Department of Health and Human Services
 

OFFICE OF 

INSPECTOR GENERAL 

MEDICARE PAYMENT FOR 


IRINOTECAN
 

Daniel R. Levinson
 

Inspector General 


August 2008
 

OEI-03-08-00310
 
 

 

 

 

 

 

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 

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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 

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guidance to the health care industry concerning the anti-kickback statute and other OIG 

enforcement authorities. 
 

 

 

 

 

Δ EXECUTIVE SUMMARY 

OBJECTIVE 

To compare the first-quarter 2008 Medicare payment amount to 

manufacturer prices for irinotecan hydrochloride in March 2008. 

BACKGROUND 

Irinotecan hydrochloride (hereinafter referred to as irinotecan) is an 

injectable drug used to treat patients with colorectal cancer. The 

Food and Drug Administration approved the first generic version of 

irinotecan on February 20, 2008. This study examines the difference 

between the Medicare payment amount and manufacturer-reported 

sales prices during March 2008. At that time, generic versions of 

irinotecan were available for purchase, but not yet factored into the 

calculation of the Medicare payment amount because of the 

two-quarter lag between the time when sales occur and the time when 

these sales become the basis for Medicare payment. 

Sections 1847A(d)(1) and (2) of the Social Security Act (the Act), as 

added by the Medicare Prescription Drug, Improvement, and 

Modernization Act of 2003, P.L. No. 108-173, direct the Office of 

Inspector General (OIG) to undertake studies that compare average 

sales prices (ASP) to widely available market prices and average 

manufacturer prices (AMP). If OIG finds that the ASP for a drug 

exceeds the widely available market price by a certain threshold 

(currently 5 percent), section 1847A(d)(3) of the Act states that the 

Secretary of the Department of Health and Human Services (the 

Secretary) may disregard the ASP for the drug when setting 

reimbursement. After being so informed by OIG, the Secretary shall 

substitute, effective as of the next quarter, the payment amount for 

that drug with the lesser of the widely available market price, or 

103 percent of the AMP. 

We collected pricing and other information (e.g., sales volume and 

discounts) from seven manufacturers of irinotecan (one brand-name 

manufacturer and six generic manufacturers). To calculate the average 

manufacturer sales price, we divided total sales (net of discounts, where 

available) for March 2008 by the total number of units sold during that 

month. We compared the first-quarter 2008 Medicare payment amount 

to the March 2008 average manufacturer sales price calculated by OIG. 

We also estimated the amount that Medicare would have saved in 

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EXECUTIVE SUMMARY 

March 2008 if reimbursement had been based on average manufacturer 

sales prices. 

FINDING 

In March 2008, the Medicare payment amount for irinotecan was 

more than double the OIG-calculated average manufacturer sales 

price. The Medicare payment amount for irinotecan ($126.31) exceeded 

the OIG-calculated average manufacturer sales price ($51.59) by 

145 percent in March 2008. Lower priced generic versions accounted for 

the vast majority (86 percent) of irinotecan sales in March 2008. The 

average manufacturer sales price for generic irinotecan was $40.66; the 

average manufacturer sales price for the brand-name product was nearly 

three times greater. 

Further, we estimate that had the Medicare payment amount for 

irinotecan been based on the average manufacturer sales price in 

March 2008, Medicare expenditures for this drug would have been 

reduced by $6.5 million in that month alone. 

RECOMMENDATION 

Because of the two-quarter lag in CMS’s standard process for 

establishing Medicare payment amounts, the underlying pricing issues 

identified in this report are not limited to irinotecan. Absent a change 

in the standard process, Medicare payment amounts for drugs with new 

generic versions will continue to be temporarily higher than 

manufacturer sales prices, sometimes substantially. 

