Department of Health and Human Services

OFFICE OF

INSPECTOR GENERAL

PART B PAYMENTS FOR DRUGS 

INFUSED THROUGH DURABLE 

MEDICAL EQUIPMENT

Daniel R. Levinson 

Inspector General

February 2013

OEI-12-12-00310 
 

EXECUTIVE SUMMARY: PART B PAYMENTS FOR DRUGS INFUSED 

THROUGH DURABLE MEDICAL EQUIPMENT

OEI-12-12-00310

WHY WE DID THIS STUDY 

Medicare pays 106 percent of the average sales price (ASP) for most drugs covered under 

Part B. However, payment amounts for infusion drugs administered in conjunction with 

durable medical equipment (DME) are instead set at 95 percent of the drugs’ average 

wholesale prices (AWP) that were in effect on October 1, 2003. Numerous Office of 

Inspector General reports have shown that AWPs greatly exceed drug acquisition costs. 

Basing payments for DME infusion drugs on AWPs set almost a decade ago raises 

concerns about whether Medicare payment levels are appropriate. 

HOW WE DID THIS STUDY

For every year between 2005 and 2011, we compared the ASP (which serves as an 

estimate for provider acquisition cost) of each DME infusion drug to its AWP-based 

Medicare payment amount. ASPs are statutorily defined and based on actual sales data. 

We also calculated how much Medicare would have saved between 2005 and 2011 had 

payment been based on ASPs rather than AWPs. 

WHAT WE FOUND

Overall, Medicare payment amounts for DME infusion drugs exceeded ASPs by 54 to 

122 percent annually. Most individual drugs had Medicare payment amounts that 

exceeded ASPs, many by more than two times, in each year. However, for as many as 

one-third of DME infusion drugs in each year, the payment amounts were below their 

ASPs, meaning that Medicare may be underpaying providers for these drugs. Medicare 

spending on DME infusion drugs would have been reduced by 44 percent ($334 million) 

between 2005 and 2011 had payment been based on ASPs. 

WHAT WE RECOMMEND 

Our results once again show that AWPs are unrelated to actual prices in the marketplace

and that the reliance on an AWP-based payment methodology has cost Medicare 

hundreds of millions of dollars. Therefore, we recommend that the Centers for Medicare 

& Medicaid Services (CMS) either (1) seek a legislative change requiring DME infusion 

drugs to be paid using the ASP methodology or (2) include DME infusion drugs in the 

next round of the competitive bidding program. CMS partially concurred with the 

recommendation to seek a legislative change and concurred with the recommendation to 

include DME infusion drugs in the next round of the competitive bidding program. 

 
TABLE OF CONTENTS

Objectives ....................................................................................................1 

Background ..................................................................................................1 

Methodology ................................................................................................5 

Findings........................................................................................................7 

Overall, Medicare payment amounts for DME infusion drugs 

exceeded ASPs by 54 to 122 percent annually from 2005 to 

2011 ..................................................................................................7 

Medicare and its beneficiaries would have saved $334 million 

between 2005 and 2011 if payments for DME infusion drugs had 

been based on ASPs .........................................................................9 

Conclusion and Recommendations ............................................................ 11 

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

Appendixes ................................................................................................13 

A. Durable Medical Equipment Infusion Drug Descriptions ........13 

B. Annual Savings Under Average Sales Price Methodology ......15 

C. Agency Comments ...................................................................16 

Acknowledgments......................................................................................18 
 

1 

Part B Payments for Drugs Infused Through Durable Medical Equipment (OEI-12-12-00310) 

OBJECTIVES

1. To compare Medicare payment amounts based on average wholesale 

prices (AWP) to average sales prices (ASP) for Part B durable medical 

equipment (DME) infusion drugs between 2005 and 2011. 

2. To determine how much Medicare would have saved on DME infusion 

drugs between 2005 and 2011 had payment been based on the ASP 

methodology. 

BACKGROUND 

Infusion drugs administered in conjunction with DME are one of the few 

types of drugs that are paid by Medicare Part B using AWPs instead of 

ASPs. Numerous Office of Inspector General (OIG) reports have found 

that AWPs often greatly exceed the drugs’ actual costs. Partly on the basis 

of this work, the Medicare Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA) replaced AWP with ASP—a 

benchmark that reflects actual prices in the marketplace—as the pricing 

method for most Part B drugs beginning on January 1, 2005.1

 However, 

the MMA excluded infusion drugs used with DME from the new ASP 

methodology and set their payment amount at 95 percent of the AWPs that 

were in effect on October 1, 2003.2 

Medicare Part B Coverage of Infusion Pumps

In infusion therapy, drugs are typically administered intravenously using a 

needle, catheter, or device such as an infusion pump to control the rate of 

drug flow.3 Physicians often prescribe infusion therapy when oral 

medications may not effectively treat the patient’s condition.4 Infusion 

therapy is commonly used to treat acute conditions, such as pain and 

infections, and chronic conditions, such as cancer, multiple sclerosis, and 

rheumatoid arthritis.5 Infusion therapy is often provided in the home 

rather than in inpatient settings to reduce costs associated with inpatient 

care and maintain patient convenience and comfort.6

 

