[Federal Register Volume 68, Number 161 (Wednesday, August 20, 2003)]
[Proposed Rules]
[Pages 50428-50452]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-21308]



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Part IV





Department of Health and Human Services





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Centers for Medicare and Medicaid Services



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42 CFR Part 405



Medicare Program; Payment Reform for Part B Drugs; Proposed Rule

  Federal Register / Vol. 68 , No. 161 / Wednesday, August 20, 2003 / 
Proposed Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 405

[CMS-1229-P]
RIN 0938-AM12


Medicare Program; Payment Reform for Part B Drugs

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise, based on one of four 
approaches, the current payment methodology for Part B covered drugs 
and biologicals that are not paid on a cost or prospective payment 
basis. We are seeking comments on which of these proposed approaches we 
should implement. This proposed rule would also make changes to 
Medicare payment for furnishing or administering certain drugs and 
biologicals.

DATES: We will consider comments if we receive them at the appropriate 
address, as provided below, no later than 5 p.m. on October 14, 2003.

ADDRESSES: In commenting, please refer to file code CMS-1229-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission or e-mail. Mail written comments (one 
original and three copies) to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-1229-P, P.O. Box 8013, Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be timely 
received in the event of delivery delays.
    If you prefer, you may deliver (by hand or courier) your written 
comments (one original and three copies) to one of the following 
addresses: Room 445-G, Hubert H. Humphrey Building, 200 Independence 
Avenue, SW., Washington, DC 20201, or Room C5-14-03, 7500 Security 
Boulevard, Baltimore, MD 21244-1850. (Because access to the interior of 
the HHH Building is not readily available to persons without Federal 
Government identification, commenters are encouraged to leave their 
comments in the CMS drop slots located in the main lobby of the 
building. A stamp-in clock is available for persons wishing to retain a 
proof of filing by stamping in and retaining an extra copy of the 
comments being filed.)
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and could be considered late.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Marjorie Baldo, (410) 786-0548.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: Comments 
received timely will be available for public inspection as they are 
received, generally beginning approximately 3 weeks after publication 
of a document, at the headquarters of the Centers for Medicare & 
Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, 
Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule 
an appointment to view public comments, please call (410) 786-7197.
    Copies: This Federal Register document is available from the 
Federal Register online database through GPO Access, a service of the 
U.S. Government Printing Office. The Web site address is: http://www.access.gpo.gov/nara/index.html.
    To assist readers in referencing sections contained in this 
document, we are providing the following Table of Contents.

Table of Contents

I. Background
    A. Covered Drugs and Biologicals
    B. Current Medicare Drug Spending
    C. History of the Current Payment System
    D. List AWP and Widely Available Market Prices
    E. Studies and Developments Since the Balanced Budget Act of 
1997 (BBA)
    F. Implications of GAO and OIG Studies
II. Provisions of the Proposed Rule
    A. Approaches to Revising the Current Payment System
    1. Comparability Provision
    2. Average AWP Discount
    3. Market Monitoring
    4. Competitive Acquisition Program and Average Sales Prices
    B. Increases in Payments Related to the Administrative Costs of 
Furnishing Drugs
    C. Beneficiary Access
III. Collection of Information Requirements
IV. Response to Public Comments
V. Regulatory Impact Analysis
Addendum A Tables
Addendum B List of Medicare Drug HCPCS Codes

Alphabetical List of Acronyms in the Proposed Rule

AMP Average Manufacturer's Price
APC Ambulatory Payment Classification
ASCO American Society of Clinical Oncology
ASP Average Sale Price
AWP Average Wholesale Price
BBA Balanced Budget Act of 1997
BBRA Balanced Budget Refinement Act of 1999
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection 
Act of 2000
CMS Centers for Medicare & Medicaid Services
DHHS Department of Health and Human Services
DME Durable Medical Equipment
DMERC Durable Medical Equipment Regional Carrier
DOJ Department of Justice
EAC Estimated Acquisition Cost
EPO Erythropoietin
ESRD End-Stage Renal Disease
FSS Federal Supply Schedule
GAO General Accounting Office
MEDPAC Medicare Payment Advisory Commission
NDC National Drug Code
NOC Not Otherwise Classified
OIG Department of Health and Human Services Office of Inspector General
OMB Office of Management and Budget
OPPS Outpatient Prospective Payment System
PPO Preferred Provider Organization
PRA Paperwork Reduction Act of 1995
SDP Single Drug Pricer
VA Department of Veterans Affairs
WAMP Widely Available Market Price

I. Background

A. Covered Drugs and Biologicals

    Medicare Part B currently covers a limited number of prescription 
drugs. For the purposes of this proposed rule, the term ``drugs'' will 
hereafter refer to both drugs and biologicals. Currently covered 
Medicare drugs generally fall into three categories: drugs furnished 
incident to a physician's service, durable medical equipment (DME) 
drugs, and statutorily covered drugs and other drugs.
1. Drugs Furnished Incident to a Physician's Service
    These are injectable or intravenous drugs that are administered 
incident to a physician's service (section 1861(s)(2) of the Social 
Security Act (the Act)). The Act limits coverage to drugs that are not 
usually self-administered. Under the ``incident-to'' provision, the 
physician must incur a cost for the drug, and must bill for it. 
Examples include injectable prostate cancer drugs (lupron acetate for 
depot suspension, goserelin acetate implant), injectable drugs used in 
connection with treatment of cancer (epoetin alpha), intravenous drugs 
used to treat cancer (paclitaxel and docetaxel

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used to treat breast cancer), injectable anti-emetic drugs used to 
treat the nausea resulting from chemotherapy, infliximab used to treat 
rheumatoid arthritis, and rituximab used to treat non-Hodgkin's 
lymphoma.
2. Durable Medical Equipment (DME) Drugs
    These are drugs that are administered through a covered item of DME 
such as a nebulizer or pump. Two of the most common drugs in this 
category are the inhalation drugs albuterol sulfate and ipratropium 
bromide.
3. Statutorily Covered Drugs and Other Drugs
    Certain drugs are specifically covered by statute including: 
immuno[chyph]suppressive drugs; hemophilia blood clotting factor; 
certain oral anti-cancer drugs; oral anti-emetic drugs; pneumococcal, 
influenza and hepatitis vaccines; antigens; erythropoietin for trained 
home dialysis patients; certain other drugs separately billed by end 
stage renal disease (ESRD) facilities (for example, iron dextran, 
vitamin D injections); and osteoporosis drugs.
4. Types of Providers
    Types of providers and suppliers that are paid based on average 
wholesale price (AWP) for all or some of the Medicare covered drugs 
they furnish include: physicians, pharmacies, DME suppliers, hospital 
outpatient departments, and ESRD facilities.
5. Drugs Paid on a Cost or Prospective Payment Basis
    Drugs paid on a cost or prospective payment basis that are 
generally outside of the scope of this proposed rule include: drugs 
furnished during an inpatient hospital stay (except clotting factor); 
drugs packaged under the outpatient prospective payment system (OPPS); 
drugs furnished by ESRD facilities whose payments are included in 
Medicare's composite rate; and drugs furnished by critical access 
hospitals, skilled nursing facilities (unless outside of a covered 
stay), comprehensive outpatient rehabilitation facilities, rural health 
facilities, and federally qualified health centers.

B. Current Medicare Drug Spending

    In 2002, the preliminary estimate of allowed charges for the 
approximately 450 drugs paid by Medicare carriers is $8.4 billion. The 
majority of these expenditures were for drugs administered incident to 
a physician's service and drugs furnished in conjunction with DME. 
Spending growth for Medicare drugs has been substantial. Medicare 
allowed charges for drugs were approximately $3.3 billion in 1998. As 
indicated above, we estimate 2002 Medicare spending for drugs at 
approximately $8.4 billion or nearly three times the 1998 levels or an 
average of 27 percent per year. Because during this time period 
Medicare fee-for-service enrollment grew by an average of only 1.4 
percent per year, other factors such as price increases and additional 
utilization played a greater role in this expenditure growth. More than 
77 percent of Medicare spending for drugs goes to oncologists and 
urologists for cancer drugs and pharmacies and other medical suppliers 
of DME drugs. Medicare spending for drugs billed by oncologists has 
more than tripled between 1998 and 2002 growing from $1.2 billion to 
$3.8 billion. Between 2001 and 2002, Medicare spending for drugs billed 
by oncologists increased by 41 percent. Growth in spending for the two 
highest expenditure DME drugs, albuterol and ipratropium bromide, has 
increased from $393 million in 1998 to nearly $1.0 billion in 2002.
    Much of the current Medicare spending is concentrated in relatively 
few of the approximately 450 covered drugs. For example, of the $8.4 
billion for carrier paid drugs, 7 drugs account for 49 percent of 
spending ($4.0 billion), 19 drugs account for 75 percent of spending 
($6.2 billion) and 33 drugs account for 86 percent of spending ($7.1 
billion). The top drug code, epoetin alpha (Q0136), accounts for 13 of 
carrier spending. Two prostate cancer drugs, lupron acetate for depot 
suspension (J9217) and goserelin acetate implant (J9202), combined, 
account for 14 of carrier paid drugs. Two generic drugs furnished via a 
covered item of DME, albuterol and ipratropium bromide, account for 13 
percent of carrier drug spending.
    Intermediaries and not carriers process ESRD facility claims for 
drugs paid outside the ESRD composite rate. In 2000, allowed charges 
for ESRD facilities for these drugs were $1.4 billion for 
erythropoietin, $0.1 billion for iron dextran, $0.1 billion for vitamin 
D injections, and $0.4 billion for all other separately billed drugs. 
Section 1881(b)(11)(B) of the Act provides a statutory formula to 
determine the payment amount for erythropoietin separately billed by 
ESRD facilities. The other drugs furnished and separately billed by 
ESRD facilities are paid 95 percent of the AWP under section 1842(o) of 
the Act.

C. History of the Current Payment System

    In the June 5, 1991 physician fee schedule proposed rule (56 FR 
25792), we proposed that the drug payment limit be based on 85 percent 
of the national AWP of the drug. For very high volume drugs, we 
proposed that the drug payment limits be based on the estimated 
acquisition cost (EAC) of the drugs. The EAC was to be determined from 
survey data. We received many comments, primarily from oncologists, 
indicating that an 85 percent standard was inappropriate. In response 
to these comments, the 1992 physician fee schedule final rule 
established a payment limit based on the lower of 100 percent of AWP or 
the EAC. However, because of statistical sampling concerns generated by 
a lack of information on the variation in acquisition costs between low 
and high volume providers, the EAC was never implemented. Various 
legislative proposals were submitted to move away from payment based on 
100 percent of AWP, including changing the percentage of AWP to a lower 
amount. In 1997, the Congress, responding in part to one of these 
proposals, amended the Act to limit payment for drugs not paid on a 
cost or prospective payment basis to the lower of the actual charge or 
95 percent of AWP (section 1842(o)(1) of the Act as added by section 
4556 of the Balanced Budget Act of 1997 (BBA 1997) (Pub. L. 105-33)). 
The statutory term, average wholesale price, is not defined in law or 
regulation. In creating payment limits for Medicare covered drugs, 
Medicare currently relies on the list AWP. The term ``list AWP'' will 
hereafter refer to the AWP published in commercial compendia such as 
Red Book, Price Alert, and Medispan.

D. List AWP and Widely Available Market Prices

    Numerous reports by the General Accounting Office (GAO), and the 
Office of Inspector General (OIG), as well as data collected by the 
Department of Justice (DOJ), discussed below, have indicated that 95 
percent of list AWP reflected in published compendia is significantly 
higher than the prices that drug manufacturers, wholesalers, physician 
supply houses, specialty pharmacies, and similar entities actually 
charge to physicians and suppliers purchasing these drugs.
    Differences between Medicare's payment based on 95 percent of list 
AWP and the widely available market prices creates what has been 
referred to as the ``spread''. The presence of a

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substantial ``spread'' or a difference between the price that 
physicians and suppliers actually pay to acquire drugs in the market 
and Medicare's reimbursement at 95 percent of list AWP, means that the 
Medicare program and Medicare beneficiaries often overpay for drugs. 
For a few drugs, the ``spread'' is so large that the amount that the 
Medicare beneficiary pays the physician or supplier for coinsurance is 
greater than the physician or supplier's payment to acquire the drug. 
For example, leucovorin calcium (J0640) has a list AWP of $18.44. Based 
on GAO and OIG studies, the widely available market price is 15 percent 
of the list AWP or $2.77. The Medicare payment is 95 percent of the 
list AWP, or $17.52. The beneficiary coinsurance is 20 percent of the 
Medicare payment or $3.69. The beneficiary is paying more in 
coinsurance ($3.69) than the physician is paying to purchase the drug 
($2.77).

E. Studies and Developments Since the Balanced Budget Act of 1997 (BBA)

    This section discusses developments since BBA and provides an 
overview of some of the relevant studies that have been performed 
illustrating the excessive payments that occur under the current 
payment methodology.
    In September 2000, the Medicare program attempted to allow carriers 
to consider data provided by DOJ as another and more accurate data 
source than the list AWP in the published compendia. The use of another 
data source would allow us to set more accurate AWP payment limits for 
certain drugs (Program Memorandum ``An Additional Source of Average 
Wholesale Price Data in Pricing Drugs and Biologicals Covered by the 
Medicare Program,'' (AB-00-86, (change request 1232), 
published September 8, 2000). However, we deferred implementation of 
this program memorandum in November 2000 since, although we continued 
to believe that the list AWP reported in the published compendia was 
inaccurate and inflated, congressional action pending at that time 
would have precluded the immediate use of this data. We wanted to avoid 
the disruption that would result from a decrease in payment allowances 
followed by an immediate increase due to congressional action. In 
addition to the payment disruption, we also received numerous public 
comments asserting that drug payments for chemotherapy drugs subsidize 
payments for services related to the administration of these drugs. The 
deferral of the use of the DOJ data was published in our program 
memorandum titled, ``Source of Average Wholesale Price Data in Pricing 
Drugs and Biologicals Covered by the Medicare Program,'' AB-00-115 
(change request 1447) published November 17, 2000.
    In December 2000, the Congress enacted the Medicare, Medicaid, and 
SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 
106-554). Section 429(a) of BIPA mandated that the GAO conduct a study 
on the payment for drugs under the current Medicare methodology. 
Section 429(c) established a moratorium on reductions in Medicare 
payments rates for drugs until after the Secretary reviewed the GAO 
report. In the study, the GAO was required to--
    [sbull] Identify the average prices at which Medicare drugs are 
acquired by physicians and other suppliers;
    [sbull] Quantify the difference between such average prices and the 
Medicare payment amount; and
    [sbull] Determine the extent to which Medicare payment is adequate 
to compensate physicians, providers of services, or other suppliers of 
these drugs for costs incurred related to administrative costs of 
furnishing drugs and biologicals.
    In addition, BIPA required the GAO to provide specific 
recommendations for revised methodologies for payment of drugs and for 
related services under the Medicare program. In making these 
recommendations, BIPA instructed the GAO to consider--
    [sbull] If appropriate, new or adjusted payments for costs incurred 
in the administration, handling, or storage of certain categories of 
drugs;
    [sbull] The method and amount of payment for similar drugs made by 
large group health plans;
    [sbull] The potential for patients to receive inpatient or 
outpatient hospital services in lieu of services in a physician's 
office as a result of any revised payment methodology;
    [sbull] The effect of any revised payment methodology on the 
delivery of drug therapies by hospital outpatient departments; and
    [sbull] The results of a previously mandated GAO study (GAO-02-053) 
on the adequacy of Medicare's physician payments to oncologists.
    Additionally, the Congress required that the GAO, in making their 
recommendations, ``shall ensure that any proposed revised payment 
methodology be designed to ensure that Medicare beneficiaries continue 
to have appropriate access to health care services under the Medicare 
program.''
    Section 429(b) of BIPA requires us, notwithstanding any other 
provision of law, to revise the Medicare payment methodology for drugs 
under sections 1842(o) of the Act based on the GAO report to the 
Congress. We may, to the extent appropriate, provide new or adjusted 
payments for the costs incurred in the administration, handling, and 
storage of drugs. However, the estimated aggregate payments for drugs 
under the revised system (including additional payments for the 
administration, handling, and storage of drugs) cannot exceed payments 
as projected by the Secretary under section 1842(o) of the Act.
    Prior to the completion of the GAO report, the OIG published a 
report in January 2001 titled ``Medicare Reimbursement of Prescription 
Drugs'' (OEI-03-00-00310) that revealed excessive payments for Medicare 
covered drugs. This study was a follow-up to a prior 1997 OIG Study: 
``Excessive Medicare Payments for Prescription Drugs'' (OEI-03-97-
00290) in which the OIG found that payments based on 95 percent of list 
AWP were substantially greater than the prices widely available to the 
physician community. In this January 2001 study, the OIG compared 
calendar year (CY) 1999 Medicare payments for 24 high expenditure drugs 
to prices available to the physician and supplier community, the 
Department of Veterans Affairs (VA), and Medicaid. In determining the 
prices available to the physician supplier community, the OIG reviewed 
print and online catalogs from five drug wholesalers and one group 
purchasing organization. The report indicated that we would have saved 
$761 million a year by paying for drugs based on the actual wholesale 
prices available to physicians and suppliers rather than paying 95 
percent of list AWP.
    In September 2001, the GAO presented its study to the Congress in a 
report titled, ``Medicare: Payments for Covered Outpatient Drugs Exceed 
Providers' Costs'' (GAO-01-1118). The report contained some significant 
findings and also confirmed previous OIG reports on drug payments.
    [sbull] Physicians and suppliers are able to obtain Medicare-
covered drugs at prices significantly below 95 percent of list AWP. 
(See Table 1 in Appendix A for a reprint of the table from the GAO 
report summarizing some of these findings.)
    [sbull] For most physician-administered drugs, the average discount 
from list AWP ranged from 13 percent to 34 percent; two physician-
administered drugs had discounts of 65 and 86 percent. That is, 
physicians paid an average of 66 to 87 percent of the list AWP, and for 
two drugs physicians paid 14 percent and 35 percent of the list AWP.

[[Page 50431]]

    [sbull] For two high expenditure drugs provided by pharmacies, 
ipratropium bromide and albuterol, discounts from list AWP averaged 78 
percent and 85 percent, respectively. In other words, suppliers paid 15 
and 22 percent of the list AWP.
    [sbull] While physician practices that purchase large volumes of 
drugs may have access to larger discounts and rebates, low volume 
providers can also purchase drugs for markedly less than list AWP, and 
often at additional discounts below widely available prices. In 
particular, physicians who bill Medicare for low volumes of drugs used 
in cancer treatment receive discounted prices for many of these drugs 
similar to or greater than widely available discounts. (See Table 2 in 
Appendix A for a reprint of the table from the GAO report summarizing 
some of these findings.)
    [sbull] Private health plans use their drug-purchase and patient 
volume to negotiate favorable prices for drugs and the physician and 
supplier services related to supplying or delivering the drugs.
    [sbull] Public payers, such as the VA, use their purchasing volume 
along with information about actual transaction prices from private 
payers to lower their drug payments.
    Based on its studies, the GAO concluded that our current payment 
methodology is flawed because current payment rates (that is, 95 
percent of the list AWP) do not reflect market prices. The GAO 
recommended that we take the following actions with regard to the 
payment for drugs and related services.
    [sbull] Establish Medicare payment levels for Part B drugs that are 
more closely related to their costs. Payments for drugs should be set 
at levels that reflect actual market transaction prices and the likely 
acquisition cost to providers.
    [sbull] Pay appropriately for drug delivery and administration and 
not allow potential overpayments for drugs to subsidize payments for 
related services.
    [sbull] Examine the benefits and risks of expanding the current 
competitive bidding demonstration projects for drugs covered under Part 
B.
    [sbull] Institute a process to monitor access to Part B covered 
drugs to ensure that payment changes do not negatively affect access 
for particular drugs or groups of beneficiaries or for certain 
geographic areas.