We therefore recommend that CMS explore options to expedite the 

process to ensure that Medicare payment amounts for drugs with 

newly available generic versions accurately reflect market prices. The 

Secretary has the authority to lower Medicare payment amounts based 

on the results of OIG studies comparing ASPs to AMPs and widely 

available market prices; however, CMS has yet to make any changes as 

a result of OIG’s pricing comparisons. Further, the effectiveness of 

using this authority to address the disparities between Medicare 

payment amounts and market prices for drugs with newly available 

generics is limited by timing issues. In addition to the time needed to 

collect data on widely available market prices, pricing changes based on 

these data would not take effect until the quarter after OIG provides the 

pricing data to CMS. Therefore, CMS should explore alternative 

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EXECUTIVE SUMMARY 

options to address pricing discrepancies arising from newly available 

generic drugs, which may include seeking a legislative change. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

In its comments on the draft report, CMS concurred with our 

recommendation. CMS expressed its commitment to ensuring 

accurate payments for drug products under the ASP methodology and 

will review any specific suggestions OIG may have to further this 

goal. CMS noted that the third-quarter 2008 Medicare payment 

amount for irinotecan is $74.75, representing a 40-percent decrease 

from the previous quarter ($126.24). CMS also noted that this 

decrease results in a payment differential per unit for the third 

quarter that is substantially lower than the differential for March 

2008, demonstrating that the ASP methodology reflects market-based 

prices over time. 

OIG’s recommendation focuses on exploring options to reduce the 

time it takes for ASP to reflect market-based prices. The thirdquarter payment amount is still substantially higher than the 

average manufacturer sales price OIG found for March 2008 ($51.59), 

further illustrating the effects of the two-quarter lag. The first full 

quarter of generic sales data for irinotecan will not be reflected in the 

Medicare payment amount until October 2008—almost 8 months 

after the first generic versions reached the market. 

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...........

Δ TABLE OF CONTENTS 

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

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

FINDING ................................................... 8 
 

Medicare payment was more than double the OIG-calculated 

average manufacturer sales price in March 2008 . . . . . . . . . . . . . . 8 

RECOMMENDATION ...................................... 10 
 

Agency Comments and Office of Inspector General Response . . . 11 

APPENDIX ................................................ 12 
 

Agency Comments...................................... 12 
 

ACKNOWLEDGMENTS .................................... 14 
 
 

 

 

 

 

Δ INTRODUCTION 

OBJECTIVE 

To compare the first-quarter 2008 Medicare payment amount to 

manufacturer prices for irinotecan hydrochloride in March 2008. 

BACKGROUND 

Irinotecan hydrochloride (hereinafter referred to as irinotecan) is an 

injectable drug used to treat patients with colorectal cancer. The 

Food and Drug Administration (FDA) approved the first generic 

version of irinotecan on February 20, 2008. This study examines the 

difference between the Medicare payment amount and 

manufacturer-reported sales prices during March 2008. At that time, 

generic versions of irinotecan were available for purchase, but not yet 

factored into the calculation of the Medicare payment amount. 

Medicare Part B Payment for Irinotecan 

Medicare Part B covers a limited number of outpatient prescription 

drugs, including drugs used in conjunction with durable medical 

equipment; injectable drugs administered by a physician (such as 

irinotecan); certain self-administered drugs, such as oral anticancer 

drugs and immunosuppressive drugs; and some vaccines.1 To obtain 

Medicare payment for Part B-covered drugs like irinotecan, physicians 

submit claims using codes established by the Centers for Medicare & 

Medicaid Services (CMS) as part of the Healthcare Common Procedure 

Coding System (HCPCS).2 The HCPCS codes provide a standardized 

coding system for describing the specific items and services provided in 

the delivery of health care. In the case of prescription drugs, each 

HCPCS code defines the drug name and dosage size but does not specify 

manufacturer or package size information. Medicare and its 

beneficiaries paid $132 million for irinotecan in 2007.3 

Medicare payment methodology. The Medicare Prescription Drug, 

Improvement, and Modernization Act of 2003 (MMA), P.L. 108-173, 

1 For the purpose of this report, the term “Part B-covered drugs” refers to outpatient 

prescription drugs covered by Medicare Part B. Part B-covered drugs do not refer to drugs 

billed under Part A but paid with Part B funds, such as drugs administered in a dialysis 

setting. 

2 CMS contracts with private companies, known as carriers, to process and pay Medicare 

Part B claims. 

3 Medicare Part B Extract and Summary System, updated through March 2008 

(98 percent of claims reported), accessed on May 15, 2008. 

