42 USC 1395 - Use of average sales price payment methodology

View all text of Part B [§ 1395j - § 1395w-6]

§ 1395w–3a. Use of average sales price payment methodology

(a) Application

(1) In general

(2) Election

(b) Payment amount

(1) In generalSubject to paragraph (7) and subsections (d)(3)(C) and (e), the amount of payment determined under this section for the billing and payment code for a drug or biological (based on a minimum dosage unit) is, subject to applicable deductible and coinsurance—

(A) in the case of a multiple source drug (as defined in subsection (c)(6)(C)), 106 percent of the amount determined under paragraph (3) for a multiple source drug furnished before April 1, 2008, or 106 percent of the amount determined under paragraph (6) for a multiple source drug furnished on or after April 1, 2008;

(B) in the case of a single source drug or biological (as defined in subsection (c)(6)(D)), 106 percent of the amount determined under paragraph (4) or in the case of such a drug or biological product that is a selected drug (as referred to in section 1320f–1(c) of this title), with respect to a price applicability period (as defined in section 1320f(b)(2) of this title), 106 percent of the maximum fair price (as defined in section 1320f(c)(3) of this title) applicable for such drug and a year during such period; or

(C) in the case of a biosimilar biological product (as defined in subsection (c)(6)(H)), the amount determined under paragraph (8).

(2) Specification of unit

(A) Specification by manufacturer

(B) Unit defined

(3) Multiple source drugFor all drug products included within the same multiple source drug billing and payment code, the amount specified in this paragraph is the volume-weighted average of the average sales prices reported under section 1396r–8(b)(3)(A)(iii) of this title or subsection (f)(2), as applicable, determined by—

(A) computing the sum of the products (for each National Drug Code assigned to such drug products) of—

(i) the manufacturer’s average sales price (as defined in subsection (c)); and

(ii) the total number of units specified under paragraph (2) sold; and

(B) dividing the sum determined under subparagraph (A) by the sum of the total number of units under subparagraph (A)(ii) for all National Drug Codes assigned to such drug products.

(4) Single source drug or biologicalThe amount specified in this paragraph for a single source drug or biological is the lesser of the following:

(A) Average sales price

(B) Wholesale acquisition cost (WAC)

(5) Basis for payment amount

(6) Use of volume-weighted average sales prices in calculation of average sales price

(A) In generalFor all drug products included within the same multiple source drug billing and payment code, the amount specified in this paragraph is the volume-weighted average of the average sales prices reported under section 1396r–8(b)(3)(A)(iii) of this title or subsection (f)(2), as applicable, determined by—

(i) computing the sum of the products (for each National Drug Code assigned to such drug products) of—(I) the manufacturer’s average sales price (as defined in subsection (c)), determined by the Secretary without dividing such price by the total number of billing units for the National Drug Code for the billing and payment code; and(II) the total number of units specified under paragraph (2) sold; and

(ii) dividing the sum determined under clause (i) by the sum of the products (for each National Drug Code assigned to such drug products) of—(I) the total number of units specified under paragraph (2) sold; and(II) the total number of billing units for the National Drug Code for the billing and payment code.

(B) Billing unit defined

(7) Special ruleBeginning with April 1, 2008, the payment amount for—

(A) each single source drug or biological described in section 1395u(o)(1)(G) of this title that is treated as a multiple source drug because of the application of subsection (c)(6)(C)(ii) is the lower of—

(i) the payment amount that would be determined for such drug or biological applying such subsection; or

(ii) the payment amount that would have been determined for such drug or biological if such subsection were not applied; and

(B) a multiple source drug described in section 1395u(o)(1)(G) of this title (excluding a drug or biological that is treated as a multiple source drug because of the application of such subsection) is the lower of—

(i) the payment amount that would be determined for such drug or biological taking into account the application of such subsection; or

(ii) the payment amount that would have been determined for such drug or biological if such subsection were not applied.

(8) Biosimilar biological product

(A) In generalSubject to subparagraph (B), the amount specified in this paragraph for a biosimilar biological product described in paragraph (1)(C) is the sum of—

(i) the average sales price as determined using the methodology described under paragraph (6) applied to a biosimilar biological product for all National Drug Codes assigned to such product in the same manner as such paragraph is applied to drugs described in such paragraph; and

(ii) 6 percent of the amount determined under paragraph (4) for the reference biological product (as defined in subsection (c)(6)(I)).