F. Implications of GAO and OIG Studies

    Table 4 provides a summary of the reports on Medicare prescription 
drugs published by OIG between 1997 through 2001. The 1997 report 
indicated that for 22 drugs studied by the OIG, Medicare's allowances 
for these drugs exceeded wholesale prices by $447 million in 1996. For 
1998 the report indicated that Medicare would have saved $1 billion if 
the allowed amounts for the 34 drugs studied were equal to prices 
obtained by the VA through the Federal Supply Schedule (FSS). 
Additionally, the report indicated that Medicare would have saved $1.6 
billion for 24 drugs studied if Medicare had paid for these drugs based 
on the FSS. Although the savings estimates vary, for example due to 
differences in the particular drugs studied, OIG concluded based on the 
reports that the potential savings for Medicare and its beneficiaries 
from reforming the current payment policy to a system based on FSS is 
substantial.
    In table 3, we have combined the findings of the GAO and OIG 
reports displaying the prices that they found as a percent of list AWP. 
For the GAO report, we used the findings from their widely available 
drug prices. We examined but did not use the separate survey of low 
volume billers. Although many low volume biller prices were below the 
widely available drug prices, they were compiled through a small phone 
survey of physicians. The widely available drug prices were based on 
price lists from wholesalers and GPOs. We believe that the widely 
available drug prices are a better reflection of the prices available 
to physicians and suppliers. In addition, there was much more 
consistency between the GAO's widely available drug prices and the 
OIG's finding.
    Table 3 separately presents the findings for brand name drugs and 
for generic drugs. The ``spread,'' computed as a percent of Medicare's 
payment at 95 percent of list AWP, is also displayed for each drug 
based on the average of the GAO and OIG findings. The lower the price 
found by GAO or OIG as a percent of list AWP, the larger the spread 
between that price and Medicare's current payment. In effect, the 
``spread'' is the difference between the Medicare allowed charge (95 
percent of the list AWP) and the actual purchase price paid by the 
physicians and suppliers. The percent spread is the difference between 
the Medicare payment and the market price expressed as a percentage of 
the Medicare payment. For example, the list AWP for granisetron hcl 
(J1626) is $19.52. The Medicare payment is 95 percent of the list AWP 
or $18.54. The average of the GAO and OIG data indicates that the 
market price is 71 of the list AWP or $13.86. The 25 percent spread is 
calculated as ($18.54 - $13.86) / $18.54 = $4.68 / $18.54 = .25 = 25 
percent.
    A review of Table 3 shows that in general the ``spread,'' in 
percentage terms, is larger for the generic drugs examined in the 
studies than for brand drugs. This is consistent with our understanding 
that when actual market prices decline with the introduction of generic 
competition, the list AWPs do not usually experience a corresponding 
decline of the same magnitude. With one exception, among the brand name 
drugs studied, physicians and suppliers could obtain these drugs at 71 
percent to 87 percent of list AWP, which translates into a spread of 25 
percent and 8 percent, respectively. For the generic drugs examined, 
there was considerably more variability. For six of the drugs examined, 
physicians or suppliers could purchase at a price between 15 percent 
and 46 percent of list AWP, translating into a spread of 84 percent and 
52 percent, respectively. The other three drugs examined had spreads 
more in line with that for brand drugs.
    A general conclusion reached in reviewing the GAO and OIG data is 
that there is a level of overstatement in the list AWP for all drugs 
beyond the 5 percent currently accounted for in Medicare's policy. 
Using the average of the GAO and OIG findings, every drug studied was 
available at a price not greater than 87 percent of list AWP. Most 
drugs could be obtained at an even lower price, sometimes substantially 
lower.
    If we examine the data in the aggregate, the difference between 
Medicare's payment and widely available market prices was $1.5 billion 
in 2002 for the 29 drugs where we have GAO and OIG data. That is, if 
Medicare had paid widely available market prices instead of 95 percent 
of list AWP in 2002 for these 29 drugs, Medicare and its beneficiaries 
would have paid nearly $1.5 billion less for drugs or nearly 17 percent 
less than total estimated payments of $8.4 billion. Of this amount, 
Medicare and its beneficiaries would have paid approximately $475 
million less to oncologists and $760 million less to suppliers of DME 
drugs. Assuming that widely available market prices were between 80 
percent and 90 percent of list AWP for all other drugs, the total 
savings to Medicare and its beneficiaries in 2002 from paying in this 
way would have been between $1.7 and $2.0 billion.

II. Provisions of the Proposed Rule

A. Approaches to Revising the Current Payment System

    Given the serious and well-documented flaws in the current

[[Page 50432]]

Medicare payment system identified by the GAO, OIG, and our own 
analyses, we are seeking comments on four different approaches to 
revising the Medicare drug payment system: (1) Basing our reform 
efforts on the comparability provision in the statute; (2) applying an 
average list AWP discount to the list AWPs as of April 1, 2003; (3) 
utilizing existing sources of market-based prices and developing 
additional sources for market monitoring; and (4) establishing a 
competitive acquisition program and Average Sales Price system. We are 
proposing to select one of these options.
Option 1--Comparability Provision
    One option we are proposing is to base our reform efforts on the 
``comparability'' provision in the Act, section 1842(b)(3)(B) of the 
Act. Specifically, this provision limits Medicare payment for a drug to 
what our contractors pay when the same drug is provided to their 
private policyholders and subscribers under comparable circumstances. 
As described below, we are proposing additional guidance to our 
contractors in identifying comparable circumstances with respect to the 
drug payments they make in their private sector business. While 
comparability applies to all charge-based services, we are proposing to 
focus its application on drugs given the excessive payments by the 
Medicare program and our beneficiaries under the current methodology, 
as reflected in several OIG and GAO reports.
    Section 1842 of the Act authorizes us to enter into contracts with 
carriers for the administration of Part B benefits. Section 1842(b)(3) 
of the Act mandates that each contract with a carrier provide that the 
carrier:

    ``* * * will take such action as may be necessary to assure 
that, where payment under this part for a service is on a charge 
basis, such charge will be reasonable and not higher than the charge 
applicable, for a comparable service and under comparable 
circumstances, to policyholders and subscribers of the carrier * * 
*.''

    Section 1842 of the Act sets forth general provisions applicable to 
part B payment determinations, including drug payments. The 
comparability provision requires a carrier to take action, when 
necessary, to ensure that Part B charges are reasonable and ``not 
higher than the charge applicable for a comparable service in 
comparable circumstances'' to its own policyholders. This limitation is 
a principle set forth by the Congress at the outset of the Medicare 
program, providing that Medicare beneficiaries should not be charged 
more than private pay patients for a comparable service provided under 
comparable circumstances. To this end, the Congress mandated that, 
where payment for a service to a Medicare beneficiary is on a charge 
basis, as opposed to a cost basis, the carrier's private plan, if it 
has one, should be assessed to determine whether the service in 
question and the circumstances under which the service is provided are 
``comparable'' to Medicare. If the service is comparable, then the 
applicable charge under the carrier's private insurance plan may serve 
as a limitation on the amount that we pay. In accordance with these 
provisions, we have broad authority to make comparability adjustments 
with respect to Part B payment determinations based on charges.
    At the time the Congress legislated the current drug payment 
methodology, it did not amend our authority to make comparability 
adjustments or provide any indication that the other provisions of 
section 1842(b) of the Act with respect to Part B payment calculations 
were no longer applicable.
    Section 1842(b)(3) of the Act requires carriers, including Durable 
Medical Equipment Regional Carriers (DMERCs), to limit payment rates 
for Medicare covered drugs to the amounts that the carriers pay when 
these drugs are provided to their private policyholders and subscribers 
under comparable circumstances. We are proposing to issue additional 
guidance to our contractors indicating that comparability would exist 
with drug payments made in the same geographic area under the carrier's 
indemnity health insurance products or broad network preferred provider 
organization (PPO) products that do not rely on selective contracting. 
We are seeking comments on this proposed guidance.
    Consistent with Sec.  405.508(c), the responsibility for 
determining that a carrier's indemnity product or PPO product is 
comparable would in the first instance fall upon the carrier in 
reporting pertinent information about its programs to us. When the 
pertinent information has been reported, we will advise the carrier 
whether any of its products has comparability. If we determine that a 
carrier's lower private payment for a drug has comparability in a given 
locality, the lower private payment limit would apply to the Medicare 
payment in that locality.
    Contractors would inform physicians, suppliers and other impacted 
parties about the new lower payment limit through their usual means of 
provider education (for example, bulletins, newsletters, Web site 
postings.)
    As an example of how this approach would apply to a specific drug 
using hypothetical data, we will examine docetaxol (J9170). Suppose the 
national payment limit for docetaxol in 2004 was $358. If one of our 
carriers was paying $325 for docetaxol in one of its localities in its 
comparable private side business, the Medicare payment limit for 
docetaxol in that locality would be set at $325. This lower payment 
amount would only apply in that locality and would not be the national 
payment limit. If, however, the carrier was paying $375 for docetaxol 
in this locality, the Medicare payment would be based on the current 
national limit of $358.
    We understand that to the extent private sector drug payments vary 
by geographic region, the application of comparability may result in 
regional variation in drug payments. We seek comment on this aspect of 
the policy.
    It is our understanding that historically many private insurers 
have focused more on payments for oral drugs and inhalation drugs than 
injectable drugs, although this is changing due to the rapid growth in 
expenditures for injectable drugs. MedPAC discussed this in their June 
2003 report to Congress titled ``Report to the Congress: Variation and 
Innovation in Medicare,'' which stated that ``Only as expenditures have 
sharply increased in the past few years have payers begun to focus on 
more efficient methods of paying for these drugs.'' We are seeking 
information on these new methods of paying for injectable drugs and 
comments on any implications for Medicare drug payment limits under the 
comparability provision.
Option 2--Average AWP Discount
    a. Existing Drugs
    Another option we are proposing is to apply an average AWP discount 
to the AWPs published in commercial compendia as of April 1, 2003. 
Specifically, we would lock-in and reduce the AWP published as of April 
1, 2003 in the national drug pricing compendia by an average price 
discount from AWP. Our analysis of the available data from the GAO and 
OIG studies indicates that the majority of drugs examined had a 
discount of approximately 10 to 20 percent off of the AWP, with the 
remaining drugs having larger discounts. The Medicare payment limit, 
therefore, would be set at between 80 percent and 90 percent of the AWP 
published as of April 1, 2003. We are seeking comment on the 
appropriate uniform reduction to make in this range. This policy would 
be effective January 1, 2004. In future years, these prices would be 
updated on an annual basis by the increase in the consumer price index 
for medical care

[[Page 50433]]

for the 12-month period ending June of the prior year.
    As an example of how this approach might apply to a specific drug 
assuming an average AWP discount of 15 percent, we will again examine 
docetaxol (J9170). The April 1, 2003 AWP published in the commercial 
compendia for docetaxol is $377. Applying an average AWP discount of 15 
percent, the Medicare 2004 payment limit for J9170 would be $320. 
Assuming a 4.0 percent increase in the consumer price index (CPI) for 
medical care for the 12-month period ending June 2004, the 2005 payment 
limit for J9170 would be $333, regardless of the list AWP at that time.
    b. New Drugs and Drugs With Patent Expirations
    The reimbursement rate for new drugs and drugs coming off of patent 
would be determined for the first year based on our review of 
information provided by the manufacturer about the expected widely 
available market price for that year. As a condition of obtaining a 
HCPCS code for billing purposes (in the case of new drugs) or 
continuing to recognize a HCPCS code for billing purposes (in the case 
of drugs coming off patent), manufacturers would be required to provide 
information on the anticipated widely available market price that a 
prudent physician or prudent supplier would pay for the drug and a 
rationale for the new price. We expect that drug manufacturers in the 
normal course of conducting their business have determined the prices 
that physicians and suppliers would pay for the drug when sold through 
a distributor or via direct distribution.
    If we suspect that a manufacturer has knowingly supplied misleading 
pricing information to generate or maintain a ``spread'' between 
Medicare payment and the widely available market price, we will refer 
the matter to the OIG. As stated by the OIG in their Office of 
Inspector General's Compliance Program Guidance for Pharmaceutical 
Manufacturers (68 FR 23737) that was published on May 5, 2003:

    ``If a pharmaceutical manufacturer purposefully manipulates the 
AWP to increase its customers' profits by increasing the amount the 
federal health care programs reimburse its customers, the anti-
kickback statute is implicated. Unlike bona fide discounts, which 
transfer remuneration from a seller to a buyer, manipulation of the 
AWP transfers remuneration to a seller's immediate customer from a 
subsequent purchaser (the federal or state government). Under the 
anti-kickback statute, offering remuneration to a purchaser or 
referral source is improper if one purpose is to induce the purchase 
or referral of program business. In other words, it is illegal for a 
manufacturer knowingly to establish or inappropriately maintain a 
particular AWP if one purpose is to manipulate the `spread' to 
induce customers to purchase its product.''

    During the first year the HCPCS code is used for billing, the 
manufacturer would provide updated information to us on the actual 
prices that physicians and suppliers are paying to purchase the drug. 
Again, we expect manufacturers would collect this information in the 
normal course of conducting their business.
    We would review this data and other available data sources on the 
widely available market price of the drug to determine if an adjustment 
to the Medicare payment limit would be required for the second year. In 
the absence of a second year adjustment, the first year payment would 
be updated by the increase in the medical component of the CPI for the 
12-month period ending six months prior to the year. For the third year 
and all subsequent years, the Medicare payment limit would be updated 
on an annual basis by the increase in the CPI for medical care for the 
12-month period ending June of the prior year.
Option 3--Market Monitoring
    Another option we are proposing is to utilize existing sources of 
market-based prices in developing Medicare payment limits and to 
develop additional sources of this information for market monitoring. 
Under this option, we would define AWP to be the widely available 
market price. Initially, we would use the market analyses available to 
us from GAO and OIG studies to transition widely available market 
prices into the Medicare payments. As discussed below, over time we may 
expand our data sources for these market prices. Although the GAO and 
OIG performed market analyses on drugs covering the majority of 
Medicare expenditures, they did not study all of the approximately 450 
Medicare drugs. As described earlier in section I.B, Medicare drug 
spending is concentrated in relatively few drugs; 33 drugs account for 
86 percent of the spending. Initially, for those drugs where we do not 
have GAO and OIG information on which to base a market price, we would 
proceed as in option 2 and base the payment limit on an average AWP 
discount off of the list AWP reported to the commercial compendia as of 
April 1, 2003.
    a. Definition of Average Wholesale Price
    In implementing sections 1842(o) of the Act and 429 of BIPA, we 
propose to define the AWP of a drug to be the widely available market 
price. The widely available market price would be the price that a 
prudent physician or prudent supplier would pay when purchasing the 
drug from common sources. Common sources that a prudent physician or 
supplier might utilize when purchasing a drug include, but are not 
limited to, wholesalers, manufacturers, repackagers, physician supply 
houses, pharmacies, specialty pharmacies, and group purchasing 
organizations. The widely available market price would not be a list 
price that is commonly discounted, but would be the purchase price net 
of discounts, rebates, and price concessions routinely available to 
prudent purchasers.
    The widely available market price would reflect prices in programs 
where a manufacturer, a manufacturer's subsidiary or related company, 
or a repackager sells drugs to physicians and suppliers directly or 
through buying groups or other mechanisms. For example, if a drug 
manufacturer establishes a buying group easily accessed by prudent 
physicians, the lower price offered to the buying group should be 
reflected as the widely available market price.
    It is not our intent to set the Medicare payment limit below the 
widely available market price. Under the current system, the Medicare 
allowed charge is the lower of the actual charge and 95 percent of the 
AWP. Using the authority granted to the Secretary under section 429(b) 
of BIPA, the Medicare allowed charge in a fully phased-in revised 
payment methodology would be the lower of the actual charge or the 
widely available market price. We would not pay at 95 percent of the 
widely available market price since we wish to consider further the 
issue of beneficiary access at 95 percent of the widely available 
market price. As described in section II.D, we do not expect any 
beneficiary access issues with payment at the widely available market 
price.
    b. Use of existing sources of market based prices
    As described earlier in section I.F, both the GAO and OIG have 
performed market analyses of the widely available market prices for the 
top Medicare drugs in terms of expenditures. While the market analyses 
differed in their methodologies, for example the GAO used averages of 
drug prices from their data sources and the OIG used medians, in 
general the results were consistent for these drugs. To begin to 
incorporate this information into the Medicare payment limits for the 
drugs that have been studied, we would take the average discount 
between the GAO and OIG data for the drug and apply it to the list AWP 
reported in the published

[[Page 50434]]

compendia as of April 1, 2003. Although as noted the results of the GAO 
and OIG market analyses are generally consistent, we seek comment on 
our proposed approach of averaging these two data sources.
    For example, one drug studied by both the GAO and OIG is rituximab 
(J9310). The April 1, 2003 list AWP published in the commercial 
compendia for rituximab is $501.13 for 100 mg. The GAO study indicates 
the average market price for rituximab is 81 percent of the list AWP. 
The OIG study indicates the average market price for rituximab is 80 
percent of AWP. The average of these two data sources rounded to 
nearest percent is 81 percent of the list AWP. Under this option, the 
Medicare payment limit for J9310 would be $405.92 (that is, 81 percent 
of $501.13) effective January 1, 2004.
    Clotting factor was the subject of a separate GAO report entitled 
``Payment for Blood Clotting Factor Exceeds Providers' Acquisition 
Costs'' (GAO-03-184). This report found that the market price for 
clotting factor was 59 percent of list AWP for hemophilia treatment 
centers and 69 percent of list AWP for homecare companies. We are 
proposing to transition these market prices into the Medicare payment 
limit for clotting factor at the average of these two figures, 64 
percent, with an initial transition amount of 80 percent in 2004. (see 
section 3.f. for further discussion on the transition to market 
prices). We are requesting comments on the appropriate payment limit 
rate. The limit would apply for all clotting factor HCPCS codes, 
including both the human and recombinant forms.
    c. Drugs Without Market-Based Price Information
    Initially, for those drugs where we do not have GAO and OIG 
information on which to base a market price, we would proceed as in 
option 2 and base the payment limit on the average AWP discount off of 
the list AWP reported to the commercial compendia as of April 1, 2003.
    As an example of how this approach might apply to a specific drug 
assuming an average AWP discount of 15 percent, we will examine 
ifosfamide (J9208). The OIG and GAO did not study ifosfamide. The April 
1, 2003 list AWP published in the commercial compendia for ifosfamide 
is $158. The Medicare payment limit for J9208 would be $135 (that is, 
85 percent of $158) effective January 1, 2004.
    d. Exceptions Process for First Year Reductions
    A manufacturer could seek an exception from the application of 
these reductions on January 1, 2004 to one or more of its drugs if it 
would furnish us before October 1, 2003 with verifiable data on the 
widely available market price, as described earlier in section 
II.A.3.a, of the drug as of April 1, 2003 and certify the accuracy of 
this data. We will review the data and determine if it should be 
incorporated into the Medicare payment limit. Note that all data 
submitted as part of comments on this proposed rule would be available 
to the public. Also note that we would base any changes to our proposed 
payment policy only on data that we could make available to the public.
    e. Future Years
    As discussed in section 3.f below, we expect to develop additional 
sources of market-based prices in future years for the purpose of 
market monitoring. We also recognize that the OIG may perform updated 
market analyses on drugs previously studied or additional drugs. If the 
OIG performs a new market analysis, we expect to incorporate this 
information into the Medicare payment limits. As we develop additional 
sources of widely available market prices and sufficient new valid 
information becomes available from these sources, we expect to 
incorporate this information into the Medicare payment limits based on 
the methodology described above. In the absence of additional valid 
data sources indicating a change in the widely available market price, 
the Medicare payment limits would be updated on an annual basis by the 
increase in the CPI for medical care for the 12-month period ending 
June of the prior year.
    f. Transition for Existing Drugs
    For existing drugs where the widely available market price based on 
the OIG and GAO studies is less than 80 percent of list AWP, we would 
transition to the market-based payment in 15 percentage point 
increments. This is similar to the approach taken by the Congress in 
specifying the incremental payment changes under the inherent 
reasonableness authority (section 1842(b)(8) of the Act). For example, 
one drug studied by both the GAO and OIG is ipratropium bromide 
(J7644). The April 1, 2003 AWP published in the commercial compendia 
for ipratropium bromide is $3.52. The GAO study indicates the average 
market price for ipratropium bromide is 33 percent of list AWP. The OIG 
study indicates the average market price for ipratropium bromide is 34 
percent of list AWP. The average of these two data sources rounded to 
the nearest percent is 34 percent of AWP. Because this is lower than 80 
percent of list AWP, the Medicare payment limit for ipratropium bromide 
effective January 1, 2004 would be 80 percent of the list AWP or $2.82. 
The Medicare payment limit for ipratropium bromide effective January 1, 
2005 would be 65 percent of the list AWP published in the commercial 
compendia as of April 1, 2003 updated by the medical CPI. The Medicare 
payment limits for CY 2006 and CY 2007 would be 50 percent and 35 
percent, respectively, of the April 1, 2003 list AWP updated by the 
medical CPI. In 2008, the transition to the widely available market 
price would be complete and the payment limit would be 34 percent of 
the April 1, 2003 list AWP updated by the medical CPI.
    To the extent that the OIG performs a new market analysis or 
additional data sources are developed as described in section 3.h, the 
target widely available market price might change.
    g. New Drugs and Drugs with Patent Expirations
    The payment limit for new drugs and drugs coming off of patent 
would be determined as described under option 2. The only difference 
would be that under the market monitoring approach the out year payment 
limit might change to the extent that the OIG performs a market 
analysis or additional data sources are developed as described in the 
next section.
    h. Additional Sources of Market-Based Prices
    We are considering additional sources of market-based price 
information. These sources could include drug distributors (for 
example, wholesalers, physician supply houses, specialty pharmacies, 
retail pharmacies, manufacturers, repackagers) physicians, suppliers, 
and group purchasing organizations (GPOs). To the extent that payments 
by private insurers and health plans reflect widely available market 
prices, we are considering inclusion of these sources.
    The general approach we will use is to take the median price among 
valid available sources of information on widely available market 
prices, after making any adjustments required to make the information 
comparable. We are considering whether to restrict the median 
calculation to those information sources that reflect significant 
market share. We are proposing to rely on a single information source 
if we determine that the source is representative of the widely 
available market price for a drug.
    We are considering the acquisition of this market-based price 
information through market research firms, contractors, consultants, 
the OIG, and/or by directly obtaining such data.
    If we obtain additional sources of market-based prices and if we 
determine

