Department of Health and Human Services

OFFICE OF

INSPECTOR GENERAL

 

MEDICARE PAYMENTS FOR 

DRUGS USED TO TREAT WET 

AGE-RELATED MACULAR 

DEGENERATION

Daniel R. Levinson 

Inspector General

April 2012

OEI-03-10-00360 
EXECUTIVE SUMMARY: MEDICARE PAYMENTS FOR DRUGS USED TO 

TREAT WET AGE-RELATED MACULAR DEGENERATION

OEI-03-10-00360

WHY WE DID THIS STUDY 

Wet age-related macular degeneration (AMD), a leading cause of vision loss in people aged 

60 and older, affects millions of Americans. Lucentis is a Medicare Part B-covered drug 

approved by the Food and Drug Administration (FDA) for the treatment of wet AMD. 

Avastin is a Part B-covered drug approved by FDA for the treatment of various forms of 

cancer, but smaller doses of the drug are being used off-label to treat wet AMD. A dose of 

Avastin used to treat wet AMD costs a small fraction of the cost of a dose of Lucentis. The 

Centers for Medicare & Medicaid Services (CMS) established a national Medicare payment 

amount for Lucentis; however, there is no national Medicare payment amount for Avastin 

when used to treat wet AMD in a physician’s-office setting. In 2010, combined Part B 

expenditures for Lucentis and Avastin totaled nearly $2 billion. 

HOW WE DID THIS STUDY

Using Medicare claims data, we selected 2 stratified random samples: 1 sample of 

160 physicians who received Medicare payment for Lucentis and 1 sample of 

160 physicians who received Medicare payment for Avastin. We sent electronic surveys 

asking physicians to provide the total dollar amount and quantity purchased of Lucentis 

and Avastin in the first quarter of 2010. We also asked physicians to describe the factors 

that they consider when choosing Avastin instead of Lucentis for the treatment of wet 

AMD. We compared physician acquisition costs to Medicare payment amounts obtained 

from CMS and Medicare contractors. Additionally, we analyzed Medicare contractor 

payment policies and the reasons physicians reported for administering Avastin instead of 

Lucentis.

WHAT WE FOUND

In the first quarter of 2010, physician acquisition costs for Lucentis and Avastin were 

5 and 53 percent below the Medicare payment amount, respectively. Medicare 

contractors’ payment amounts for Avastin when used to treat wet AMD differed by as 

much as 28 percent, although payment policies were similar. Additionally, we found that 

the majority of physicians who administered Avastin to treat wet AMD reported the 

substantial cost difference compared to Lucentis as a primary factor in their decision.

WHAT WE RECOMMEND

We recommend that CMS (1) establish a national payment code for Avastin when used 

for the treatment of wet AMD and (2) educate providers about the clinical and payment 

issues related to Lucentis and Avastin. CMS did not concur with our first 

recommendation at this time but did concur with our second recommendation.
TABLE OF CONTENTS

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

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

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

Findings......................................................................................................10

Physician acquisition costs for Lucentis were 5 percent below the 

Medicare payment amount in the first quarter of 2010..................10

Physician acquisition costs for Avastin were 53 percent below the 

average Medicare contractor payment amount in the first quarter 

of 2010; however, these acquisition costs were nearly four times 

the rescinded national Medicare payment amount from the 

previous quarter .............................................................................10

Contractors’ payment amounts for Avastin differed by as much 

as 28 percent, although payment policies were similar .................11

The majority of physicians who administered Avastin to treat 

wet AMD reported the substantial cost difference compared to 

Lucentis as a primary factor in their decision................................12

Conclusion and Recommendations............................................................13

Agency Comments and Office of Inspector General Response.....14

Appendixes ................................................................................................15

A: Confidence Intervals................................................................15

B: Agency Comments...................................................................16

Acknowledgments......................................................................................18
Medicare Payments for Drugs Used To Treat Wet Age-Related Macular Degeneration (OEI-03-10-00360) 1

OBJECTIVES

1. To compare the Medicare payment amount for Lucentis to physicians’ 

acquisition costs. 

2. To determine the average Medicare contractor payment amount for 

Avastin when used to treat wet age-related macular degeneration 

(AMD) and compare it to physicians’ acquisition costs. 

3. To examine Medicare contractor payment policies for Avastin when 

used to treat AMD. 

4. To examine the factors considered by physicians when choosing 

Avastin for the treatment of AMD.

BACKGROUND

AMD, a leading cause of vision loss in people aged 60 and older, affects 

millions of Americans, according to the National Eye Institute (NEI), part of 

the National Institutes of Health (NIH). Wet AMD is an advanced form of 

the disease that reduces the ability to see objects clearly and inhibits the 

performance of common daily tasks, such as reading and driving. 

Lucentis is a Part B-covered drug approved by the Food and Drug 

Administration (FDA) for the treatment of wet AMD. Avastin is a 

Part B-covered drug approved by FDA for the treatment of various forms of 

cancer, but smaller doses of the drug (usually prepared for an additional cost 

by compounding pharmacies) are being used off-label to treat wet AMD.1

Medicare Part B Coverage of Prescription Drugs

 A 

dose of Avastin used to treat wet AMD costs a small fraction of the cost of a 

dose of Lucentis. In 2010, combined Part B expenditures for Lucentis and 

Avastin totaled nearly $2 billion. 