(B) Temporary payment increase

(i) In general

(ii) Applicable 5-year periodFor purposes of clause (i), the applicable 5-year period for a qualifying biosimilar biological product is—(I) in the case of such a product for which payment was made under this paragraph as of September 30, 2022, the 5-year period beginning on October 1, 2022; and(II) in the case of such a product for which payment is first made under this paragraph during a calendar quarter during the period beginning October 1, 2022, and ending December 31, 2027, the 5-year period beginning on the first day of such calendar quarter during which such payment is first made.

(iii) Qualifying biosimilar biological product definedFor purposes of this subparagraph, the term “qualifying biosimilar biological product” means a biosimilar biological product described in paragraph (1)(C) with respect to which—(I) in the case of a product described in clause (ii)(I), the average sales price under paragraph (8)(A)(i) for a calendar quarter during the 5-year period described in such clause is not more than the average sales price under paragraph (4)(A) for such quarter for the reference biological product; and(II) in the case of a product described in clause (ii)(II), the average sales price under paragraph (8)(A)(i) for a calendar quarter during the 5-year period described in such clause is not more than the average sales price under paragraph (4)(A) for such quarter for the reference biological product.

(1) In generalFor purposes of this section, subject to paragraphs (2) and (3), the manufacturer’s “average sales price” means, of a drug or biological for a National Drug Code for a calendar quarter for a manufacturer for a unit—

(A) the manufacturer’s sales to all purchasers (excluding sales exempted in paragraph (2)) in the United States for such drug or biological in the calendar quarter; divided by

(B) the total number of such units of such drug or biological sold by the manufacturer in such quarter.

(2) Certain sales exempted from computationIn calculating the manufacturer’s average sales price under this subsection, the following sales shall be excluded:

(A) Sales exempt from best price

(B) Sales at nominal charge

(3) Sale price net of discounts

(4) Payment methodology in cases where average sales price during first quarter of sales is unavailable

(A) In generalSubject to subparagraph (B), in the case of a drug or biological during an initial period (not to exceed a full calendar quarter) in which data on the prices for sales for the drug or biological is not sufficiently available from the manufacturer to compute an average sales price for the drug or biological, the Secretary may determine the amount payable under this section—

(i) in the case of a drug or biological furnished prior to January 1, 2019, based on—(I) the wholesale acquisition cost; or(II) the methodologies in effect under this part on November 1, 2003, to determine payment amounts for drugs or biologicals; and

(ii) in the case of a drug or biological furnished on or after January 1, 2019—(I) at an amount not to exceed 103 percent of the wholesale acquisition cost; or(II) based on the methodologies in effect under this part on November 1, 2003, to determine payment amounts for drugs or biologicals.

(B) Limitation on payment amount for biosimilar biological products during initial periodIn the case of a biosimilar biological product furnished on or after July 1, 2024, during the initial period described in subparagraph (A) with respect to the biosimilar biological product, the amount payable under this section for the biosimilar biological product is the lesser of the following:

(i) The amount determined under clause (ii) of such subparagraph for the biosimilar biological product.

(ii) The amount determined under subsection (b)(1)(B) for the reference biological product.

(5) Frequency of determinations

(A) In general on a quarterly basis

(B) Updates in payment amounts

(6) Definitions and other rulesIn this section:

(A) Manufacturer

(B) Wholesale acquisition cost

(i) In generalThe term “multiple source drug” means, for a calendar quarter, a drug for which there are 2 or more drug products which—(I) are rated as therapeutically equivalent (under the Food and Drug Administration’s most recent publication of “Approved Drug Products with Therapeutic Equivalence Evaluations”),(II) except as provided in subparagraph (E), are pharmaceutically equivalent and bioequivalent, as determined under subparagraph (F) and as determined by the Food and Drug Administration, and(III) are sold or marketed in the United States during the quarter.

(ii) Exception

(D) Single source drug or biologicalThe term “single source drug or biological” means—

(i) a biological; or

(ii) a drug which is not a multiple source drug and which is produced or distributed under a new drug application approved by the Food and Drug Administration, including a drug product marketed by any cross-licensed producers or distributors operating under the new drug application.

