5 mL 

55390-0114-50 Paclitaxel 30 mg/5 mL 

55390-0314-05 Paclitaxel 30 mg/5 mL 

55390-0314-20 Paclitaxel 30 mg/5 mL 

55390-0314-50 Paclitaxel 30 mg/5 mL 

61703-0342-09 Paclitaxel 100 mg/16.7 mL 

61703-0342-22 Paclitaxel 100 mg/16.7 mL 

61703-0342-50 Paclitaxel 100 mg/16.7 mL 

15 J9355, Trastuzumab, 10 mg 50242-0134-60 Herceptin®

 440 mg 

50242-0134-68 Herceptin® 440 mg 

16 J9217, Leuprolide Acetate (for 

depot suspension), 7.5 mg 

00024-0222-05 Eligard®

 22.5 mg 

00024-0597-07 Eligard® 7.5 mg 

00024-0597-22 Eligard®

 22.5 mg 

00024-0610-30 Eligard®

 30 mg 
Enclosure II Enclosure II 

25 GAO-05-581R Medicare Hospital Outpatient Drug Prices

Rank in Medicare 

spending on drug 

SCODs HCPCS and description National Drug Code National Drug Code name 

00024-0793-75 Eligard® 7.5 mg 

00300-3346-01 Lupron Depot® 22.5 mg 

00300-3642-01 Lupron Depot®

 7.5 mg 

00300-3683-01 Lupron Depot®

 30 mg 

17 J0256, Injection, Alpha 1 - 

Proteinase Inhibitor - Human, 

10 mg 

00026-0601-30 Prolastin® approx 500 mg 

00026-0601-35 Prolastin® approx 1000 mg 

00053-7201-02 ZemairaTM approx 1000 mg 

49669-5800-02 Aralast®

 approx 1000 mg 

18 J9035,b

 Injection, Bevacizumab, 

10 mg 

50242-0060-01 AvastinTM 100 mg/4 mL 

50242-0060-02 AvastinTM 400 mg/16 mL 

19 J1441, Injection, Filgrastim (GCSF), 480 mcg 55513-0209-01 Neupogen®

 480 mcg/0.8 mL 

55513-0209-10 Neupogen® 480 mcg/0.8 mL 

55513-0546-01 Neupogen®

 480 mcg/1.6 mL 

55513-0546-10 Neupogen®

 480 mcg/1.6 mL 

20 J1950, Injection, Leuprolide Acetate 

(for depot suspension), per 3.75 mg 

00300-3641-01 Lupron Depot®

 3.75 mg 

00300-3663-01 Lupron Depot® 11.25 mg 

21 J9001, Doxorubicin Hydrochloride, 

all lipid formulations, 10 mg 

17314-9600-01 Doxil® 2 mg/mL 

17314-9600-02 Doxil® 2 mg/mL 

22 J2353, Injection, Octreotide, depot 

form for intramuscular injection, 

1 mg 

00078-0340-84 Sandostatin LAR® Depot 10 mg 

00078-0341-84 Sandostatin LAR® Depot 20 mg 

00078-0342-84 Sandostatin LAR®

 Depot 30 mg 

23 J9055,b Injection, Cetuximab, 

10 mg 

66733-0948-23 ErbituxTM 100 mg/50 mL 

24 J9041,b Injection, Bortezomib, 

0.1 mg 

63020-0049-01 Velcade® 3.5 mg 

25 J9350, Topotecan, 4 mg 00007-4201-01 Hycamtin® 4 mg 

00007-4201-05 Hycamtin® 4 mg 

26 J1440, Injection, Filgrastim (GCSF), 300 mcg 55513-0530-01 Neupogen®

 300 mcg/mL 

55513-0530-10 Neupogen® 300 mcg/mL 

55513-0924-10 Neupogen®

 300 mcg/0.5 mL 

27 J1785, Injection, Imiglucerase, per 

unit 

58468-1983-01 Cerezyme®

 200 unit 

58468-4663-01 Cerezyme® 400 unit 

28 J3396, Injection, Verteporfin, 

0.1 mg 

58768-0150-15 Visudyne®

 15 mg 

29 J9202, Goserelin Acetate Implant, 

per 3.6 mg 