In general, external and implantable pumps used in infusion therapy are 

covered by Medicare under the DME benefit when they are used as

1 MMA, P.L. 108-173, § 303(c) (adding section 1847A of the Social Security Act (the 

Act)).

2 MMA, P.L. 108-173, § 303(b) (amending section 1842(o)(1) to set a different payment 

methodology for infusion drugs administered through DME at 1842(o)(1)(D)(i)).

3 National Home Infusion Association (NHIA), Infusion FAQs. Accessed at 

http://www.nhia.org on July 18, 2012. 4 NHIA, About Infusion Therapy. Accessed at http://www.nhia.org on July 18, 2012. 5 NHIA, Infusion FAQs. Accessed at http://www.nhia.org on July 18, 2012. 6 Ibid.
 

2 

Part B Payments for Drugs Infused Through Durable Medical Equipment (OEI-12-12-00310) 

specified by the Medicare National Coverage Determinations Manual. 

For example, Medicare covers external infusion pumps when used to treat 

iron poisoning, thromboembolic disease, and diabetes, among other 

conditions. Implantable infusion pumps are covered when they are used to 

treat certain conditions, including chronic intractable pain, chronic 

intractable spasticity, and liver cancer. 7 

Medicare Part B Coverage of DME Infusion Drugs

Part B-covered drugs generally fall into the following categories: drugs 

furnished incident to a physician’s service (e.g., injectable drugs used in 

connection with the treatment of cancer); drugs explicitly covered by 

statute (e.g., some vaccines and oral anticancer drugs); and drugs used in 

conjunction with DME (e.g., certain inhalation and infusion drugs). 8, 9 

Medicare Part B covers drugs used in infusion therapy under its DME 

benefit if (1) the drug is necessary for the effective use of a covered 

external or implantable infusion pump and (2) the drug being used with 

the pump is itself reasonable and necessary for the patient’s treatment.10 

From 2005 to 2011, the Centers for Medicare & Medicaid Services (CMS)

classified 31 to 38 drugs as “DME infusion” in any given quarter.11

Medicare Part B Payments for DME Infusion Drugs 

CMS pays physicians and DME suppliers for most Part B-covered drugs 

using a methodology based on ASPs. Section 1847A(c) of the Act defines 

ASP as a manufacturer’s sales of a drug (with certain exceptions) to all 

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

number of units of the drug sold by the manufacturer in that same quarter. 

The ASP is net of any price concessions, such as volume discounts, 

“prompt pay” discounts, cash discounts, free goods contingent on 

purchase requirements, chargebacks, and rebates other than those obtained 

through the Medicaid drug rebate program. As such, it can be considered 

a proxy for providers’ acquisition costs. Manufacturers provide CMS with 

the ASPs and volume of sales for each of their drug products on a 

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

quarter. Medicare payments for most Part B-covered prescription drugs 

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

7 Medicare National Coverage Determinations Manual, ch. 1 § 280.14. 8 Infusion drugs used in conjunction with DME will hereinafter be referred to as “DME 

infusion drugs.”

9 42 CFR § 414.900(b) and Medicare Benefit Policy Manual, ch. 15 § 50. 10 Medicare National Coverage Determinations Manual, ch. 1 § 280.14. 11 DME infusion drugs are classified and paid using Healthcare Common Procedure 

Coding System (HCPCS) codes. In the case of prescription drugs, each HCPCS code 

defines the drug name and the amount of drug represented by the HCPCS code but does 

not specify manufacturer or package size information.
 

3 

Part B Payments for Drugs Infused Through Durable Medical Equipment (OEI-12-12-00310) 

code (or the actual billed charge, if that amount is lower). Medicare 

beneficiaries are responsible for 20 percent of this amount in coinsurance, 

as well as for any deductible. 