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INTROD U C T U C T I O N I O N 
 

changed the basis of payment for most Part B-covered drugs to average 

sales price (ASP) effective January 1, 2005. Prior to 2005, Medicare 

generally paid for these drugs based on the average wholesale price 

(AWP).4 Previous reports by the Office of Inspector General (OIG) and 

the Government Accountability Office found that the AWP-based 

reimbursements were often significantly higher for Part B-covered 

drugs than the prices that drug manufacturers, wholesalers, and 

similar entities actually charged the physicians and suppliers that 

purchased these drugs.5 

Section 1847A(c) of the Social Security Act (the Act), as added by the 

MMA, defines the 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 includes all sales (e.g., sales to pharmacies that are 

reimbursed by Medicaid or private insurance plans), not just sales 

reimbursed by Medicare Part B. The ASP is net of any price 

concessions, such as volume, prompt pay, and cash discounts; free goods 

contingent on purchase requirements; chargebacks; and rebates other 

than those obtained through the Medicaid drug rebate program.6 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.7 8 

Manufacturers report ASPs by national drug codes (NDC), which are 

11-digit identifiers that indicate the drug name, the manufacturer of the 

drug, the product dosage form, and the package size. Manufacturers 

must provide CMS with the ASP and volume of sales for each NDC on a 

4 In 2004, the reimbursement amount for most covered drugs was based on either 

80 or 85 percent of the AWP as published in national pricing compendia, such as the “Red 

Book.” Prior to 2004, Medicare Part B reimbursed for covered drugs based on the lower of 

either the billed amount or 95 percent of the AWP. 

5 OEI-03-00-00310, January 2001; OEI-03-97-00290, December 1997; GAO-01-1118, 

September 2001. 

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

7 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. 

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

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INTROD U C T I O N 

quarterly basis, with submissions due 30 days after the close of the 

quarter.9 

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 uses 

information in the crosswalk to calculate volume-weighted ASPs for 

covered HCPCS codes. 

Because Medicare payment amounts are based on ASPs reported by 

manufacturers within 30 days after the end of the applicable calendar 

quarter, 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, third-quarter 2007 

ASP data from manufacturers served as the basis for first-quarter 2008 

Medicare payment amounts for most Part B-covered drug codes, 

including irinotecan. Effective January 1, 2005, 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. 

Generic Versions of Irinotecan 

On February 20, 2008, FDA approved the first generic versions of 

irinotecan. As of May 2008, nine manufacturers had received FDA 

approval to market the drug. The generic versions of irinotecan are 

identical, or bioequivalent, to the brand-name version in dosage form, 

safety, strength, route of administration, quality, performance 

characteristics, and intended use, according to FDA. Although generic 

drugs are chemically identical to their branded counterparts, they are 

typically sold at substantial discounts from the branded price.10 

However, because of the two-quarter lag, the Medicare payment amount 

for brand-name and generic irinotecan will be based on only 

brand-name ASPs and will not include the ASPs for generic irinotecan 

until the third quarter of 2008 (beginning July 1, 2008). In addition, 

because the generic versions were not sold until the middle of the first 

quarter, the full impact of generic irinotecan will not be realized in 

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

10 FDA. “Office of Generic Drugs.” Available online at http://www.fda.gov/cder/ogd/. 

Accessed on May 5, 2008. 

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INTRODUCTION 

July 2008; i.e., the first full quarter of sales will be for the period from 

April 1 to June 30, 2008, which then are reflected in the Medicare 

payment amount starting October 1, 2008. 

Office of Inspector General Authority to Conduct Medicare Drug Pricing 

Studies 

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

OIG to undertake studies that compare ASPs to widely available 

market prices and average manufacturer prices (AMP).11 12 Related 

to this requirement, OIG has completed six reports comparing ASPs 

to AMPs and one report comparing ASPs to widely available market 

prices.13 In determining widely available market prices, OIG is 

authorized to consider information from sources including (but not 

limited to) manufacturers, wholesalers, distributors, physicians, and 

suppliers.14 

If OIG finds that the ASP exceeds the widely available market price 

or AMP by a certain threshold (currently 5 percent), the Secretary of 

the Department of Health and Human Services (the Secretary) may 

disregard the ASP for the drug when setting reimbursement.15 After 

being so informed by OIG, the Secretary shall substitute, effective as 

of the next quarter, the payment amount for that drug with the lesser 

of the widely available market price, or 103 percent of the AMP.16 

Although CMS acknowledged the Secretary’s authority to adjust ASP 

payment limits based on the findings of these studies, the agency has 

yet to make any changes to Part B drug reimbursement as a result of 

OIG’s pricing comparisons. 