Although Medicare Part D covers most outpatient prescription drugs, the 

Centers for Medicare & Medicaid Services (CMS) continues to cover a 

limited number of outpatient prescription drugs and biologicals 

(hereinafter referred to as drugs) under its Part B benefit. Part B-covered 

drugs generally fall into the following categories: drugs furnished incident 

to a physician’s service (e.g., injectable drugs such as Lucentis and 

Avastin); drugs explicitly covered by statute (e.g., some vaccines and oral 

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

1 The term “off-label use” refers to the prescribing of FDA-approved medications by 

physicians for purposes outside the scope of the drugs’ approved labels.
 

Medicare Payments for Drugs Used To Treat Wet Age-Related Macular Degeneration (OEI-03-10-00360) 2

equipment (e.g., inhalation drugs).2

Medicare Part B Payments for Prescription Drugs

 Medicare beneficiaries can receive 

Part B-covered drugs in several settings, including physicians’ offices and 

hospital outpatient departments. 

CMS contracts with private companies (i.e., contractors) to process and 

pay Medicare Part B claims, including those for prescription drugs.3 To 

obtain payment for covered outpatient prescription drugs, health care 

providers submit claims to their Medicare contractors using codes 

established by CMS, called Healthcare Common Procedure Coding 

System (HCPCS) codes.4

Payment Methodology for Part B Drugs 

 In 2010, Medicare and its beneficiaries spent 

$12 billion for Part B drugs. 

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

based on average sales prices (ASP).5 The ASP is defined as a 

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

calendar quarter divided by the total number of units of the drug sold by the 

manufacturer in that same quarter.6 Manufacturers provide CMS with the 

ASP and volume of sales for their drugs on a quarterly basis.7

As required by law, CMS sets a single national payment amount for most 

Part B-covered prescription drugs at 106 percent of the volume-weighted 

ASP.8 Medicare beneficiaries are generally responsible for 20 percent of this 

amount in the form of coinsurance. 

2 Section 1861(s)(2) of the Social Security Act (the Act), 42 U.S.C. § 1395x(s)(2); 42 CFR 

§ 414.900(b) and CMS, Medicare Benefit Policy Manual (BPM), Pub. 100-02, ch. 15, § 50.

3 CMS is transitioning from a system of fiscal intermediaries and carriers to Medicare 

Administrative Contractors. Medicare contracting reform was mandated by the Medicare 

Prescription Drug, Improvement, and Modernization Act of 2003, P.L. 108-173 § 911 (Dec. 8, 

2003). 

4 HCPCS codes provide a standardized 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 the amount of drug represented by the code but does not specify 

manufacturer or package size information. 5 Several Part B drugs, including certain vaccines and blood products, are not paid under the 

ASP methodology. See sections 1847A(a)(1) and 1842(o)(1) of the Act, 42 U.S.C. 

§§ 1395w-3a(a)(1) and 1395u(o)(1).

6 Per section 1847A(c) of the Act, 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. 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 Sections 1847A(f) and 1927(b)(3) of the Act, 42 U.S.C § 1396r-8(b)(3).

8 Section 1847A(b) of the Act. 
 

Medicare Payments for Drugs Used To Treat Wet Age-Related Macular Degeneration (OEI-03-10-00360) 3

Part B-Covered Drugs Used to Treat Wet AMD

Lucentis, which was approved by FDA in 2006 to treat wet AMD, is 

manufactured by Genentech. This drug is sold in single-use vials and 

administered by physicians through a monthly 0.5-mg intravitreal 

injection (i.e., delivered via the eye). Genentech also manufactures

Avastin, which FDA approved in 2004 to treat various forms of cancer. 

Ophthalmologists also use Avastin in an off-label manner to treat wet 

AMD. When using Avastin to treat wet AMD, physicians typically inject 

a much smaller amount of it (1.25 mg per month) than when the drug is 

used in cancer treatments.9

Both Lucentis and Avastin are typically administered by physicians in an 

office setting. However, Avastin is sold by Genentech in 100-mg or 400-mg 

vials that are intended for use in treating cancer. The smaller (1.25-mg) 

Avastin dose used to treat wet AMD must be prepared in a sterile 

environment through a process known as compounding.

 

10, 11 Compounding 

is a pharmacy practice that enables physicians to prescribe—and patients to 

take—medicines that are specially prepared by pharmacists to meet patients’ 

individual needs.12

Physicians who use Avastin to treat wet AMD obtain the drug primarily 

through two methods. Some physicians purchase Avastin in 100-mg or 

400-mg vials and send the vials to compounding pharmacies. Therefore, 

in addition to the cost of acquiring Avastin, these eye doctors typically 

incur separate compounding costs. Other physicians purchase 

ready-to-use syringes prefilled with smaller doses of Avastin, directly from 

a compounding pharmacy. In these cases, the drug costs and 

compounding costs are combined into a single price. 

