MMA - Drugs Paid by Average Selling Price Beginning January 1, 2005

Provider Types Affected
Physicians, suppliers, and providers

Provider Action Needed
Physicians, suppliers, and providers should note that beginning January 1, 2005, the payment limit for Part B drugs and biologicals, not paid on a cost or prospective payment basis, will be paid based on the Average Sales Price (ASP) plus 6 percent. Drugs will be paid based on date of service and the lower of:

1) The submitted charge; or
2) The ASP plus 6 percent

Background
According to the Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA), beginning January 1, 2004 through December 31, 2004, drugs and biologicals not paid on a cost or prospective payment basis are paid based on various standards specified in the statute, although the default payment limit standard is 85 percent of Average Wholesale Price (AWP).

This instruction notifies contractors (Part B Local Carriers and Durable Medical Equipment Carriers

(DMERCs)) that the MMA mandates that drugs and biologicals not paid on a cost or prospective payment basis are to be paid based on the ASP beginning January 1, 2005.

Therefore, beginning January 1, 2005, the Centers for Medicare & Medicaid Services (CMS) will:

• Supply contractors with a drug payment limit file for drugs and biologicals
• Send quarterly updates of this file to contractors

Payment will be based on:

• The lower of the submitted charge or the payment limit on this file
• The date-of-service

Finally, contractors will:

• Develop payment limits when CMS does not supply a payment limit for the drug on the file
• Continue to determine the payment limit for compounded drugs
• Continue to determine the payment limit for new drugs

Implementation
The implementation date for this instruction is January 1, 2005.

Related Instructions
The Medicare Internet Only Manual (IOM) has been edited with revised and new sections to reflect changes implemented with this instruction. These revised and new sections include the following:

The Medicare Claims Processing Manual (Pub. 100-4), Chapter 17 (Drugs and Biologicals):

• Section 10 (Payment Rules for Drugs and Biologicals) - revised
• Section 20 (Payment Allowance Limit for Drugs and Biologicals Not Paid on a Cost or Prospective Payment Basis) - revised
• Subsection 20.1 (MMA Drugs) - new

These revised and new sections of the Medicare Claims Processing Manual are included in the actual instruction (CR 3232) issued to your carrier or DMERC.

Additional Information
The official instruction issued to your carrier regarding this change may be found by going to: http://www.cms.hhs.gov/Transmittals/

From that Web page, look for CR 3232 in the CR NUM column on the right, and click on the file for that CR. If you have any questions, please contact your carrier/intermediary at their toll-free number, which may be found at: http://www.cms.hhs.gov/MedlearnProducts/downloads/CallCenterTollNumDirectory.pdf

Disclaimer
Medlearn Matters articles are prepared as a service to the public and are not intended to grant rights or impose obligations. Medlearn Matters articles may contain references or links to statutes, regulations, or other policy materials. The information provided is only intended to be a general summary. It is not intended to take the place of either the written law or regulations. We encourage readers to review the specific statutes, regulations, and other interpretive materials for a full and accurate statement of their contents.

Related Change Request (CR) #: 3232
Medlearn Matters Number: MM3232

Related CR Release Date: July 23, 2004
Related CR Transmittal #: 248

Effective Date: August 23, 2004
Implementation Date: January 3, 2005