Unlike most drugs covered under Part B, DME infusion drugs are not paid 

on the basis of ASPs. Rather, section 1842(o)(1)(D)(i) of the Act, as 

amended by the MMA, sets payment amounts for these drugs at 

95 percent of the AWPs that were in effect on October 1, 2003.12 Statutes 

and regulations do not define AWP, and AWPs do not represent actual 

transactional prices. Rather, AWPs are the list prices established by drug 

manufacturers and reported by publishers such as Red Book. 

For a single-source DME infusion drug, the Part B payment amount for a 

HCPCS code is based on 95 percent of the drug’s AWP on 

October 1, 2003.13 For a multiple-source DME infusion drug, payment is 

based on 95 percent of the median AWP on October 1, 2003, for generic 

sources. However, if the lowest AWP among brand-name products is less 

than the generic sources’ median AWP, Medicare pays 95 percent of this 

brand-name product’s AWP. Each quarter, CMS publishes on its Web site 

the AWP-based payment amounts for DME infusion drugs.14 Medicare 

beneficiaries are responsible for 20 percent of the payment amount in 

coinsurance, as well as for any deductible.

In 2011, Medicare and its beneficiaries spent approximately $125 million 

for 21 DME infusion drugs. (The other 10 drugs classified as “DME 

infusion” were not associated with any Part B expenditures.) However, 

just 3 of the 21 drugs accounted for 91 percent of expenditures, with a 

single drug (milrinone lactate) accounting for 62 percent of the total.15, 16

Competitive Bidding for DME Infusion Drugs

The DME, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive 

Bidding Program was mandated by section 302 of the MMA to reduce 

12 According to section 20.1.3 of chapter 17 of the Medicare Claims Processing Manual, 

this payment methodology does not apply if the drug is compounded or furnished 

incident to a professional service. Also, pursuant to section 1842(o)(1)(D)(ii) of the Act, 

payments for DME infusion drugs are not based on 95 percent of AWP if furnished in 

competitive bidding areas. However, CMS is implementing the competitive bidding

program by phasing in specific items. Medicare Claims Processing Manual, ch. 36 

§ 20.1. At this time, DME infusion drugs have not been designated for inclusion in the 

competitive bidding program.

13 Medicare Claims Processing Manual, ch. 17 § 20.4. 14 Although the payment amounts remain constant, the HCPCS codes classified as DME 

infusion and thus subject to AWP-based payment may change from quarter to quarter. 15 2011 National Claims History (NCH) DME file. Claims data are added to NCH files 

on a rolling basis. Therefore, the 2011 NCH DME file did not include 100 percent of 

claims for DME infusion drugs when OIG analyzed it in April 2012.

16 Milrinone lactate (brand name Primacor) is used to treat congestive heart failure.
 

4 

Part B Payments for Drugs Infused Through Durable Medical Equipment (OEI-12-12-00310) 

expenses for Medicare and its beneficiaries.17 DME suppliers submit bids 

to become Medicare contract suppliers and to furnish items in competitive 

bidding areas. Payment amounts resulting from the bids replace current 

fee-schedule payment amounts for the items.

18 The competitive bidding 

program has been implemented in phases beginning with bids for items 

with the highest cost and highest volume or with the largest savings 

potential.19 On January 1, 2011, CMS launched the initial phase in nine 

geographic areas for nine product categories.20 Pursuant to the Patient 

Protection and Affordable Care Act, all areas will have competitive 

bidding or payment rate adjustments based on competitive bid rates by 

2016.21 At this time, DME infusion drugs have not been included as part 

of the competitive bidding process. According to CMS staff, the agency 

intends to include DME infusion drugs in a future phase of the program; 

however, no definitive plans for their inclusion have been announced. 

Previous OIG Work 

Since 1997, OIG has released numerous reports showing that AWPs 

greatly exceed acquisition costs. For example, a 2001 OIG report found 

that Part B payment amounts, which were set at 95 percent of AWP, 

exceeded actual wholesale prices (obtained from wholesaler catalogs) for 

24 drugs with the highest total Medicare payments.22 If Medicare had 

reimbursed these drugs at the actual wholesale prices, it would have saved 

$761 million a year. Another OIG report found that Medicare payments 

for end stage renal disease drugs, which were set at 95 percent of AWP, 

exceeded amounts paid by the Department of Veterans Affairs (VA) in 

1999.23 Medicare Part B payment amounts would have been nearly halved 

for five drugs had payment amounts been based on VA acquisition costs. 

Both of these studies recommended that CMS reduce excessive Medicare 

payment amounts. 

17 Medicare Claims Processing Manual, ch. 36 § 10. 18 Ibid.

19 Medicare Claims Processing Manual, ch. 36 § 20.1. 20 CMS, DMEPOS Competitive Bidding. Accessed at https://www.cms.gov on July 12, 

2012.