00310-0950-36 Zoladex® 3.6 mg 

00310-0951-30 Zoladex® 10.8 mg 

00310-0960-36 Zoladex®

 3.6 mg 

00310-0961-30 Zoladex®

 10.8 mg 

30 J1626, Injection, Granisetron 

Hydrochloride, 100 mcg 

00004-0239-09 Kytril®

 1 mg/mL 

00004-0240-09 Kytril® 1 mg/mL 
Enclosure II Enclosure II 

26 GAO-05-581R Medicare Hospital Outpatient Drug Prices

Rank in Medicare 

spending on drug 

SCODs HCPCS and description National Drug Code National Drug Code name 

00029-4149-01 Kytril® 1 mg/mL 

31 J0585, Botulinim Toxin Type A, per 

unit 

00023-1145-01 Botox® 100 unit 

32 J0207, Injection, Amifostine, 

500 mg 

17314-7253-03 Ethyol® 500 mg 

58178-0017-03 Ethyol® 500 mg 

33 J2430, Injection, Pamidronate 

Disodium, per 30 mg 

00703-4075-19 Pamidronate Disodium 

30 mg/10 mL 

00703-4085-11 Pamidronate Disodium 

90 mg/10 mL 

00703-4085-91 Pamidronate Disodium 

90 mg/10 mL 

55390-0127-01 Pamidronate Disodium 

30 mg 

55390-0129-01 Pamidronate Disodium 

90 mg 

55390-0157-01 Pamidronate Disodium 

30 mg 

55390-0159-01 Pamidronate Disodium 

90 mg 

55390-0204-01 Pamidronate Disodium 

30 mg/10 mL 

55390-0604-01 Pamidronate Disodium 

30 mg/10 mL 

61703-0325-18 Pamidronate Disodium 

6 mg/mL 

63323-0734-10 Pamidronate Disodium 

30 mg/10 mL 

63323-0735-10 Pamidronate Disodium 

90 mg/10 mL 

34 J9390, Vinorelbine Tartrate, per 

10 mg 

00703-4182-01 Vinorelbine Tartrate 

10 mg/mL 

00703-4182-91 Vinorelbine Tartrate 

10 mg/mL 

00703-4183-01 Vinorelbine Tartrate 

10 mg/mL 

00703-4183-91 Vinorelbine Tartrate 

10 mg/mL 

10019-0970-01 Vinorelbine Tartrate 

10 mg/mL 

10019-0970-02 Vinorelbine Tartrate 

10 mg/mL 

55390-0069-01 Vinorelbine Tartrate 

10 mg/mL 

55390-0070-01 Vinorelbine Tartrate 

10 mg/mL 

59911-5958-01 Vinorelbine Tartrate 

10 mg/mL 

59911-5959-01 Vinorelbine Tartrate 

10 mg/mL 

35 J2993, Injection, Reteplase, 

18.1 mg 

57894-0040-01 Retavase®

 2x18.1 mg 

57894-0040-02 Retavase® 18.1 mg 

36 J9293, Injection, Mitoxantrone 

Hydrochloride, per 5 mg 

44087-1520-01 Novantrone®

 2 mg/mL 

44087-1525-01 Novantrone® 2 mg/mL 

44087-1530-01 Novantrone®

 2 mg/mL 

58406-0640-03 Novantrone®

 2 mg/mL 
Enclosure II Enclosure II 

27 GAO-05-581R Medicare Hospital Outpatient Drug Prices

Rank in Medicare 

spending on drug 

SCODs HCPCS and description National Drug Code National Drug Code name 

58406-0640-05 Novantrone® 2 mg/mL 

58406-0640-07 Novantrone® 2 mg/mL 

37 J9185, Fludarabine Phosphate, 

50 mg 

00703-5854-01 Fludarabine Phosphate 50 mg 

50419-0511-06 Fludara® 50 mg 

38 C1305, Apligraf®

, per 44 square 

centimeters 

09978-0001-99 Apligraf®

39 J9395, Injection, Fulvestrant, 25 mg 00310-0720-25 Faslodex® 125 mg/2.5 mL 