[[Page 50435]]

these sources are valid for the purposes of determining payment limits 
based on widely available prices, we will provide an opportunity for 
public comment on the sources.
1. Data from Distributors and Manufacturers
    We would seek to acquire data from drug distributors and 
manufacturers. Although there may be many distributors for a given 
drug, our understanding is that most physicians and suppliers tend to 
use the same distributors over a given time period and that the 
majority of these purchases, at least for injectable drugs, are 
concentrated in a small number of distributors. We are considering 
whether to focus our efforts initially on these distributors and we are 
seeking comment on this focused approach.
    Our market analyses would also include pricing information from 
manufacturers' direct distribution programs since, as discussed 
earlier, we understand that many of these programs are easily 
accessible to physicians and suppliers and that the prices offered in 
these programs are often lower than the prices available through other 
distribution channels.
2. Data From Physicians and Suppliers
    We would also seek to obtain acquisition cost information from 
physician and suppliers. Although individual invoice pricing may not 
necessarily be reflective of the widely available market price, for 
example due to the presence of volume related rebates and price 
concessions, this information could be informative in developing the 
widely available market price.
    While issues have been raised in the past concerning the use of 
invoice prices due to the potential presence of volume discounting, we 
note that the GAO study found that physicians who billed for low 
amounts of chemotherapy drugs were still able to obtain significant 
price discounts. We seek comment on this issue.
3. Data from Private Insurers and Health Plans
    We are considering obtaining data from private insurers and health 
plans, including Medicare carriers' private businesses. As discussed 
earlier, it is our understanding that while many private insurers pay 
widely available market prices for oral drugs and inhalation drugs, 
they have not historically paid widely available market prices for 
injectable drugs. Given this, we are considering initially seeking 
private business prices for oral and inhalation drugs. For example, we 
are considering whether to request our four DMEPOS contractors to 
supply us with oral and inhalation drug pricing and related information 
from their private side business.
    For injectable drugs, as private insurers develop alternative 
payment approaches that reflect widely available market prices, we 
could seek this information from them. For example, similar to the 
approach suggested for oral and inhalation drugs, we are considering 
asking our carriers to furnish us with their private business payments 
for these drugs.
4. Approaches to Acquiring Market-Based Pricing Information
    We are considering the acquisition of this market-based price 
information through market research firms, consultants, contractors, 
the OIG, and/or directly obtaining such data. It is our understanding 
that many manufacturers use market research firms to gather information 
on their products. For example, they conduct surveys of physician 
practices and compile pricing information. We are considering 
contracting with one of these firms to perform a market analysis of 
physician practices. We also understand that a few private health plans 
have begun to use consultants, at least for injectable drugs, to assist 
them in developing market-based payment structures. We are considering 
contracting with these consultants. We are considering an attempt to 
obtain pricing information directly from distributors using full or 
part-time CMS employed or contracted physicians. We are considering the 
selection of one or more contractors to acquire this information for us 
and maintain updated pricing information. The OIG may also update 
market analyses of drugs they have previously studied and examine 
additional drugs.
Option 4--Competitive Acquisition Program and Average Sales Prices
    A fourth option we are considering is the establishment of a 
competitive acquisition program for drugs covered under section 1842(o) 
of the Act coupled with the establishment of a process for determining 
Average Sales Price (ASP). Under this option, we would establish 
competitive acquisition areas and entities would bid to supply drugs to 
physicians in one or more of these areas. A physician could choose 
annually to acquire drugs from one of these entities and the entity 
would be responsible for billing Medicare. Alternatively, a physician 
could choose to purchase drugs and bill Medicare. If a physician 
elected to purchase drugs, we would pay the physician the ASP for the 
drug. Manufacturers would be required to furnish us with the ASP for 
each of their drugs quarterly. This option is consistent with the GAO's 
recommendation that we evaluate expanding competitive bidding 
approaches to obtain lower drug prices (GAO-01 1118, p.5) and is 
consistent with our understanding of Congressional intent with respect 
to section 429 of BIPA.
    Below we describe our proposed competitive acquisition program and 
ASP-based payment systems. We seek comment on any additional elements 
that need to be considered in the establishment of these payment 
systems. We also note that for some drugs, such as those currently 
provided directly from the manufacturer to the physician, we may be 
potentially introducing an additional distribution level in the form of 
the bidding entity. Therefore, we have explicitly identified safeguards 
under the competitive acquisition program that are more implicit under 
our alternative payment reform proposals. While we believe that section 
429 of BIPA contemplates (and section 1842(o) of the Act could be 
defined to permit) the use of such a competitive acquisition model, 
coupled with the implementation of an ASP setting function described 
below, we specifically solicit comments on the extent of the authority 
to implement the option set forth below either in its entirety or in a 
modified fashion.

A. Competitive Acquisition

1. Categories of Drugs
    Under this proposal, we would bid two categories of drugs in each 
competitive acquisition area: oncology and non-oncology. The oncology 
category would consist of covered drugs typically billed by oncologists 
or otherwise used to treat cancer. The non-oncology category would 
consist of all other covered drugs with the exception of DME drugs, 
clotting factors, drugs furnished to individuals in connection with the 
treatment of end stage renal disease, and vaccines. Payment for 
excepted drugs would be based on the ASP. We may propose subcategories 
of non-oncology drugs in the future. We seek comment on any additional 
categories of drugs that may be inappropriate for competitive bidding 
due to low utilization, a unique method of delivery, or similar 
reasons.
2. Bidding Entity Qualifications
    a. Capacity
    Bidding entities would be required to demonstrate sufficient 
capacity to

[[Page 50436]]

supply the drugs in the drug category in accordance with all applicable 
state requirements and pharmacy laws. The entity would need to have 
sufficient arrangements to acquire and to deliver drugs within the 
category at the bid price for all physicians that may elect such entity 
in a competitive acquisition area.
    b. Shipment
    Bidding entities would be required to have arrangements in effect 
for the shipment of drugs at least 5 days each week and for the timely 
delivery (including emergency situations) of drugs in the competitive 
acquisition area. The shipments would be made to the physician and not 
directly to the beneficiary, except under circumstances where a 
beneficiary currently receives the drug in the home or other 
nonphysician office setting. The contractor would not deliver drugs to 
a physician except upon receipt of a prescription.
    c. Integrity of the distribution system.
    Bidding entities would need to demonstrate that the drugs provided 
in the competitive acquisition program would be acquired directly from 
the manufacturer or from a distributor that has acquired the drugs 
directly from the manufacturer.
    d. Inquiries and dispute resolution.
    Bidding entities would be required to establish procedures for the 
prompt response and resolution of physician and beneficiary inquiries 
regarding the shipment of drugs and to establish a grievance process 
for the resolution of disputes. For disputes that are not resolved at 
the bidding entity, we propose to establish a national ombudsman to 
oversee and review complaints under the competitive acquisition 
program.
3. Bidding Process
    a. Evaluation of bids.
    We propose to select one or more winning bidders for each category 
based on the bid prices for the drugs, the ability to ensure product 
integrity, customer service, and past experience in the distribution of 
drugs. We also propose to reject any bid that we estimate would result 
in aggregate payments that exceed the payments that would have been 
made if the drugs in the category were paid at the ASP.
    b. Timing of bidding process.
    We expect to have the initial bidding process complete and the 
winning entities selected in time for the competitive acquisition 
program to be implemented for oncology drugs beginning in 2005 and non-
oncology drugs beginning in 2006. We propose to select subsequent 
contractors on a periodic basis and seek comment on the appropriate 
time between bidding periods and the appropriate length of the 
contracts.
    c. Bid prices.
    The prices bid by an entity would be the prices in effect and 
available for the supply of contracted drugs in the area through the 
entity for the entire contract period. The bid price would not vary 
within a competitive acquisition area. The bid price would include all 
costs related to carrying out the contract provisions, including costs 
related to the delivery, dispensing, and shipping of the drug.
    d. Bidding on a national or regional basis.
    We would propose, but not require, entities to bid for contracts in 
more than one competitive acquisition area.
4. Competitive Acquisition Areas
    We seek comment on the appropriate geographic regions to establish 
for a competitive acquisition program.
5. Billing and Coinsurance Under Competitive Acquisition
    We propose that a successful bidder would be responsible for 
billing Medicare and collecting coinsurance for the drugs they supply 
that are subsequently administered to Medicare beneficiaries.

B. Average Sales Price

    Under the competitive acquisition model option, a physician would 
make an annual election to obtain drugs in a given category through a 
winning bidder or could purchase the drugs and bill Medicare. If a 
physician chooses to purchase drugs, they would be paid under the ASP-
based system described below. Manufacturers would be required to report 
the ASP to us on a quarterly basis.
1. Definition of Average Sales Price
    Under this proposed option we would propose to define the ASP for a 
drug for a quarter as a manufacturer's total sales for the quarter less 
any sales exempted from the ASP calculation divided by the total number 
of units of such drug sold by the manufacturer in such quarter less any 
units from sales exempted from the ASP calculation. We seek comment on 
this definition as well as on the appropriate categories of sales that 
should be exempted from the ASP calculation.
2. Discounts
    Under this proposal, in calculating the ASP, the manufacturer would 
take into account volume discounts, prompt pay discounts, cash 
discounts, the free goods that are contingent on any purchase 
requirement, chargebacks, and rebates (other than rebates under section 
1927), that result in a reduction of the cost to the purchaser. A 
rebate to a payor or other entity that does not take title to a covered 
outpatient drug shall not be taken into account in determining such 
price unless the manufacturer has an agreement with the payor or other 
entity under which the purchaser's price for the drug is reduced as a 
consequence of such rebate.
3. Payments.
    We propose to pay for multi-source drugs at an appropriate markup 
above ASP and seek comment on a markup in the range of 101 to 112 
percent of ASP. We propose to pay for single source drugs at the lesser 
of an appropriate markup of ASP in the range of 101 to 112 percent or 
the Wholesale Acquisition Cost (WAC).
    a. Wholesale Acquisition Cost (WAC).
    Under this competitive acquisition model option we would propose 
defining the WAC as the manufacturer's list price for the drug to 
wholesalers and direct purchasers in the United States as reported in 
wholesale price guides or other publications of drug pricing data. The 
WAC would not include prompt pay or other discounts, rebates or 
reductions in price.

B. Increases in Payments Related to the Costs of Furnishing or 
Administering Drugs

    As described earlier, section 429(b) of BIPA requires us to revise 
the Medicare payment methodology for drugs under section 1842(o) of the 
Act based on the GAO report to the Congress. Under section 429(b), to 
the extent the Secretary determines appropriate, the Secretary may make 
adjustments to the practice expense component of the physician fee 
schedule for costs incurred in the administration, handling, or storage 
of certain categories of such drugs and biologicals. Section 429(b) 
also authorizes the Secretary to make proposals for new payments to 
providers of services or suppliers for such costs, if appropriate. 
However, the estimated aggregate payments for drugs under the revised 
system (including additional payments for related costs of furnishing 
or administering the drug) cannot exceed payments as projected by the 
Secretary under the current system. Below, we discuss payment issues 
associated with furnishing or administering Medicare covered drugs. To 
the extent appropriate, we are proposing increased payments for the 
administration of drugs or new payments to providers or suppliers for

[[Page 50437]]

furnishing Medicare covered drugs and seek comment on the applicability 
of these payments under each of our four options for reforming the 
current payment system.
1. Proposed Changes in Physician Fee Schedule Payment for the 
Administration of Medicare Covered Drugs
    a. SMS and Supplemental Survey Data
    An important element in calculation of the practice expense 
relative value units (RVUs) for all services paid using the physician 
fee schedule is specialty-specific practice expenses per hour of 
patient care. We use the American Medical Association's (AMA's) 
Socioeconomic Monitoring System (SMS) survey of actual aggregate cost 
data by specialty as the major source of data for these expenses per 
hour. However, not every specialty is included in the SMS data and 
several other specialties have commented that the SMS data were not 
adequately representative of the costs incurred by their specialty. (63 
FR 58824-58826) Section 212 of the Balanced Budget Refinement Act of 
1999 (BBRA) directed us to establish a process under which we would 
accept and use, to the maximum extent practicable and consistent with 
sound data practices, data collected or developed by organizations. In 
an interim final rule published on May 3, 2000 (65 FR 25664) we set 
forth our criteria for accepting such supplemental surveys. In the 
December 31, 2002 Federal Register that contained the 2003 physician 
fee schedule final rule (67 FR 79972), in response to comments, we made 
some modifications to these criteria. In this year's physician schedule 
proposed rule (68 FR 49030), we proposed changes to the deadline for 
submitting supplemental survey information to our contractor, the Lewin 
Group.
    Using the SMS data, we calculated a total practice expense per hour 
of $99.30 for oncology. We are currently using this practice expense 
per hour for CMS specialty codes 83 (Hematology/Oncology) and 90 
(Medical Oncology). However, the American Society of Clinical Oncology 
(ASCO) submitted a supplemental survey in 2002 with a practice expense 
per hour of $189.00. In the 2003 physician fee schedule final rule (67 
FR 79973), we discussed the practice expense survey submitted by the 
ASCO. Although the survey met our stated criteria, we did not use it in 
the calculation of the 2003 practice expense RVUs because of concerns 
about the data. Our contractor, the Lewin Group evaluated the data and 
indicated that average compensation (including salaries and fringes) 
for clinical and administrative staff reported in the ASCO survey 
averaged $71,014 and $87,253 respectively and appear inconsistent with 
other available data on wage rates for such staff. Furthermore, the 
Lewin Group indicated that the category of ``other professional 
expenses'' was 349 percent higher than the SMS survey. The Lewin Group 
suggested that we seek an explanation for the high values in the ASCO 
survey before incorporating it into the practice expense methodology. 
In the December 31, 2002 physician fee schedule final rule we indicated 
that we intended to meet with ASCO to discuss our concerns and that we 
would consider using the data in the future if our concerns were 
addressed. We have subsequently held such discussions with ASCO and 
understand that the high values for average compensation for clinical 
and administrative staff are largely due to a limited number of 
practices with very high values that raise the average values 
calculated across all respondents to the survey. At this time, we are 
proposing to incorporate the survey into the methodology. Since our 
practice has been to use all survey data and not eliminate practices 
with high values, we are including all respondents in the supplemental 
practice expense per hour.
    As we note in more detail below, section 429(b) authorizes the 
Secretary to provide for adjustments to payments for the costs incurred 
in the administration of certain categories of drugs. While we believe 
the provision allows the Secretary to make changes to practice expense 
payments in a non-budget neutral manner, we also believe that it 
anticipates that the Secretary will make adjustments to payments for 
drug administration services at the same time the Secretary revises the 
payment methodology for drugs. Otherwise, we would be unable to compare 
the aggregate costs of the changes authorized by section 429. We are, 
therefore, proposing only to incorporate the oncology survey data into 
the practice expense methodology at the same time proposed changes in 
Medicare payment for drugs are adopted.
    ASCO, the GAO, and OIG have all indicated that Medicare overpays 
for drugs and revisions to the payment methodology for drugs should 
coincide with increase in practice expense payments for drug 
administration services. In testimony before the House Ways and Means 
Committee on October 3, 2002, ASCO acknowledged the need for 
comprehensive reform of Medicare payment for drugs and physician 
practice expenses. ASCO testified:

    We do not relish being targets for those who correctly point out 
that some drugs are reimbursed by Medicare at a rate that exceeds 
the acquisition cost * * * reform must be comprehensive, 
encompassing both overpayments for drugs and underpayments for the 
costs of administering the drugs.

    The GAO echoed this view in testimony before the House Energy and 
Commerce Subcommittee on Health Oversight and Investigations on 
September 21, 2001 testifying: ``it should be a principle of Medicare 
payment policy to pay for each service appropriately.'' OIG testified:

    Our reports have shown time after time that Medicare pays too 
much for drugs * * * We agree that physicians need to be properly 
reimbursed for patient care. However, we do not believe that the 
payment of artificially inflated drug prices is an appropriate 
mechanism to compensate them.

At the same hearing, Subcommittee Chair James C. Greenwood stated:

We will need to develop a solution that results in Medicare paying 
prices for drugs that are closer to the actual prices paid by health 
care providers. Similarly we will need to take steps to ensure that 
health care providers are sufficiently reimbursed for all of their 
services.