21 The Patient Protection and Affordable Care Act, P.L. 111-148 § 6410. 22 OIG, Medicare Reimbursement of Prescription Drugs, OEI-03-00-00310, 

January 2001.

23 OIG, Medicare Reimbursement of End Stage Renal Disease Drugs, OEI-03-00-00020, 

June 2000.
 

5 

Part B Payments for Drugs Infused Through Durable Medical Equipment (OEI-12-12-00310) 

METHODOLOGY

Data Collection 

Selection of Drugs. We used CMS’s payment amount files to select the 

HCPCS codes that were paid on the basis of DME infusion payment limits 

(i.e., 95 percent of AWPs from October 1, 2003) in each quarter between 

2005 and 2011. As previously stated, during that time, 31 to 38 HCPCS 

codes were classified as “DME infusion drugs” in any given quarter. See 

Appendix A for a list of these drugs. 

Total Part B Expenditures and Utilization for DME Infusion Drugs. We 

obtained all paid Part B DME claims for infusion drug HCPCS codes from 

the 2005–2011 NCH DME files to determine quarterly utilization and 

spending. If a HCPCS code did not have any associated expenditures in a 

particular quarter, we removed the code from the analysis for that quarter 

(i.e., our analysis includes only codes for which there were Part B 

expenditures). As a result, between 7 and 13 HCPCS codes were removed 

from our analysis in any given quarter. 

AWP-Based Payment Amounts. We obtained the AWP-based payment 

amounts for all relevant HCPCS codes in every quarter between 2005 and 

2011 from CMS’s payment amount files. 

ASPs and ASP-Based Payment Amounts. CMS also calculates ASP-based 

payment amounts for the HCPCS codes under review for situations when 

the drugs are provided incident to a professional service (e.g., the identical 

drug is paid on the basis of its ASP rather than AWP when it is 

administered in a physician’s office rather than infused in a patient’s 

home).24 We obtained the ASP-based payment amounts for all relevant 

HCPCS codes in every quarter under review from CMS’s payment amount 

files. We used the ASP-based payment amounts to calculate ASPs by

dividing each HCPCS code’s ASP-based payment amount by 1.06.25 As 

previously stated, because ASPs are based on actual sales in the 

marketplace, they provide a reasonable estimate of the acquisition costs of 

these drugs for providers. 

24 Medicare Claims Processing Manual, ch. 17 § 20.1.3. 25 There is a two-quarter lag between the time when ASP sales occur and when Medicare 

payment amounts reflect those sales. As a result, ASPs in a given quarter were calculated 

using ASP-based payment amounts from two quarters later (e.g., fourth-quarter 2011 

ASPs were calculated by dividing second-quarter 2012 payment amounts by 1.06). We 

removed between zero and four HCPCS codes from our comparisons in any given quarter 

because there were no ASP-based payment data in the relevant quarter on which to base 

our calculations.
 

6 

Part B Payments for Drugs Infused Through Durable Medical Equipment (OEI-12-12-00310) 

Data Analysis

Comparing ASPs and Medicare Payment Amounts Between 2005 and 

2011. We first estimated an annual ASP for each HCPCS code by 

weighting the ASP in each quarter by Part B utilization in that quarter. We 

then calculated the difference between the AWP-based payment amount 

and the annual ASP for each HCPCS code. For every year from 2005 

through 2011, we counted the number of DME infusion drug HCPCS 

codes that had Medicare payment amounts that exceeded their annual 

ASPs and the number of codes with Medicare payment amounts that were 

less than their annual ASPs. We examined whether the number of HCPCS 

codes with Medicare payments amounts above and below their annual 

ASPs changed during this period. 

To determine an overall difference between Medicare payment amounts 

and ASPs across all DME infusion drugs in each year, we calculated a 

median difference among all the individual HCPCS codes. We tracked 

these median differences over the entire 2005–2011 period to determine 

whether the relationship between ASPs and Medicare payment amounts 

changed across the entire group of DME infusion drugs during this time. 

Determination of Potential Savings. For each HCPCS code, we multiplied 

its utilization by its ASP-based payment amount for every quarter between 

2005 and 2011 to determine how much would have been spent if payments 

for DME infusion drugs had been set at 106 percent of ASP (i.e., the 

methodology used to pay for most Part B drugs). We then subtracted the 

result from actual expenditures in the relevant quarter to determine the 

difference in spending between the AWP-based and ASP-based payment 

methodologies. We added the quarterly results to determine the total 

savings in each year from 2005 to 2011. 