(E) Exception from pharmaceutical equivalence and bioequivalence requirement

(F) Determination of pharmaceutical equivalence and bioequivalenceFor purposes of this paragraph—

(i) drug products are pharmaceutically equivalent if the products contain identical amounts of the same active drug ingredient in the same dosage form and meet compendial or other applicable standards of strength, quality, purity, and identity; and

(ii) drugs are bioequivalent if they do not present a known or potential bioequivalence problem, or, if they do present such a problem, they are shown to meet an appropriate standard of bioequivalence.

(G) Inclusion of vaccines

(H) Biosimilar biological product

(I) Reference biological product

(d) Monitoring of market prices

(1) In general

(2) Comparison of pricesBased upon such studies and other data for drugs and biologicals, the Inspector General shall compare the average sales price under this section for drugs and biologicals with—

(A) the widely available market price for such drugs and biologicals (if any); and

(B) the average manufacturer price (as determined under section 1396r–8(k)(1) of this title) for such drugs and biologicals.

(3) Limitation on average sales price

(A) In general

(B) Applicable threshold percentage definedIn this paragraph, the term “applicable threshold percentage” means—

(i) in 2005, in the case of an average sales price for a drug or biological that exceeds widely available market price or the average manufacturer price, 5 percent; and

(ii) in 2006 and subsequent years, the percentage applied under this subparagraph subject to such adjustment as the Secretary may specify for the widely available market price or the average manufacturer price, or both.

(C) Authority to adjust average sales priceIf the Inspector General finds that the average sales price for a drug or biological exceeds such widely available market price or average manufacturer price for such drug or biological by the applicable threshold percentage, the Inspector General shall inform the Secretary (at such times as the Secretary may specify to carry out this subparagraph) and the Secretary shall, effective as of the next quarter, substitute for the amount of payment otherwise determined under this section for such drug or biological the lesser of—

(i) the widely available market price for the drug or biological (if any); or

(ii) 103 percent of the average manufacturer price (as determined under section 1396r–8(k)(1) of this title) for the drug or biological.

(4) Civil money penalty

(A) Misrepresentation

(B) Failure to provide timely information

(D) Increasing oversight and enforcementFor calendar quarters beginning on or after January 1, 2022, section 1396r–8(b)(3)(C)(iv) of this title shall be applied as if—

(i) each reference to “under this subparagraph and subsection (c)(4)(B)(ii)(III)” were a reference to “under this subparagraph, subsection (c)(4)(B)(ii)(III), and subparagraphs (A), (B), and (C) of section 1395w–3a(d)(4) of this title”; and

(ii) the reference to “activities related to the oversight and enforcement of this section and agreements under this section” were a reference to “activities related to the oversight and enforcement of this section and under subsection (f)(2) of section 1395w–3a of this title and subparagraphs (A), (B), and (C) of this subsection 1395w–3a(d)(4) of this title and, if applicable, agreements under this section”.

(E) Procedures

(5) Widely available market price

(A) In general

(B) ConsiderationsIn determining the price under subparagraph (A), the Inspector General shall consider information from one or more of the following sources:

(i) Manufacturers.

(ii) Wholesalers.

(iii) Distributors.

(iv) Physician supply houses.

(v) Specialty pharmacies.

(vi) Group purchasing arrangements.

(vii) Surveys of physicians.

(viii) Surveys of suppliers.

(ix) Information on such market prices from insurers.

(x) Information on such market prices from private health plans.

(e) Authority to use alternative payment in response to public health emergency

(f) Quarterly report on average sales price

(1) In general

(2) Manufacturers without a rebate agreement under subchapter xix

(A) In general

(B) Audit

(D) ConfidentialityNotwithstanding any other provision of law, information disclosed by manufacturers or wholesalers under this paragraph (other than the wholesale acquisition cost for purposes of carrying out this section) is confidential and shall not be disclosed by the Secretary in a form which discloses the identity of a specific manufacturer or wholesaler or prices charged for drugs or biologicals by such manufacturer or wholesaler, except—

(i) as the Secretary determines to be necessary to carry out this section (including the determination and implementation of the payment amount), or to carry out section 1320a–7b of this title;

(ii) to permit the Comptroller General of the United States to review the information provided;

(iii) to permit the Director of the Congressional Budget Office to review the information provided;

(iv) to permit the Medicare Payment Advisory Commission to review the information provided; and

(v) to permit the Medicaid and CHIP Payment and Access Commission to review the information provided.

