DEPARTMENt OF HEALTH .~'lD HUMAN SERVJ~!ES
`
`OFFICE OF INSPECTOR GENERAL
`
`WASHINGTON, DC 20201
`
`DEC 1 2 2012
`
`TO:
`
`Marilyn Tavenner
`Acting Administrator
`Centers for Medicare & Medicaid Services
`
`FROM:
`
`Stuart Wright
`Deputy Inspector General
`for Evaluation and Inspections
`
`SUBJECT: Memorandum Report: Comparison ofFirst-Quarter 2012 Average Sales
`Prices and Average Manufacturer Prices: Impact on .Medicare
`Reimbursementfor Third Quarter 2012, OEI-03-12-00730
`
`This review was conducted in accordance with the statutory mandate for the Office of
`Inspector General (OIG) to identify Medicare Part B prescription drugs with average
`sales prices (ASP) that exceed average manufacturer prices (AMP) by at least 5 percent.
`This review estimated the financial impact oflowering reimbursement amounts for drugs
`that met the 5-percent threshold to I 03 percent of the AMPs, and also examined the
`potential effect of a November 2012 final rule that, among other things, specifies the
`circumstances under which the Centers for Medicare & Medicaid Services (CMS) wili
`make AMP-based price substituti.ons.
`
`SUMMARY
`
`When Congress estahlished ASP as the primary basis for Medicare P~ B drug
`reimbursement, it also mandated that OIG compare ASPs with AMPs and directed CMS
`to lower reimbursement for drugs with ASPs that exceed AMPs by a threshold of
`5 percent. Since the impiementation of the ASP payment methodology in 2005, OIG has
`fulfilled its responsibility by issuing 26 reports comparing ASPs and AMPs. However,
`CMS has yet to lower reimbursement in response to OIG's findings and
`·
`recommendations. This latest comparison examines drugs that exceeded the 5-percent
`threshold based on either complete or partial AMP data in the first quarter of2012. Of
`the 385 drug codes with complete AMP data, 22 exceeded the 5-percent threshold. If
`reimbursement amounts for all 22 codes had been based on 103 percent of the AMPs in
`the third quarter of2012, Medicare would have saved an estimated $739,000 in that
`.
`quarter alone. Under'CMS's price substitution policy, reimbursement amounts for 15 of
`the 22 drugs would have been reduced, saving an estimated $606,000 in the quarter. Of
`the 64 drug codes with partial AMP data, 6 exceeded the 5·percent threshold. CMS has
`
`Comparison of First-Quarter 2011 ASPs and AMPs (OEI-03-12-00730)
`
`Medac Exhibit 2079
`Koios Pharmaceuticals v. Medac
`IPR2016-01370
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`expressed concern that partial AMP data may not adequately reflect market trends and
`therefore will not apply its price substitution policy to drugs with partial AMP data.
`However, we found that pricing comparisons for two of the six codes with partial AMP
`data seemed to accurately capture market trends; therefore, price reductions may be
`appropriate in these cases. We could not perform pricing comparisons for an additional
`52 drug codes because none of the associated drug products had corresponding AMP
`data. Manufacturers for 9 percent of the associated drug products had Medicaid drug
`rebate agreements and were therefore generally required to submit AMPs.
`
`BACKGROUND
`
`The Social Security Act (the Act) mandates that OIG compare ASPs to AMPs.1 If OIG
`finds that the ASP for a drug exceeds the AMP by a certain percentage (currently
`5 percent), the Act states that the Secretary of Health and Human Services (the Secretary)
`may disregard the ASP for the drug when setting reimbursement amounts. 2, 3 The Act
`further states that “… the Inspector General shall inform the Secretary (at such times as
`the Secretary may specify to carry out this subparagraph) and the Secretary shall,
`effective as of the next quarter, substitute for the amount of payment … the lesser of
`(i) the widely available market price … (if any); or (ii) 103 percent of the average
`manufacturer price….”4
`
`Medicare Part B Coverage of Prescription Drugs
`Medicare Part B covers only a limited number of outpatient prescription drugs. Covered
`drugs include injectable drugs administered by a physician; certain self-administered
`drugs, such as oral anticancer drugs and immunosuppressive drugs; drugs used in
`conjunction with durable medical equipment; and some vaccines.
