by Jared Staheli
July 7th, 2015
Section 303(c) of the Medicare Modernization Act of 2003 (MMA) revised the payment methodology for Part B covered drugs and biologicals that are not priced on a cost or prospective payment basis. Per the MMA, beginning January 1, 2005, the vast majority of drugs and biologicals not priced on a cost or prospective payment basis will be priced based on the average sales price (ASP) methodology. Pricing for compounded drugs is performed by the local contractor. Additionally, beginning in 2006, all ESRD drugs furnished by both independent and hospital-based ESRD facilities, as well as specified covered outpatient drugs, and drugs and biologicals with pass-through status under the Outpatient Prospective Payment System (OPPS), will be priced based on the ASP methodology. The ASP methodology is based on quarterly data submitted to CMS by manufacturers. CMS will supply contractors with the ASP drug pricing files for Medicare Part B drugs on a quarterly basis. Contractors will be notified of the availability of this file via a Recurring Update Notification. Please click here to see these notifications.
The absence or presence of a HCPCS code and its associated payment limit does not indicate Medicare coverage of the drug or biological. Similarly, the inclusion of a payment limit within a specific column does not indicate Medicare coverage of the drug in that specific category. The local Medicare contractor processing the claim shall make these determinations.
Beginning January 1, 2005, in general, the payment allowance limits for Medicare Part B drugs and biologicals that are not paid on a cost or prospective payment basis are 106 percent of the ASP. Beginning January 1, 2006, in general, the payment allowance limits for ESRD drugs when separately billed by freestanding and hospital-based ESRD facilities, as well as specified covered outpatient drugs, and drugs and biologicals with pass-through status under the OPPS, will be paid based on 106 percent of the ASP. CMS will update the payment allowance limits quarterly.
As announced in late 2006, CMS has been working further to ensure that accurate and separate payment is made for single source drugs and biologicals as required by Section 1847A of the Social Security Act. As part of this effort, we have also reviewed how we have operationalized the terms “single source drug,” “multiple source drug,” and “biological product” in the context of payment under Section 1847A. For the purposes of identifying “single source drugs” and “biological products” subject to payment under Section 1847A, generally CMS (and its contractors) will utilize a multi-step process. We will consider:
• The FDA approval;
• Therapeutic equivalents as determined by the FDA; and
• The date of first sale in the United States.
For a biological product (as evidenced by a new FDA Biologic License Application or other relevant FDA approval) or a single source drug (that is, not a drug for which there are two or more drug products that are rated as therapeutically equivalent in the most recent FDA Orange Book) first sold in the United States after October 1, 2003, the payment limit for a biological product or single source drug will be based on the pricing information for products marketed or sold under the applicable FDA approval. As appropriate, a unique HCPCS code will be assigned to facilitate separate payment. Separate payment may be operationalized through use of “not otherwise classified” HCPCS codes.