(g) Payment adjustment for certain drugs for which there is a self-administered NDC

(1) OIG studies

(2) Payment adjustmentIf the Inspector General identifies a National Drug Code for a drug or biological product under paragraph (1), the Inspector General shall inform the Secretary (at such times as the Secretary may specify to carry out this paragraph) and the Secretary shall, to the extent the Secretary deems appropriate, apply as the amount of payment under this section for the applicable billing and payment code the lesser of—

(A) the amount of payment that would be determined under this section for such billing and payment code if such National Drug Code for such product so identified under paragraph (1) were excluded from such determination; or

(B) the amount of payment otherwise determined under this section for such billing and payment code without application of this subsection.

(3) Application to certain identified productsIn the case of a National Drug Code for a drug or biological product that is self-administered for which payment is not made under this part because such product is not covered pursuant to section 1395x(s)(2) of this title that was identified by the Inspector General of the Department of Health and Human Services in the final recommendation followup report of the Inspector General published July 2020, entitled Loophole in Drug Payment Rule Continues To Cost Medicare and Beneficiaries Hundreds of Millions of Dollars, beginning July 1, 2021, the amount of payment under this section for the applicable billing and payment code shall be the lesser of—

(A) the amount of payment that would be determined under this section for such billing and payment code if such National Drug Code for such drug or biological products so identified were excluded from such determination; or

(B) the amount of payment otherwise determined under this section for such billing and payment code without application of this subsection.

(h) Refund for certain discarded single-dose container or single-use package drugs

(1) Secretarial provision of information

(A) In generalFor each calendar quarter beginning on or after January 1, 2023, the Secretary shall, with respect to a refundable single-dose container or single-use package drug (as defined in paragraph (8)), report to each manufacturer (as defined in subsection (c)(6)(A)) of such refundable single-dose container or single-use package drug the following for the calendar quarter:

(i) Subject to subparagraph (C), information on the total number of units of the billing and payment code of such drug, if any, that were discarded during such quarter, as determined using a mechanism such as the JW modifier used as of November 15, 2021 (or any such successor modifier that includes such data as determined appropriate by the Secretary).

(ii) The refund amount that the manufacturer is liable for pursuant to paragraph (3).

(B) Determination of discarded amounts

(2) Manufacturer requirement

(3) Refund amount

(A) In generalThe amount of the refund specified in this paragraph is, with respect to a refundable single-dose container or single-use package drug of a manufacturer assigned to a billing and payment code for a calendar quarter beginning on or after January 1, 2023, an amount equal to the estimated amount (if any) by which—

(i) the product of—(I) the total number of units of the billing and payment code for such drug that were discarded during such quarter (as determined under paragraph (1)); and(II)(aa) in the case of a refundable single-dose container or single-use package drug that is a single source drug or biological, the amount of payment determined for such drug or biological under subsection (b)(1)(B) for such quarter; or(bb) in the case of a refundable single-dose container or single-use package drug that is a biosimilar biological product, the amount of payment determined for such product under subsection (b)(1)(C) for such quarter; exceeds

(ii) an amount equal to the applicable percentage (as defined in subparagraph (B)) of the estimated total allowed charges for such drug under this part during the quarter.

(B) Applicable percentage defined

(i) In generalFor purposes of subparagraph (A)(ii), the term “applicable percentage” means—(I) subject to subclause (II), 10 percent; and(II) if applicable, in the case of a refundable single-dose container or single-use package drug described in clause (ii), a percentage specified by the Secretary pursuant to such clause.

(ii) Treatment of drugs that have unique circumstances

(4) Frequency

(5) Refund deposits

(6) Enforcement

(A) Audits

(i) Manufacturer audits

(ii) Provider audits

(B) Civil money penalty

(i) In generalThe Secretary shall impose a civil money penalty on a manufacturer of a refundable single-dose container or single-use package drug who has failed to comply with the requirement under paragraph (2) for such drug for a calendar quarter in an amount equal to the sum of—(I) the amount that the manufacturer would have paid under such paragraph with respect to such drug for such quarter; and(II) 25 percent of such amount.