`
`Medicare Part B Payments for Prescription Drugs
`CMS contracts with private companies to process and pay Medicare Part B claims,
`including those for prescription drugs. To obtain reimbursement for covered outpatient
`prescription drugs, health care providers submit claims to Medicare contractors using
`procedure codes. CMS established the Healthcare Common Procedure Coding System
`(HCPCS) to 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 the amount of the drug represented by the
`HCPCS code but does not specify manufacturer or package size information.
`
`
`
`
`1 Section 1847A(d)(2)(B) of the Act.
`2 Section 1847A(d)(3)(A) of the Act.
`3 Section 1847A(d)(3)(B)(ii) of the Act provides the Secretary with authority to adjust the applicable
`threshold percentage in 2006 and subsequent years; however, the threshold percentage has been maintained
`at 5 percent.
`4 Section 1847A(d)(3)(C) of the Act.
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`Medicare and its beneficiaries spent over $12 billion for Part B drugs in 2011.5 Although
`Medicare paid for more than 500 outpatient prescription drug HCPCS codes that year,
`most of the spending for Part B drugs was concentrated on a relatively small subset of
`those codes. In 2011, 62 HCPCS codes accounted for 90 percent of the expenditures for
`Part B drugs, with only 13 of these codes representing the majority of total Part B drug
`expenditures.
`
`Reimbursement Methodology for Part B Drugs and Biologicals
`Medicare Part B pays for most covered drugs using a reimbursement methodology based
`on ASPs.6 As defined by law, an ASP is 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. 7 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. 8 Sales that are nominal in amount are
`exempted from the ASP calculation, as are sales excluded from the determination of “best
`price” in Medicaid’s drug rebate program. 9, 10
`
`Manufacturers that participate in the Medicaid drug rebate program must provide CMS
`with the ASP and volume of sales for each of their national drug codes (NDC) on a
`quarterly basis, with submissions due 30 days after the close of each quarter. 11 An NDC
`is an 11-digit identifier that represents a specific manufacturer, product, and package size.
`
`Because Medicare Part B reimbursement for outpatient 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 this crosswalk file to calculate volume-
`weighted ASPs for covered HCPCS codes.
`
`Calculation of Volume-Weighted ASPs
`Third-quarter 2012 Medicare payments for most covered drug codes were based on
`first-quarter 2012 ASP submissions from manufacturers, which were volume weighted
`
`5 Medicare expenditures for Part B drugs in 2011 were calculated using CMS’s Part B Analytics and
`Reports (PBAR). The PBAR data for 2011 were 98-percent complete when the data were downloaded in
`May 2012.
`6 Several Part B drugs, including certain vaccines and blood products, are not paid for under the ASP
`methodology.
`7 Section 1847A(c) of the Act, as added by the Medicare Prescription Drug, Improvement, and
`Modernization Act of 2003, P.L. 108-173.
`8 Section 1847A(c)(3) of the Act.
`9 Section 1847A(c)(2) of the Act.
`10 Pursuant to § 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.
`11 Section 1927(b)(3) of the Act.
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`using an equation that involves the following variables: the ASP for the 11-digit NDC as
`reported by the manufacturer, the volume of sales for the NDC as reported by the
`manufacturer, and the number of billing units in the NDC as determined by CMS. 12 The
`amount of the drug contained in an NDC may differ from the amount of the drug
`specified by the HCPCS code that providers use to bill Medicare. Therefore, the number
`of billing units in an NDC describes the number of HCPCS code units that are in that
`NDC. For instance, an NDC may contain 10 milliliters of Drug A, but the corresponding
`HCPCS code may be defined as only 5 milliliters of Drug A. In this case, there are two
`billing units in the NDC. CMS calculates the number of billing units in each NDC when
`developing its crosswalk files.
`
`Under the ASP pricing methodology, the Medicare allowance for most Part B drugs is
`equal to 106 percent of the volume-weighted ASP for the HCPCS code. 13 Medicare
`beneficiaries are generally responsible for 20 percent of this amount in the form of
`coinsurance.