 

Medicare Payment for Lucentis and Avastin

For Lucentis, physicians bill for and are paid under HCPCS code J2778. 

The Medicare payment amount for one dose of Lucentis administered in a 

physician’s office, typically 0.5 mg (one vial), was $2,023 in the first quarter 

9 Physicians administer approximately 1.25 mg of Avastin every 4 to 6 weeks to treat wet 

AMD. However, physicians could administer hundreds of milligrams of Avastin per cancer 

treatment depending on the patient’s weight and type of cancer. For example, a 150-pound 

person being treated for lung cancer could be administered approximately 1,000 mg of 

Avastin every 3 weeks.

10 James Folk, M.D. Avastin. Accessed at http://www.medrounds.org on May 19, 2011.

11 Because Avastin is packaged in 100- and 400-mg vials that exceed the 1.25-mg dose 

commonly used for treating wet AMD, physicians often use compounding pharmacies to 

repackage the drug into single-use syringes that contain the smaller dose for intravitreal use. 

In August 2011, in response to a cluster of eye infections traced to patients who had received 

Avastin repackaged by a pharmacy in Florida, FDA alerted health care professionals of 

infection risk from repackaged Avastin intravitreal injections. 

12 Compounding is not exclusive to drugs used for off-label purposes. 
 

Medicare Payments for Drugs Used To Treat Wet Age-Related Macular Degeneration (OEI-03-10-00360) 4

of 2010. In total, Medicare and its beneficiaries spent $1.1 billion for 

Lucentis in 2010. 

As of September 2011, CMS does not have a single HCPCS code or 

payment amount for Avastin when used to treat wet AMD in a 

physician’s-office setting. Medicare contractors that process and pay claims 

determine the Medicare payment amount for Avastin used to treat wet 

AMD.

13 The contractors also instruct physicians administering Avastin in an 

office setting to use the HCPCS codes for unclassified drugs (J3490), 

unclassified biologics (J3590), or Avastin used to treat cancer (J9035). 

Regardless of the HCPCS code used, the Medicare payment amount for one 

Avastin dose used to treat wet AMD is always substantially less than the 

Medicare payment amount for Lucentis. In total, Medicare and its 

beneficiaries spent $27 million for Avastin used to treat wet AMD in 2010.14

In August 2009, CMS announced that it would create a new HCPCS code 

(Q2024), to take effect in the fourth quarter of 2009, for the use of Avastin 

in treating wet AMD. This change would have set a national Medicare 

payment amount at $7.185 for every 1.25-mg dose (an amount determined 

by taking the payment amount for the 10-mg dose of Avastin and dividing 

it by 8).15

National Eye Institute Study

 Some doctors expressed concern that this new payment amount 

would not cover the extra compounding costs that they incurred when 

using Avastin to treat wet AMD. In an October 2009 letter to CMS, a 

member of Congress noted this concern, writing that the new payment 

policy could cause physicians to switch from Avastin to the more 

expensive Lucentis. This, in turn, would have resulted in higher payment 

amounts and coinsurance for Medicare and its beneficiaries. In 

November 2009, CMS decided to rescind the new payment code (Q2024) 

and policy. Payment reverted to the previous codes established by 

individual Medicare contractors. 

In 2008, NEI began the Comparison of AMD Treatments Trials (CATT) to 

assess the safety and effectiveness of Lucentis and Avastin to treat wet 

AMD. NEI is also determining whether both drugs remain effective when 

doses are administered more than 1 month apart. 

13 Off-label use is covered by Medicare if the Medicare contractor determines the use to be 

medically accepted. See BPM, ch. 15, § 50.4.2. Moreover, Medicare contractors determine 

pricing for compounded drugs. See BPM, ch. 17, § 20.1.2.

14 Because there is not a unique HCPCS code for Avastin used to treat wet AMD, we 

projected a total based on Part B claims data. 15 When CMS created the new HCPCS code Q2024 to pay for Avastin used to treat wet 

AMD, it took the payment amount for J9035 ($57.479) and divided it by 8, arriving at an 

amount of $7.185. 
 

Medicare Payments for Drugs Used To Treat Wet Age-Related Macular Degeneration (OEI-03-10-00360) 5

In April 2011, NEI released the preliminary results from the first year of 

the CATT. NEI found that Avastin was as effective as Lucentis in treating 

wet AMD.16 It also found evidence that Avastin and Lucentis could be 

administered effectively at longer intervals than the normal 

once-per-month schedule. Finally, NEI found that “serious adverse events 

(primarily hospitalizations)” occurred at a rate of 24 percent for patients 

receiving Avastin and a rate of 19 percent for patients receiving Lucentis. 

However, NEI was unable to determine a causal link between the type of 

treatment and particular adverse events. Longer term study results will 

provide additional information about the relative safety and efficacy of 

Avastin and Lucentis. 