(ii) Application

(7) Implementation

(8) Definition of refundable single-dose container or single-use package drug

(A) In general

(B) ExclusionsThe term “refundable single-dose container or single-use package drug” does not include—

(i) a drug or biological that is either a radiopharmaceutical or an imaging agent;

(ii) a drug or biological approved by the Food and Drug Administration for which dosage and administration instructions included in the labeling require filtration during the drug preparation process, prior to dilution and administration, and require that any unused portion of such drug after the filtration process be discarded after the completion of such filtration process; or

(iii) a drug or biological approved by the Food and Drug Administration on or after November 15, 2021, and with respect to which payment has been made under this part for fewer than 18 months.

(9) Report to Congress

(i) Rebate by manufacturers for single source drugs and biologicals with prices increasing faster than inflation

(1) Requirements

(A) Secretarial provision of informationNot later than 6 months after the end of each calendar quarter beginning on or after January 1, 2023, the Secretary shall, for each part B rebatable drug, report to each manufacturer of such part B rebatable drug the following for such calendar quarter:

(i) Information on the total number of units of the billing and payment code described in subparagraph (A)(i) of paragraph (3) with respect to such drug and calendar quarter.

(ii) Information on the amount (if any) of the excess average sales price increase described in subparagraph (A)(ii) of such paragraph for such drug and calendar quarter.

(iii) The rebate amount specified under such paragraph for such part B rebatable drug and calendar quarter.

(B) Manufacturer requirement

(2) Part B rebatable drug defined

(A) In generalIn this subsection, the term “part B rebatable drug” means a single source drug or biological (as defined in subparagraph (D) of subsection (c)(6)), including a biosimilar biological product (as defined in subparagraph (H) of such subsection) but excluding a qualifying biosimilar biological product (as defined in subsection (b)(8)(B)(iii)), for which payment is made under this part, except such term shall not include such a drug or biological—

(i) if, as determined by the Secretary, the average total allowed charges for such drug or biological under this part for a year per individual that uses such a drug or biological are less than, subject to subparagraph (B), $100; or

(ii) that is a vaccine described in subparagraph (A) or (B) of section 1395x(s)(10) of this title.

(B) IncreaseThe dollar amount applied under subparagraph (A)(i)—

(i) for 2024, shall be the dollar amount specified under such subparagraph for 2023, increased by the percentage increase in the consumer price index for all urban consumers (United States city average) for the 12-month period ending with June of the previous year; and

(ii) for a subsequent year, shall be the dollar amount specified in this clause (or clause (i)) for the previous year (without application of subparagraph (C)), increased by the percentage increase in the consumer price index for all urban consumers (United States city average) for the 12-month period ending with June of the previous year.

(3) Rebate amount

(A) In generalFor purposes of paragraph (1), the amount specified in this paragraph for a part B rebatable drug assigned to a billing and payment code for a calendar quarter is, subject to subparagraphs (B) and (G) and paragraph (4), the estimated amount equal to the product of—

(i) the total number of units determined under subparagraph (B) for the billing and payment code of such drug; and

(ii) the amount (if any) by which—(I) the amount equal to—(aa) in the case of a part B rebatable drug described in paragraph (1)(B) of subsection (b), 106 percent of the amount determined under paragraph (4) of such section 2

2 So in original. Probably should be “subsection”.

for such drug during the calendar quarter; or(bb) in the case of a part B rebatable drug described in paragraph (1)(C) of such subsection, the payment amount under such paragraph for such drug during the calendar quarter; exceeds(II) the inflation-adjusted payment amount determined under subparagraph (C) for such part B rebatable drug during the calendar quarter.

(B) Total number of unitsFor purposes of subparagraph (A)(i), the total number of units for the billing and payment code with respect to a part B rebatable drug furnished during a calendar quarter described in subparagraph (A) is equal to—

(i) the number of units for the billing and payment code of such drug furnished during such calendar quarter, minus

(ii) the number of units for such billing and payment code of such drug furnished during such calendar quarter—(I) with respect to which the manufacturer provides a discount under the program under section 256b of this title or a rebate under section 1396r–8 of this title; or(II) that are packaged into the payment amount for an item or service and are not separately payable.