`
`The Medicaid Drug Rebate Program and AMPs
`In general, for Federal payment to be available for covered outpatient drugs provided
`under Medicaid, the Act mandates that drug manufacturers enter into rebate agreements
`with the Secretary and pay quarterly rebates to State Medicaid agencies. 14 Under these
`rebate agreements and pursuant to the Act, manufacturers must provide CMS with the
`AMPs for each of their NDCs.15 As further explained in regulation, manufacturers are
`required to submit AMPs within 30 days after the end of each quarter. 16
`
`The AMP is generally calculated as a weighted average of prices for all of a
`manufacturer’s package sizes of a drug and is reported for the lowest identifiable quantity
`of the drug (e.g., 1 milliliter, one tablet, one capsule). By law, AMP is defined as the
`average price paid to the manufacturer for the drug in the United States by
`(1) wholesalers for drugs distributed to retail community pharmacies and (2) retail
`community pharmacies that purchase drugs directly from the manufacturer. 17, 18
`
`
`12 The equation that CMS currently uses to calculate volume-weighted ASPs is described in § 1847A(b)(6)
`of the Act. It is also provided in Appendix A.
`13 Section 1847A(b)(1) of the Act.
`14 Sections 1927(a)(1) and (b)(1) of the Act.
`15 Section 1927(b)(3) of the Act.
`16 42 CFR § 447.510.
`17 Section 1927(k)(1) of the Act, as amended by § 2503 of the Patient Protection and Affordable Care Act,
`P.L. 111-148.
`18 Pursuant to § 1927(k)(10) of the Act, “retail community pharmacy” means an independent, chain,
`supermarket, or mass merchandiser pharmacy that is licensed as a pharmacy by the State and that dispenses
`medications to the general public at retail prices. Such term does not include a pharmacy that dispenses
`prescription medications to patients primarily through the mail; nursing home, long-term-care, or hospital
`pharmacies; clinics; charitable or not-for-profit pharmacies; government pharmacies; or pharmacy benefit
`managers.
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`Penalties for Failure To Report Timely Drug Pricing Data
`Pursuant to the Act, manufacturers that fail to provide ASP and AMP data on a timely
`basis may be subject to civil money penalties and/or termination from the drug rebate
`program. 19, 20 Accordingly, CMS has terminated rebate agreements with a number of
`manufacturers for failure to report AMPs and, for the purposes of evaluating potential
`civil money penalties, has referred to OIG manufacturers that failed to submit timely
`ASPs and AMPs. In accordance with an enforcement initiative announced in September
`2010, OIG has imposed civil monetary penalties on certain manufacturers that failed to
`report timely ASPs and/or AMPs. 21
`
`OIG’s Monitoring of ASPs and AMPs
`To comply with its statutory mandate, OIG has issued 22 quarterly pricing comparisons
`since the ASP reimbursement methodology for Part B drugs was implemented in January
`2005. In addition, OIG has completed four annual overviews of ASPs and AMPs, which
`examined data across all four quarters of 2007, 2008, 2009, and 2010, respectively.
`
`OIG has consistently recommended that CMS develop a price substitution policy and
`lower the reimbursement amounts for drugs that exceed the 5-percent threshold as
`directed by the Act. Although CMS has yet to make any changes to Part B drug
`reimbursement as a result of OIG’s studies, the agency published a final rule in
`November 2012 that, among other things, specifies the circumstances under which
`AMP-based price substitutions will occur beginning in 2013.22, 23
`
`CMS’s Price Substitution Policy
`According to its November 2012 final rule, CMS will substitute 103 percent of the AMP
`for the ASP-based reimbursement amount when OIG identifies a HCPCS code that
`exceeds the 5-percent threshold in two consecutive quarters or three of four quarters. 24
`Because CMS believes that comparisons based on partial AMP data may not adequately
`reflect market trends, 25 the agency will lower reimbursement amounts only when ASP
`
`
`19 Sections 1927(b)(3)(C)(i) and (4)(B)(i) of the Act.
`20 The Secretary delegated to OIG the responsibility to impose civil money penalties for violations of
`§ 1927(b)(3)(C) of the Act in 59 Fed. Reg. 52967 (Oct. 20, 1994).
`21 OIG, Special Advisory Bulletin: Average Manufacturer Price and Average Sales Price Reporting
`Requirements, September 2010. Available online at http://www.oig.hhs.gov.
`22 77 Fed. Reg. 68892, 69368 (Nov. 16, 2012).