00310-0720-50 Faslodex® 250 mg/5 mL 

40 J3100, Injection, Tenecteplase, 

50 mg 

50242-0038-61 TNKaseTM 50 mg 

41 J9305,b Injection, Pemetrexed, 

10 mg 

00002-7623-01 Alimta® 500 mg 

42 J9160, Denileukin Diftitox, 300 mcg 64365-0503-01 Ontak® 150 mcg/mL 

43 J0180,b Injection, Agalsidase Beta, 

1 mg 

58468-0040-01 Fabrazyme® 35 mg 

58468-0041-01 Fabrazyme® 5 mg 

44 Q0166, Granisetron Hydrochloride, 

1 mg, oralc 

00004-0237-09 Kytril® 2 mg/10 mL 

00004-0241-26 Kytril® 1 mg 

00004-0241-33 Kytril®

 1 mg 

00029-4151-05 Kytril®

 1 mg 

45 J2469,b Injection, Palonosetron Hcl, 

25 mcg 

58063-0797-25 Aloxi® 0.25 mg/5 mL 

46 J9010, Alemtuzumab, 10 mg 50419-0355-10 CamPath® 10 mg/mL 

50419-0355-12 CamPath® 10 mg/mL 

47d Q9942, Injection, Immune Globulin, 

Intravenous, Lyophilized, 10 mg 

00053-7486-05 Gammar®-P IV 5 g 

00053-7486-06 Gammar®-P IV 5 g 

00053-7486-10 Gammar®

-P IV 10 g 

00078-0124-96 Sandoglobulin®

 6 g 

00944-2620-01 Gammagard®

 S/D 0.5 g 

00944-2620-02 Gammagard®

 S/D 2.5 g 

00944-2620-03 Gammagard®

 S/D 5 g 

00944-2620-04 Gammagard®

 S/D 10 g 

44206-0416-03 Carimune®

 NF 3 g 

44206-0417-06 Carimune®

 NF 6 g 

44206-0418-12 Carimune®

 NF 12 g 

44206-0505-51 Carimune®

 1 g 

44206-0507-56 Carimune®

 6 g 

44206-0508-62 Carimune®

 12 g 

52769-0268-66 Panglobulin®

 6 g 

52769-0269-72 Panglobulin®

 12 g 

52769-0417-06 Panglobulin®

 NF 6 g 

52769-0417-12 Panglobulin®

 NF 12 g 

52769-0418-12 Panglobulin®

 NF 12 g 

52769-0471-75 Polygam®

 S/D 5 g 

52769-0471-80 Polygam®

 S/D 10 g 

54129-0233-50 Iveegam®

 5 g 

64193-0250-50 Iveegam®

 EN 5 g 
Enclosure II Enclosure II 

28 GAO-05-581R Medicare Hospital Outpatient Drug Prices

Rank in Medicare 

spending on drug 

SCODs HCPCS and description National Drug Code National Drug Code name 

47d Q9944, Injection, Immune Globulin, 

Intravenous, Non-Lyophilized, 

10 mg 

00026-0646-24 Gamimune® N 5% 10 g 

00026-0646-25 Gamimune® N 5% 12.5 g 

00026-0646-71 Gamimune®

 N 5% 5 g 

00026-0648-12 Gamimune®

 N 10% 1 g 

00026-0648-15 Gamimune®

 N 10% 2.5 g 

00026-0648-20 Gamimune®

 N 10% 5 g 

00026-0648-24 Gamimune®

 N 10% 20 g 

00026-0648-71 Gamimune®

 N 10% 10 g 

49669-1613-01 Venoglobulin®

-S 5% 5 g 

49669-1614-01 Venoglobulin®

-S 5% 10 g 

49669-1622-01 Venoglobulin®

-S 10% 5 g 

49669-1623-01 Venoglobulin®

-S 10% 10 g 

49669-1624-01 Venoglobulin®

-S 10% 20 g 

61953-0003-03 Flebogamma®

 5% 5 g 

61953-0003-04 Flebogamma®

 5% 10 g 

68516-1623-01 Venoglobulin®

-S 10% 10 g 

68516-1624-01 Venoglobulin®

-S 10% 20 g 

48 J7190, Factor VIII (Antihemophilic 

Factor, Human) per I.U. 