(C) Determination of inflation-adjusted payment amountThe inflation-adjusted payment amount determined under this subparagraph for a part B rebatable drug for a calendar quarter is—

(i) the payment amount for the billing and payment code for such drug in the payment amount benchmark quarter (as defined in subparagraph (D)); increased by

(ii) the percentage by which the rebate period CPI–U (as defined in subparagraph (F)) for the calendar quarter exceeds the benchmark period CPI–U (as defined in subparagraph (E)).

(D) Payment amount benchmark quarter

(E) Benchmark period CPI–U

(F) Rebate period CPI–U

(G) Reduction or waiver for shortages and severe supply chain disruptionsThe Secretary shall reduce or waive the amount under subparagraph (A) with respect to a part B rebatable drug and a calendar quarter—

(i) in the case of a part B rebatable drug that is described as currently in shortage on the shortage list in effect under section 356e of title 21 at any point during the calendar quarter; or

(ii) in the case of a biosimilar biological product, when the Secretary determines there is a severe supply chain disruption during the calendar quarter, such as that caused by a natural disaster or other unique or unexpected event.

(4) Special treatment of certain drugs and exemption

(A) Subsequently approved drugs

(B) Timeline for provision of rebates for subsequently approved drugs

(5) Application to beneficiary coinsuranceIn the case of a part B rebatable drug furnished on or after April 1, 2023, if the payment amount described in paragraph (3)(A)(ii)(I) (or, in the case of a part B rebatable drug that is a selected drug (as defined in section 1320f–1(c) of this title), the payment amount described in subsection (b)(1)(B) for such drug) for a calendar quarter exceeds the inflation adjusted payment for such quarter—

(A) in computing the amount of any coinsurance applicable under this part to an individual to whom such drug is furnished, the computation of such coinsurance shall be equal to 20 percent of the inflation-adjusted payment amount determined under paragraph (3)(C) for such part B rebatable drug; and

(B) the amount of such coinsurance for such calendar quarter, as computed under subparagraph (A), shall be applied as a percent, as determined by the Secretary, to the payment amount that would otherwise apply under subparagraphs (B) or (C) of subsection (b)(1).

(6) Rebate deposits

(7) Civil money penalty

(8) Limitation on administrative or judicial reviewThere shall be no administrative or judicial review of any of the following:

(A) The determination of units under this subsection.

(B) The determination of whether a drug is a part B rebatable drug under this subsection.

(D) The computation of coinsurance under paragraph (5) of this subsection.

(E) The computation of amounts paid under section 1395l(a)(1)(EE) of this title.

(j) Judicial reviewThere shall be no administrative or judicial review under section 1395ff of this title, section 1395oo of this title, or otherwise, of—

(1) determinations of payment amounts under this section, including the assignment of National Drug Codes to billing and payment codes;

(2) the identification of units (and package size) under subsection (b)(2);

(3) the method to allocate rebates, chargebacks, and other price concessions to a quarter if specified by the Secretary;

(4) the manufacturer’s average sales price when it is used for the determination of a payment amount under this section; and

(5) the disclosure of the average manufacturer price by reason of an adjustment under subsection (d)(3)(C) or (e).

(Aug. 14, 1935, ch. 531, title XVIII, § 1847A, as added Pub. L. 108–173, title III, § 303(c)(1), Dec. 8, 2003, 117 Stat. 2239; amended Pub. L. 110–173, title I, § 112, Dec. 29, 2007, 121 Stat. 2500; Pub. L. 111–148, title III, § 3139(a), Mar. 23, 2010, 124 Stat. 439; Pub. L. 116–39, § 6, Aug. 6, 2019, 133 Stat. 1062; Pub. L. 116–260, div. CC, title IV, §§ 401(a), (b), 405, Dec. 27, 2020, 134 Stat. 2995, 2996, 3002; Pub. L. 117–58, div. I, § 90004, Nov. 15, 2021, 135 Stat. 1343; Pub. L. 117–169, title I, §§ 11001(b)(1)(A), 11101(a), (c)(1), 11102(b)(1), 11402, 11403, Aug. 16, 2022, 136 Stat. 1851, 1865, 1870, 1876, 1898.)