Related Office of Inspector General Work

A September 2011 Office of Inspector General (OIG) audit report17 found 

that if Medicare reimbursement for all beneficiaries treated for wet AMD 

with Avastin or Lucentis had been based on the Avastin payment amount, 

Medicare and its beneficiaries would have saved approximately 

$1.4 billion. Twenty percent of these savings would have been from 

decreases in beneficiary copayments. Conversely, the report found that if 

Medicare reimbursement for all beneficiaries treated for wet AMD with 

Avastin or Lucentis had been based on the Lucentis payment amount, 

spending for Medicare and its beneficiaries would have increased by 

$1.9 billion. Similarly, 20 percent of that total would have been from 

increases in beneficiary copayments. OIG recommended that CMS 

(1) consider the results of that report when evaluating coverage and 

reimbursement policies related to Avastin and Lucentis and (2) seek 

additional authority as necessary to control Part B drug expenditures. 

METHODOLOGY

Data Sources and Collection

Sample Selection. We extracted all Part B drug claims for Lucentis 

(HCPCS code J2778) and Avastin (HCPCS codes J3490, J3590, J9035, 

and Q2024) with dates of service in the first quarter of 2010 from CMS’s 

National Claims History File. The sampling frame for this analysis 

included only claims associated with the treatment of wet AMD in 

ophthalmologists’ offices in the 50 States and the District of Columbia 

based on the claims’ HCPCS codes, physician specialty code, diagnosis 

code, place of service code, and procedure code for related treatment. See 

Table 1 for a detailed description of the criteria for claims selection. 

16 NEI, NIH Study finds Avastin and Lucentis are equally effective in treating age-related 

macular degeneration, April 2011. Accessed at http://www.nei.nih.gov on May 4, 2011. 

17 OIG, Review of Medicare Part B Avastin and Lucentis Treatments for Age-Related Macular 

Degeneration (A-01-10-00514), September 2011. 
 

 

Criteria Value for Inclusion in Sampling Frame 

HCPCS Code J2778 (Lucentis); J3490, J3590, J9035, Q2024 (Avastin) 

Physician Specialty Code 18 (ophthalmologist) 

Diagnosis Code 36252 (exudative (wet) senile macular degeneration, i.e., wet AMD) 

Place of Service 11 (office) 

Procedure Code for 67028 (intravitreal (eye) injection) 

Related Treatment 

 Source: Part B claims data dictionary, OIG analysis of Part B claims data, 2010. 

Description of Stratum Number of Physicians 

in Population 

Number of 

Physicians in Sample 

Lucentis 

Physicians with allowed charges ≤ $190,000 in the 

first quarter of 2010 1,334 68

Physicians with allowed charges > $190,000 in the 

first quarter of 2010 369 92

 Total 1,703 160 Avastin 

Physicians with allowed charges ≤ $4,600 in the 

first quarter of 2010 1,623 67

Physicians with allowed charges > $4,600 in the 

first quarter of 2010 490 93

 Total 2,113 160

 Source: OIG analysis of Lucentis and Avastin Medicare Part B claims, 2010. 

Medicare Payment Amounts and Policies. We obtained from CMS’s Web 

site the first-quarter 2010 Medicare payment amount for Lucentis. 

18 We ran simulations of our universe to determine the dividing point for each stratum (i.e., 

$190,000 for Lucentis and $4,600 for Avastin). 

 Table 1. Claims Selection Criteria 

After selecting the claims that met the above criteria, we grouped them by 

prescribing physician and summarized the claims data in each group. 

From these summarized data, we selected 2 stratified random samples: 

1 sample of 160 physicians who received Medicare payment for Lucentis 

and 1 sample of 160 physicians who received Medicare payment for 

Avastin. To increase the precision of our estimates and to keep the sample 

size within reason, we stratified each sample based on total allowed 

charges for administering Avastin or Lucentis.18 See Table 2 for a 

description of our sampling frame. 

Table 2. Sampling Frame 

Medicare Payments for Drugs Used To Treat Wet Age-Related Macular Degeneration (OEI-03-10-00360) 6
 

Medicare Payments for Drugs Used To Treat Wet Age-Related Macular Degeneration (OEI-03-10-00360) 7

Because there is no national payment amount for Avastin when used to 

treat wet AMD in a physician’s-office setting, we obtained first-quarter 

2010 Medicare payment amounts and coverage policies for it from all 

11 Medicare contractors that paid claims for Part B-covered drugs in the 

first quarter of 2010. In addition, we obtained from CMS’s Web site the 

(now-rescinded) fourth-quarter 2009 national Medicare payment amount 

for Avastin when used to treat wet AMD. 

Physician Surveys

In the survey, we asked physicians to provide us with the total dollar 

amount they purchased, the quantity they purchased, and any discounts or 

rebates they received for Lucentis or Avastin in the first quarter of 2010. 

We asked physicians who administered Avastin to describe the steps taken 

to prepare Avastin for the treatment of wet AMD (i.e., compounding), 

including identifying the entity responsible for compounding and the total 

cost of compounding. We also asked physicians how many 1.25-mg doses 

of Avastin were produced from the vials purchased. Additionally, we 

asked physicians to describe the factors that they consider when choosing 

Avastin instead of Lucentis for the treatment of wet AMD.