Limitations

We did not review Part B claims for accuracy, nor did we review any 

documentation in support of the claims included in our study. We also did 

not examine any infusion-related services (either covered or uncovered) 

that may have been provided to beneficiaries who received DME infusion 

drugs. 

Standards

This study was conducted in accordance with the Quality Standards for 

Inspection and Evaluation issued by the Council of the Inspectors General 

on Integrity and Efficiency.
 

7 

Part B Payments for Drugs Infused Through Durable Medical Equipment (OEI-12-12-00310) 

FINDINGS

Overall, Medicare payment amounts for DME infusion 

drugs exceeded ASPs by 54 to 122 percent annually

from 2005 to 2011

Given that ASPs should reflect providers’ acquisition costs, our analysis 

suggests that Medicare overpaid for DME infusion drugs by a substantial 

margin in each year from 2005 to 2011. Although overall differences were 

smallest in 2006, Medicare payment amounts that year still exceeded 

ASPs by 54 percent at the median (see Figure 1). In contrast, the largest 

spread was in 2009, when payment amounts were more than double the 

ASPs at the median. 

Figure 1: Median Difference Between ASPs and Medicare Payment 

Amounts From 2005–2011 for All DME Infusion Drugs

0%

20%

40%

60%

80%

100%

120%

140%

2005 2006 2007 2008 2009 2010 2011

Median Difference Between ASPs and Medicare 

Payment Amounts

Year

 Source: OIG analysis of CMS’s 2005–2011 payment amount files.

From 2005 to 2011, the majority of drugs had Medicare 

payment amounts that exceeded ASPs; however, as many as 

one-third of drugs had payment amounts that were less than 

ASPs each year, meaning that providers were potentially being 

underpaid for some products

In each year under review, 67 to 86 percent of DME infusion drug HCPCS 

codes had Medicare payment amounts that exceeded their ASPs (see 

Table 1). In many of these cases (between 46 and 52 percent each year), 
 

8 

Part B Payments for Drugs Infused Through Durable Medical Equipment (OEI-12-12-00310) 

Medicare paid providers at rates that were more than double the ASPs of 

the drugs. For example, in 2011, 10 of the 21 HCPCS codes for DME 

infusion drugs had AWP-based payment amounts that were at least twice 

the ASPs, with 4 of these being paid at more than 10 times the market 

prices. 

In contrast, from 2005 to 2011, 14 to 33 percent of HCPCS codes (as 

many as 7 drugs per year) had ASPs that exceeded their Medicare payment 

amounts. In other words, Medicare reimbursement may not have been 

sufficient to cover the average cost of these drugs, possibly because 

payment amounts had remained unchanged since 2003. For example, in 

2005, the annual ASP of the drug ganciclovir sodium was $34.33 and 

Medicare paid providers $35.25 (a spread of 3 percent).26 The following 

year, the annual ASP of the drug increased to $36.78 but the Medicare 

payment amount stayed the same. By 2011, the ASP of ganciclovir 

sodium had risen to $65.03, yet Medicare payment was still $35.25 (or 

46 percent below ASP).

Table 1: Percentage of Drugs With Medicare Payment Amounts Greater 

and Less Than ASPs 

2005

n=29

2006

n=24

2007

n=26

2008

n=26

2009

n=23

2010

n=23

2011

n=21

Payment is 

greater than

ASP

86% 79% 73% 73% 70% 74% 67%

Payment is less 

than ASP

14% 21% 27% 27% 30% 26% 33%

 Source: OIG analysis of CMS’s 2005–2011 payment amount files. 

The DME infusion drug with the highest expenditures in each 

of the last 6 years had Medicare payment amounts that were 

10 to 18 times greater than ASPs

In every year under review except 2005, Medicare spent more on 

milrinone lactate than on any other DME infusion drug. From 2005 to 

2011, expenditures for milrinone lactate accounted for 24 to 62 percent of 

total yearly spending in the DME infusion category, despite the fact that 

only a small percentage of providers supplied the drug. For example, in 

26 Ganciclovir sodium (brand name Cytovene) is an antiviral drug.
 

9 

Part B Payments for Drugs Infused Through Durable Medical Equipment (OEI-12-12-00310) 

2011, just 5 percent of infusion drug providers had paid Part B claims for 

milrinone lactate.

27 

In 5 of the 7 years, milrinone lactate also had the greatest difference 

between Medicare payment amounts and ASPs among all DME infusion 

drugs. For example, in 2006, the annual ASP was $2.80 for milrinone

lactate, while the AWP-based payment amount was more than 18 times 

greater ($51.58).28 In 2011, despite an increase in ASP (to $4.32 on 

average), Medicare was still paying almost 12 times the ASP.