`23 This is the third time that CMS has pursued rulemaking on AMP-based price substitutions. In July 2010,
`CMS published a proposed rule that specified the circumstances under which AMP-based price
`substitutions would occur, effective January 2011; however, the agency opted not to finalize this proposed
`rule based, in part, on impending changes to the definition of AMP (75 Fed. Reg. 73170, 73471
`(Nov. 29, 2010)). In November 2011, CMS published a final rule that again specified circumstances under
`which price substitutions would occur (76 Fed. Reg. 73026, 73473 (Nov. 28, 2011)). Although that final
`rule took effect in January 2012, CMS did not implement that policy in light of access concerns related to
`drug shortages.
`24 77 Fed. Reg. 68892, 69368 (Nov. 16, 2012).
`25 76 Fed. Reg. 73026, 73289 (Nov. 28, 2011).
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`and AMP comparisons are based on the same set of NDCs (i.e., based on complete AMP
`data).26 Price substitutions will take effect in the quarter after OIG shares the results of its
`most recent pricing comparison and remain in effect for one quarter. 27, 28 Drugs identified
`by the Food and Drug Administration (FDA) as being in short supply will not be eligible
`for price substitution. 29
`
`METHODOLOGY
`
`We obtained a file from CMS containing NDC-level ASP data from the first quarter of
`2012, which were used to establish Part B drug reimbursement for the third quarter of
`2012. This file also includes information that crosswalks NDCs to their corresponding
`HCPCS codes. Both the ASP data and the crosswalk data were current as of
`June 21, 2012. We also obtained AMP data from CMS for the first quarter of 2012,
`which were current as of May 7, 2012.
`
`Analyzing ASP Data From the First Quarter of 2012
`As mentioned previously, Medicare does not base reimbursement for covered drugs on
`NDCs; instead, it uses HCPCS codes. Therefore, CMS uses ASP information submitted
`by manufacturers for each NDC to calculate a volume-weighted ASP for each covered
`HCPCS code. When calculating these volume-weighted ASPs, CMS includes only
`NDCs with ASP submissions that are deemed valid. As of June 2012, CMS had
`established prices for 514 HCPCS codes based on the ASP reimbursement methodology
`mandated by the Act.30 Reimbursement amounts for the 514 HCPCS codes were based
`on ASP data for 3,197 NDCs.
`
`Analyzing AMP Data From the First Quarter of 2012
`To ensure that the broadest range of drug codes is subject to OIG’s pricing comparisons,
`we divided HCPCS codes into the following three groups:
`
`
`(1) HCPCS codes with complete AMP data—i.e., HCPCS codes with AMP data
`for every NDC that CMS used in its calculation of volume-weighted ASPs;
`
`
`26 77 Fed. Reg. 68892, 69368 (Nov. 16, 2012).
`27 See, e.g., 76 Fed. Reg. 73026, 73473 (Nov. 28, 2011). After that one quarter, the reimbursement amount
`will be either 106 percent of the volume-weighted ASP for the current quarter or, if the HCPCS code
`continues to meet CMS’s price substitution criteria, 103 percent of the volume-weighted AMP for the
`current quarter.
`28 To prevent CMS’s policy from inadvertently raising the Medicare reimbursement amount, a price
`substitution will not occur when the substituted amount is greater than the ASP-based payment amount
`calculated for the quarter in which the price substitution would take effect (77 Fed. Reg. 68892, 69368
`(Nov. 16, 2012)). For example, if the AMP-based substitution amount were $5 and the ASP-based
`reimbursement amount were $4 for the quarter in which the substitution would take place, CMS would not
`make the price substitution.
`29 77 Fed. Reg. 68892, 69368 (Nov. 16, 2012).
`30 Section 1847A(b)(6) of the Act.
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`(2) HCPCS codes with partial AMP data—i.e., HCPCS codes with AMP data for
`only some of the NDCs that CMS used in its calculation of volume-weighted
`ASPs; and
`
`
`(3) HCPCS codes with no AMP data—i.e., HCPCS codes with no AMP data for
`any of the NDCs that CMS used in its calculation of volume-weighted ASPs.
`
`
`As previously noted, the AMP for each NDC is reported for the lowest identifiable
`quantity of the drug contained in that NDC (e.g., 1 milliliter, one tablet, one capsule).
`In contrast, the ASP is reported for the entire amount of the drug contained in the NDC
`(e.g., 50 milliliters, 100 tablets). To ensure that the AMP would be comparable to the
`ASP, it was necessary to convert the AMP for each NDC so that it represented the total
`amount of the drug contained in that NDC.