. We sent electronic surveys to the physicians in each 

sample, using mailing addresses obtained from CMS. We made up to three 

attempts to contact the physicians in each sample to increase the response 

rate. Between January and April 2011, 131 of 160 (82 percent) physicians 

who administered Lucentis responded to our survey and 122 of 

160 (76 percent) physicians who administered Avastin responded to our 

survey. 

19

Data Analysis 

 

Lucentis. Of the 131 responding physicians, 125 supplied complete data 

that could be used in our analysis.20 To calculate physicians’ first-quarter 

2010 average acquisition cost for Lucentis, we summed acquisition costs 

(net of discounts) among all respondents and divided that number by the 

number of vials purchased. We compared the first-quarter 2010 Medicare 

payment amount to physicians’ average acquisition cost and calculated the 

percentage difference. We also calculated the acquisition cost of Lucentis 

for each individual responding physician and determined the percentage of 

physicians that purchased the drug at prices below the Medicare payment 

amount.21

19 We asked this question because Avastin is not approved by FDA to treat wet AMD. 

Conversely, as Lucentis is approved by FDA to treat wet AMD, we did not ask why 

physicians use Lucentis instead of Avastin. 

 

20 Six responding physicians were excluded for not providing complete data.

21 All of the cost calculations were weighted based on the stratified sample selection. 
 

Medicare Payments for Drugs Used To Treat Wet Age-Related Macular Degeneration (OEI-03-10-00360) 8

Avastin. Of the 122 responding physicians, 113 supplied complete data that 

could be used in our analysis.22 We then calculated the average first-quarter 

2010 Medicare payment amount for Avastin when used to treat wet AMD 

based on payment amounts provided by 10 of the 11 Medicare contractors.23

To calculate physicians’ average acquisition costs for Avastin in the first 

quarter of 2010, we summed acquisition costs (net of discounts) among all 

respondents and divided that number by the number of doses purchased. We 

compared the average first-quarter 2010 Medicare payment amount to 

physicians’ average acquisition cost and calculated the percentage

difference. In addition, we compared physicians’ average acquisition cost to 

the rescinded national Medicare payment amount from the fourth quarter of 

2009.

 

24

Additionally, we calculated both the average drug costs and average 

compounding costs (i.e., the two components of physicians’ acquisition 

costs) separately by (1) dividing the drug acquisition costs by the number of 

doses purchased and (2) dividing compounding costs by the number of doses 

purchased.

 

25

We reviewed each contractor’s payment amounts and policies for Avastin 

used to treat wet AMD to determine the extent to which payment amounts 

and payment policies differed. We calculated the difference in contractor 

payment amounts and identified the payment and diagnosis codes that 

contractors required physicians to use when submitting claims for Avastin 

used to treat wet AMD. 

 

We reviewed the reasons physicians reported for using Avastin instead of 

Lucentis to treat wet AMD and determined the frequency of each factor.26

Limitations

 

Because Lucentis is approved by FDA for the treatment of wet AMD, we 

did not ask a similar question of physicians who administered Lucentis. 

The analysis and results in this report are based only on physicians’ and 

contractors’ self-reported data. We did not verify the accuracy or 

completeness of physicians’ or contractors’ responses. 

22 Nine responding physicians were excluded for not providing complete data. 

23 One contractor bases its payment for Avastin used to treat wet AMD on cost and does not 

have a single payment amount. Therefore, we excluded this contractor from our calculation of 

an average Medicare payment amount. Several other contractors reported a single payment 

amount that we included in our calculation, but noted that they paid based on cost if that 

amount was lower than the usual payment amount. 

24 All cost calculations were weighted based on the stratified sample selection. 

25 Because of the small number of physicians who provided these data, we were unable to 

project these results. 

26 These calculations were weighted based on the stratified sample selection. 
 

Medicare Payments for Drugs Used To Treat Wet Age-Related Macular Degeneration (OEI-03-10-00360) 9

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.
 

Medicare Payments for Drugs Used To Treat Wet Age-Related Macular Degeneration (OEI-03-10-00360) 10

FINDINGS

Physician acquisition costs for Lucentis were 

5 percent below the Medicare payment amount in the 

first quarter of 2010

On average, physicians paid $1,928 (net of discounts) per vial of Lucentis 

in the first quarter of 2010. This was 5 percent below the Medicare 

payment amount of $2,023 during that quarter. Nearly all physicians

(98 percent) purchased Lucentis at a price below the Medicare payment 

amount during the time period under review.

Physician acquisition costs for Avastin were 

53 percent below the average Medicare contractor 

payment amount in the first quarter of 2010; however, 

these acquisition costs were nearly four times the 

rescinded national Medicare payment amount from the 

previous quarter

On average, physicians paid $26 per dose of Avastin (including drug and 

compounding costs) in the first quarter of 2010. This was 53 percent below 

the average Medicare contractor payment amount of $55 per dose in that 

quarter. Almost all physicians (96 percent) were able to purchase Avastin to 

treat wet AMD at a price below the average Medicare contractor payment 

amount. 

