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October 30, 2014 - Revised: 02.07.23

Reimbursement for Drugs & Biologicals: How Are Payments Calculated?

CGS reimburses drugs and biologicals using one of several methodologies:

  • Center for Medicare & Medicaid Services (CMS) Average Sales Price (ASP)
  • CMS Not Otherwise Classified (NOC) Pricing File
  • Wholesale Acquisition Cost (WAC) or invoice pricing
  • Other pricing methodology (employed for some radiopharmaceuticals)

For drugs and biologicals reimbursed using CMS's ASP methodology:

  • No invoice is needed for drugs reimbursed using this methodology.
  • Payment is based on 106 percent of the ASP.
  • There are several exceptions to the ASP payment methodology, including: blood and blood products; drugs infused through a covered item of Durable Medical Equipment; and certain vaccines.
  • ASP and NOC pricing files are available on the CMS websiteExternal Website.

For drugs or biologicals reimbursed using WAC or invoice pricing:

  • WAC pricing applies to drugs that are not reimbursed based on CMS's ASP or NOC Pricing Files.
    • No invoice is needed when a WAC amount is available. ¬†When WAC pricing is available, CGS calculates reimbursement based on the WAC amount from the Redbook.
    • The payment limit is based on the lesser of the lowest brand or median generic WAC.
    • The payment allowance for new drugs that were first sold on or after January 1, 2005, is based on 106 percent of the WAC.
    • Information on determining WAC pricing is available in CMS Medicare Claims Processing Manual, chapter 17, section 20.1.3 on the CMS websiteExternal Website.
  • When invoice pricing is used, each Medicare contractor determines how many invoices are necessary to determine the reimbursement amount.
    • CGS requires that invoices be submitted with each claim when the drug or biological is not priced based on ASP and there is no WAC available.

For radiopharmaceuticals (HCPCS codes A9500-A9700):

  • CMS has established pricing information for some radiopharmaceuticals. Those radiopharmaceuticals with established reimbursement amounts do not require additional invoice information, as described below. Drugs with an established reimbursement are listed on the CMS websiteExternal Website.
  • For radiopharmaceuticals other than those listed on the CMS website (with established reimbursement):
    • Claims for radiopharmaceuticals must be submitted with either a copy of the actual invoice or invoice information must be included on the electronic claim itself.
  • The name of the drug, radiopharmaceutical, or skin substitute and the exact dosage administered/used must appear in the Documentation Field.
    • For electronic claims, report invoice information in the Electronic Documentation Field Loop 2300, NTE Segment (header level) or Loop 2400, NTE Segment (line level).
    • If you are approved to submit paper claims, report this information in Item 19 of the CMS-1500 claim form and provide a copy of the actual invoice.
  • If the charge matches the actual invoice cost, note "Actual Invoice Cost" in the Documentation Field. You are not required to submit invoice information with the claim; however, it must be available if requested.
  • If you are submitting a charge greater than the actual invoice cost, please include the following information in the Documentation Field, using these abbreviations:
    • Des = Description/Name of agent (e.g., Des=TC99m MDP)
    • QS = Quantity shipped (e.g., QS=100 mci)
    • TA = Total amount charged for quantity shipped in dollars and cents with the decimal (e.g., TA=$57.40)
    • UP = Unit Price in dollars and cents with the decimal (e.g., UP = $0.57 per mci) (Optional)
    • DG = Dosage administered/amount used (e.g., DG=25 mci)
  • In lieu of submitting the invoice information, you may use the Paperwork (PWK) process and send a copy of the invoice via fax or mail Details on the PWK Segment Process.
  • Claims requiring invoice submitted without the above information or the actual invoice may be denied or delayed.

References:

Revised: 02.07.23

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