00026-0665-20 Koate®-DVI 250 unit 

00026-0665-30 Koate®-DVI 500 unit 

00026-0665-50 Koate®

-DVI 1000 unit 

00053-7656-01 Monoclate-P®

 250 unit 

00053-7656-02 Monoclate-P®

 500 unit 

00053-7656-04 Monoclate-P®

 1000 unit 

00944-2935-01 Hemofil®

 M 200-1000 unit 

49669-4600-01 Alphanate®

 250-500 unit 

49669-4600-02 Alphanate®

 1000-1500 unit 

52769-0460-01 Monarc-MTM 250-1100 unit 

49 J0130, Injection, Abciximab, 10 mg 00002-7140-01 Reopro®

 2 mg/mL 

50 J0850, Injection, Cytomegalovirus 

Immune Globulin, Intravenous 

(Human), per vial 

60574-3101-01 CytoGam®

51 J1327, Injection, Eptifibatide, 5 mg 00085-1136-01 Integrilin® 0.75 mg/mL 

00085-1177-01 Integrilin® 2 mg/mL 

00085-1177-02 Integrilin®

 2 mg/mL 

52 J9214, Interferon, Alfa-2B, 

Recombinant, 1 million units 

00085-0120-02 Intron®

 A 5 million units 

00085-0285-02 Intron® A 25 million units 

00085-0539-01 Intron®

 A 50 million units 

00085-0571-02 Intron®

 A 10 million units 

00085-0647-05 Intron®

 A 3 million units 

00085-1110-01 Intron®

 A 18 million units 

00085-1133-01 Intron®

 A 10 million units/mL 

00085-1168-01 Intron®

 A 6 million units/mL 

00085-1179-02 Intron®

 A 10 million units/mL 

00085-1235-01 Intron®

 A 5 million units/0.2 mL 

00085-1242-01 Intron®

 A 3 million units/0.2 mL 
Enclosure II Enclosure II 

29 GAO-05-581R Medicare Hospital Outpatient Drug Prices

Rank in Medicare 

spending on drug 

SCODs HCPCS and description National Drug Code National Drug Code name 

00085-1254-01 Intron® A 10 million units/0.2 mL 

53 C9201, Dermagraft®, per 37.5 

square centimeters 

38172-0202-00 Dermagraft® 5 cm x 7.5 cm 

Sources: GAO survey and CMS. 

Note: ESRD = end-stage renal disease, mL = milliliter, mg = milligram, g = gram, mcg = microgram, I.U. = international unit, 

cm = centimeter. 

a

On April 1, 2005, CMS replaced J1563, Injection, Immune Globulin, Intravenous, 1g, with two new codes: Q9941 and Q9943. 

J1563 was ranked fourth in total Medicare spending on SCODs from January 1, 2004, to September 30, 2004. 

b

On January 1, 2005, CMS replaced C9214, C9215, C9207, C9213, C9208, and C9210 with J9035, J9055, J9041, J9305, 

J0180, and J2469, respectively. The ranks for the new codes correspond to the ranks in total Medicare spending on SCODs 

from January 1, 2004, to September 30, 2004, for the former codes. 

c

The complete description for HCPCS Q0166 is “Granisetron Hydrochloride, 1 mg, Oral, FDA Approved Prescription AntiEmetic, for Use as a Complete Therapeutic Substitute for an IV Anti-Emetic at the Time of Chemotherapy Treatment, Not to 

Exceed a 24 Hour Dosage Regimen.” 

d

On April 1, 2005, CMS replaced J1564, Injection, Immune Globulin, Intravenous, 10 mg, with two new codes: Q9942 and 

Q9944. J1564 was ranked 47th in total Medicare spending on SCODs from January 1, 2004, to September 30, 2004. 
Enclosure III Enclosure III 

30 GAO-05-581R Medicare Hospital Outpatient Drug Prices 

Comments from the Department of Health and Human Services
Enclosure III Enclosure III 

31 GAO-05-581R Medicare Hospital Outpatient Drug Prices
Enclosure IV Enclosure IV 

32 GAO-05-581R Medicare Hospital Outpatient Drug Prices 

GAO Contact and Staff Acknowledgments

GAO Contact 

Phyllis Thorburn, (202) 512-7012 

Acknowledgments 

Dae Park, Jonathan Ratner, Anna Theisen-Olson, Kaycee Misiewicz, Thomas Walke, 

Martha Kelly, Suzanne Worth, Hannah Fein, Richard Lipinski, Daniel Ries, Mike 

Thomas, Elizabeth T. Morrison, and Todd Anderson contributed to this report. 

(290352) 
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