    Furthermore, we remain concerned about high practice expense per 
hour values from the ASCO survey. Even when practices with extremely 
high values are eliminated from the calculations, the supplemental 
survey practice expense per hour would remain 174 percent higher than 
the all physician average and more than 45 percent higher than the next 
highest specialty. We will continue investigating why oncology practice 
expenses would be so far above other specialties. For the reasons 
above, we believe the supplemental survey should only be incorporated 
into the practice expense methodology at the same time that Medicare 
revises the payment methodology for drugs.
    b. Weight Averaging Supplemental Survey and SMS Data
    When we use supplemental survey data, we have generally blended the 
supplemental data with SMS data for the specialty in order to use the 
maximum number of survey responses in calculating a practice expense 
per hour. However, the argument has been made that specialty societies 
would only undertake a survey because of the belief that the existing 
SMS data were not sufficiently representative of the specialty's 
practice expenses. According to this argument, blending the

[[Page 50438]]

supplemental data with existing SMS data were not appropriate. We agree 
and propose to use supplemental survey data without blending it with 
the SMS data.
    On only one previous occasion have we used blended data in the 
calculation of a specialty's practice expense per hour. In the 1999 
physician fee schedule final rule (64 FR 59391), we blended the survey 
data from the Society of Thoracic Surgeons (STS) with the older SMS 
data for cardiac and thoracic surgery. Consistent with the proposed 
change to use supplemental survey data for oncologists' practice 
expenses without blending it with the SMS data, we are proposing to 
recalculate the practice expense per hour for cardiac and thoracic 
surgery using the data from only the STS survey which will result in a 
modest increase in their practice expense per hour. We are proposing to 
use the following revised data for oncology and cardiac and thoracic 
surgery:

                                                            Revised Practice Expense Per Hour
                                                                        [Dollar]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Clin.        Admin.       Office        Med.         Med.
                          Specialty                               staff        staff       expense      supplies      equip.       Other        Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cardiac/Thoracic.............................................         19.5         18.0         17.2          2.1          2.1         14.2         73.1
Oncology.....................................................         53.4         34.7         34.4         16.9          7.4         42.2        189.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    c. Nonphysician Work Pool
    The nonphysician work pool is a special methodology that we used to 
determine practice expense RVUs for many services that do not have 
physician work RVUs. We created the nonphysician work pool as an 
interim measure until we could further analyze the effect of the basic 
practice expense methodology on Medicare payment for services that do 
not have physician work RVUs. While the nonphysician work pool is of 
benefit to many of the services that were originally included, we have 
allowed specialties to request that their services be removed from the 
pool. Because the nonphysician work pool includes a variety of services 
performed by many different specialties, we use the ``all physician'' 
average practice expense per hour in place of a specialty-specific 
practice expense per hour.
    Oncologists currently receive approximately 23 percent of their 
Medicare physician fee schedule revenues from drug administration 
services that are in the nonphysician work pool. For drug 
administration codes to benefit from the increase in oncology's 
practice expense per hour, it would be necessary to remove them from 
the nonphysician work pool and use the general top-down methodology to 
establish their practice expense RVUs. For this reason, we are 
proposing to remove therapeutic and diagnostic infusions (CPT codes 
90780 and 90781), therapeutic, prophylactic or diagnostic injections 
(CPT codes 90782 through 90788) and chemotherapy administration (CPT 
codes 96408 through 96549) from the nonphysician work pool. Practice 
expense RVUs for these services will be computed utilizing the standard 
practice expense methodology used for computing practice expense RVUs 
for other services outside the nonphysician work pool. (CPT code 96400, 
chemotherapy injection, is not listed above because it has already been 
removed from the nonphysician work pool at the request of the American 
Urological Association. See the December 31, 2002 final rule, 67 FR 
79981. This service is primarily provided by urologists and increased 
in payment by 640 percent between 2002 and 2003 as a result of being 
removed from the nonphysician work pool).
    As we state above, we use the all physician average practice 
expense per hour in calculating the aggregate practice expense pool for 
services included in the nonphysician work pool. Once drug 
administration services are removed from the nonphysician work pool, 
nearly 98 percent of Medicare allowed charges for services affected by 
the nonphysician work pool calculations are diagnostic tests provided 
by radiologists, cardiologists and internists and therapeutic radiation 
oncology services. Because there is a less heterogeneous group of 
services remaining in the nonphysician work pool once drug 
administration services are removed and to minimize the impact of the 
removal of these services, we are proposing to revise the practice 
expense per hour based on a weighted average of the specialties that 
perform the services affected by its calculations. We are proposing to 
use the following revised data in the practice expense methodology for 
services remaining in the nonphysician work pool:

                                                            Revised Practice Expense Per Hour
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Clin.        Admin.       Office        Med.
                          Specialty                               staff        staff       expense      supplies   Med.  equip     Other        Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Nonphysician Work Pool.......................................        $15.8        $17.4        $21.5         $7.9         $4.9        $15.0        $82.6
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In the practice expense methodology, the practice expense per hour 
for each category of costs is multiplied by the physician time per 
procedure and summed to the specialty level to create aggregate cost 
pools. By definition, nonphysician work pool services do not involve 
the physician and have no physician time. To create the nonphysician 
work pool, we have used clinical staff time per procedure in the 
computation. In the June 28, 2002 proposed rule (67 FR 43851), we 
proposed to use the maximum staff time where multiple staff are 
involved in providing the service. By using the maximum staff time, we 
are assuming that clinical staff are working concurrently. However, it 
is possible that clinical staff are working sequentially and it would 
be appropriate to use the total staff time for each service. We believe 
the staff time arrangement will likely differ based on the specific 
service and it is not possible to adopt a rule that will address every 
situation. Nevertheless, we are proposing to use the total staff time 
in place of the maximum staff time for developing the 2004 physician 
fee schedule. As we stated earlier, the nonphysician work pool was 
adopted as an interim step until we could further

[[Page 50439]]

analyze the effect of the top-down methodology on nonphysician work 
pool services. We have performed these analyses and are optimistic 
about being able to address nonphysician work pool issues as part of 
developing the 2005 physician fee schedule. At that time, we will no 
longer need to use staff time in the creation of the aggregate cost 
pools and this issue will be resolved.
    We have modeled the effect of removing drug administration services 
from the nonphysician work pool in combination with the change to the 
practice expense per hour and clinical staff time changes described 
above. These changes will increase the practice expense RVUs for the 
nonphysician work pool by approximately 3 percent relative to the 
practice expense RVUs shown in the physician fee schedule proposed rule 
published on August 15, 2003.
    d. Crosswalk Issues
    As stated above, we are currently using the oncology practice 
expense per hour for CMS specialties 83 (Hematology/Oncology) and 90 
(Medical Oncology). We have reviewed 2002 Medicare data for specialty 
82 (Hematology). The mix of services provided by physicians billing 
under specialty 82 is similar to those of specialties 83 and 90. For 
this reason, we are proposing to change the specialty practice expense 
per hour crosswalk for specialty 82 from internal medicine to oncology.
    e. Issues Related to Budget Neutrality
    Section 1848(c)(2)(B)(ii)(II) of the Act requires that the 
additional expenditures resulting from changes in RVUs be budget-
neutral. We normally adjust the practice expense RVUs so that the 
aggregate amount of expenditures is the same before and after a change 
to the methodology or data that are used to develop the practice 
expense RVUs. However, section 429(b)(1) of the BIPA indicates that, 
``Notwithstanding any other provision of law'' * * *. (emphasis added) 
the Secretary is required to revise payments for drugs and is allowed 
to provide for adjustments to payment amounts for the practice expense 
component of the physician fee schedule (or new payments to providers 
or suppliers) for the costs incurred in the administration, handling, 
or storage of certain categories of drugs and biologicals). The 
additional physician fee schedule payment and the new payments to 
providers and suppliers cannot exceed savings from revising payments 
for drugs. We believe that BIPA section 429(b) provides authority for 
us to increase physician fee schedule expenditures (that is, not apply 
the budget-neutrality requirement in section 1848(c)(2)(B)(ii)(II) of 
the Act) for adjustments made to the practice expense RVUs for drug 
administration. We have modeled all of the changes described above and 
determined that payments for the drug administration services will 
increase by $190 million ($150 million to oncologists and $40 million 
to other specialties that provide drug administration services such as 
rheumatology, gastroenterology and infectious disease). Because section 
429(b) of BIPA provides authority to increase physician fee schedule 
expenditures for the adjustments to the practice expense RVUs for drug 
administration services, the proposed adjustments to practice expense 
RVUs will increase physician fee schedule allowed charges by $190 
million or the amount of increased payments for drug administration 
services. In general, the proposed adjustments to practice expense RVUs 
will result in increases in payment for those specialties that provide 
drug administration services and minimal net payment effects on other 
specialties. We believe that BIPA allows us not to apply the physician 
fee schedule budget-neutrality requirements in the context of revising 
payment rates for drugs and only if the additional expenditures from 
these and other changes described below do not exceed savings from 
revising prices for drugs. If we increased physician fee schedule 
expenditures for the adjustments made to the practice expense RVUs for 
drug administration without simultaneously revising payments for drugs, 
we would be spending more on Medicare drugs and drug administration 
services than we would be in the absence of making the payment changes. 
Such a policy is clearly prohibited by BIPA.
    As we stated earlier, we believe the statute anticipates that we 
would make drug administration payment changes in conjunction with 
adopting a revised payment methodology for Medicare drugs. Therefore, 
we are also proposing not to make the drug administration payment 
changes, even if we were to make them budget neutral under section 
1848(c)(2)(B)(ii)(II) of the Act with respect to other physician fee 
schedule service unless the drug payment changes are also made. If 
these proposed changes are adopted the increased costs will be 
reflected in the sustainable growth rate.
    f. Multiple Pushes
    In the November 25, 1991 Federal Register (56 FR 59541), we 
indicated that Medicare will allow CPT code 96408 (Chemotherapy 
administration, intravenous; push technique) to be reported only once 
per day even if the physician administers multiple drugs. Since this 
code is in the nonphysician work pool, its payment amount is 
established based on charge-based practice expense RVUs. However, 
because we are establishing resource-based practice expense RVUs and 
there are additional resources involved in administering each 
subsequent drug, we are proposing to change our policy and allow for 
96408 to be reported once per day for each drug administered. Using 
2002 Medicare utilization data and the payment amounts resulting from 
the proposed changes described above, we estimate a $25 million 
increase in Medicare allowed charges to oncologists. We will reflect 
any increased costs associated with paying for multiple drug 
administrations on the same day in the sustainable growth rate. 
However, as discussed previously, we do not believe the statute permits 
us to adopt this proposal without revising Medicare's payment 
methodology for drugs since aggregate payments for drugs and drug 
administration services would exceed payments that would be made in the 
absence of such changes.
    g. Summary of Physician Fee Schedule Proposals
    We are proposing to: (1) Use the ASCO survey data without blending 
it with existing SMS data to determine practice expenses per hour for 
use in the top-down methodology (resulting in increased payment rates 
for drug administration codes provided by oncologists, rheumatologists, 
gastroenterologists, infectious disease specialties and all other 
physicians that provide these services); (2) revise the cardiac/
thoracic surgery practice expense per hour to use supplemental survey 
data without blending with SMS data; (3) remove drug administration 
codes from the nonphysician work pool and instead use our general top-
down methodology to establish practice expense relative values units 
(RVUs); (4) revise the practice expense per hour and clinical staff 
time used to determine the nonphysician work pool; (5) change the 
specialty practice expense crosswalk for specialty 82 (Hematology) from 
internal medicine to oncology; (6) increase physician fee schedule 
expenditures for the adjustments made to the practice expense RVUs for 
drug administration services (but only if there are accompanying 
revisions in payment for drugs discussed elsewhere in this proposed 
rule) resulting in minimal net payment effects on any specialty that 
does not provide drug administration services; and (7) revise our 
policy on payment for multiple pushes.
    We have modeled the above proposals as though they were in effect 
in 2002 to determine the specialty-level impact on

[[Page 50440]]

Medicare revenues for oncologists. In 2002, oncologists received 
approximately $3.8 billion in Medicare revenues for drugs, $1.1 billion 
for physician fee schedule services and $0.1 billion for all other 
services. Taken together, oncologists received approximately $5.0 
billion in 2002 Medicare revenues for all services. Using 2002 
utilization, we estimate that total physician fee schedule payments to 
oncologists would have increased by $150 million as a result of using 
oncology survey data and other changes to the practice expense 
methodology. Allowing payment for multiple drug administration by the 
push technique would have increased oncology payments another $25 
million. The estimated additional payment of $175 million to 
oncologists represents a 17 percent increase in their physician fee 
schedule revenues and a 58 percent increase in their payments for drug 
administration services. If we had adopted one of the proposals 
described above to revise drug payments in 2002, Medicare revenues to 
oncologists would have increased $80 million or 2 percent from applying 
comparability. Medicare revenues to oncologists would have declined by 
$570 million or 8 percent from applying an average list AWP discount of 
80 percent.
2. Clotting Factor
    As mentioned earlier, in January 2003 the GAO issued a report 
entitled ``MEDICARE: Payment for Blood Clotting Factor Exceeds 
Providers'' Acquisition Costs'' (GAO-03-184). GAO recommended that we 
establish Medicare payment levels for clotting factor that are more 
closely related to providers' acquisition costs and then establish a 
separate payment for the cost of delivering clotting factor to Medicare 
beneficiaries by hemophilia treatment centers and homecare companies. 
In following the GAO's recommendation, at the same time that we 
establish an appropriate price for clotting factor, we plan to 
establish a separate payment to hemophilia treatment centers and 
homecare companies for the administrative costs associated with 
furnishing the clotting factor. GAO estimated that total delivery costs 
in 2000 and 2001 ranged from $0.03 to $0.08 per unit of clotting factor 
sold by hemophilia treatment centers. GAO did not receive enough data 
from homecare companies to estimate their costs. We are proposing to 
create a payment of $0.05 per unit of clotting factor provided to 
Medicare beneficiaries by hemophilia treatment centers and homecare 
companies to appropriately pay for the administrative costs associated 
with furnishing the clotting factor. Note that we are not proposing the 
creation of separate payment for furnishing the clotting factor for 
individuals or entities other than hemophilia treatment centers and 
homecare companies, for example hospitals. The administrative costs of 
these other individuals or entities associated with furnishing clotting 
factor are already paid for in their respective payment systems. We 
also note that GAO indicated that providers may also furnish other 
services for which they are not separately reimbursed, such as patient 
education and community outreach. However, these services are not 
Medicare-covered benefits and they are generally targeted to younger 
patients who are not Medicare beneficiaries. We are proposing not to 
include such non-Medicare covered services in the separate payment that 
we plan to establish for furnishing clotting factor. Section 429(b) of 
BIPA authorizes the Secretary to establish payment for clotting factor 
delivery. Therefore, we plan to assure that the total amount of 
Medicare expenditures for both clotting factor and delivery of such 
factor does not exceed the amount that Medicare would otherwise spend 
for clotting factor in the absence of adjustment in payment for the 
drug and establishment of a separate fee for furnishing the drug. We 
are seeking public comment and data related to the appropriateness of a 
fee for furnishing clotting factor under each of our four options for 
revising the current payment methodology.
3. Separately Billable ESRD Drugs
    Medicare pays ESRD facilities a prospective payment, the composite 
rate, for each hemodialysis treatment furnished. The composite rate is 
designed to cover the facility's costs of ESRD services furnished to 
beneficiaries. ESRD facilities can also bill Medicare separately for 
certain drugs paid outside the composite rate, including 
erythropoietin, vitamin D analogue, and calcitrol. By law, Medicare 
payment for erythropoietin furnished by ESRD facilities is $10 per 
1,000 units. The other separately billable drugs are paid under the 
current 95 percent of list AWP methodology.
    In its March 2003 report to Congress, MedPAC concludes that after 
taking into account the combined payments to ESRD facilities for both 
the dialysis treatment and the separately billable drugs, the aggregate 
Medicare payments for outpatient dialysis services appear to be 
adequate. However, MedPAC found that in 2001, Medicare's composite rate 
payment did not cover the costs of providing dialysis services. MedPAC 
indicated that the profitability of erythropoietin and other separately 
billable drugs is subsidizing the lower margins under the composite 
rate. The finding regarding the profitability of the separately 
billable drugs is consistent with two earlier studies by the OIG. The 
OIG also found that Medicare's payment rates for these drugs were high 
relative to providers' costs and the rates paid by the VA and Medicaid 
programs.
    We believe that it is important to pay appropriately for the 
composite rate and separately billable drugs and not have payments for 
one cross-subsidize the other. It is our preference for the Congress to 
provide explicit authority to increase the composite rate when we 
reduce payments for ESRD separately billable drugs. However, we believe 
that Congress intended for us to establish additional payments for ESRD 
facilities to account for increased costs resulting from revised drug 
payment rates. Section 429(b) provides that the Secretary may provide 
for additional payments to providers or suppliers for the 
administration, handling, and storage of drugs and biologicals. While 
the citation in section 429(b) is to a provision of the statute that no 
longer exists, we believe that in light of other provisions in section 
429, Congress intended the Secretary to provide for additional payments 
to ESRD facilities for increased costs related to the administration of 
drugs and biologicals to offset revised Part B payments rates if the 
Secretary determined it was appropriate. We believe based on the MedPAC 
analysis that it is appropriate to increase ESRD payments to offset the 
savings that will occur as we reform drug payments under the current 
methodology. This would result in the same amount of money being paid 
to ESRD facilities in 2004, but with more accurate payment for 
separately billable drugs. This would not involve the bundling of 
payment for these drugs or the drug savings into the composite rate, 
but a separate payment from the composite rate. After we have selected 
an AWP reform option, we would determine the average first year savings 
from the ESRD separately billable drugs per hemodialysis treatment and 
create a separate ESRD facility payment per hemodialysis treatment 
equal to this amount. As stated earlier, we would prefer for Congress 
to provide explicit authority for us to bundle the savings from 
reforming the separately billable ESRD drug payments into the composite 
rate.
    We are requesting comments from the public on our interpretation of 
the BIPA

[[Page 50441]]

provisions as well as our proposal for additional ESRD payments.
4. Inhalation and Home Infusion Drugs
    For inhalation drugs furnished in connection with an item of DME, 
Medicare currently pays for: (i) The DME itself, (ii) servicing of the 
DME, and (iii) the inhalation or infusion drug. For inhalation drugs, 
Medicare also pays a dispensing fee.
    Inhalation equipment, such as nebulizers and home infusion pumps, 
are paid under the DME benefit under the capped rental category. The 
supplier furnishes the equipment to a beneficiary and the supplier is 
paid 10 percent of the purchase price for the first three months and 
7.5 percent of the purchase price for months 4 through 15 (that is, up 
to 120 percent) of the purchase price of the equipment. The supplier 
furnishes the equipment for as many months as the beneficiary needs it. 
The statute also provides for a purchase option for the beneficiary. If 
a beneficiary does not purchase the equipment, the supplier retains 
title to the equipment and could furnish it to another beneficiary. In 
this case, the payment occurs in a similar fashion and the supplier 
could be paid up to another 120 percent of the purchase price of the 
equipment. Medicare's payment includes delivery of the equipment to the 
patient and any necessary setup and training of the beneficiary in its 
use.
    The statute specifies that Medicare also make payments for 
maintenance and servicing the equipment. Such maintenance and servicing 
payments cover 6-month periods beginning 7 months after initial use of 
the equipment. By statute, Medicare's payment for maintenance and 
servicing is equal to the lesser of a reasonable and necessary 
maintenance and servicing fee, or 10 percent of the total purchase 
price of the equipment.
    In their September 2001 report described earlier (GAO-01-1118), the 
GAO noted that although there have been no recent analyses of the 
adequacy of Medicare DME payments, there are indications that the 
payments may be above market rates. We are unaware of any studies 
indicating that absent excessive Medicare payments for DME drugs, 
payment for the DME itself is inadequate. Nevertheless, we are 
interested in receiving convincing and comprehensive data from the 
public about any underpayment for inhalation and infusion durable 
medical equipment believed to exist and the applicability of that data 
under each of our four options revising the current payment 
methodology.
    We note that it has been suggested that the current excessive 
Medicare payments for DME drugs are used to pay for inhalation and 
infusion services provided by DME suppliers that are not covered by the 
Medicare program. We believe it is inappropriate for excessive drug 
payments to subsidize these non-covered services.
5. Oral Drugs Provided by Pharmacies
    Medicare makes no separate payment to pharmacies for dispensing 
covered Medicare drugs such as oral immunosuppressive and oral anti-
emetic drugs. The GAO report did not make a recommendation with respect 
to dispensing fees for pharmacies. We are seeking public comment and 
data related to the appropriateness of dispensing fees under each of 
our four options for revising the current payment methodology.