In commenting on one of OIG’s reports, CMS expressed a desire to 

better understand the fluctuating differences between ASPs and 

AMPs, with the intent of developing a process to adjust payment 

11 Section 1927(k)(1) of the Act generally defines AMP as the average price paid to the 

manufacturer by wholesalers in the United States for drugs distributed to the retail 

pharmacy class of trade. 

12 Section 1847A(d)(5) of the Act 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. 

13 OEI-03-04-00430, April 2006; OEI-03-05-00430, June 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; and OEI-03-08-00130, May 2008. 

14 Section 1847A(d)(5)(B) of the Act. 

15 Section 1847A(d)(3)(A) of the Act. 

16 Section 1847A(d)(3)(C) of the Act. 

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INTROD U C T I O N 

amounts based on the results of OIG’s comparisons.17 However, CMS 

has not specified what, if any, steps it will take to adjust Medicare 

payment amounts. 

METHODOLOGY 

Scope and Data Collection 

Scope. We compared the Medicare payment amount from the first and 

second quarters of 2008 to manufacturer sales prices from March 2008. 

We obtained Medicare payment data from CMS and manufacturer sales 

data from irinotecan manufacturers. 

Manufacturer sales data. In April 2008, we sent surveys to seven 

manufacturers that have FDA approval to produce and market 

brand-name and generic irinotecan (one brand-name manufacturer and 

six generic manufacturers).18 The surveys requested that the 

manufacturers provide total irinotecan sales and sales volume for 

March 2008 by NDC.19 20 We also asked manufacturers to include any 

discounts and rebates that they offered to their customers. All seven 

manufacturers responded to our survey; six manufacturers provided us 

with irinotecan sales data.21 

CMS data. We obtained the Medicare payment amount for irinotecan 

from CMS for the first and second quarters of 2008 (based on 

volume-weighted ASPs from the third and fourth quarters of 2007, 

respectively). 

Data Analysis 

To calculate the average manufacturer sales price, we summarized the 

total irinotecan sales (including brand-name and generic irinotecan) for 

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

18 Two additional manufacturers received approval to produce irinotecan; however, we 

excluded these manufacturers from our analysis. One manufacturer received FDA approval 

to market irinotecan after we began data collection; the other manufacturer is not based in 

the United States. Additionally, the manufacturer of brand-name irinotecan also produces 

a generic version through a subsidiary company; we consider the data for both products to 

be from the same respondent. 

19 Several manufacturers stated that the data were the same as the ASP data they would 

report to CMS. 

20 One manufacturer provided data that included sales from February 28 through 

March 31, 2008. 

21 The manufacturer that did not provide sales data responded that it did not have any 

irinotecan sales for the period under review (March 2008). 

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INTROD U C T I O N 

March 2008 to all customers, net of discounts, where available, and 

divided that number by the total number of units sold during that 

month.22 This figure is hereinafter referred to as the average 

manufacturer sales price. 

Comparing Medicare payment amount to manufacturer sales prices. We 

compared the first-quarter 2008 Medicare payment amount for irinotecan 

to the average manufacturer sales prices from March 2008. We calculated 

the percentage difference between the average manufacturer sales price 

and the Medicare payment amount for irinotecan. 

Brand-name and generic product sales. The average manufacturer sales 

prices include prices for both generic and brand-name products; the 

Medicare payment amount from the first quarter of 2008 includes only 

ASPs for brand-name products. We also calculated separate average 

manufacturer sales prices for brand-name and generic versions of 

irinotecan and determined the percentage of manufacturer sales in 

March 2008 for both versions. 