`
`To calculate “converted AMPs” for NDCs in the first and second groups, we multiplied
`the AMP by the total amount of the drug contained in each NDC, as identified by sources
`such as the CMS crosswalk file, manufacturer Web sites, drug labels, Thomson Reuters’
`Red Book, and FDA’s NDC directory.31 For certain NDCs, we were unable to identify
`the amount of the drug reflected by the ASP or AMP and therefore could not calculate a
`converted AMP. Because of these unsuccessful AMP conversions, 13 HCPCS codes
`were removed from our analysis.
`
`Using NDCs with successful AMP conversions, we then calculated a volume-weighted
`AMP for each of the corresponding HCPCS codes, consistent with CMS’s methodology
`for calculating volume-weighted ASPs. When calculating the volume-weighted AMP for
`a HCPCS code with partial AMP data, we excluded any NDCs without AMPs; however,
`we did not exclude those NDCs from the corresponding volume-weighted ASP. This
`means that the volume-weighted AMP for a HCPCS code with partial AMP data is based
`on fewer NDCs than the volume-weighted ASP for that same code. Appendix B provides
`a more detailed description of the methods we used to both convert AMPs and calculate
`volume-weighted AMPs. Table 1 provides the final number of HCPCS codes and NDCs
`included in our analysis after we removed NDCs with either no AMP data or
`unsuccessful AMP conversions.
`
`Table 1: Number of Drug Codes and NDCs Included in OIG’s Pricing Comparison
`Number of
`Number of
`HCPCS Codes
`NDCs
`
`Availability of AMP Data for HCPCS Codes
`
`Complete AMP Data
`
`Partial AMP Data
`
`No AMP Data
`
`385
`
`64
`
`52
`
`1,713
`
`728
`
`208
`
`Source: OIG analy sis of f irst-quarter 2012 ASP and AMP data, 2012.
`
`31 We did not calculate converted AMPs for NDCs in the third group because they had no AMP data.
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`Comparing First-Quarter 2012 Volume-Weighted ASPs and AMPs for HCPCS
`Codes With Complete AMP Data
`For each of the 385 HCPCS codes with complete AMP data, we compared the volume-
`weighted ASP and AMP and determined whether the ASP for the code exceeded the
`AMP by at least 5 percent. For HCPCS codes that exceeded the 5-percent threshold, we
`reviewed the associated NDCs to verify the accuracy of the billing unit information.
`According to our review, none of the HCPCS codes that exceeded the threshold based on
`complete AMP data was associated with questionable billing units.
`
`For each of the HCPCS codes that exceeded the 5-percent threshold, we estimated the
`monetary impact of lowering reimbursement to 103 percent of the AMP. 32 First, we
`calculated 103 percent of the volume-weighted AMP and subtracted this amount from the
`third-quarter 2012 reimbursement amount for the HCPCS code. To estimate the financial
`effect for the third quarter of 2012, we then multiplied the difference by one-fourth of the
`number of services that were allowed by Medicare for each HCPCS code in 2011, as
`reported in the PBAR.33, 34
`
`To determine which HCPCS codes would have been subject to CMS’s price substitution
`policy, we identified codes with complete AMP data that met the 5-percent threshold in
`two consecutive or three of four quarters and were not identified by FDA as being in
`short supply. We then totaled the estimated third-quarter 2012 savings for that subset of
`codes.
`
`Comparing First-Quarter 2012 Volume-Weighted ASPs and AMPs for HCPCS
`Codes With Partial AMP Data
`For each of the 64 HCPCS codes with partial AMP data, we compared the volume-
`weighted ASP and AMP and determined whether the ASP for the code exceeded the
`AMP by at least 5 percent. For HCPCS codes that exceeded the 5-percent threshold, we
`reviewed the associated NDCs to verify the accuracy of the billing units. According to
`our review, one of the HCPCS codes that exceeded the threshold based on partial AMP
`data was associated with questionable billing units. Because volume-weighted ASPs and
`AMPs are calculated using this billing unit information, we could not be certain that the
`results for this code was correct. Therefore, we excluded this HCPCS code from our
`count of codes with partial AMP data that exceeded the 5-percent threshold.
`
`
`32 Section 1847A(d)(3)(C) of the Act directs the Secretary to replace payment amounts for drugs that
`exceed the 5-percent threshold with the lesser of the widely available market price for the drug (if any) or
`103 percent of the AMP. For the purposes of this study, we used 103 percent of the AMP to estimate the
`impact of lowering reimbursement amounts. If widely available market prices had been available for these
`drugs and lower than 103 percent of the AMP, the savings estimate presented in this report would have
`been greater.