In contrast, average physician acquisition costs substantially exceeded the 

national Medicare payment amount of about $7 that CMS proposed and then 

rescinded for the fourth quarter of 2009. The average acquisition cost—

$26 per dose—is almost 4 times greater than the rescinded national payment 

amount.27

Physicians who purchased Avastin in vials (as opposed to in prefilled 

syringes) needed to compound the drug prior to administering it to 

patients. For responding physicians from the sample, the two components 

of the total cost—i.e., the average drug cost ($15 per dose) and the average 

compounding cost ($10 per dose)—by themselves exceeded the rescinded 

Medicare payment amount. We could not calculate separate drug and 

 Because CMS rescinded the national payment amount and policy, 

there is currently no national payment amount for Avastin used to treat wet 

AMD in a physician’s-office setting. Had the national payment amount been 

implemented, physicians would have been reimbursed at 72 percent below 

their costs. 

27 This calculation assumes that the Medicare payment amount stayed the same from the 

fourth quarter of 2009 to the first quarter of 2010. 
 

Medicare Payments for Drugs Used To Treat Wet Age-Related Macular Degeneration (OEI-03-10-00360) 11

compounding costs for physicians who purchased Avastin in syringes 

because the drug in these syringes had already undergone the 

compounding process prior to purchase. 

Contractors’ payment amounts for Avastin differed by 

as much as 28 percent, although payment policies 

were similar

Generally, CMS is required to set a national Medicare payment amount for 

Part B-covered drugs at 106 percent of ASP. However, as previously stated, 

there is no national Medicare payment amount for Avastin used to treat wet 

AMD in a physician’s-office setting; Medicare contractors must set the 

payment amount in their jurisdictions. Consequently, payment amounts 

differed by as much as 28 percent in the first quarter of 2010 (although 5 of 

the 11 contractors had the same payment amount).28

Similarly, Medicare contractors established their own policies for the 

coding and payment of Avastin claims when the drug is used to treat wet 

AMD. All contractors instructed providers to use one of three HCPCS 

billing codes (J3490, J3590, or J9035) on these claims. Additionally, all 

contractors except one reported that they require a related diagnosis code 

for wet AMD and/or procedure code on these claims. See Table 3 for a

description of contractor payment amounts and policies. 

 Ten Medicare 

contractors reported per-dose payment amounts for Avastin ranging from 

$45 (1 contractor) to $57 (7 contractors) per dose during the first quarter of 

2010. The remaining contractor paid claims based on cost and did not 

establish a specific payment amount.

 Table 3. Contractor Payment Amounts and Policies

Contractor HCPCS Codes Payment Amount Related Diagnosis or 

Procedure Code Required 

1 J3590 $50.00 Yes

2 J9035 $57.46 Yes

3 J9035 $57.46 Yes

4 J3590 $45.00 No 

5 J3490 $50.00 Yes

6 J9035 $57.46 Yes

7 J9035 $57.46 Yes

8 J3590 or J3490 . $57.40 Yes

9 J9035 $57.46 Yes

10 J3590 or J3490 $57.44 Yes

11 J3590 or J3490 Based on invoice cost Yes

 Source: OIG analysis of Medicare contractor responses, 2010. 

28 Two additional contractors had payment amounts within $0.06 of the five contractors with 

the same payment amount. 
 

Medicare Payments for Drugs Used To Treat Wet Age-Related Macular Degeneration (OEI-03-10-00360) 12

The majority of physicians who administered Avastin 

to treat wet AMD reported the substantial cost 

difference compared to Lucentis as a primary factor in 

their decision

Physicians reported several reasons for using Avastin rather than Lucentis to 

treat wet AMD with cost being the primary factor (70 percent). Forty-five

percent reported efficacy/effectiveness as a reason, and 40 percent cited 

patient insurance coverage. Additional reasons—cited by 1 to 14 percent of 

physicians—included less frequent injections, patient preference, patient 

condition, ease of use, and safety. One physician reported giving Avastin to 

all patients unless they do not respond to that treatment. 

Based on our analysis, the final cost of a dose of Avastin is about 1 percent 

the cost of a dose of Lucentis, on average ($26 vs. $1,928). Physician 

acquisition costs for Lucentis are much higher; those costs, in turn, are 

passed on to the Medicare program and beneficiaries in the form of higher 

program payments and coinsurance. Beneficiaries would pay approximately 

$400 in coinsurance for each dose of Lucentis, compared to approximately 

$11 in coinsurance for each dose of Avastin. One physician’s rationale for 

choosing Avastin raised all of these concerns: 

I believe that Avastin works as well if not better than Lucentis. 

Why would I not want to save expenses for my patients, our 

society, and government by using a product I believe is as effective 

as the incredibly more expensive alternative? My personal income 

would have been higher if I had used Lucentis, but I do not believe 

that is the right thing to do. 
 

Medicare Payments for Drugs Used To Treat Wet Age-Related Macular Degeneration (OEI-03-10-00360) 13

CONCLUSION AND RECOMMENDATIONS

Lucentis and Avastin are the primary drugs that ophthalmologists use to treat 

wet AMD, a leading cause of severe vision loss that affects millions of 

Americans. Congressional interest, media reports, and other OIG work have 

recently focused on the substantial price difference between Lucentis and 

Avastin as well as on physician reimbursement concerns. Additionally, in 

April 2011, NEI released the preliminary results of the CATT, which found 

that Avastin was equally as effective as Lucentis in treating wet AMD. 