29 

Medicare and its beneficiaries would have saved 

$334 million between 2005 and 2011 if payments for 

DME infusion drugs had been based on ASPs 

If payment amounts for DME infusion drugs had been based on ASPs 

rather than AWPs between 2005 and 2011, total Medicare Part B spending 

would have been reduced by 44 percent (from $765 million to 

$431 million), a savings of $334 million. One-fifth of the savings 

($67 million) would have been realized by beneficiaries in the form of 

reduced coinsurance. Figure 2 shows the spending under the two 

methodologies each year. 

Potential savings based on the ASP methodology ranged from 28 percent 

in 2005 to 57 percent in 2011. Reduced payments for milrinone lactate 

would have accounted for more than three-quarters of the savings in each 

year. For example, in 2011, Medicare payments to just 263 providers for 

milrinone lactate would have been reduced by almost $71 million (or 

nearly 99 percent of the total savings for all DME infusion drugs) had 

reimbursement been set at 106 percent of ASP. 

Payment amounts for most drugs would have decreased under the ASP 

methodology. However, because the ASP-based payment amounts for 

some drugs were higher than the existing AWP-based payment amounts 

(i.e., providers were likely being underpaid), Medicare spending would 

have actually increased for some drugs. For example, in 2011, Medicare 

spending would have been reduced by $76 million for 14 drug codes but 

would have increased by $4 million for 7 drug codes, resulting in a net 

savings of $72 million. 

27 Of the 4,995 providers that had paid Part B claims for DME infusion drugs in 2011, 

only 263 had paid claims for milrinone lactate. 

28 The next highest spread was for bleomycin sulfate, at almost nine times the ASP.

29 However, milrinone lactate no longer had the largest spread.
 

10

Part B Payments for Drugs Infused Through Durable Medical Equipment (OEI-12-12-00310) 

Figure 2: Medicare Part B Spending for DME Infusion Drugs Under 

AWP-Based and ASP-Based Methodologies From 2005–2011

$0

$20

$40

$60

$80

$100

$120

$140

2005 2006 2007 2008 2009 2010 2011

Total Spending (Millions)

Year

Spending under the AWP-based payment methodology

Spending under the ASP-based payment methodology

 

 Note: Medicare spending includes beneficiary copayments and deductibles. 

 Source: OIG analysis of CMS’s 2005–2011 payment amount files.
 

11

Part B Payments for Drugs Infused Through Durable Medical Equipment (OEI-12-12-00310) 

CONCLUSION AND RECOMMENDATIONS 

Unlike most drugs covered under Medicare Part B, DME infusion drugs 

are still being paid under a flawed AWP-based reimbursement 

methodology. Our findings—like those of OIG’s previous studies in this 

area—demonstrate that AWPs are unrelated to the prices of drugs in the 

marketplace and that the reliance on an AWP-based payment methodology 

has cost the program hundreds of millions of dollars. 

Furthermore, although the current methodology has led to excessive 

payments to providers for most DME infusion drugs, we also found that 

providers may actually be paid below their costs for a number of DME 

infusion drugs. These payment-related issues could significantly affect

drug utilization and acquisition. For example, excessive payments could 

present incentives for providers to overutilize a particular product, while 

payments that are below cost could contribute to an inability or 

unwillingness to provide a particular drug. 

To ensure that payment amounts for DME infusion drugs more accurately 

reflect acquisition costs, we recommend that CMS either: 

Seek a legislative change requiring DME infusion drugs to be 

paid using the ASP methodology 

ASPs, which are based on actual sales and reported quarterly, are much 

more closely related to prices in the marketplace than AWPs set nearly a 

decade ago. In 2011 alone, Medicare would have saved $72 million had it 

reimbursed on the basis of the ASP methodology.

Include DME infusion drugs in the next round of competitive 

bidding

The purpose of the DMEPOS competitive bidding program is to align 

Medicare payments with acquisition costs and ensure that providers will 

still be able to acquire items necessary to treat beneficiaries. CMS has 

noted that it intends to include DME infusion drugs in future competitive 

bidding efforts; however, no definitive plans for their inclusion have been 

announced. Given the payment issues discussed in this report, DME 

infusion drugs seem to be a prime candidate to be included sooner rather 

than later. 
 

12

Part B Payments for Drugs Infused Through Durable Medical Equipment (OEI-12-12-00310) 

AGENCY COMMENTS 

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

recommendation to seek a legislative change that would require DME 

infusion drugs to be paid using the ASP payment methodology. The

agency noted that section 1842(o)(1)(D) of the Social Security Act would 

need to be amended and the request for legislative change would need to 

be included in the annual President’s Budget. 