`33 The PBAR data for 2011 were 98-percent complete when the data were downloaded in May 2012.
`34 This estimate assumes that the number of services allowed by Medicare in 2011 remained consistent
`from one quarter to the next and that there were no significant changes in utilization between 2011 and
`2012.
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`For each of the remaining HCPCS codes that exceeded the 5-percent threshold based on
`partial AMP data, we determined whether missing AMPs unduly influenced the results of
`our pricing comparison. As mentioned previously, the volume-weighted AMP for a
`HCPCS code with partial AMP data is based on fewer NDCs than the volume-weighted
`ASP for that same code. Therefore, there may be a disparity between the volume-
`weighted ASP and AMP that would not exist if AMP data were available for the full set
`of NDCs. In other words, the volume-weighted ASP for the HCPCS code could exceed
`the volume-weighted AMP by at least 5 percent only because AMPs for certain NDCs
`were not represented.
`
`CMS has expressed concern that partial AMP data may not adequately reflect market
`trends.35 Therefore, to identify HCPCS codes with partial AMP data that exceeded the
`5-percent threshold only because AMP data were missing, we reanalyzed pricing data
`after accounting for the missing values. Specifically, we replaced each missing AMP
`with its corresponding ASP and recalculated the volume-weighted AMPs using those
`imputed prices.36 We then compared those new volume-weighted AMPs to the volume-
`weighted ASPs originally calculated by CMS.
`
`If a HCPCS code no longer exceeded the 5-percent threshold, we concluded that the
`missing AMPs likely caused the HCPCS code to initially exceed the threshold, as
`opposed to an actual disparity between ASPs and AMPs in the marketplace.
`
`If a HCPCS code continued to exceed the 5-percent threshold, we concluded that missing
`AMPs had little impact on the results of our pricing comparison. These HCPCS codes
`likely exceeded the threshold as a result of actual pricing differences between ASPs and
`AMPs. Because price substitutions for these HCPCS codes may be warranted, we also
`identified which of these HCPCS codes met the threshold in two consecutive or three of
`four quarters.
`
`Limitations
`We did not verify the accuracy of manufacturer-reported ASP and AMP data, nor did we
`verify the underlying methodology used by manufacturers to calculate ASPs and AMPs.
`Furthermore, we did not verify the accuracy of CMS’s crosswalk files or examine NDCs
`that CMS opted to exclude from its calculation of Part B drug reimbursement amounts.
`
`Manufacturers are required to submit their quarterly ASP and AMP data to CMS 30 days
`after the close of the quarter. Our analyses were performed on ASP and AMP data
`
`
`35 76 Fed. Reg. 73026, 73289 (Nov. 28, 2011).
`36 Although an NDC’s ASP is not usually the same as its AMP, ASPs were within 3 percent of the AMPs at
`the median during the last three quarters of 2011 and the first quarter of 2012. Therefore, we believe that
`ASP acts as a reasonable proxy for AMP, ensuring that the NDC is represented in both the volume-
`weighted ASP and the volume-weighted AMP for the HCPCS code.
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`compiled by CMS soon after that deadline. We generally did not determine whether
`manufacturers provided additional or revised pricing data to CMS at a later date.
`
`Standards
`This inspection was conducted in accordance with the Quality Standards for Inspection
`and Evaluation approved by the Council of the Inspectors General on Integrity and
`Efficiency.
`
`RESULTS
`
`Of the 385 Drug Codes With Complete AMP Data, Volume-Weighted ASPs for
`22 Exceeded the Volume-Weighted AMPs by at Least 5 Percent
`As mandated by the Act, OIG compared ASPs to AMPs to identify instances in which the
`ASP for a particular drug exceeded the AMP by a threshold of 5 percent. In the first
`quarter of 2012, 22 of the 385 HCPCS codes with complete AMP data (6 percent)
`exceeded this 5-percent threshold. Table 2 describes the extent to which ASPs exceeded
`AMPs for the 22 HCPCS codes. For half of the codes, the volume-weighted ASP
`exceeded the volume-weighted AMP by more than 20 percent. A list of all 22 HCPCS
`codes, including their descriptions and HCPCS dosage amounts, is presented in
`Appendix C.