C. Beneficiary Access to Drugs

    Given our intent to pay appropriately for drugs and our proposed 
increases in payments for the costs related to furnishing and 
administering drugs, we do not believe that any beneficiaries will 
experience drug access issues as a result of our four proposed options. 
For the drugs (for example, the inhalation drugs) where we are not 
currently proposing changes in payments related to the administrative 
costs of furnishing the drugs, we are seeking comments and data 
supporting the appropriateness of any payment changes.
    Although we do not believe any drug access issues will result from 
this proposed rule, we intend to monitor beneficiary access closely and 
may propose additional changes to our payment system in the future if 
necessary. The data sources we might examine in our access monitoring 
effort include claims data, surveys and focus groups, beneficiary 
inquiries to the 1-800-Medicare number, and environmental scanning 
activities.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the PRA requires that we 
solicit comment on the following issues:
    [sbull] The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
    [sbull] The accuracy of our estimate of the information collection 
burden.
    [sbull] The quality, utility, and clarity of the information to be 
collected.
    [sbull] Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    Requirement:
    Under proposed option 2 and option 3 for this regulation, a 
manufacturer of a new drug or a drug coming off patent would have to 
submit detailed information and a rationale to us for a new price, in 
order to receive a HCPCS code or continue the use of a HCPCS code, 
respectively. During the first year, the manufacturer would also have 
to provide updated information on the actual prices that Medicare 
physicians and supplier pay to purchase the drug.
    The burden associated with these requirements is the time involved 
in providing us the information the first time and in providing us the 
updates. The burden of submitting the data should be minimal, as most 
of it will undoubtedly be electronically stored and transmitted. 
Submitting information should take no longer than 1 hour; updates would 
take no more than 30 minutes per year. Assuming a maximum of 50 
Medicare Part B covered drugs per year either new, coming off patent, 
or subject to a manufacturer update in the first year based on actual 
sales, we expect the maximum aggregate burden per year would not exceed 
150 hours. In addition, under option 3 a manufacturer could request an 
exception to price reduction in the first year. We believe that it 
would take an average of one hour to submit the request and the 
necessary data and certification. Given the universe of approximately 
450 Medicare drug codes and assuming an average of 10 manufacturers per 
drug code, the maximum aggregate burden associated with this activity 
would be 4500 hours.
    For proposed option 3 for this regulation we would collect, through 
various means, market-based price information. This information would 
be collected from any of the following: manufacturers, distributors, 
physicians and suppliers, and private insurers and health plans.
    The burden associated with these requirements is the time involved 
in providing us the information. We expect it would take an average of 
one hour to provide us with this information. We expect the burden will 
not vary significantly regardless of the number of codes requested 
since this information

[[Page 50442]]

is predominately stored electronically by these entities. Assuming a 
maximum of 1000 of the above entities are requested to provide 
information in a given year, the maximum aggregate burden associated 
with this information in 1000 hours per year.
    Under option 4, bidders would have to submit a bid. They would have 
to demonstrate that they have sufficient capacity, that the source of 
the drugs is the wholesaler or distributor for the wholesaler, and that 
they have arrangements for shipment within a specified time frame. They 
would be required to have a procedure for resolving disputes.
    The burden associated with the competitive acquisition program 
would be the time it would take a bidder to submit the bid and to 
document that it has met the requirements. We expect it would take an 
average of approximately 40 hours to collect the information for 
competitive bidding under option 4. Given that we are seeking comment 
on the number of geographic areas to conduct the competitive bidding, 
it is not possible to estimate the aggregate burden.
    Also under option 4 we are requesting information from 
manufacturers on the Average Sales Price of a drug. We believe that it 
would take an average of one hour to collect this information. Given 
the universe of approximately 450 Medicare drug codes and assuming an 
average of 10 manufacturers per drug code, the maximum aggregate burden 
associated with this activity would be 4500 hours per quarter.
    If you comment on these information collection and record keeping 
requirements, please mail copies directly to the following:

Centers for Medicare & Medicaid Services, Office of Strategic 
Operations and Regulatory Affairs, DRDI, DRD-B, Attn: Julie Brown, Room 
C5-16-03, 7500 Security Boulevard, Baltimore, MD 21244-1850.
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 10235, New Executive Office Building, Washington, DC 
20503, Attn: Brenda Aguilar, CMS Desk Officer.

    Comments submitted to OMB may also be emailed to the following 
address: email: [email protected]; or faxed to OMB at (202) 395-
6974.

IV. Response to Public Comments

    Because of the large number of items of correspondence we normally 
receive on Federal Register documents published for comment, we are not 
able to acknowledge or respond to them individually. We will consider 
all comments we receive by the date and time specified in the DATES 
section of this preamble, and, if we proceed with a subsequent 
document, we will respond to the major comments in the preamble to that 
document.

V. Regulatory Impact Analysis

    We have examined the impact of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132. 
Executive Order 12866 (as amended by Executive Order 13258, which 
reassigns responsibility of duties) directs agencies to assess all 
costs and benefits of available regulatory alternatives and, when 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis must be prepared for final rules with 
economically significant effects (that is, a final rule that would have 
an annual effect on the economy of $100 million or more in any 1 year, 
or would adversely affect in a material way the economy, a sector of 
the economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities). As described below, we have simulated the effect of 
changes in payment resulting from the implementation of each of the 
four options for revising the current drug payment methodology. We have 
also simulated the impact of our proposed increase in payments for the 
administrative costs related to furnishing drugs.
    Since this rule is considered to be a major rule because it is 
economically significant, we have prepared a regulatory impact 
analysis. The RFA requires that we analyze regulatory options for small 
businesses and other entities. We prepare a Regulatory Flexibility 
Analysis unless we certify that a rule would not have a significant 
economic impact on a substantial number of small entities. The analysis 
must include a justification concerning the reason action is being 
taken, the kinds and number of small entities the rule affects, and an 
explanation of any meaningful options that achieve the objectives with 
less significant adverse economic impact on the small entities.
    For purposes of the RFA, physicians and non-physician practitioners 
are considered small businesses if they generate revenues of $8.5 
million or less. Approximately 96 percent of physicians are considered 
to be small entities. There are in excess of 20,000 physicians and 
other practitioners that receive Medicare payment for drugs. These 
physicians are more concentrated in the specialties of oncology, 
urology, and rheumatology. Of the physicians in these specialties, 
approximately 40 percent are in oncology and 45 percent in urology.
    For purposes of the RFA, approximately 98 percent of suppliers of 
DME and prosthetic devices are considered small businesses according to 
the Small Business Administration's (SBA) size standards. We estimate 
that 106,000 entities bill Medicare for DME, prosthetics, orthotics, 
surgical dressings, and other equipment and supplies each year. Total 
Medicare expenditures for DME are approximately $7 billion per year, of 
which approximately $1 billion are for DME drugs.
    The impact of this proposed rule on an individual physician or DME 
supplier is dependent on the mix of drugs they provide to Medicare 
beneficiaries. For example, under the market monitoring option a 
physician could: (1) Determine the quantities of drugs that the 
physician provides to Medicare beneficiaries; (2) determine the 
proposed impact on that physician for drugs which have been studied by 
GAO and OIG based on the quantities the physician provides, the 
information in Table 3, and our proposed transition as described in 
section II.A.3.f; and, (3) determine the proposed impact on that 
physician for drugs which have not been studied by GAO and OIG based on 
the quantities the physician provides and our proposal to pay 80 
percent to 90 percent of AWP as discussed earlier in section II.A.3.c. 
Different impacts will result from this calculation depending on the 
mix of drugs provided.
    Section 1102(b) of the Act requires us to prepare a regulatory 
impact analysis for any proposed rule that may have a significant 
impact on the operations of a substantial number of small rural 
hospitals. This analysis must conform to the provisions of section 603 
of the RFA. For purposes of section 1102(b) of the Act, we define a 
small rural hospital as a hospital that is located outside a 
Metropolitan Statistical Area and has fewer than 100 beds. To the 
extent changes in drug payments would have any impact on small rural 
hospitals, it would be limited to the few drugs they might furnish with 
pass-through status

[[Page 50443]]

under the Outpatient Prospective Payment System.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in expenditures in any 1 year by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, of $110 million. We have determined that this proposed 
rule will have no consequential effect on State, local, or tribal 
governments.
    We have examined this final rule in accordance with Executive Order 
13132 and have determined that this regulation would not have any 
significant impact on the rights, roles, or responsibilities of State, 
local, or tribal governments.

A. Anticipated Effects

    We have prepared the following analysis, related to the assessment 
requirements. It explains the rationale for, and purposes of, the rule, 
details the costs and benefits of the rule, analyzes alternatives, and 
presents the measures we are using to minimize the burden on small 
entities. As indicated elsewhere, we are making changes to payments for 
drugs and related services in response to the requirements of section 
429(b) of BIPA and section 1842(o) of the Act. It is our intent to 
revise our drug payment system and pay appropriately for the 
administrative costs related to furnishing drugs. We provide 
information for each of the policy changes in the relevant sections in 
this rule. The provisions of this rule are changing only our payment 
rates for drugs and related services. This rule does not impose 
reporting, record keeping, and other compliance requirements except as 
described in section II.A.2.b New Drugs and Drugs with Patent 
Expirations and section II.A.4.b Average Sales Price. We are unaware of 
any relevant Federal rules that duplicate, overlap, or conflict with 
this rule.

B. Impact of Approaches to Revising the Current Payment System

    The proposed approach of basing our reform efforts on the 
comparability provision (Option 1) in the statute and issuing 
additional guidance to our contractors would result in decreases in 
Medicare expenditures for drugs of $4.1 billion over the ten-year 
period FY 2004 through 2013. The effect of implementing an average list 
AWP discount (Option 2) is dependent on the level of the discount. We 
are seeking comment on the appropriate discount in the range of 10 
percent to 20 percent. At 10 percent, the impact of this proposal is 
$5.1 billion for FY 2004 through 2013. At 20 percent the impact is 
$14.3 billion for FY 2004 through 2013. The implementation of market 
monitoring (Option 3) is also dependent on the list AWP discount since 
the discount impacts the drugs that have not been studied by the OIG 
and GAO. At a 10 percent discount for the drugs that have not been 
studied, the impact of this proposal is $16.1 billion for FY 2004 
through 2013. At 20 percent, the impact is $19.4 billion for FY 2004 
through 2013. The proposed approach of basing our reform efforts on the 
establishment of a competitive acquisition program and Average Sales 
Price system (Option4) is dependent on the ASP markup. At a 1 percent 
markup the impact of this proposal for FY 2004 through 2013 is $13.5 
billion excluding DME drugs and $27.6 billion including DME drugs. At a 
12 percent markup the impact of this proposal for FY 2004 through 2013 
is $7.6 billion excluding DME drugs and $21.2 billion including DME 
drugs.

C. Impact on Payments Related to Furnishing or Administering Drugs

    We have simulated the impact of our proposed increase in payments 
for the costs of furnishing or administering drugs. Medicare payments 
for physician fee schedule services are estimated to increase by $1.6 
billion over the ten-year period FY 2004 through 2013. For ESRD 
facility costs related to furnishing separately billable ESRD drugs, we 
would set payments budget neutral to the reductions in drug payments. 
For DME inhalation, DME home infusion, and oral drugs provided by 
pharmacies, we are seeking comment on the appropriateness of any 
changes to the payments for the administrative costs of furnishing 
these drugs.

D. Alternatives Considered

    This proposed rule contains the four alternative approaches to 
reforming the current payment methodology that we considered, each of 
which has been discussed in detail. We are seeking comment on these 
approaches. We expect to select one of these approaches after reviewing 
all public comments received on the proposed rule and making any 
necessary modifications.

E. Impact on Beneficiaries

    We have simulated the effect of changes in beneficiary copayments 
for drugs and related changes in beneficiary Part B premium payments 
resulting from the implementation of the four options for reforming the 
AWP system. The proposed approach of basing our reform efforts on the 
comparability provision in the statute and issuing additional guidance 
to our contractors would result in decreases in these payments by 
beneficiaries of $2.6 billion over the ten-year period FY 2004 through 
2013. The effect on beneficiary payments resulting from the 
implementation of an average list AWP discount is dependent on the 
level of the discount. At 10 percent, the proposal will save 
beneficiaries $3.2 billion for FY 2004 through 2013. At 20 percent, the 
proposal will save beneficiaries $9.1 billion for FY 2004 through 2013. 
The implementation of market monitoring is also dependent on the list 
AWP discount since this impacts the drugs that have not been studied by 
the OIG and GAO. At a 10 percent discount for the drugs that have not 
been studied, the proposal will save beneficiaries $10.3 billion for FY 
2004 through 2013. At 20 percent, the proposal will save beneficiaries 
$12.3 billion for FY 2004 through 2013. The proposed approach of basing 
our reform efforts on the establishment of a competitive acquisition 
program and Average Sales Price system is dependent on the ASP markup. 
At a 1 percent markup the proposal will save beneficiaries $8.6 billion 
excluding DME drugs and $17.6 billion including DME drugs. At a 12 
percent markup this proposal will save beneficiaries $4.8 billion 
excluding DME drugs and $13.5 billion including DME drugs.
    Beneficiaries will pay an additional $1.1 billion in copayments and 
related Part B premium increases as a result of the proposed changes to 
the Medicare physician fee schedule.
    As described in section II.C, we do not believe that any 
beneficiaries will experience drug access issues as a result of our 
four proposed options. We intend to monitor beneficiary access closely 
and may propose additional changes to our payment system in the future 
if necessary.
    In accordance with the provisions of Executive Order 12866, the 
Office of Management and Budget has reviewed this regulation.

(Catalog of Federal Domestic Assistance Program No. 93.774, 
Medicare--Supplementary Medical Insurance Program)

    Dated: June 27, 2003.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.

    Approved: August 13, 2003.
Tommy G. Thompson,
Secretary.

Addendum A

[[Page 50444]]



 Table 1.--Reprint of ``Table 3: Widely Available Discounts from AWP for Medicare-Covered Drugs Billed Primarily
                                    by Physicians, 2001'' From the GAO Report
----------------------------------------------------------------------------------------------------------------
                                                                                                 Average widely
                                                 Specialty most frequently                         available
                  Drug name                           billing for drug          Average AWP a  discount from AWP
                                                                                                 (percentage) b
----------------------------------------------------------------------------------------------------------------
Leuprolide acetate (for depot suspension)...  urology........................         $618.93               17.6
Rituximab...................................  oncology c.....................          478.47               19.2
Goserelin acetate implant...................  urology........................          469.99               21.9
Docetaxel...................................  oncology.......................          313.51               22.0
Filgrastim (G-CSF) 480 mcg..................  oncology.......................          300.40             d 18.0
Pamidronate disodium........................  oncology.......................          279.86               16.8
Hylan G-F 20................................  orthopedic surgery.............          225.13             d 17.7
Filgrastim (G-CSF) 300mcg...................  oncology.......................          193.62             d 18.4
Paclitaxel..................................  oncology.......................          180.57               19.0
Irinotecan..................................  oncology.......................          141.32               22.9
Carboplatin.................................  oncology.......................          120.48               20.3
Gemcitabine HCl.............................  oncology.......................          112.34               21.3
Dolasetron mesylate, injection..............  oncology.......................           45.02             d 65.0
Granisetron HCl, injection..................  oncology.......................           19.52               29.3
Leucovorin calcium..........................  oncology.......................           18.44               85.6
Epoetin alpha for non-ESRD use..............  oncology.......................           12.91               15.2
Ondansetron HCl, injection..................  oncology.......................            6.41               12.8
Botulinum toxin type A......................  neurology......................            4.86              e n/a
Imiglucerase................................  oncology.......................            3.95              e n/a
Dexamethasone sodium phosphate..............  oncology.......................            1.44               14.2
Heparin sodium..............................  oncology.......................            0.43              34.4
----------------------------------------------------------------------------------------------------------------
 Source: GAO Report ``Medicare Payments for Covered Outpatient Drugs Exceed Providers' Cost'' (GAO-01-1118)
 
 a ``Average AWP'' is the average of AWP of each NDC for that product adjusted to the HCPCS-defined dosage.
b ``Average widely available discount from AWP'' for each drug was calculated by (1) determining the average
  widely available price(s) for each NDC for that drug, (2) determining the percentage difference between the
  average widely available price(s) and the AWP for each NDC for that drug, and (3) averaging the percentage
  differences for all NDCs for that drug.
c ``Oncology'' specialty includes hematology/oncology and medical oncology.
d ``Average widely available discount from AWP'' in 2001 for this drug is based on a price or prices from a
  single wholesaler. For these four drugs, we had 2000 data from two or more sources. Those data showed that the
  average widely available discount from AWP in 2000 was 18.8 percent for Filgrastim (G-CSF) 480 mcg, 17.6
  percent for Hylan G-F 20, 19.0 percent for Filgrastim (G-CSF) 300mcg, and 42.2 percent for Dolasetron
  mesylate, injection.
e We (GAO) were unable to obtain wholesaler or GPO prices for these products.
 Source: GAO analysis of data from BESS, the Medical Economics Drug Topics Red Book CD-ROM vol. 21, and
  wholesaler and GPO price lists.


     Table 2.--Reprint of ``Table 4: Discounts From AWP Obtained by
   Physicians Who Billed Medicare for a Low Volume of Selected Drugs,
   Compared to Widely Available Discounts, 2001'' From the GAO Report
------------------------------------------------------------------------
                                        Low volume       Average widely
                                     billers' average      available
             Drug name              discount from AWP  discount from AWP
                                       (percentage)     a  (percentage)
------------------------------------------------------------------------
Leuprolide acetate (for depot                    32.8               17.6
 suspension)......................
Rituximab.........................               15.7               19.2
Goserelin acetate implant.........             b 22.3               21.9
Docetaxel.........................               22.0               22.0
Filgrastim (G-CSF) (480 mcg)......               22.4             c 18.0
Pamidronate disodium..............               18.0               16.8
Filgrastim (G-CSF) (300mcg).......               21.7             c 18.4
Paclitaxel........................               25.8               19.0
Irinotecan........................               27.1               22.9
Carboplatin.......................             b 20.0               20.3
Gemcitabine HCl...................               16.1               21.3
Dolasetron mesylate, injection....               62.0             c 65.0
Granisetron HCl, injection........               28.1               29.3
Leucovorin calcium................               90.4               85.6
Epoetin alpha for non-ESRD use....               22.1               15.2
Ondansetron HCl, injection........               26.4              12.8
------------------------------------------------------------------------
 Source: GAO Report ``Medicare Payments for Covered Outpatient Drugs
  Exceed Providers' Cost'' (GAO-01-1118)
 
 a ``Average widely available discount from AWP'' for each drug was
  calculated by (1) determining the average widely available price(s)
  for each NDC for that drug, (2) determining the percentage difference
  between the average widely available price(s) and the AWP for each NDC
  for that drug, and (3) averaging the percentage differences for all
  NDCs for that drug.
b ``Low-volume billers' average discount from AWP'' for this drug is
  based on a price from a single physician.
c ``Average widely available discount from AWP'' for this drug is based
  on a price or prices from a single wholesaler.
 
  Notes: Out of our sample of 108 physicians, 14 provided us with
  acquisition cost data for 16 of the 18 cancer treatment drugs we
  examined. An additional 37 physicians belonged to large, hospital-
  based or national chain oncology practices that likely had access to
  widely available drug price discounts. Fifty-six physicians could not
  be contacted or refused to participate. One physician in the sample
  did not purchase drugs.

[[Page 50445]]

 
 Source: GAO telephone survey of a sample of physicians who billed
  Medicare for a low volume of cancer drugs in 1999 and AWPs listed in a
  contemporaneous wholesaler catalog.