CMS concurred with the recommendation to include DME infusion drugs 

in the next round of the DMEPOS competitive bidding program. CMS 

stated that it plans to include infusion drugs in a future round of the 

program. 

CMS also provided several technical comments. In response, we made 

minor revisions to the report, where appropriate. CMS’s comments are 

provided in Appendix C. 
 

13

Part B Payments for Drugs Infused Through Durable Medical Equipment (OEI-12-12-00310) 

APPENDIX A

Durable Medical Equipment Infusion Drug Descriptions 

Healthcare 

Common 

Procedure Coding 

System (HCPCS) 

Code

Description HCPCS Code 

Dosage

J0285 Amphotericin b injection 50 mg

J0287 Amphotericin b lipid complex injection 10 mg

J0288 Amphotericin b cholesteryl sulfate complex injection 10 mg

J0289 Amphotericin b liposome injection 10 mg

J0475 Baclofen injection 10 mg

J0476 Baclofen intrathecal trial injection 50 mcg

J0735 Clonidine hydrochloride injection 1 mg

J0895 Deferoxamine mesylate injection 500 mg

J1170 Hydromorphone injection 4 mg

J1230 Methadone injection 10 mg

J1250 Dobutamine hydrochloride injection 250 mg

J1325 Epoprostenol injection .5 mg

J1455 Foscarnet sodium injection 1000 mg

J1570 Ganciclovir sodium injection 500 mg

J1817 Insulin for insulin pump use 50 units

J2175 Meperidine hydrochloride injection 100 mg

J2260 Milrinone lactate injection 5 mg

J2270 Morphine sulfate injection 10 mg

J2271 Morphine sulfate injection 100 mg

J2275 Morphine sulfate injection 10 mg

J3010 Fentanyl citrate injection .1 mg

J9001 Doxorubicin hydrochloride liposome injection 10 mg

J9040 Bleomycin sulfate injection 15 units

J9065 Cladribine injection 1 mg

J9100 Cytarabine hydrochloride injection 100 mg

J9110 Cytarabine hydrochloride injection 500 mg

J9190 Fluorouracil injection 500 mg

J9200 Floxuridine injection 500 mg

J9208 Ifosfamide injection 1 gm

J9280 Mitomycin injection 5 mg
 

14

Part B Payments for Drugs Infused Through Durable Medical Equipment (OEI-12-12-00310) 

HCPCS Code Description HCPCS Code 

Dosage

J9355 Trastuzumab injection 10 mg

J9360 Vinblastine sulfate injection 1 mg

J9370 Vincristine sulfate injection 1 mg

J9375 Vincristine sulfate injection 2 mg

J9380 Vincristine sulfate injection 5 mg

Q4075* Acyclovir injection 5 mg

Q4076* Dopamine hydrochloride injection 40 mg

Q4077* Treprostinil injection 1 mg

Note: The Centers for Medicare & Medicaid Services (CMS) did not classify all of the listed drugs as durable 

medical equipment infusion drugs in every quarter between 2005 and 2011. 

 

*HCPCS codes Q4075, Q4076, and Q4077 were deleted as of December 31, 2005. They were replaced with 

HCPCS codes J0133, J1265, and J3285, respectively, as of January 1, 2006, and were no longer subject to the 

DME infusion payment limit during the subsequent quarters under review. 

 Source: CMS’s 2005–2011 payment amount files. 
15

Part B Payments for Drugs Infused Through Durable Medical Equipment (OEI-12-12-00310)

APPENDIX B

Annual Savings Under the Average Sales Price Methodology

Year

Total Spending for 

Durable Medical 

Equipment (DME)

Infusion Drugs

Spending Under

Average Sales 

Price 

(ASP)-Based

Methodology

Savings Under 

ASP-Based 

Payment 

Methodology

Percentage 

Savings Under 

ASP-Based 

Payment 

Methodology

2005 $129,917,517 $93,627,954 $36,289,563 28%

2006 $86,313,154 $51,464,796 $34,848,358 40%

2007 $89,365,108 $54,438,177 $34,926,931 39%

2008 $100,700,741 $58,574,188 $42,126,553 42%

2009 $108,419,875 $62,306,379 $46,113,495 43%

2010 $124,990,747 $56,573,383 $68,417,364 55%

2011 $125,459,122 $53,732,067 $71,727,055 57%

 Total $765,166,263 $430,716,945 $334,449,318 44%

 Source: Office of Inspector General (OIG) analysis of the Centers for Medicare & Medicaid Services’ 2005–2011 

payment amount files and OIG analysis of 2005-2011 National Claims History DME files.
APPENDIXC 

