CMS Describes Payment Methodology for the Medicare Modernization Act of 2003 (MMA)
The Medicare Modernization Act of 2003 (MMA), Section 303(c), revises the methodology of paying for Part B covered drugs
and biologicals that are not paid on a cost or prospective payment basis. Effective January 1, 2005, these drugs are paid based on
the new Average Sales Price (ASP) drug payment methodology.
The ASP file, used in the ASP methodology, is based on data CMS receives quarterly from manufacturers. Each quarter, the
Centers for Medicare & Medicaid Services (CMS) will update your carrier and Fiscal Intermediary (FI) payment allowance limits
with the ASP drug pricing files based on these manufacturers’ data.
Beginning January 1, 2005, 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, and CMS will update the payment allowance limits quarterly. However,
there are exceptions to this general rule as summarized below:
• For blood and blood products (with certain exceptions like blood clotting factors), payment allowance limits are determined
in the same manner they were determined on October 1, 2003. Specifically, the payment allowance limits for blood and blood
products are 95 percent of the Average Wholesale Price (AWP) as reflected in the published compendia. The payment
allowance limits will be updated on a quarterly basis.
• For infusion drugs furnished through a covered item of Durable Medical Equipment (DME) on or after January 1, 2005,
payment allowance limits will continue to be 95 percent of the AWP reflected in the published compendia as of October 1,
2003 regardless of whether or not the DME is implanted. The payment allowance limits will not be updated in 2005.
• For influenza, pneumococcal, and hepatitis B vaccines payment allowance limits are 95 percent of the AWP as reflected in
the published compendia. The payment allowance limits will be updated on a quarterly basis.
• For drugs, other than new drugs, not included in the ASP Medicare Part B Drug Pricing File or Not Otherwise
Classified (NOC) Pricing File payment allowance limits are based on the published Wholesale Acquisition Cost (WAC) or
invoice pricing. In determining the payment limit based on WAC, carriers/FIs will follow the methodology specified in the
Medicare Claims Processing Manual for calculating the AWP, but substitute WAC for AWP. Please see Pub. 100-04, Chapter
17 (Drugs and Biologicals) at the following CMS web site:
http://www.cms.hhs.gov/manuals/104_claims/clm104c17.pdf.
The payment limit is 100 percent of the WAC for the lesser of the lowest brand or median generic. Your carrier or FI may, at
their discretion, contact CMS to obtain payment limits for drugs not included in the quarterly ASP or NOC files. If available,
CMS will provide the payment limits either directly to the requesting carrier/FI or via posting an MS Excel file on the CMS
web site. If the payment limit is available from CMS, carriers/FIs will substitute CMS-provided payment limits for pricing
based on WAC or invoice pricing.
• For new drugs and biologicals not included in the ASP Medicare Part B Drug Pricing File or NOC Pricing File, payment
allowance limits are based on 106 percent of the WAC. This policy applies only to new drugs that were first sold on or after
December 1, 2004.
The April 2005 and new January 2005 ASP drug pricing files will contain three decimal places in the currency fields. In addition,
the new January file contains revised payment limits for some drugs. The codes with a revised payment limit are identified in the
column titled “Notes.” The absence or presence of a HCPCS code and its associated payment limit in the pricing files do not
indicate Medicare coverage of the drug. Similarly, the inclusion of a payment limit within a specific column does not indicate
Medicare coverage of the drug in that specific category. The carrier/FI processing your claim will make these determinations.
In addition, your carrier or FI is required to accomplish the following:
• Use the April 2005 ASP and NOC drug pricing files to pay for Medicare Part B drugs effective April 1, 2005. This file shall
be used for dates of service from April 1, 2005 through June 30, 2005;
• Determine for any drug or biological not listed in the ASP or NOC drug pricing files, the payment allowance limits in
accordance with the policies described in this transmittal, CR3539, dated October 29, 2004 (see
http://www.cms.hhs.gov/manuals/pm_trans/R348CP.pdf), and CR3232, dated December 16, 2004 (see
http://www.cms.hhs.gov/manuals/pm_trans/R397CP.pdf), and FIs should seek payment allowances from their local carrier;
• Use the new January 2005 ASP drug pricing file for (1) those claims where the carriers/FIs are asked to retroactively adjust
claims processed with the original January 2005 file and (2) those claims with dates of service on or after January 1, 2005 and
before April 1, 2005 that are processed after April 4, 2005. Your carrier or FI shall not search and adjust claims that have
already been processed unless brought to their attention;
• Overlay the old January 2005 file with the new January 2005 file; and
• For any drug or biological for which they (your carrier or FI) calculates a payment allowance limit, forward to CMS the
following:
• The drug name,
• Dosage,
• Payment allowance limit, and
• National Drug Code (if available).
Note: The ASP and NOC drug pricing files will contain the 106 percent ASP, 106 percent WAC or WAC based payment allowance
limits; therefore, no additional payment calculation is required by your carrier or FI. The payment limits for the blood clotting
factor codes includes the $0.14 per I.U. furnishing fee.
Additional Information
The new January 2005 and April 2005 ASP and NOC Pricing Files are available from the following CMS Website on or after
March 17, 2005:
http://www.cms.hhs.gov/providers/drugs/asp.asp
You can find more information about the April 2005 Quarterly Average Sales Price (ASP) Medicare Part B Drug Pricing File,
Effective April 1, 2005, and New January 2005 Quarterly ASP File at:
http://www.cms.hhs.gov/manuals/transmittals/comm_date_dsc.asp
From that web page, look for CR 3667 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/medlearn/tollnums.asp