Our findings indicate that in the first quarter of 2010, physicians could 

purchase both Lucentis and Avastin at prices below their Medicare payment 

amounts. The results also demonstrate that physicians’ acquisition costs for 

Avastin used to treat wet AMD ($26) are substantially lower than acquisition 

costs for Lucentis ($1,928). The majority of physicians who used Avastin 

generally reported that they chose the drug because of its substantially lower 

costs. Our findings also highlight the variability in contractor payment in 

the absence of a national Medicare payment amount. 

Given the lack of a national payment policy for Avastin used to treat wet 

AMD in a physician’s-office setting and the substantial difference in cost 

of the two drugs to Medicare and its beneficiaries, we recommend that 

CMS: 

Establish a National Payment Code for Avastin When Used for 

the Treatment of Wet AMD

Generally, the law requires CMS to set a national payment amount for 

Part B-covered drugs at 106 percent of ASP, an amount that is based on 

actual sales data and is consistent nationwide. Currently, CMS does not 

have a national payment amount for Avastin used to treat wet AMD; 

consequently, the Medicare contractor in each jurisdiction has to set its 

own payment amount. Most contractors paid nearly identical amounts for 

Avastin used to treat wet AMD and had similar payment policies, although 

in some cases contractor payment amounts differed by up to 28 percent. 

We recognize that physicians incur additional costs (i.e., compounding 

costs) when using Avastin to treat wet AMD and that these costs are not 

factored into the drug’s ASP. The unique circumstances surrounding the 

acquisition and administration of Avastin to treat wet AMD in a 

physician’s-office setting would need to be considered when setting a 

payment amount. To help establish a national payment amount, CMS 

could use physician acquisition cost data collected by OIG. 

Educate Providers About the Clinical and Payment Issues 

Related to Lucentis and Avastin

Our findings show that physicians can purchase Avastin at a much lower 

price than Lucentis and that many physicians are using Avastin because it 
 

Medicare Payments for Drugs Used To Treat Wet Age-Related Macular Degeneration (OEI-03-10-00360) 14

is a lower cost alternative. CMS could direct a provider education 

initiative to educate ophthalmologists about the clinical issues regarding 

Lucentis and Avastin (e.g., the results of the CATT) as well as the 

implications of the wide variance in cost on the program and beneficiaries. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS did not concur with our first recommendation at this time, but did 

note the existence of a unique code and payment amount for intraocular 

doses of Avastin in the hospital outpatient setting. CMS concurred with 

our second recommendation. 

In not concurring with our recommendation to establish a national 

payment code for Avastin when used to treat wet AMD, CMS noted that it 

had previously taken steps to create a national payment code and amount 

in 2009, but that the code was rescinded in light of beneficiary access 

concerns. 

CMS concurred with our recommendation to educate providers about the 

clinical and payment issues related to Lucentis and Avastin. CMS stated 

that it plans to inform claims processing contractors about our findings 

related to Avastin payment amounts. Further, CMS noted that it will 

instruct contractors to make our report’s findings available to providers. 

We acknowledge that the previous attempt to establish a national payment 

code and amount for the intraocular use of Avastin in physicians’ offices 

raised concerns over beneficiary access and that the unique circumstances 

surrounding the acquisition and administration of the drug would need to 

be considered when setting a payment amount. However, given the lack 

of a national payment policy, the substantial cost difference between these 

two drugs, and the existence of a unique payment code and amount for 

intraocular doses of Avastin in the hospital outpatient setting, we continue 

to believe that CMS should establish a national payment code and amount 

for Avastin when administered in a physician’s office that takes all of these 

factors into account. 

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

Medicare Payments for Drugs Used To Treat Wet Age-Related Macular Degeneration (OEI-03-10-00360) 15