Monetary impact. We estimated what the monetary impact would have 

been in March 2008 if Medicare had based payment for irinotecan on the 

average manufacturer sales price calculated for this report. We subtracted 

the March 2008 average manufacturer sales price from the first-quarter 

2008 Medicare payment amount for irinotecan. To estimate the financial 

impact for March 2008, we multiplied the difference by one-twelfth of the 

number of services allowed by Medicare for irinotecan in 2007, as reported 

in CMS’s Part B Extract and Summary System.23 This estimate assumes 

that the number of services allowed by Medicare in 2007 remained 

consistent from 1 month to the next and that there were no significant 

changes in utilization between 2007 and 2008. We also estimated what 

the financial impact would have been if Medicare had based payment for 

irinotecan on the average manufacturer sales price during the time the 

Medicare payment amount included brand-name prices only, i.e., March to 

June 2008. 

Limitations 

This study compares 1 month of manufacturer sales data to one quarter 

of Medicare payment data; we were unable to collect a full quarter of 

22 The unit values are based on the Medicare payment amount for irinotecan. Medicare 

payment for irinotecan is calculated per 20 milligrams. 

23 As of May 15, 2008, CMS’s 2007 Medicare Part B Extract and Summary System was 

98 percent complete. 

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INTRODUCTION 

manufacturer sales data because manufacturers did not receive 

approval to market generic versions of irinotecan until February 20, 

2008. We did not verify the accuracy of the sales data provided by the 

manufacturers. 

Standards 

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

Inspections” issued by the President’s Council on Integrity and 

Efficiency and the Executive Council on Integrity and Efficiency. 

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Δ FINDING 

In March 2008, the Medicare payment amount for 

irinotecan was more than double the 

OIG-calculated average manufacturer sales price 

The Medicare payment amount 

for irinotecan ($126.31) exceeded 

the OIG-calculated average 

manufacturer sales price ($51.59) 

by 145 percent in March 2008. 

(See Table 1.) 

Table 1. Volume-Weighted ASP and Manufacturer Sales Price for Irinotecan 

HCPCS 

Code 

Short Description March 2008 

Average 

Manufacturer 

Sales Price* 

First-Quarter 

2008 Medicare 

Payment 

Amount** 

Percentage 

Difference 

J9206 Irinotecan injection, 20 milligrams $51.59 $126.31 145% 

*Source: OIG analysis of March 2008 manufacturer sales prices for irinotecan. The average manufacturer sales price includes both brand-name and 

generic irinotecan. 

**Source: CMS’s first-quarter 2008 ASP file (based on volume-weighted ASPs from the third quarter of 2007). 

Generic irinotecan made up the majority of manufacturer sales and had 

substantially lower prices in March 2008 

Lower priced generic versions accounted for the vast majority 

(86 percent) of irinotecan sales in March 2008. According to 

manufacturer sales prices and sales volume in March 2008, the 

average price for generic irinotecan was $40.66; the average price for 

the brand-name product was nearly three times greater.24 Therefore, 

any purchaser acquiring generic irinotecan in March 2008 received 

Medicare payment that was approximately $85 more than the 

average manufacturer sales price. In addition, because the Medicare 

payment amount changed minimally in the second quarter of 2008, 

manufacturer sales prices are likely to continue to be substantially 

lower than the Medicare payment amount during that period as 

well.25 26 

24 We are not publishing the brand-name average manufacturer sales price because of 

the proprietary nature of the manufacturer sales data. 

25 The Medicare payment amount for irinotecan in the second quarter of 2008 was 

$126.24 per 20 milligrams. 

26 The Medicare payment amount for irinotecan in the third quarter of 2008 ($74.75) is 

41 percent lower than it was for the previous quarter. This reduction is because of the 

inclusion of approximately 6 weeks of generic sales (generic irinotecan did not enter the 

market until the middle of the first quarter). The first full quarter of generic sales will be 

for the period from April 1 to June 30, 2008, which then will be reflected in the Medicare 

payment amount starting October 1, 2008. It is likely that the Medicare payment amount 

will undergo another reduction at that time. 

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F I NDING 

Medicare expenditures would have been reduced by $6.5 million in 

March 2008 had the Medicare payment amount for irinotecan been based on 

the average manufacturer sales price 

We estimate that had the Medicare payment amount for irinotecan 

been based on the calculated manufacturer prices in March 2008, 

Medicare expenditures for this drug would have been reduced by 

$6.5 million in that month alone. 

