The Competitive Acquisition Program (CAP) for Drugs and Biologicals Not Paid on a Cost or Prospective Payment Basis (Rev. 3085, Effective: Upon Implementation of ICD-10)

by  Jared Staheli
July 9th, 2015

Section 303 (d) of the Medicare Prescription Improvement and Modernization Act (MMA) of 2003 requires the implementation of a competitive acquisition program (CAP) for Medicare Part B drugs and biologicals not paid on a cost or prospective payment system basis. Beginning with drugs administered on or after July 1, 2006, physicians will be given a choice between buying and billing these drugs under the average sales price (ASP) system, or obtaining these drugs from vendors selected in a competitive bidding process. For purposes of the CAP, the term “a physician” includes individuals defined under §1861(s) of the Social Security Act who are authorized to provide physician services under §1861(s) of the Act and who can, within their State’s scope of practice, prescribe and order drugs covered under Medicare Part B.

For 2006, the first CAP year will run from July 1, 2006 through December 31, 2006. In subsequent years, it will run annually on a calendar year basis.

The Secretary may exclude drugs from the CAP if competitive pricing will not result in significant savings, or is likely to have an adverse impact on access to such drugs. The statute gives CMS the authority to select drugs, or categories of drugs, that will be included in the program, to establish geographic competitive acquisition areas, and to phase in these elements as appropriate.

A competition will be held every 3 years to award contracts to approved CAP vendors that will supply drugs and biologicals for the program. A 3-year contract will be awarded to qualified approved CAP vendors in each geographic area who have and maintain: 1) Sufficient means to acquire and deliver competitively biddable drugs within the specified contract area; 2) Arrangements in effect for shipping at least 5 days each week for the competitively biddable drugs under the contract and means to ship drugs in emergency situations; 3) Quality, service, financial performance, and solvency standards; and 4) A grievance and appeals process for dispute resolution. A vendor’s contract may be terminated during the contract period if they do not abide by the terms of their contract with CMS. CMS will establish a single payment amount for each of the competitively bid drugs and areas, for this 3year cycle there will be one drug category and one geographic area. After CAP drug prices are determined and vendor contracts are awarded the information will be posted to a directory on the Medicare Web site.

Medicare physicians will be given an opportunity to elect to participate in the CAP on an annual basis. Physicians who elect to participate in CAP will continue to bill their local A/B MAC (B) for drug administration. Except where applicable State pharmacy law prohibits it, the CAP Participating Physicians will supply the following information to the approved CAP vendor at the time that a CAP drug order is placed: date of order, beneficiary name, address, and phone number, physician identifying information: name, practice location/shipping address, group practice information, NPI; drug name, strength, quantity ordered, dose, frequency/ instructions, anticipated date of administration, beneficiary Medicare information/ Health insurance (HIC) number, supplementary insurance information (if applicable), Medicaid information (if applicable), additional patient information: date of birth, allergies, height/weight, and diagnosis if necessary. Claims for erythropoiesis stimulating agents (ESAs) must contain the most recent hematocrit or hemoglobin value. CAP drug claims for any drugs furnished to an individual for the treatment of anemia shall be returned if the most recent laboratory values for hemoglobin or hematocrit are not reported on the claim per Medicare requirements.

The participating CAP physicians will receive all of their drugs from the approved CAP vendor for the drug categories they have selected, with only one exception. The exception will be for “furnish as written” situations where the participating CAP physician requires that, due to medical necessity, the beneficiary must have a specific drug, defined by its National Drug Code (NDC), for one of the HCPCS codes within the approved CAP vendor’s drug list if that specific drug NDC is not available on the CAP drug list. The participating CAP physician may buy the drug, administer it to the beneficiary and bill Medicare using the ASP system. The local A/B MAC (B) will monitor drugs obtained using the “furnish as written” provision to ensure that the participating CAP physician is complying with Medicare payment rules.

The CAP will also allow a participating CAP physician to provide a drug to a Medicare beneficiary from his or her own stock and obtain the replacement drug from the approved CAP vendor when certain conditions are met. The local A/B MAC (B) will monitor drugs ordered under the replacement provision to ensure that the participating CAP physician is complying with Medicare payment rules.

Approved CAP vendors must qualify for enrollment in Medicare as a supplier, and will be enrolled as a new provider specialty type. The approved CAP vendor’s claims for the drugs will be submitted to one designated Medicare A/B MAC (B). The approved CAP vendor will bill the Medicare designated A/B MAC (B) for the drug and the beneficiary for any applicable coinsurance and deductible under the MMA, for CAP claims submitted after July 1, 2006 but before April 1, 2007, payment to the approved CAP vendor for the drug was conditioned on verification that the drug was administered to the Medicare beneficiary. Proof that the drug was administered was established by matching the participating CAP physician’s claim for drug administration with the approved CAP vendor’s claim for the drug in the Medicare claims processing system by means of a prescription number on both claims. When the claims matched in the claims processing system, the approved CAP vendor was paid in full.

Title II, section 108(a) of the Tax Relief and Health Care Act of 2006 (TRHCA), struck language used to develop the existing CAP claims matching process and furthermore required the implementation of a post payment review process effective April 1, 2007. The post payment review process is required to assure that drugs supplied under the CAP have been administered to a beneficiary and the process must establish a mechanism to recoup, offset or collect any overpayments to the approved CAP vendor. The CMS is implementing CAP claims processing changes in order to comply with THRCA by April 1, 2007. Pending CAP claims submitted prior to April 1, 2007, and all new CAP claims submitted on or after April 1 will be subject to the post payment review process. Until drug administration is verified, the approved CAP vendor may not bill the beneficiary and/or his third party insurance for any applicable coinsurance and deductible. For more information on the CAP claims processing see FR70251.


The Competitive Acquisition Program (CAP) for Drugs and Biologicals Not Paid on a Cost or Prospective Payment Basis (Rev. 3085, Effective: Upon Implementation of ICD-10). (2015, July 9). Find-A-Code Articles. Retrieved from

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