CMS Pub. 100-02, ch. 1, § 30

A3-3101.3, HO-210.3

Drugs and biologicals for use in the hospital, which are ordinarily furnished by the

hospital for the care and treatment of inpatients, are covered.

Three basic requirements must be met for a drug or biological furnished by a hospital to

be a covered hospital service:

1. The drug or biological must represent a cost to the institution in rendering

services to the beneficiary;

2. The drug or biological must meet the statutory definition. Under the statute,

payment may be made for a drug or biological only where it is included, or

approved for inclusion, in the latest official edition of the United States

Pharmacopoeia-National Formulary (USP-NF), the United States Pharmacopoeia

Drug Information (USP DI), or the American Dental Association (ADA) Guide to

Dental Therapeutics, except for those drugs and biologicals unfavorably evaluated

in the ADA Guide to Dental Therapeutics. Combination drugs are also included

in the definition of drugs if the combination itself or all of the therapeutic

ingredients of the combination are included, or approved for inclusion, in any of

the above drug compendia. Drugs and biologicals are considered approved for

inclusion in a compendium if approved under the established procedure by the

professional organization responsible for revision of the compendium; or be

approved by the pharmacy and drug therapeutics or equivalent committee of the

medical staff of the hospital for use in the hospital; and

3. Use of the drug or biological must be safe and effective and otherwise reasonable

and necessary as specified in the Medicare Benefit Policy Manual, Chapter 15,

“Covered Medical and Other Health Services,” §50.

Drugs or biologicals approved for marketing by the Food and Drug

Administration (FDA) are considered safe and effective for purposes of this last

requirement when used for indications specified in the labeling. Therefore, use of

an FDA-approved drug or biological is covered if:

• It was administered on or after the date of the FDA's approval;

• It is reasonable and necessary for the individual patient; and

• All other applicable coverage requirements are met.

Drugs and biologicals, which have not received final marketing approval by the FDA, are

not covered unless CMS instructs the A/B MAC (A) to the contrary. However, FDA-approved drugs are used for indications other than those specified on the labeling. As

long as the FDA has not specified such use as nonapproved, coverage is determined

taking into consideration the generally accepted medical practice in the community. For

example, the labeling of certain chemotherapeutic drugs indicates their use in the therapy

of specified types of cancer. However, based on experience and empirical evidence,

physicians may prescribe these drugs for a wider range of cancer treatments than what is

indicated in the labeling. Local medical review policy may or may not grant coverage,

depending on the circumstances.

Determinations as to whether use of a drug or biological is reasonable and necessary for

an individual patient are the responsibility of the Quality Improvement Organization

(QIO), if this is part of the review for a PPS acute care admission. However, if this is an

excluded service claim being reviewed by the A/B MAC (A), the A/B MAC (A) reviews

and makes a determination, unless it cannot and needs to refer it to the QIO for an initial

determination.

A hospital stay solely for the purpose of use of a drug or biological that is determined not

reasonable and necessary is not covered.