                                         Table 3.--Medicare Part B Drugs in the Most Recent GAO and OIG Studies
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Rank in     GAO average
                                                                        Medicare      terms of       widely      OIG median
                                                                         allowed      medicare      available     catalogue    Average of    ``Spread''
             Brand drugs (c)                         HCPCS             charges (CY     allowed     price as a    price as a    GAO and OIG       (j)
                                                                        '02, run       charges     percent of    percent of       data        (percent)
                                                                       thru 2/03)    across all      AWP (a)       AWP (b)      (percent)
                                                                                    part B drugs     (2001)        (2000)
--------------------------------------------------------------------------------------------------------------------------------------------------------
EPOETIN ALFA (PROCRIT)..................  Q0136                               $928             1            85            89            87             8
LEUPROLIDE ACETATE (LUPRON).............  J9217                                627             2            82            80            81            15
GOSERELIN ACETATE (ZOLADEX).............  J9202                                441             4            78            80            79            17
RITUXIMAB (RITUXAN).....................  J9310                                377             6            81            80            81            15
PACLITAXEL (c) (TAXOL)..................  J9265                                226             9            81            80            81            15
DOCETAXEL (TAXOTERE)....................  J9170                                221            10            78            80            79            17
CARBOPLATIN (PARAPLATIN)................  J9045                                189            11            80            82            81            15
IRINOTECAN (CAMPTOSAR)..................  J9206                                170            12            77            80            79            17
GEMCITABINE HCL (GEMZAR)................  J9201                                159            13            79            80            80            16
PAMIDRONATE DISODIUM (c) (AREDIA).......  J2430                                126            14            83            87            85            11
DOLASETRON MESYLATE (ANZEMET)...........  J1260                                125            15          d 58          d 53            56            41
FILGRASTIM (NEUPOGEN) 480mcg............  J1441                                 99            17          d 81          d 80            81            15
HYLAN G-F 20 (SYNVISC)..................  J7320                                 93            18           d82  ............          f 82            14
MYCOPHENOLATE MOFETIL (CELLCEPT)........  J7517                                 64            20          e 86  ............            86             9
FILGRASTIM (NEUPOGEN) 300mcg............  J1440                                 53            26          d 81          d 80            81            15
GRANISETRON HCL (KYTRIL)................  J1626                                 47            28            71            71            71            25
ONDANSETRON (ZOFRAN)....................  J2405                                 45            29            87            86            87             8
VINORELBINE TARTATE (c) (NAVELBINE).....  J9390                                 38            33            81          g 81            15
SARGRAMOSTIM (LEUKINE)..................  J2820                                 35            35            80  ............          g 80            16
TOPOTECAN (HYCAMTIM)....................  J9350                                 34            36  ............            84          g 84            12
              Generic Drugs
IPRATROPIUM BROMIDE.....................  J7644                                550             3          d 33     (d)(i) 34            34            64
ALBUTEROL SULFATE.......................  J7619                                381             5            15        (i) 18            17            82
IMMUNE GLOBULIN (h).....................  J1561 J1563                          105  ............  ............            72           g72            24
LEUCOVORIN CALCIUM......................  J0640                                 61            22            14            15            15            84
DOXORUBICIN HCL.........................  J9000                                 29            41  ............            22          g 22            77
DEXAMETHOSONE SODIUM PHOSPHATE..........  J1100                                  3           104            86  ............          f 86             9
HEPARIN SODIUM LOCK-FLUSH...............  J1642                                  3           105            66          f 66  ............            31
CROMOLYN SODIUM.........................  J7631                                  3           106            31          f 31            67
ACETYLCYSTEINE..........................  J7608                                  2           129          e 28            64            46           52
--------------------------------------------------------------------------------------------------------------------------------------------------------
 Sources: GAO, ``Medicare Payments for Covered Outpatient Drugs Exceed Providers' Costs,'' September 2001. OIG, ``Medicare Reimbursement of Prescription
  Drugs,'' January 2001. OIG, ``Excessive Medicare Reimbursement for Albuterol,'' March 2002. OIG, ``Excessive Medicare Reimbursement for Ipratromium
  Bromide,'' March 2002.
 
 (a) GAO estimated the average widely available discount from AWP. We converted that figure into the average widely available price as percent of AWP by
  subtracting the GAO average widely available discount from 100 percent.
(b) The OIG studies report the median Medicare payment amount and the median catalogue price for each HCPCS code. Based on the OIG data, we divided the
  OIG Medicare payment amount by 95 percent to estimate AWP and then divided the median catalogue price by the estimated AWP.
(c) PACLITAXEL and PAMIDRONATE DISODIUM became generic drugs in 2002 and VINORELBINE TARTATE became generic in 2003, however, the pricing information in
  the GAO and OIG studies covers the time period when they were brand drugs only.
(d) For these drugs, GAO only had data from 1 wholesaler in 2001, but had data from 2 or more sources in 2000. The widely available price as a % of AWP
  shown above for these drugs is the 2000 estimate. The figures for 2000 and 2001, respectively, were: DOLASETRON MESYLATE (58% and 35%), FILGRASTIM
  480mcg (81% and 82%), HYLAN G-F 20 (82% and 82%) FILGRASTIM 300mcg (81% and 82%), and IPRATROPIUM BROMIDE (33% and 22%).
(e) GAO data are for 2000.
(f) Only based on GAO data.
(g) Only based on OIG data.
(h) Immune globulin was included in the generic category because it is a multisource biologic. OIG collected data on Immune Globulin HCPCs J1562. That
  Jcode is no longer in use and now corresponds to Jcodes 1561 and 1563.
(i) The price estimates based on OIG data for ALBUTEROL AND IPRATROPIUM BROMIDE include more than just catalogue prices. OIG conducted special studies
  on these two drugs in 2002. The studies provided data on the median Medicare payment amount in 2001, the median wholesale catalogue price in 2001, the
  median invoice price (data gathered by OIG reflecting the time period 1998--August 2000), and the median wholesale acquisition cost reported in the
  April 2001 Drug Topics Redbook. For these 2 drugs, we calculated the median price across OIG's three data sources, and then divided it by our estimate
  of AWP (OIG's Medicare median payment amount divided by 95%).
(j) The ``spread'' is the percent difference between the Medicare reimbursement price (i.e., 95 percent of AWP) and the average GAO/OIG widely available/
  catalogue price.
(k) Top 20 w/combined Jcodes.


                                             Table 4.--Summary of OIG Reports on Medicare Prescription Drugs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                        Year of Report                           1997     1998                  2000                        2001               2002
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  22       34       5 ESRD                    24                    24      Ipratropium
                        Drugs reviewed                          drugs    drugs      drugs      Albuterol    drugs    Albuterol    drugs       Bromide
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year Reviewed................................................     1996     1997         1998         1999     1999         2000     2000            2000
Medicare Expenditures for Reviewed Drugs.....................      \3\      \3\     \4\ $379     \4\ $246      \3\     \4\ $296      \3\        \4\ $348
                                                                  $1.5     $2.1                               $3.1                  $3.7
Excessive Payments Based On:
    VA.......................................................  .......   \3\ $1     \4\ $162     \4\ $209      \3\     \4\ $264      \3\        \4\ $279
                                                                                                              $1.6                  $1.9
    Catalogs.................................................      \4\  .......  ...........  ...........      \4\     \4\ $245      \4\        \4\ $262
                                                                  $447                                        $761                  $887
    Medicaid.................................................  .......  .......      \4\ $42     \4\ $120      \4\  ...........  .......  ..............
                                                                                                              $425
Beneficiary Share of Excessive Payments:
    VA.......................................................  .......  .......      \4\ $32      \4\ $42      \4\      \4\ $53      \4\         \4\ $56
                                                                                                              $320                  $380
    Catalogs.................................................  \4\ $89      \4\  ...........  ...........      \4\      \4\ $49      \4\         \4\ $52
                                                                           $200                               $152                  $177

[[Page 50446]]

 
    Medicaid.................................................  .......  .......          4$8         4$24     4$85  ...........  .......
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources:
\1\ OIG, ``Testimony of George F. Grob, Deputy Inspector General for Evaluation and Inspections, HHS Office of Inspector General,'' House Committee on
  Energy and Commerce, Subcommittee on Oversight and Investigations and Subcommittee on Health, Joint Hearing September 21, 2001.
\2\ OIG, ``Excessive Reimbursement for Ipratropium Bromide,'' Report Number: OEI-03-01-00411, March 2002.
\3\ Billion.
\4\ Million.


                    List of Medicare Drug HCPCS Codes
------------------------------------------------------------------------
          HCPCS*                            Description
------------------------------------------------------------------------
90371....................  HEPATITIS B IG, IM
90375....................  RABIES IG, IM/SC
90376....................  RABIES IG, HEAT TREATED
90379....................  RESPIRATORY SYNCYTIAL VIRUS IG, IV
90385....................  RHO(D) IG (RHLG), MINIDOSE, IM
90389....................  TETANUS IG, IM
90585....................  BACILLUS CALMETTE-GUERIN VACCINE,
                            PERCUTANEOUS
90632....................  HEPATITIS A VACCINE, ADULT IM
90633....................  HEPATITIS A VACCINE, PED/ADOL, 2 DOSE
90634....................  HEPATITIS A VACCINE, PED/ADOL, 3 DOSE
90645....................  HEMOPHILUS INFLUENZA B VACCINE, HBOC, IM
90675....................  RABIES VACCINE, IM
90691....................  TYPHOID VACCINE, IM
90700....................  DIPTHERIA, TETANUS TOXOIDS VACCINE, IM
90703....................  TETANUS VACCINE, IM
90704....................  MUMPS VACCINE, SC
90705....................  MEASLES VACCINE, SC
90706....................  RUBELLA VACCINE, SC
90707....................  MEASLES, MUMPS AND RUBELLA VIRUS VACCINE, SC
90713....................  POLIOVIRUS VACCINE, IPV, SC
90716....................  CHICKEN POX VACCINE, SC
90717....................  YELLOW FEVER VACCINE, SC
90718....................  TETANUS AND DIPTHERIA TOXOIDS VACCINE  7, IM
90721....................  DIPTHERIA, TETANUS TOXOIDS, & ACELLULAR
                            PERTUSSIS VACCINE & HEMOPHILUS INFLUENZA B
                            VACCINE, IM
90733....................  MENINGOCOCCAL VACCINE, SC
90740....................  HEPATITIS B VACCINE, DIALYSIS OR
                            IMMUNOSUPPRESSED PATIENT, 3 DOSE, IM
90743....................  HEPATITIS B VACCINE, ADOL, 2 DOSE, IM
90744....................  HEPATITIS B VACCINE, PED/ADOL 3 DOSE, IM
90746....................  HEPATITIS B VACCINE, ADULT, IM
90747....................  HEPATITIS B VACCINE, DIALYSIS OR
                            IMMUNOSUPPRESSED PATIENT, 4 DOSE, IM
J0130....................  INJECTION, ABCIXIMAB, 10 MG
J0150....................  INJECTION, ADENOSINE, 6 MG (NOT TO BE USED TO
                            REPORT ANY ADENOSINE PHOSPHATE)
J0151....................  INJECTION, ADENOSINE, 90 MG (NOT TO BE USED
                            TO REPORT ANY ADENOSINE PHOSPHATE)
J0170....................  INJECTION, ADRENALIN, EPINEPHRINE, UP TO 1 ML
                            AMPULE
J0200....................  INJECTION, ALATROFLOXACIN MESYLATE, 100 MG
J0205....................  INJECTION, ALGLUCERASE, PER 10 UNITS
J0207....................  INJECTION, AMIFOSTINE, 500 MG
J0210....................  INJECTION, METHYLDOPATE HCL, UP TO 250 MG
J0256....................  INJECTION, ALPHA 1-PROTEINASE INHIBITOR--
                            HUMAN, 10 MG
J0280....................  INJECTION, AMINOPHYLLIN, UP TO 250 MG
J0282....................  INJECTION, AMIODARONE HYDROCHLORIDE, 30 MG
J0285....................  INJECTION, AMPHOTERICIN B, 50 MG
J0287....................  INJECTION, AMPHOTERICIN B LIPID COMPLEX, 10
                            MG
J0288....................  INJECTION, AMPHOTERICIN B CHOLESTERYL SULFATE
                            COMPLEX, 10 MG
J0289....................  INJECTION, AMPHOTERICIN B LIPOSOME, 10 MG
J0290....................  INJECTION, AMPICILLIN SODIUM, 500 MG
J0295....................  INJECTION, AMPICILLIN SODIUM/SULBACTAM
                            SODIUM, PER 1.5 GM
J0300....................  INJECTION, AMOBARBITAL, UP TO 125 MG
J0330....................  INJECTION, SUCCINYLCHOLINE CHLORIDE, UP TO 20
                            MG
J0360....................  INJECTION, HYDRALAZINE HCL, UP TO 20 MG
J0380....................  INJECTION, METARAMINOL BITARTRATE, PER 10 MG
J0390....................  INJECTION, CHLOROQUINE HYDROCHLORIDE, UP TO
                            250 MG
J0395....................  INJECTION, ARBUTAMINE HCL, 1 MG
J0456....................  INJECTION, AZITHROMYCIN, 500 MG
J0460....................  INJECTION, ATROPINE SULFATE, UP TO 0.3 MG
J0470....................  INJECTION, DIMERCAPROL, PER 100 MG
J0475....................  INJECTION, BACLOFEN, 10 MG
J0476....................  INJECTION, BACLOFEN, 50 MCG FOR INTRATHECAL
                            TRIAL
J0500....................  INJECTION, DICYCLOMINE HCL, UP TO 20 MG
J0515....................  INJECTION, BENZTROPINE MESYLATE, PER 1 MG
J0520....................  INJECTION, BETHANECHOL CHLORIDE, MYOTONACHOL
                            OR URECHOLINE, UP TO 5 MG
J0530....................  INJECTION, PENICILLIN G BENZATHINE AND
                            PENICILLIN G PROCAINE, UP TO 600,000
J0540....................  INJECTION, PENICILLIN G BENZATHINE AND
                            PENICILLIN G PROCAINE, UP TO 1,200,000

[[Page 50447]]

 
J0550....................  INJECTION, PENICILLIN G BENZATHINE AND
                            PENICILLIN G PROCAINE, UP TO 2,400,000
J0560....................  INJECTION, PENICILLIN G BENZATHINE, UP TO
                            600,000 UNITS
J0570....................  INJECTION, PENICILLIN G BENZATHINE, UP TO
                            1,200,000 UNITS
J0580....................  INJECTION, PENICILLIN G BENZATHINE, UP TO
                            2,400,000 UNITS
J0585....................  BOTULINUM TOXIN TYPE A, PER UNIT
J0587....................  BOTULINUM TOXIN TYPE B, PER 100 UNITS
J0592....................  INJECTION, BUPRENORPHINE HYDROCHLORIDE, 0.1
                            MG
J0600....................  INJECTION, EDETATE CALCIUM DISODIUM, UP TO
                            1000 MG
J0610....................  INJECTION, CALCIUM GLUCONATE, PER 10 ML
J0620....................  INJECTION, CALCIUM GLYCEROPHOSPHATE AND
                            CALCIUM LACTATE, PER 10 ML
J0630....................  INJECTION, CALCITONIN SALMON, UP TO 400 UNITS
J0636....................  INJECTION, CALCITRIOL, 0.1 MCG
J0637....................  INJECTION, CASPOFUNGIN ACETATE, 5 MG
J0640....................  INJECTION, LEUCOVORIN CALCIUM, PER 50 MG
J0670....................  INJECTION, MEPIVACAINE HYDROCHLORIDE, PER 10
                            ML
J0690....................  INJECTION, CEFAZOLIN SODIUM, 500 MG
J0692....................  INJECTION, CEFEPIME HYDROCHLORIDE, 500 MG
J0694....................  INJECTION, CEFOXITIN SODIUM, 1 GM
J0696....................  INJECTION, CEFTRIAXONE SODIUM, PER 250 MG
J0697....................  INJECTION, STERILE CEFUROXIME SODIUM, PER 750
                            MG
J0698....................  INJECTION, CEFOTAXIME SODIUM, PER GM
J0702....................  INJECTION, BETAMETHASONE ACETATE AND
                            BETAMETHASONE SODIUM PHOSPHATE, PER 3 MG
J0704....................  INJECTION, BETAMETHASONE SODIUM PHOSPHATE,
                            PER 4 MG
J0706....................  INJECTION, CAFFEINE CITRATE, 5MG
J0713....................  INJECTION, CEFTAZIDIME, PER 500 MG
J0715....................  INJECTION, CEFTIZOXIME SODIUM, PER 500 MG
J0720....................  INJECTION, CHLORAMPHENICOL SODIUM SUCCINATE,
                            UP TO 1 GM
J0725....................  INJECTION, CHORIONIC GONADOTROPIN, PER 1,000
                            USP UNITS
J0735....................  INJECTION, CLONIDINE HYDROCHLORIDE, 1 MG
J0740....................  INJECTION, CIDOFOVIR, 375 MG
J0743....................  INJECTION, CILASTATIN SODIUM; IMIPENEM, PER
                            250 MG
J0744....................  INJECTION, CIPROFLOXACIN FOR INTRAVENOUS
                            INFUSION, 200 MG
J0745....................  INJECTION, CODEINE PHOSPHATE, PER 30 MG
J0760....................  INJECTION, COLCHICINE, PER 1 MG
J0770....................  INJECTION, COLISTIMETHATE SODIUM, UP TO 150
                            MG
J0780....................  INJECTION, PROCHLORPERAZINE, UP TO 10 MG
J0800....................  INJECTION, CORTICOTROPIN, UP TO 40 UNITS
J0835....................  INJECTION, COSYNTROPIN, PER 0.25 MG
J0850....................  INJECTION, CYTOMEGALOVIRUS IMMUNE GLOBULIN
                            INTRAVENOUS (HUMAN), PER VIAL
J0880....................  INJECTION, DARBEPOETIN ALFA, 5 MCG
J0895....................  INJECTION, DEFEROXAMINE MESYLATE, 500 MG
J0900....................  INJECTION, TESTOSTERONE ENANTHATE AND
                            ESTRADIOL VALERATE, UP TO 1 CC
J0945....................  INJECTION, BROMPHENIRAMINE MALEATE, PER 10 MG
J0970....................  INJECTION, ESTRADIOL VALERATE, UP TO 40 MG
J1000....................  INJECTION, DEPO-ESTRADIOL CYPIONATE, UP TO 5
                            MG
J1020....................  INJECTION, METHYLPREDNISOLONE ACETATE, 20 MG
J1030....................  INJECTION, METHYLPREDNISOLONE ACETATE, 40 MG
J1040....................  INJECTION, METHYLPREDNISOLONE ACETATE, 80 MG
J1051....................  INJECTION, MEDROXYPROGESTERONE ACETATE, 50 MG
J1056....................  INJECTION, MEDROXYPROGESTERONE ACETATE/
                            ESTRADIOL CYPIONATE, 5MG/25MG
J1060....................  INJECTION, TESTOSTERONE CYPIONATE AND
                            ESTRADIOL CYPIONATE, UP TO 1 ML
J1070....................  INJECTION, TESTOSTERONE CYPIONATE, UP TO 100
                            MG
J1080....................  INJECTION, TESTOSTERONE CYPIONATE, 1 CC, 200
                            MG
J1094....................  INJECTION, DEXAMETHASONE ACETATE, 1 MG
J1100....................  INJECTION, DEXAMETHASONE SODIUM PHOSPHATE,
                            1MG
J1110....................  INJECTION, DIHYDROERGOTAMINE MESYLATE, PER 1
                            MG
J1120....................  INJECTION, ACETAZOLAMIDE SODIUM, UP TO 500 MG
J1160....................  INJECTION, DIGOXIN, UP TO 0.5 MG
J1165....................  INJECTION, PHENYTOIN SODIUM, PER 50 MG
J1170....................  INJECTION, HYDROMORPHONE, UP TO 4 MG
J1180....................  INJECTION, DYPHYLLINE, UP TO 500 MG
J1190....................  INJECTION, DEXRAZOXANE HYDROCHLORIDE, PER 250
                            MG
J1200....................  INJECTION, DIPHENHYDRAMINE HCL, UP TO 50 MG
J1205....................  INJECTION, CHLOROTHIAZIDE SODIUM, PER 500 MG
J1212....................  INJECTION, DMSO, DIMETHYL SULFOXIDE, 50
                            percent, 50 ML
J1230....................  INJECTION, METHADONE HCL, UP TO 10 MG
J1240....................  INJECTION, DIMENHYDRINATE, UP TO 50 MG
J1245....................  INJECTION, DIPYRIDAMOLE, PER 10 MG
J1250....................  INJECTION, DOBUTAMINE HYDROCHLORIDE, PER 250
                            MG
J1260....................  INJECTION, DOLASETRON MESYLATE, 10 MG
J1270....................  INJECTION, DOXERCALCIFEROL, 1 MCG
J1320....................  INJECTION, AMITRIPTYLINE HCL, UP TO 20 MG
J1325....................  INJECTION, EPOPROSTENOL, 0.5 MG
J1327....................  INJECTION, EPTIFIBATIDE, 5 MG
J1364....................  INJECTION, ERYTHROMYCIN LACTOBIONATE, PER 500
                            MG
J1380....................  INJECTION, ESTRADIOL VALERATE, UP TO 10 MG
J1390....................  INJECTION, ESTRADIOL VALERATE, UP TO 20 MG
J1410....................  INJECTION, ESTROGEN CONJUGATED, PER 25 MG
J1435....................  INJECTION, ESTRONE, PER 1 MG
J1436....................  INJECTION, ETIDRONATE DISODIUM, PER 300 MG
J1438....................  INJECTION, ETANERCEPT, 25 MG (CODE MAY BE
                            USED FOR MEDICARE WHEN DRUG

