CMS Pub. 100-04, ch. 17, § 60.1

Medicare does not cover a drug used as a supply with DME or a prosthetic device if the drug is

dispensed by an entity that is not licensed to dispense the drug. The drug is not considered to be

reasonable and necessary because CMS cannot be assured of its safety and effectiveness unless it is

dispensed by an entity that has a State license that qualifies it to dispense the drug. The equipment used

with the drugs dispensed by a nonlicensed entity is also considered to be not reasonable and necessary

because of the related safety and efficacy concerns. Physicians are considered to have been “deemed”

the right to dispense prescription drugs, and therefore do not require a pharmacy license.

The DME MACs should deny claims for a prescription drug (and related equipment when billed on the

same claim as the drug) when the National Supplier Clearinghouse’s (NSC’s) files show the supplier is

or was not licensed to dispense the drugs on the date of service (DOS).

An exception to this general policy is oxygen claims.

Messages for Assigned Claims:

The contractor shall use the following remittance advice messages and associated codes when

rejecting/denying claims under this policy. This CARC/RARC combination is compliant with CAQH

CORE Business Scenario Three.

Group Code: CO

CARC: B7

RARC: M143

MSN: 8.50

Messages for Nonassigned Claims:

MSN: “This item or service is not covered when performed or ordered by this provider.”

(MSN #12.18)

Appeals should be addressed according to the instructions in Chapter 29.