`
`
`Table 2: Extent to Which ASPs Exceeded AMPs for
`22 HCPCS Codes With Complete AMP Data
`Percentage
` Number of Codes
`
`5.00–9.99%
`10.00–19.99%
`20.00–29.99%
`30.00–39.99%
`40.00–49.99%
`
`50.00–59.99%
`60.00–69.99%
`70.00–79.99%
`80.00–89.99%
`90.00–99.99%
`
`8
`3
`5
`2
`1
`
`1
`0
`0
`0
`0
`
`2
`100% and above
`22
` Total
`Source: OIG analy sis of f irst-quarter 2012 ASP and AMP data, 2012.
`
`
`Pursuant to section 1847A(d)(3) of the Act, the Secretary may disregard the ASP for a
`drug that exceeds the 5-percent threshold and shall substitute the payment amount with
`the lesser of either the widely available market price or 103 percent of the AMP. If
`reimbursement amounts for all 22 codes with complete AMP data had been based on
`
`Comparison of First-Quarter 2012 ASPs and AMPs (OEI-03-12-00730)
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`Page 00010
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`Page 11 – Marilyn Tavenner
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`103 percent of the AMPs during the third quarter of 2012, Medicare expenditures would
`have been reduced by an estimated $739,000.37
`
`If CMS’s price substitution policy had been in effect, reimbursement amounts for 15 of
`the 22 HCPCS codes would have been reduced. These 15 HCPCS codes had complete
`AMP data, exceeded the 5-percent threshold in either two consecutive quarters or three of
`four quarters, and were not identified by FDA as being in short supply as of September
`2012 (see Table 3).38 If reimbursement amounts for the 15 codes had been based on
`103 percent of the AMPs during the third quarter of 2012, Medicare expenditures would
`have been reduced by an estimated $606,000.
`
`
`Table 3: Fifteen HCPCS Codes With Complete AMP Data in the First Quarter
`of 2012 That Would Have Met CMS’s Criteria for Price Substitution
`Previous Comparisons of ASPs and AMPs
`
`
`
`
`HCPCS
`Code
`J0500
`
`J0610
`
`J0670
`
`J1205
`J1742
`
`J1756
`
`J1955
`
`J2501
`
`J2675
`
`J2780
`
`J9045
`J9065
`
`J9211
`
`J9214
`
`Q0166
`
`First
`Quarter
`2012
`X
`
`Fourth
`Quarter
`2011
`X
`
`Third
`Quarter
`2011
`X
`
`Second
`Quarter
`2011
`
`
`X
`
`X
`
`X
`X
`
`X
`
`X
`
`X
`
`X
`
`X
`
`X
`X
`
`X
`
`X
`
`X
`
`X
`
`X
`
`X
`X
`
`X
`
`X
`
`X
`
`X
`
`X
`
`X
`X
`
`X
`
`X
`
`
`
`
`
`
`
`X
`X
`
`
`
`
`
`X
`
`X
`
`X
`
`X
`
`
`X
`
`X
`
`X
`
`
`
`
`
`X
`
`
`
`
`
`
`X
`
`
`
`X
`
`
`X
`
`
`
`X
`
`X
`
`Source: OIG analy sis of ASP and AMP data f rom the second through f ourth quarters of
`2011 and the f irst quarter of 2012.
`
`
`
`
`
`
`37 All savings estimates in this report assume that the number of services allowed by Medicare in 2011
`remained consistent from one quarter to the next and that there were no significant changes in utilization
`between 2011 and 2012.
`38 Two additional HCPCS codes had complete AMP data and exceeded the 5-percent threshold in two
`consecutive or three of four quarters; however, the drugs represented by these HCPCS codes were
`identified by FDA as being in short supply at the time of our analysis.
`
`Comparison of First-Quarter 2012 ASPs and AMPs (OEI-03-12-00730)
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`Page 12 – Marilyn Tavenner
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`Of the 64 Drug Codes With Partial AMP Data, Volume-Weighted ASPs for
`6 Exceeded the Volume-Weighted AMPs by at Least 5 Percent
`In addition to examining HCPCS codes with complete AMP data, we examined
`64 HCPCS codes for which only partial AMP data were available. ASPs for 6 of these
`64 HCPCS codes (9 percent) exceeded the AMPs by at least 5 percent in the first quarter
`of 2012. A list of the six HCPCS codes, including th