[[Page 50448]]

 
J1440....................  INJECTION, FILGRASTIM (G-CSF), 300 MCG
J1441....................  INJECTION, FILGRASTIM (G-CSF), 480 MCG
J1450....................  INJECTION FLUCONAZOLE, 200 MG
J1452....................  INJECTION, FOMIVIRSEN SODIUM, INTRAOCULAR,
                            1.65 MG
J1455....................  INJECTION, FOSCARNET SODIUM, PER 1000 MG
J1460....................  INJECTION, GAMMA GLOBULIN, INTRAMUSCULAR, 1
                            CC
J1470....................  INJECTION, GAMMA GLOBULIN, INTRAMUSCULAR, 2
                            CC
J1480....................  INJECTION, GAMMA GLOBULIN, INTRAMUSCULAR, 3
                            CC
J1490....................  INJECTION, GAMMA GLOBULIN, INTRAMUSCULAR, 4
                            CC
J1500....................  INJECTION, GAMMA GLOBULIN, INTRAMUSCULAR, 5
                            CC
J1510....................  INJECTION, GAMMA GLOBULIN, INTRAMUSCULAR, 6
                            CC
J1520....................  INJECTION, GAMMA GLOBULIN, INTRAMUSCULAR, 7
                            CC
J1530....................  INJECTION, GAMMA GLOBULIN, INTRAMUSCULAR, 8
                            CC
J1540....................  INJECTION, GAMMA GLOBULIN, INTRAMUSCULAR, 9
                            CC
J1550....................  INJECTION, GAMMA GLOBULIN, INTRAMUSCULAR, 10
                            CC
J1563....................  INJECTION, IMMUNE GLOBULIN, INTRAVENOUS, 1G
J1564....................  INJECTION, IMMUNE GLOBULIN, 10 MG
J1565....................  INJECTION, RESPIRATORY SYNCYTIAL VIRUS IMMUNE
                            GLOBULIN, INTRAVENOUS, 50 MG
J1570....................  INJECTION, GANCICLOVIR SODIUM, 500 MG
J1580....................  INJECTION, GARAMYCIN, GENTAMICIN, UP TO 80 MG
J1590....................  INJECTION, GATIFLOXACIN, 10MG
J1600....................  INJECTION, GOLD SODIUM THIOMALATE, UP TO 50
                            MG
J1610....................  INJECTION, GLUCAGON HYDROCHLORIDE, PER 1 MG
J1620....................  INJECTION, GONADORELIN HYDROCHLORIDE, PER 100
                            MCG
J1626....................  INJECTION, GRANISETRON HYDROCHLORIDE, 100 MCG
J1630....................  INJECTION, HALOPERIDOL, UP TO 5 MG
J1631....................  INJECTION, HALOPERIDOL DECANOATE, PER 50 MG
J1642....................  INJECTION, HEPARIN SODIUM, (HEPARIN LOCK
                            FLUSH), PER 10 UNITS
J1644....................  INJECTION, HEPARIN SODIUM, PER 1000 UNITS
J1645....................  INJECTION, DALTEPARIN SODIUM, PER 2500 IU
J1650....................  INJECTION, ENOXAPARIN SODIUM, 10 MG
J1652....................  INJECTION, FONDAPARINUX SODIUM, 0.5 MG
J1655....................  INJECTION, TINZAPARIN SODIUM, 1000 IU
J1670....................  INJECTION, TETANUS IMMUNE GLOBULIN, HUMAN, UP
                            TO 250 UNITS
J1700....................  INJECTION, HYDROCORTISONE ACETATE, UP TO 25
                            MG
J1710....................  INJECTION, HYDROCORTISONE SODIUM PHOSPHATE,
                            UP TO 50 MG
J1720....................  INJECTION, HYDROCORTISONE SODIUM SUCCINATE,
                            UP TO 100 MG
J1730....................  INJECTION, DIAZOXIDE, UP TO 300 MG
J1742....................  INJECTION, IBUTILIDE FUMARATE, 1 MG
J1745....................  INJECTION, INFLIXIMAB, 10 MG
J1750....................  INJECTION, IRON DEXTRAN, 50 MG
J1756....................  INJECTION, IRON SUCROSE, 1 MG
J1785....................  INJECTION, IMIGLUCERASE, PER UNIT
J1790....................  INJECTION, DROPERIDOL, UP TO 5 MG
J1800....................  INJECTION, PROPRANOLOL HCL, UP TO 1 MG
J1810....................  INJECTION, DROPERIDOL AND FENTANYL CITRATE,
                            UP TO 2 ML AMPULE
J1815....................  INJECTION, INSULIN, PER 5 UNITS
J1835....................  INJECTION, ITRACONAZOLE, 50 MG
J1840....................  INJECTION, KANAMYCIN SULFATE, UP TO 500 MG
J1850....................  INJECTION, KANAMYCIN SULFATE, UP TO 75 MG
J1885....................  INJECTION, KETOROLAC TROMETHAMINE, PER 15 MG
J1890....................  INJECTION, CEPHALOTHIN SODIUM, UP TO 1 GRAM
J1910....................  INJECTION, KUTAPRESSIN, UP TO 2 ML
J1940....................  INJECTION, FUROSEMIDE, UP TO 20 MG
J1950....................  INJECTION, LEUPROLIDE ACETATE (FOR DEPOT
                            SUSPENSION), PER 3.75 MG
J1955....................  INJECTION, LEVOCARNITINE, PER 1 GM
J1956....................  INJECTION, LEVOFLOXACIN, 250 MG
J1960....................  INJECTION, LEVORPHANOL TARTRATE, UP TO 2 MG
J1980....................  INJECTION, HYOSCYAMINE SULFATE, UP TO 0.25 MG
J1990....................  INJECTION, CHLORDIAZEPOXIDE HCL, UP TO 100 MG
J2000....................  INJECTION, LIDOCAINE HCL, 50 CC
J2010....................  INJECTION, LINCOMYCIN HCL, UP TO 300 MG
J2020....................  INJECTION, LINEZOLID, 200MG
J2060....................  INJECTION, LORAZEPAM, 2 MG
J2150....................  INJECTION, MANNITOL, 25 percent IN 50 ML
J2175....................  INJECTION, MEPERIDINE HYDROCHLORIDE, PER 100
                            MG
J2180....................  INJECTION, MEPERIDINE AND PROMETHAZINE HCL,
                            UP TO 50 MG
J2210....................  INJECTION, METHYLERGONOVINE MALEATE, UP TO
                            0.2 MG
J2250....................  INJECTION, MIDAZOLAM HYDROCHLORIDE, PER 1 MG
J2260....................  INJECTION, MILRINONE LACTATE, 5 MG
J2270....................  INJECTION, MORPHINE SULFATE, UP TO 10 MG
J2271....................  INJECTION, MORPHINE SULFATE, 100MG
J2275....................  INJECTION, MORPHINE SULFATE (PRESERVATIVE-
                            FREE STERILE SOLUTION), PER 10 MG
J2300....................  INJECTION, NALBUPHINE HYDROCHLORIDE, PER 10
                            MG
J2310....................  INJECTION, NALOXONE HYDROCHLORIDE, PER 1 MG
J2320....................  INJECTION, NANDROLONE DECANOATE, UP TO 50 MG
J2321....................  INJECTION, NANDROLONE DECANOATE, UP TO 100 MG
J2322....................  INJECTION, NANDROLONE DECANOATE, UP TO 200 MG
J2324....................  INJECTION, NESIRITIDE, 0.5 MG
J2355....................  INJECTION, OPRELVEKIN, 5 MG
J2360....................  INJECTION, ORPHENADRINE CITRATE, UP TO 60 MG

[[Page 50449]]

 
J2370....................  INJECTION, PHENYLEPHRINE HCL, UP TO 1 ML
J2400....................  INJECTION, CHLOROPROCAINE HYDROCHLORIDE, PER
                            30 ML
J2405....................  INJECTION, ONDANSETRON HYDROCHLORIDE, PER 1
                            MG
J2410....................  INJECTION, OXYMORPHONE HCL, UP TO 1 MG
J2430....................  INJECTION, PAMIDRONATE DISODIUM, PER 30 MG
J2440....................  INJECTION, PAPAVERINE HCL, UP TO 60 MG
J2460....................  INJECTION, OXYTETRACYCLINE HCL, UP TO 50 MG
J2501....................  INJECTION, PARICALCITOL, 1 MCG
J2510....................  INJECTION, PENICILLIN G PROCAINE, AQUEOUS, UP
                            TO 600,000 UNITS
J2515....................  INJECTION, PENTOBARBITAL SODIUM, PER 50 MG
J2540....................  INJECTION, PENICILLIN G POTASSIUM, UP TO
                            600,000 UNITS
J2543....................  INJECTION, PIPERACILLIN SODIUM/TAZOBACTAM
                            SODIUM, 1 GRAM/0.125 GRAMS (1.125)
J2545....................  PENTAMIDINE ISETHIONATE, INHALATION SOLUTION,
                            PER 300 MG, ADMINISTERED THROUGH
J2550....................  INJECTION, PROMETHAZINE HCL, UP TO 50 MG
J2560....................  INJECTION, PHENOBARBITAL SODIUM, UP TO 120 MG
J2590....................  INJECTION, OXYTOCIN, UP TO 10 UNITS
J2597....................  INJECTION, DESMOPRESSIN ACETATE, PER 1 MCG
J2650....................  INJECTION, PREDNISOLONE ACETATE, UP TO 1 ML
J2670....................  INJECTION, TOLAZOLINE HCL, UP TO 25 MG
J2675....................  INJECTION, PROGESTERONE, PER 50 MG
J2680....................  INJECTION, FLUPHENAZINE DECANOATE, UP TO 25
                            MG
J2690....................  INJECTION, PROCAINAMIDE HCL, UP TO 1 GM
J2700....................  INJECTION, OXACILLIN SODIUM, UP TO 250 MG
J2710....................  INJECTION, NEOSTIGMINE METHYLSULFATE, UP TO
                            0.5 MG
J2720....................  INJECTION, PROTAMINE SULFATE, PER 10 MG
J2725....................  INJECTION, PROTIRELIN, PER 250 MCG
J2730....................  INJECTION, PRALIDOXIME CHLORIDE, UP TO 1 GM
J2760....................  INJECTION, PHENTOLAMINE MESYLATE, UP TO 5 MG
J2765....................  INJECTION, METOCLOPRAMIDE HCL, UP TO 10 MG
J2770....................  INJECTION, QUINUPRISTIN/DALFOPRISTIN, 500 MG
                            (150/350)
J2780....................  INJECTION, RANITIDINE HYDROCHLORIDE, 25 MG
J2788....................  INJECTION, RHO D IMMUNE GLOBULIN, HUMAN,
                            MINIDOSE, 50 MCG
J2790....................  INJECTION, RHO D IMMUNE GLOBULIN, HUMAN, FULL
                            DOSE, 300 MCG
J2792....................  INJECTION, RHO D IMMUNE GLOBULIN,
                            INTRAVENOUS, HUMAN, SOLVENT DETERGENT, 100
                            IU
J2795....................  INJECTION, ROPIVACAINE HYDROCHLORIDE, 1 MG
J2800....................  INJECTION, METHOCARBAMOL, UP TO 10 ML
J2820....................  INJECTION, SARGRAMOSTIM (GM-CSF), 50 MCG
J2910....................  INJECTION, AUROTHIOGLUCOSE, UP TO 50 MG
J2912....................  INJECTION, SODIUM CHLORIDE, 0.9 percent, PER
                            2 ML
J2916....................  INJECTION, SODIUM FERRIC GLUCONATE COMPLEX IN
                            SUCROSE INJECTION, 12.5 MG
J2920....................  INJECTION, METHYLPREDNISOLONE SODIUM
                            SUCCINATE, UP TO 40 MG
J2930....................  INJECTION, METHYLPREDNISOLONE SODIUM
                            SUCCINATE, UP TO 125 MG
J2940....................  INJECTION, SOMATREM, 1 MG
J2941....................  INJECTION, SOMATROPIN, 1 MG
J2950....................  INJECTION, PROMAZINE HCL, UP TO 25 MG
J2993....................  INJECTION, RETEPLASE, 18.1 MG
J2995....................  INJECTION, STREPTOKINASE, PER 250,000 IU
J2997....................  INJECTION, ALTEPLASE RECOMBINANT, 1 MG
J3000....................  INJECTION, STREPTOMYCIN, UP TO 1 GM
J3010....................  INJECTION, FENTANYL CITRATE, 0.1 MG
J3030....................  INJECTION, SUMATRIPTAN SUCCINATE, 6 MG (CODE
                            MAY BE USED FOR MEDICARE WHEN DRUG)
J3070....................  INJECTION, PENTAZOCINE, 30 MG
J3100....................  INJECTION, TENECTEPLASE, 50MG
J3105....................  INJECTION, TERBUTALINE SULFATE, UP TO 1 MG
J3120....................  INJECTION, TESTOSTERONE ENANTHATE, UP TO 100
                            MG
J3130....................  INJECTION, TESTOSTERONE ENANTHATE, UP TO 200
                            MG
J3140....................  INJECTION, TESTOSTERONE SUSPENSION, UP TO 50
                            MG
J3150....................  INJECTION, TESTOSTERONE PROPIONATE, UP TO 100
                            MG
J3230....................  INJECTION, CHLORPROMAZINE HCL, UP TO 50 MG
J3240....................  INJECTION, THYROTROPIN ALPHA, 0.9 MG,
                            PROVIDED IN 1.1 MG VIAL
J3245....................  INJECTION, TIROFIBAN HYDROCHLORIDE, 12.5 MG
J3250....................  INJECTION, TRIMETHOBENZAMIDE HCL, UP TO 200
                            MG
J3260....................  INJECTION, TOBRAMYCIN SULFATE, UP TO 80 MG
J3265....................  INJECTION, TORSEMIDE, 10 MG/ML
J3280....................  INJECTION, THIETHYLPERAZINE MALEATE, UP TO 10
                            MG
J3301....................  INJECTION, TRIAMCINOLONE ACETONIDE, PER 10 MG
J3302....................  INJECTION, TRIAMCINOLONE DIACETATE, PER 5 MG
J3303....................  INJECTION, TRIAMCINOLONE HEXACETONIDE, PER 5
                            MG
J3305....................  INJECTION, TRIMETREXATE GLUCURONATE, PER 25
                            MG
J3315....................  INJECTION, TRIPTORELIN PAMOATE, 3.75 MG
J3320....................  INJECTION, SPECTINOMYCIN DIHYDROCHLORIDE, UP
                            TO 2 GM
J3360....................  INJECTION, DIAZEPAM, UP TO 5 MG
J3364....................  INJECTION, UROKINASE, 5000 I.U. VIAL
J3365....................  INJECTION, IV, UROKINASE, 250,000 I.U. VIAL
J3370....................  INJECTION, VANCOMYCIN HCL, 500 MG
J3395....................  INJECTION, VERTEPORFIN, 15 MG
J3410....................  INJECTION, HYDROXYZINE HCL, UP TO 25 MG
J3420....................  INJECTION, VITAMIN B-12 CYANOCOBALAMIN, UP TO
                            1000 MCG
J3430....................  INJECTION, PHYTONADIONE (VITAMIN K), PER 1 MG
J3475....................  INJECTION, MAGNESIUM SULFATE, PER 500 MG
J3480....................  INJECTION, POTASSIUM CHLORIDE, PER 2 MEQ

[[Page 50450]]

 
J3485....................  INJECTION, ZIDOVUDINE, 10 MG
J3487....................  INJECTION, ZOLEDRONIC ACID, 1 MG
J7030....................  INFUSION, NORMAL SALINE SOLUTION , 1000 CC
J7040....................  INFUSION, NORMAL SALINE SOLUTION, STERILE
                            (500 ML=1 UNIT)
J7042....................  5 percent DEXTROSE/NORMAL SALINE (500 ML = 1
                            UNIT)
J7050....................  INFUSION, NORMAL SALINE SOLUTION, 250 CC
J7051....................  STERILE SALINE OR WATER, UP TO 5 CC
J7060....................  5 percent DEXTROSE/WATER (500 ML = 1 UNIT)
J7070....................  INFUSION, D5W, 1000 CC
J7100....................  INFUSION, DEXTRAN 40, 500 ML
J7110....................  INFUSION, DEXTRAN 75, 500 ML
J7120....................  RINGERS LACTATE INFUSION, UP TO 1000 CC
J7130....................  HYPERTONIC SALINE SOLUTION, 50 OR 100 MEQ, 20
                            CC VIAL
J7190....................  FACTOR VIII (ANTIHEMOPHILIC FACTOR, HUMAN)
                            PER I.U.
J7191....................  FACTOR VIII (ANTIHEMOPHILIC FACTOR
                            (PORCINE)), PER I.U.
J7192....................  FACTOR VIII (ANTIHEMOPHILIC FACTOR,
                            RECOMBINANT) PER I.U.
J7193....................  FACTOR IX (ANTIHEMOPHILIC FACTOR, PURIFIED,
                            NON-RECOMBINANT) PER I.U.
J7194....................  FACTOR IX, COMPLEX, PER I.U.
J7195....................  FACTOR IX (ANTIHEMOPHILIC FACTOR,
                            RECOMBINANT) PER I.U.
J7197....................  ANTITHROMBIN III (HUMAN), PER I.U.
J7198....................  ANTI-INHIBITOR, PER I.U.
J7310....................  GANCICLOVIR, 4.5 MG, LONG-ACTING IMPLANT
J7317....................  SODIUM HYALURONATE, PER 20 TO 25 MG DOSE FOR
                            INTRA-ARTICULAR INJECTION
J7320....................  HYLAN G-F 20, 16 MG, FOR INTRA ARTICULAR
                            INJECTION
J7330....................  AUTOLOGOUS CULTURED CHONDROCYTES, IMPLANT
J7340....................  DERMAL AND EPIDERMAL TISSUE OF HUMAN ORIGIN,
                            WITH OR WITHOUT BIOENGINEERED OR
J7342....................  DERMAL TISSUE, OF HUMAN ORIGIN, WITH OR
                            WITHOUT OTHER BIOENGINEERED OR
J7500....................  AZATHIOPRINE, ORAL, 50 MG
J7501....................  AZATHIOPRINE, PARENTERAL, 100 MG
J7502....................  CYCLOSPORINE, ORAL, 100 MG
J7504....................  LYMPHOCYTE IMMUNE GLOBULIN, ANTITHYMOCYTE
                            GLOBULIN, EQUINE, PARENTERAL, 250 MG
J7505....................  MUROMONAB-CD3, PARENTERAL, 5 MG
J7506....................  PREDNISONE, ORAL, PER 5 MG
J7507....................  TACROLIMUS, ORAL, PER 1 MG
J7508....................  TACROLIMUS, ORAL, PER 5 MG
J7509....................  METHYLPREDNISOLONE ORAL, PER 4 MG
J7510....................  PREDNISOLONE ORAL, PER 5 MG
J7511....................  LYMPHOCYTE IMMUNE GLOBULIN, ANTITHYMOCYTE
                            GLOBULIN, RABBIT, PARENTERAL, 25 MG
J7513....................  DACLIZUMAB, PARENTERAL, 25 MG
J7515....................  CYCLOSPORINE, ORAL, 25 MG
J7516....................  CYCLOSPORIN, PARENTERAL, 250 MG
J7517....................  MYCOPHENOLATE MOFETIL, ORAL, 250 MG
J7520....................  SIROLIMUS, ORAL, 1 MG
J7525....................  TACROLIMUS, PARENTERAL, 5 MG
J7599....................  IMMUNOSUPPRESSIVE DRUG, NOT OTHERWISE
                            CLASSIFIED
J7608....................  ACETYLCYSTEINE, INHALATION SOLUTION
                            ADMINISTERED THROUGH DME, UNIT DOSE FORM,
                            PER GRAM
J7618....................  ALBUTEROL, ALL FORMULATIONS INCLUDING
                            SEPARATED ISOMERS, INHALATION SOLUTION
                            ADMINISTERED THROUGH DME, CONCENTRATED FORM,
                            PER 1 MG (ALBUTEROL) OR PER 0.5 MG
                            (LEVALBUTEROL)
J7619....................  ALBUTEROL, ALL FORMULATIONS INCLUDING
                            SEPARATED ISOMERS, INHALATION SOLUTION
                            ADMINISTERED THROUGH DME, UNIT DOSE, PER 1
                            MG (ALBUTEROL) OR PER 0.5 MG (LEVALBUTEROL)
J7626....................  BUDESONIDE INHALATION SOLUTION, ADMINISTERED
                            THROUGH DME, UNIT DOSE FORM, 0.25 TO 0.50 MG
J7628....................  BITOLTEROL MESYLATE, INHALATION SOLUTION
                            ADMINISTERED THROUGH DME, CONCENTRATED FORM,
                            PER MILLIGRAM
J7631....................  CROMOLYN SODIUM, INHALATION SOLUTION
                            ADMINISTERED THROUGH DME, UNIT DOSE FORM,
                            PER 10 MILLIGRAMS
J7639....................  DORNASE ALPHA, INHALATION SOLUTION
                            ADMINISTERED THROUGH DME, UNIT DOSE FORM,
                            PER MILLIGRAM
J7644....................  IPRATROPIUM BROMIDE, INHALATION SOLUTION
                            ADMINISTERED THROUGH DME, UNIT DOSE FORM,
                            PER MILLIGRAM
J7648....................  ISOETHARINE HCL, INHALATION SOLUTION
                            ADMINISTERED THROUGH DME, CONCENTRATED FORM,
                            PER MILLIGRAM
J7649....................  ISOETHARINE HCL, INHALATION SOLUTION
                            ADMINISTERED THROUGH DME, UNIT DOSE FORM,
                            PER MILLIGRAM
J7668....................  METAPROTERENOL SULFATE, INHALATION SOLUTION
                            ADMINISTERED THROUGH DME, CONCENTRATED FORM,
                            PER 10 MILLIGRAMS
J7669....................  METAPROTERENOL SULFATE, INHALATION SOLUTION
                            ADMINISTERED THROUGH DME, UNIT DOSE FORM,
                            PER 10 MILLIGRAMS
J7682....................  TOBRAMYCIN, UNIT DOSE FORM, 300 MG,
                            INHALATION SOLUTION, ADMINISTERED THROUGH
                            DME
J7699....................  NOC DRUGS, INHALATION SOLUTION ADMINISTERED
                            THROUGH DME
J8499....................  PRESCRIPTION DRUG, ORAL, NON
                            CHEMOTHERAPEUTIC, NOS
J8510....................  BUSULFAN; ORAL, 2 MG
J8520....................  CAPECITABINE, ORAL, 150 MG
J8521....................  CAPECITABINE, ORAL, 500 MG
J8530....................  CYCLOPHOSPHAMIDE; ORAL, 25 MG
J8560....................  ETOPOSIDE; ORAL, 50 MG
J8600....................  MELPHALAN; ORAL, 2 MG
J8610....................  METHOTREXATE; ORAL, 2.5 MG
J8700....................  TEMOZOLMIDE, ORAL, 5 MG
J8999....................  PRESCRIPTION DRUG, ORAL, CHEMOTHERAPEUTIC,
                            NOS
J9000....................  DOXORUBICIN HCL, 10 MG
J9001....................  DOXORUBICIN HYDROCHLORIDE, ALL LIPID
                            FORMULATIONS, 10 MG
J9010....................  ALEMTUZUMAB, 10 MG
J9015....................  ALDESLEUKIN, PER SINGLE USE VIAL
J9017....................  ARSENIC TRIOXIDE, 1MG
J9020....................  ASPARAGINASE, 10,000 UNITS
J9031....................  BCG (INTRAVESICAL) PER INSTILLATION
J9040....................  BLEOMYCIN SULFATE, 15 UNITS
J9045....................  CARBOPLATIN, 50 MG

