CMS Pub. 100-04, ch. 17, § 20

Prospective Payment Basis

(Rev. 131, 03-26-04)

Prior to January 1, 2004, drugs and biologicals not paid on cost or prospective payment are paid based

on the lower of the billed charge or 95 percent of the average wholesale price (AWP) as reflected in

published sources (e.g., Red Book, Price Alert, etc.). Examples of drugs that are paid on this basis

include, but are not limited to, drugs furnished incident to a physician’s service, immunosuppressive

drugs furnished by pharmacies, drugs furnished by pharmacies under the durable medical equipment

benefit, covered oral anticancer drugs, and blood clotting factors.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, changed the basis for

payment of drugs and biologicals not paid on a cost or prospective payment basis. For January 1, 2004,

through December 31, 2004, such drugs or biologicals are paid as described below:

• The payment limits for blood clotting factors will be 95 percent of the AWP.

• The payment limits for new drugs or biologicals will be 95 percent of the AWP. A new drug is

defined as an unlisted drug (not currently covered by a HCPCS code) that was FDA approved

subsequent to April 1, 2003. A drug would not be considered new if:

o the brand or manufacturer of the drug changed;

o a new formulation of the vial size is developed; or

o the drug received a new indication.

• The payment limits for pneumococcal and hepatitis B drugs and biologicals will be 95 percent

of the AWP.

• The payment limits for certain drugs studied by the OIG and GAO are based on the percentages

of the April 1, 2003 AWPs specified on Table 1 below.

• The payment limits for infusion drugs furnished through an item of implanted durable medical

equipment on or after January 1, 2004, will be 95 percent of the October 1, 2003 AWP.

• Drugs and biologicals not described above are paid at 85 percent of the April 1, 2003 AWP.

Payment limits determined under this instruction shall not be updated during 2004.

Table 1: Percentages of April 1, 2003 AWP for Selected Drugs

HCPCS Applicable Percentage

J0640 80

J1100 86

J1260 80

J1440 81

J1441 81

J1561/J1563 80

J1626 80

J1642 80

J2405 87

J2430 85

J2820 80

J7320 82

J7517 86

J7608 80

J7619 80

J7631 80

J7644 80

J8520/J8521* 90

J9000 80

J9045 81

J9170 80

J9201 80

J9202 80

J9206 80

J9217 81

J9265 81

J9310 81

J9350 84

J9390 81

Q0136 87

* Use the following NDC numbers when processing claims:

• 00004-1100-20 150 mg

• 00004-1100-51 150 mg

• 00004-1101-16 500mg

• 00004-1101-50 500mg