Effective January 1, the companies which manufacture certain drugs in single dose containers and the providers who administer them are subject to new regulations specific to discarded drugs.
The regulations stem from the Centers for Medicare & Medicaid Services’ (CMS’s) implementation of the 2021 Infrastructure, Investment, and Jobs Act (IIJA) requiring manufacturers of single-dose or single-use containers of certain medicines paid for through Medicare Part B to provide refunds with respect to certain discarded amounts.
As providers adjust to the use of a new coding modifier, many drug manufacturers are preparing to provide refunds to CMS.
All interested parties are looking to a CMS town hall to be held in February for discussion of exceptions that may be made for certain drugs because of “unique circumstances.”
Dosing and Discarded Drugs
Many of the single-dose or single-use drugs potentially impacted by these regulations include infused or injected drugs for complex diseases which are administered in liquid form, with variable dosing based on a patient’s body size as measured by weight or body surface area. This is in contrast to fixed dosing, in which the same dosage of a medicine is given to all patients regardless of their size. While variable dosing allows for individualized delivery of a precisely calculated dosage within a narrow “therapeutic range” of drug efficacy between ineffectiveness and toxicity, it also presents special challenges in the packaging and delivery of such drugs.
To meet the anticipated needs of the general patient population, manufacturers need to package their products in such a way that a standard package—typically a vial—holds more than what would be needed for an average patient. This means that in many cases there will be medication left in the package after administration and discarded as providers would not be able to administer single-dose or single-use drugs to multiple patients due to sterility and safety concerns.
Historical Tracking of Discarded Drugs
CMS has been tracking discarded drugs by requiring the use of provider JW modifiers in claims billing since 2017.
Per the descriptor, “Drug Amount Discarded/Not Administered to Any Patient,” the JW modifier indicates for a given drug billed that some amount was discarded and not administered to any patient. Providers are required to report the JW modifier for any unused, discarded amounts from single-dose containers or single-use packages on all claims that bill for Medicare Part B separately payable drugs and biologicals. Providers are reimbursed for the discarded amount, as well as the dose administered, up to the amount of the drug indicated on the vial or package labeling.
As an example, if a provider administers 45 units of a drug to a patient from a single vial containing 50 units, the 5 units which are discarded and not administered to the patient would be billed with the JW modifier. This discarded amount must also be recorded in the patient’s medical record.
The JW modifier is mostly reported on claims from physician’s offices and hospital outpatient settings for Medicare patients who receive drugs incident to physicians’ services. CMS reports that compliance has been inconsistent despite use of the JW modifier being mandatory.
Starting this year, healthcare providers won’t only have to document discarded drugs. Effective July 1, 2023, CMS will require providers to use the newly established JZ modifier “on all claims that bill for drugs from single-dose containers that are separately payable under Medicare Part B when there are no discarded amounts.”
The JZ modifier, in essence, has been adopted by CMS as a means by which a provider billing for administration of a single-use medication actively attests that no medication was discarded.
The institution of a new modifier has the potential to increase overhead costs for providers. Unsurprisingly, some healthcare organizations have objected to the adoption of the JZ modifier. The American Hospital Association described it as “repetitive to the JW modifier,” while the American Federation of Hospitals called it “extensive, burdensome, and wholly unnecessary” and “unlikely to improve data integrity.” However, despite concerns voiced by providers in public comments to the agency, CMS has moved forward and finalized their new provider reporting requirements for discarded drugs.
Manufacturer Refunds for Discarded Drugs
While the previous requirement of the JW modifier has allowed CMS to track some discarded drugs, it had previously not had any financial implications for manufacturers. Medicare pays the provider for both the dosage administered to the patient and the discarded excess “up to the amount of the drug or biological as indicated on the vial or package label” with no refunds or rebates owed by manufacturer to CMS for that discarded amount.
Beginning January 1, 2023, drug manufacturers will be responsible for refunds to CMS for certain discarded amounts from a refundable single-dose container or single-use package of drugs or biologics administered under Medicare Part B. Exclusions are made for radiopharmaceutical or imaging agents, certain drugs or biologics requiring filtration, and newly approved drugs or biologics which have been eligible for Medicare reimbursement for less than 18 months.
The refund amount is equal to the amount of discarded drug that exceeds an applicable percentage, which is required to be at least 10 percent, of total charges for the drug in a given calendar quarter. The quantity of discarded drugs will be determined using the JW modifier in claims.
CMS may increase the applicable percentage from 10% in calculating discarded drug refunds for products that have a unique circumstance. CMS finalized one exception in the 2023 rulemaking for drugs reconstituted with a hydrogel and with variable dosing based on patient-specific characteristics and noted plans to consider additional unique circumstances as well as the process to identify them in future rulemaking. CMS is also gathering public feedback via a February 1 and 2 Town Hall regarding unique circumstances which may warrant increasing the applicable percentage. The meeting would inform future rulemaking anticipated in July 2023.
Timeline
While CMS had initially proposed sending invoices for reimbursement to manufacturers by October, it recognized the need to create “system efficiencies related to the reconciliation and invoicing system of the discarded drug refunds and the new inflation rebate programs under the Inflation Reduction Act.” As a result, CMS will use claims from the first two calendar quarters of 2023 to prepare a preliminary report on estimated discarded drug amounts by the end of this calendar year. CMS expects to conduct rulemaking in July 2023 that will finalize the timelines for when final full reports and invoices will be sent to manufacturers, and when manufacturers will be required to make payments.
As noted above, in addition to the JW modifier requirement already in effect, providers will be required to report the JZ modifier in all outpatient settings no later than July 1, 2023. However, Medicare Administrative Contractors (MACs) will not be required to make associated claim edits until October 1, 2023.