[[Page 50451]]

 
J9050....................  CARMUSTINE, 100 MG
J9060....................  CISPLATIN, POWDER OR S0LUTION, PER 10 MG
J9062....................  CISPLATIN, 50 MG
J9065....................  INJECTION, CLADRIBINE, PER 1 MG
J9070....................  CYCLOPHOSPHAMIDE, 100 MG
J9080....................  CYCLOPHOSPHAMIDE, 200 MG
J9090....................  CYCLOPHOSPHAMIDE, 500 MG
J9091....................  CYCLOPHOSPHAMIDE, 1.0 GRAM
J9092....................  CYCLOPHOSPHAMIDE, 2.0 GRAM
J9093....................  CYCLOPHOSPHAMIDE, LYOPHILIZED, 100 MG
J9094....................  CYCLOPHOSPHAMIDE, LYOPHILIZED, 200 MG
J9095....................  CYCLOPHOSPHAMIDE, LYOPHILIZED, 500 MG
J9096....................  CYCLOPHOSPHAMIDE, LYOPHILIZED, 1.0 GRAM
J9097....................  CYCLOPHOSPHAMIDE, LYOPHILIZED, 2.0 GRAM
J9100....................  CYTARABINE, 100 MG
J9110....................  CYTARABINE, 500 MG
J9120....................  DACTINOMYCIN, 0.5 MG
J9130....................  DACARBAZINE, 100 MG
J9140....................  DACARBAZINE, 200 MG
J9150....................  DAUNORUBICIN, 10 MG
J9151....................  DAUNORUBICIN CITRATE, LIPOSOMAL FORMULATION,
                            10 MG
J9160....................  DENILEUKIN DIFTITOX, 300 MCG
J9165....................  DIETHYLSTILBESTROL DIPHOSPHATE, 250 MG
J9170....................  DOCETAXEL, 20 MG
J9180....................  EPIRUBICIN HYDROCHLORIDE, 50 MG
J9181....................  ETOPOSIDE, 10 MG
J9182....................  ETOPOSIDE, 100 MG
J9185....................  FLUDARABINE PHOSPHATE, 50 MG
J9190....................  FLUOROURACIL, 500 MG
J9200....................  FLOXURIDINE, 500 MG
J9201....................  GEMCITABINE HCL, 200 MG
J9202....................  GOSERELIN ACETATE IMPLANT, PER 3.6 MG
J9206....................  IRINOTECAN, 20 MG
J9208....................  IFOSFAMIDE, 1 GM
J9209....................  MESNA, 200 MG
J9211....................  IDARUBICIN HYDROCHLORIDE, 5 MG
J9212....................  INJECTION, INTERFERON ALFACON-1, RECOMBINANT,
                            1 MCG
J9213....................  INTERFERON, ALFA-2A, RECOMBINANT, 3 MILLION
                            UNITS
J9214....................  INTERFERON, ALFA-2B, RECOMBINANT, 1 MILLION
                            UNITS
J9215....................  INTERFERON, ALFA-N3, (HUMAN LEUKOCYTE
                            DERIVED), 250,000 IU
J9216....................  INTERFERON, GAMMA 1-B, 3 MILLION UNITS
J9217....................  LEUPROLIDE ACETATE (FOR DEPOT SUSPENSION),
                            7.5 MG
J9218....................  LEUPROLIDE ACETATE, PER 1 MG
J9219....................  LEUPROLIDE ACETATE IMPLANT, 65 MG
J9230....................  MECHLORETHAMINE HYDROCHLORIDE, (NITROGEN
                            MUSTARD), 10 MG
J9245....................  INJECTION, MELPHALAN HYDROCHLORIDE, 50 MG
J9250....................  METHOTREXATE SODIUM, 5 MG
J9260....................  METHOTREXATE SODIUM, 50 MG
J9265....................  PACLITAXEL, 30 MG
J9266....................  PEGASPARGASE, PER SINGLE DOSE VIAL
J9268....................  PENTOSTATIN, PER 10 MG
J9270....................  PLICAMYCIN, 2.5 MG
J9280....................  MITOMYCIN, 5 MG
J9290....................  MITOMYCIN, 20 MG
J9291....................  MITOMYCIN, 40 MG
J9293....................  INJECTION, MITOXANTRONE HYDROCHLORIDE, PER 5
                            MG
J9300....................  GEMTUZUMAB OZOGAMICIN, 5MG
J9310....................  RITUXIMAB, 100 MG
J9320....................  STREPTOZOCIN, 1 GM
J9340....................  THIOTEPA, 15 MG
J9350....................  TOPOTECAN, 4 MG
J9355....................  TRASTUZUMAB, 10 MG
J9357....................  VALRUBICIN, INTRAVESICAL, 200 MG
J9360....................  VINBLASTINE SULFATE, 1 MG
J9370....................  VINCRISTINE SULFATE, 1 MG
J9375....................  VINCRISTINE SULFATE, 2 MG
J9380....................  VINCRISTINE SULFATE, 5 MG
J9390....................  VINORELBINE TARTRATE, PER 10 MG
J9600....................  PORFIMER SODIUM, 75 MG
P9041....................  INFUSION, ALBUMIN (HUMAN), 5percent, 50 ML
P9043....................  INFUSION, PLASMA PROTEIN FRACTION (HUMAN),
                            5percent, 50 ML
P9045....................  INFUSION, ALBUMIN (HUMAN), 5percent, 250 ML
P9046....................  INFUSION, ALBUMIN (HUMAN), 25percent, 20 ML
P9047....................  INFUSION, ALBUMIN (HUMAN), 25percent, 50 ML
P9048....................  INFUSION, PLASMA PROTEIN FRACTION (HUMAN),
                            5percent, 250ML
Q0136....................  INJECTION, EPOETIN ALPHA, (FOR NON ESRD USE),
                            PER 1000 UNITS
Q0163....................  DIPHENHYDRAMINE HYDROCHLORIDE, 50 MG, ORAL,
                            FDA APPROVED PRESCRIPTION ANTI-EMETIC, FOR
                            USE AS A COMPLETE THERAPEUTIC SUBSTITUTE FOR
                            AN IV ANTI-EMETIC AT TIME OF CHEMOTHERAPY
                            TREATMENT NOT TO EXCEED A 48 HOUR DOSAGE
                            REGIMEN
Q0164....................  PROCHLORPERAZINE MALEATE, 5 MG, ORAL, FDA
                            APPROVED PRESCRIPTION ANTI-EMETIC, FOR USE
                            AS A COMPLETE THERAPEUTIC SUBSTITUTE FOR AN
                            IV ANTI-EMETIC AT THE TIME OF CHEMOTHERAPY
                            TREATMENT, NOT TO EXCEED A 48 HOUR DOSAGE
                            REGIMEN

[[Page 50452]]

 
Q0165....................  PROCHLORPERAZINE MALEATE, 10 MG, ORAL, FDA
                            APPROVED PRESCRIPTION ANTI-EMETIC, FOR USE
                            AS A COMPLETE THERAPEUTIC SUBSTITUTE FOR AN
                            IV ANTI-EMETIC AT THE TIME OF CHEMOTHERAPY
                            TREATMENT, NOT TO EXCEED A 48 HOUR DOSAGE
                            REGIMEN
Q0166....................  GRANISETRON HYDROCHLORIDE, 1 MG, ORAL, FDA
                            APPROVED PRESCRIPTION ANTI-EMETIC, FOR USE
                            AS A COMPLETE THERAPEUTIC SUBSTITUTE FOR AN
                            IV ANTI-EMETIC AT THE TIME OF CHEMOTHERAPY
                            TREATMENT, NOT TO EXCEED A 24 HOUR DOSAGE
                            REGIMEN
Q0167....................  DRONABINOL, 2.5 MG, ORAL, FDA APPROVED
                            PRESCRIPTION ANTI-EMETIC, FOR USE AS A
                            COMPLETE THERAPEUTIC SUBSTITUTE FOR AN IV
                            ANTI-EMETIC AT THE TIME OF CHEMOTHERAPY
                            TREATMENT, NOT TO EXCEED A 48 HOUR DOSAGE
                            REGIMEN
Q0168....................  DRONABINOL, 5 MG, ORAL, FDA APPROVED
                            PRESCRIPTION ANTI-EMETIC, FOR USE AS A
                            COMPLETE THERAPEUTIC SUBSTITUTE FOR AN IV
                            ANTI-EMETIC AT THE TIME OF CHEMOTHERAPY
                            TREATMENT, NOT TO EXCEED A 48 HOUR DOSAGE
                            REGIMEN
Q0169....................  PROMETHAZINE HYDROCHLORIDE, 12.5 MG, ORAL,
                            FDA APPROVED PRESCRIPTION ANTI-EMETIC, FOR
                            USE AS A COMPLETE THERAPEUTIC SUBSTITUTE FOR
                            AN IV ANTI-EMETIC AT THE TIME OF
                            CHEMOTHERAPY TREATMENT, NOT TO EXCEED A 48
                            HOUR DOSAGE REGIMEN
Q0170....................  PROMETHAZINE HYDROCHLORIDE, 25 MG, ORAL, FDA
                            APPROVED PRESCRIPTION ANTI-EMETIC, FOR USE
                            AS A COMPLETE THERAPEUTIC SUBSTITUTE FOR AN
                            IV ANTI-EMETIC AT THE TIME OF CHEMOTHERAPY
                            TREATMENT, NOT TO EXCEED A 48 HOUR DOSAGE
                            REGIMEN
Q0171....................  CHLORPROMAZINE HYDROCHLORIDE, 10 MG, ORAL,
                            FDA APPROVED PRESCRIPTION ANTI-EMETIC, FOR
                            USE AS A COMPLETE THERAPEUTIC SUBSTITUTE FOR
                            AN IV ANTI-EMETIC AT THE TIME OF
                            CHEMOTHERAPY TREATMENT, NOT TO EXCEED A 48
                            HOUR DOSAGE REGIMEN
Q0172....................  CHLORPROMAZINE HYDROCHLORIDE, 25 MG, ORAL,
                            FDA APPROVED PRESCRIPTION ANTI-EMETIC, FOR
                            USE AS A COMPLETE THERAPEUTIC SUBSTITUTE FOR
                            AN IV ANTI-EMETIC AT THE TIME OF
                            CHEMOTHERAPY TREATMENT, NOT TO EXCEED A 48
                            HOUR DOSAGE REGIMEN
Q0173....................  TRIMETHOBENZAMIDE HYDROCHLORIDE, 250 MG,
                            ORAL, FDA APPROVED PRESCRIPTION ANTI-EMETIC,
                            FOR USE AS A COMPLETE THERAPEUTIC SUBSTITUTE
                            FOR AN IV ANTI-EMETIC AT THE TIME OF
                            CHEMOTHERAPY TREATMENT, NOT TO EXCEED A 48
                            HOUR DOSAGE REGIMEN
Q0174....................  THIETHYLPERAZINE MALEATE, 10 MG, ORAL, FDA
                            APPROVED PRESCRIPTION ANTI-EMETIC, FOR USE
                            AS A COMPLETE THERAPEUTIC SUBSTITUTE FOR AN
                            IV ANTI-EMETIC AT THE TIME OF CHEMOTHERAPY
                            TREATMENT, NOT TO EXCEED A 48 HOUR DOSAGE
                            REGIMEN
Q0175....................  PERPHENAZINE, 4 MG, ORAL, FDA APPROVED
                            PRESCRIPTION ANTI-EMETIC, FOR USE AS A
                            COMPLETE THERAPEUTIC SUBSTITUTE FOR AN IV
                            ANTI-EMETIC AT THE TIME OF CHEMOTHERAPY
                            TREATMENT, NOT TO EXCEED A 48 HOUR DOSAGE
                            REGIMEN
Q0176....................  PERPHENAZINE, 8MG, ORAL, FDA APPROVED
                            PRESCRIPTION ANTI-EMETIC, FOR USE AS A
                            COMPLETE THERAPEUTIC SUBSTITUTE FOR AN IV
                            ANTI-EMETIC AT THE TIME OF CHEMOTHERAPY
                            TREATMENT, NOT TO EXCEED A 48 HOUR DOSAGE
                            REGIMEN
Q0177....................  HYDROXYZINE PAMOATE, 25 MG, ORAL, FDA
                            APPROVED PRESCRIPTION ANTI-EMETIC, FOR USE
                            AS A COMPLETE THERAPEUTIC SUBSTITUTE FOR AN
                            IV ANTI-EMETIC AT THE TIME OF CHEMOTHERAPY
                            TREATMENT, NOT TO EXCEED A 48 HOUR DOSAGE
                            REGIMEN
Q0178....................  HYDROXYZINE PAMOATE, 50 MG, ORAL, FDA
                            APPROVED PRESCRIPTION ANTI-EMETIC, FOR USE
                            AS A COMPLETE THERAPEUTIC SUBSTITUTE FOR AN
                            IV ANTI-EMETIC AT THE TIME OF CHEMOTHERAPY
                            TREATMENT, NOT TO EXCEED A 48 HOUR DOSAGE
                            REGIMEN
Q0179....................  ONDANSETRON HYDROCHLORIDE 8 MG, ORAL, FDA
                            APPROVED PRESCRIPTION ANTI-EMETIC, FOR USE
                            AS A COMPLETE THERAPEUTIC SUBSTITUTE FOR AN
                            IV ANTI-EMETIC AT THE TIME OF CHEMOTHERAPY
                            TREATMENT, NOT TO EXCEED A 48 HOUR DOSAGE
                            REGIMEN
Q0180....................  DOLASETRON MESYLATE, 100 MG, ORAL, FDA
                            APPROVED PRESCRIPTION ANTI-EMETIC, FOR USE
                            AS A COMPLETE THERAPEUTIC SUBSTITUTE FOR AN
                            IV ANTI-EMETIC AT THE TIME OF CHEMOTHERAPY
                            TREATMENT, NOT TO EXCEED A 24 HOUR DOSAGE
                            REGIMEN
Q0181....................  UNSPECIFIED ORAL DOSAGE FORM, FDA APPROVED
                            PRESCRIPTION ANTI-EMETIC, FOR USE AS A
                            COMPLETE THERAPEUTIC SUBSTITUTE FOR A IV
                            ANTI-EMETIC AT THE TIME OF CHEMOTHERAPY
                            TREATMENT, NOT TO EXCEED A 48 HOUR DOSAGE
                            REGIMEN
Q0183....................  DERMAL TISSUE, OF HUMAN ORIGIN, WITH AND
                            WITHOUT OTHER BIOENGINEERED OR
Q0187....................  FACTOR VIIA (COAGULATION FACTOR, RECOMBINANT)
                            PER 1.2 MG
Q2022....................  VON WILLEBRAND FACTOR COMPLEX, HUMAN, PER IU
Q3025....................  INJECTION, INTERFERON BETA-1A, 11 MCG FOR
                            INTRAMUSCULAR USE
Q4052....................  INJECTION, OCTREOTIDE, DEPOT FORM FOR
                            INTRAMUSCULAR INJECTION, 1 MG
Q4053....................  INJECTION, PEGFILGRASTIM, PER 1 MG
Q9920....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 20 OR LESS
Q9921....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 21
Q9922....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 22
Q9923....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 23
Q9924....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 24
Q9925....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 25
Q9926....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 26
Q9927....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 27
Q9928....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 28
Q9929....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 29
Q9930....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 30
Q9931....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 31
Q9932....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 32
Q9933....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 33
Q9934....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 34
Q9935....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 35
Q9936....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 36
Q9937....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 37
Q9938....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 38
Q9939....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 39
Q9940....................  INJECTION OF EPO, PER 1000 UNITS, AT PATIENT
                            HCT OF 40 OR ABOVE
------------------------------------------------------------------------
* Under HIPAA, pharmacies must use NDC codes, not HCPCS codes, to bill
  for drugs effective October 16, 2003.

[FR Doc. 03-21308 Filed 8-15-03; 1:35 pm]
BILLING CODE 4120-01-P