Further, because of the two-quarter lag, the lower generic sales prices 

for irinotecan are not reflected in the second-quarter 2008 

reimbursement amount. As a result, we estimate that Medicare 

expenditures could be reduced by a total of $26 million during the 

period between the initial approval of generic irinotecan and the time 

when the lower prices are included in the ASP calculation (i.e., 

March to June 2008).27 

27 This assumes that expenditures would have been reduced by $6.5 million per month 

for the 4 full months before generic prices were included in the Medicare payment amount 

(March–June 2008). 

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Δ RECOMMENDATION 

OIG compared the Medicare payment amount to manufacturer prices 

and found that the Medicare payment amount for irinotecan ($126.31) 

was more than double the average manufacturer sales price ($51.59) in 

March 2008. Further, Medicare and its beneficiaries would have saved 

an estimated $6.5 million in March 2008 had Medicare payment 

amounts been based on the average manufacturer sales price. The 

recent approval of lower priced generic irinotecan, which accounted for 

86 percent of irinotecan manufacturer sales in March 2008, led to this 

substantial difference. 

Because of the two-quarter lag in the ASP system, the Medicare 

payment amount will not reflect any sales of lower priced generic 

irinotecan until the third quarter of 2008. Further, because the generic 

versions were not sold until the middle of the quarter, the full impact of 

generic irinotecan will not be realized until the quarter beginning on 

October 1, 2008. The results of this report indicate that the two-quarter 

lag in the ASP system leads to Medicare payment amounts that are 

substantially higher than manufacturer prices when generic products 

first become available. 

The underlying pricing issues identified in this report are not limited to 

irinotecan because of the two-quarter lag in CMS’s standard process for 

establishing Medicare payment amounts. Absent a change in the 

standard process, Medicare payment amounts for drugs with new 

generic versions will continue to be temporarily higher than 

manufacturer sales prices, sometimes substantially. 

We therefore recommend that CMS explore options to expedite the 

process to ensure that Medicare payment amounts for drugs with 

newly available generic versions accurately reflect market prices. 

The Secretary has the authority to lower Medicare payment amounts 

based on the results of OIG studies comparing ASPs to AMPs and 

widely available market prices; however, CMS has yet to make any 

changes as a result of OIG’s pricing comparisons. Further, the 

effectiveness of using this authority to address the disparities 

between Medicare payment amounts and market prices for drugs 

with newly available generics is limited by timing issues. In addition 

to the time needed to collect data on widely available market prices, 

pricing changes based on these data would not take effect until the 

quarter after OIG provides the pricing data to CMS. Therefore, CMS 

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R E C O MMENDA T I O N 

should explore alternative options to address pricing discrepancies 

arising from newly available generic drugs, which may include 

seeking a legislative change. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

In its comments on the draft report, CMS concurred with our 

recommendation. CMS expressed its commitment to ensuring 

accurate payments for drug products under the ASP methodology and 

will review any specific suggestions OIG may have to further this 

goal. To that end, CMS stated that it continuously looks for ways to 

improve the methods it uses to collect data. CMS noted that the 

third-quarter 2008 Medicare payment amount for irinotecan is 

$74.75, representing a 40-percent decrease from the previous quarter 

($126.24). CMS also noted that this decrease results in a payment 

differential per unit for the third quarter that is substantially lower 

than the differential for March 2008, demonstrating that the ASP 

methodology reflects market-based prices over time. 

OIG’s recommendation focuses on exploring options to reduce the 

time it takes for ASP to reflect market-based prices. The thirdquarter payment amount is still substantially higher than the 

average manufacturer sales price OIG found for March 2008 ($51.59), 

further illustrating the effects of the two-quarter lag. The first full 

quarter of generic sales data for irinotecan will not be reflected in the 

Medicare payment amount until October 2008—almost 8 months 

after the first generic versions reached the market. 

The full text of CMS’s comments is provided in the Appendix. 

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Agency Comments 

Δ APPENDIX 
 

 

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APPENDIX 
 

 

APPENDIX~A 

 

Δ 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 

Kevin McAloon; other central office staff who contributed include 

Kevin Manley. 

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