Agency Comments 

_.._tlsP'<'ICt;, , 

"...- "" ~ l4 DEPARTMENT OF HEALTII & HUMAN SERVICES Centers for Medicare & Mecf.ca;d Services

Office of the Administrator 

Washington. DC 20201 

DATE: 	 DEC 1 7 lOll 

TO: 	 Daniel R. Levinson 


Inspector General 


FROM: 	 Marilyn Tavenner 


Acting Administrator 


SUBJECT: 	 Office of Inspector General ' s Draft Report: "Part B Payments for Drugs Infused 

through Durable Medical Equipment" (OEI-12-12-00310) 

The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to review and 

respond to the OIG Draft Report titled, "Part B Payments for Drugs Infused Through Durable 

Medical Equipment " (OEI-12-12-0031 0) . 

The OIG's objectives were to compare Medicare payment amounts based on average wholesale 

prices (A WP) to average sales prices (ASP) for Part B durable medical equipment (DME) 

infusion drugs between 2005 and 2011 ; and determine how much Medicare would have saved on 

DME infusion drugs between 2005 and 2011 had payment been based on the ASP methodology. 

The OIG found that during each year between 2005 and 2011 the payment amounts for 67 to 86 

percent of health care common procedures codes (HCPCS) identified by OIG as DME infusion 

drugs exceeded ASP by a substantial margin. The report also noted that as many as one third of 

the payment amounts were significantly less than ASP. Overall, the potential savings associated 

with using ASP-based payments instead of A WP-based payments ranged from 28 percent in 

2005 to 57 percent in 2011. The savings estimate totaled $334 million for the period 2005 to 

2011 . One drug, milrinone-anagent infused for the treatment of congestive heart failure, 

accounted for about three quarters of the potential savings for each year. 

OIG Recommendation 

CMS should revise payments for DME infusion drugs to reflect acquisition costs by either 

seeking a legislative change to pay infusion drugs under the same payment methodology as other 

Part B drugs (i.e, 106 percent of ASP) or including infusion drugs in the next round ofthe DME 

competitive bidding program. 

Part B Payments for Drugs Infused Through Durable Medical Equipment (OEI-12-12-00310) 

16 
 

17

Part B Payments for Drugs Infused Through Durable Medical Equipment (OEI-12-12-00310) 
 

18

Part B Payments for Drugs Infused Through Durable Medical Equipment (OEI-12-12-00310) 

ACKNOWLEDGMENTS

This report was prepared under the direction of David Tawes, Regional 

Inspector General for Evaluation and Inspections in the Baltimore regional 

office. 

Bahar Adili served as the lead analyst for this study. Central office staff 

who provided support include Berivan Demir Neubert, Kevin Farber, 

Scott Manley, and Christine Moritz. 
Office of Inspector General

http://oig.hhs.gov

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 

amended, is to protect the integrity of the Department of Health and Human Services 

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

programs. This statutory mission is carried out through a nationwide network of audits, 

investigations, and inspections conducted by the following operating components:

Office of Audit Services

The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 

audits with its own audit resources or by overseeing audit work done by others. Audits 

examine the performance of HHS programs and/or its grantees and contractors in carrying 

out their respective responsibilities and are intended to provide independent assessments of 

HHS programs and operations. These assessments help reduce waste, abuse, and 

mismanagement and promote economy and efficiency throughout HHS.

Office of Evaluation and Inspections

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on significant 

issues. These evaluations focus on preventing fraud, waste, or abuse and promoting 

economy, efficiency, and effectiveness of departmental programs. To promote impact, OEI 

reports also present practical recommendations for improving program operations. 

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The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 

of fraud and misconduct related to HHS programs, operations, and beneficiaries. With 

investigators working in all 50 States and the District of Columbia, OI utilizes its resources 

by actively coordinating with the Department of Justice and other Federal, State, and local 

law enforcement authorities. The investigative efforts of OI often lead to criminal 

convictions, administrative sanctions, and/or civil monetary penalties.

Office of Counsel to the Inspector General

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support for OIG’s internal operations. OCIG represents OIG in all civil and 

administrative fraud and abuse cases involving HHS programs, including False Claims Act, 

program exclusion, and civil monetary penalty cases. In connection with these cases, OCIG 

also negotiates and monitors corporate integrity agreements. OCIG renders advisory 

opinions, issues compliance program guidance, publishes fraud alerts, and provides other 

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

enforcement authorities.