APPENDIX A 

Confidence Intervals

Drug Estimate Description Sample Size Point 

 Estimate

 95% Confidence 

 Interval

Lucentis

Physician average acquisition cost in the first 

quarter of 2010 124* $1,928.46 $1,924.44 to $1,932.49

Percentage difference between average 

acquisition cost and the first-quarter 2010

Medicare payment amount

124* -4.67 -4.87 to -4.47

Percentage of physicians whose average 

acquisition cost was below the first-quarter 

2010 Medicare payment amount

124* 98.34 89.42 to 99.76

Avastin

Physician average acquisition cost in the first 

quarter of 2010 106** $26.05 $23.71 to $28.40

Percentage difference between average 

acquisition cost and the first-quarter 2010

Medicare payment amount

106** -52.63 -56.91 to -48.35

Percentage of physicians whose average 

acquisition cost was below the first-quarter 

2010 Medicare payment amount

106** 95.86 86.60 to 98.81

Percentage difference between average 

physician acquisition cost and the rescinded 

fourth-quarter 2009 Medicare payment amount

106** -72.42 -74.90 to -69.94

Number of times the average acquisition cost 

exceeded the rescinded fourth-quarter 2009

Medicare payment amount

106** 3.63 3.30 to 3.95

Average physician cost of Avastin as a 

percentage of average physician cost of 

Lucentis

*** 1.35 1.23 to 1.47

Percentage of physicians who cited cost as a 

reason for administering Avastin 113 69.99 58.73 to 79.27

Percentage of physicians who cited efficiency 

or effectiveness as a reason for administering 

Avastin

113 45.13 34.39 to 56.34

Percentage of physicians who cited patient 

insurance as a reason for administering 

Avastin

113 39.83 29.27 to 51.43

Percentage of physicians who cited less 

frequent of injection as a reason for 

administering Avastin

113 12.05 6.66 to 20.83

Percentage of physicians who cited patient 

preference as a reason for administering 

Avastin

113 13.66 7.43 to 23.76

Percentage of physicians who cited patient 

condition as a reason for administering Avastin 113 7.83 3.29 to 17.51

Percentage of physicians who cited ease of 

use as a reason for administering Avastin 113 0.77 0.22 to 2.67

Percentage of physicians who cited patient 

safety as a reason for administering Avastin 113 1.15 0.41 to 3.17

*The sample size is not 125 because 1 respondent reported not having purchased any Lucentis during the first quarter of 2010. This physician 

submitted claims for Lucentis in the first quarter of 2010; however, according to this individual’s response, the drugs were purchased during a 

previous quarter.

**The sample size is not 113 because 7 respondents reported that they did not purchase any Avastin during the first quarter of 2010. These 

physicians submitted claims for Avastin in the first quarter of 2010; however, according to their responses, the drugs were purchased during a 

previous quarter.

***This point estimate is based on 2 samples: 1 sample of 124 respondents (Lucentis) and 1 sample of 106 respondents (Avastin). 

Source: Office of Inspector General analysis of physicians’ average acquisition costs and survey responses. 
APPENDIX B 

Agency Comments 

/-""'..,

(~ DEPARTMENT OFHEALffi & HUMAN SERVlCFS Centers for Medicare & Medicaid Servicas 

Administrator 

Washington. DC 20201 

JAN 1 9 2012 DATE: 

TO: 	 Daniel R. Levinson 

In ~otor. General 

FROM: 	 Martl.Yn lfier 

Acting AOIllinhtrator 

SUBJECT: 	 Office ofInspector General (OIG) Draft Report: "Medicare Payments for Drugs 

Used to Treat Wet Age-Related Macular Degeneration (OEI-03-10-00360)" 

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

respond to the OIG Draft Report titled, Medicare Payments for Drugs Used to Treat Wet AgeRelated Macular Degeneration (OEI-03-! 0-00360). OIG's objectives in this study were the 

following: 

1. To compare the Medicare payment amount for Lucentis to physicians' acquisition costs. 

2. To determine the average Medicare contractor payment amount for Avastin when used to treat 

wet age-related macular degeneration (AMD) and compare it to physicians' acquisition costs. 

3. To examine Medicare contractor payment policies for Avastin when used to treat AMD. 

4. 	To examine the factors considered by physrcians when choosing Avastin for the treatment of 

AMD. 

The OIG found that in the first quarter of2010, physician acquisition costs for Lucentis and 

Avastin were 5 and 53 percent below the Medicare payment amount, respectively. Medicare 

contractors' payment amounts for Avastin when used to treat wet AMD differed by as much as 28 

percent, although payment policies were similar. The majority ofphysicians who administered 

Avastin to treat wet AMD reported the substantial cost difference compared to Lucentis as a 

primary factor when deciding which drug to administer. 

OIG Rec9.mmendation 

Establish a national payment code for Avastin when used for the treatment of wet AMD. 

CMS Response 

We non-concur at this time with this recommendation tv establish a national price for Avastin 

doses used to treat macular degeneration in the office setting. As discussed in the report, eMS 

had taken steps to create a national price for intraocular doses of Avastin in 2009. The action 

was rescinded in light of beneficiary access concerns. We note that a related code (C92S7) is 

Medicare Payments for Drugs Used To Treat Wet Age-Related Macular Degeneration (OEl-03-10-00360) 16 
 

Medicare Payments for Drugs Used To Treat Wet Age-Related Macular Degeneration (OEI-03-10-00360) 17

Agency Comments (continued) 
 

Medicare Payments for Drugs Used To Treat Wet Age-Related Macular Degeneration (OEI-03-10-00360) 18

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 Daniel J. Mallinson; other 

central office staff who contributed include Kevin Farber, Scott Horning, 

Kevin Manley, and Tasha Trusty. 
Office of Inspector General

http://oig.hhs.gov

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

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

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

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

investigations, and inspections conducted by the following operating components:

Office of Audit Services

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

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

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

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

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

mismanagement and promote economy and efficiency throughout HHS.

Office of Evaluation and Inspections

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

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

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

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

reports also present practical recommendations for improving program operations. 

Office of Investigations

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

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

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

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

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

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

Office of Counsel to the Inspector General

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

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

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

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

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

also negotiates and monitors corporate integrity agreements. OCIG renders advisory 

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

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

enforcement authorities.