ESRD PPS Transitional Drug Add-on Payment Adjustment

The TDAPA is a payment adjustment under the ESRD PPS for certain new renal dialysis drugs and biological products. As discussed in the CY 2019 and CY 2020 ESRD PPS final rules, for new renal dialysis drugs and biological products that fall into an existing ESRD PPS functional category, the TDAPA helps ESRD facilities to incorporate new drugs and biological products and make appropriate changes in their businesses to adopt such products.  Furthermore, the TDAPA provides additional payments for such associated costs and promotes competition among the products within the ESRD PPS functional categories, while also focusing Medicare resources on products that are innovative (83 FR 56935; 84 FR 60654).  For new renal dialysis drugs and biological products that do not fall within an existing ESRD PPS functional category, the TDAPA is a pathway toward a potential base rate modification (83 FR 56935).  The TDAPA requirements are set forth in the ESRD PPS regulations at 42 C.F.R. § 413.234.

This page provides information about the TDAPA, including details for requesting the TDAPA for new renal dialysis drugs and biological products.

Resources:

For a discussion of the TDAPA criteria and information regarding the ESRD PPS drug designation process, refer to the following resources:

• Calendar Year 2016 ESRD PPS Final Rule, in the November 6, 2015 Federal Register (80 FR 69013 through 69027)
• Calendar Year 2019 ESRD PPS Final Rule, in the November 14, 2018 Federal Register (83 FR 56927 through 56949)
• Calendar Year 2020 ESRD PPS Final Rule, in the November 8, 2019 Federal Register (84 FR 60653 through 60681)
• Calendar Year 2021 ESRD PPS Final Rule, in the November 9, 2020 Federal Register (85 FR 71402 through 71410)

Coming Soon: Updates to Pub. 100-02 Medicare Benefit Policy Manual, Chapter 11 - ESRD (PDF)

TDAPA Administrative Issuances:

• On August 4, 2017, CMS issued instructions regarding the implementation of the TDAPA for calcimimetics. These instructions were updated on January 10, 2018, to provide more descriptive examples.  See CR 10065 - Implementation of the Transitional Drug Add-On Payment Adjustment (PDF) and MM10065 (PDF).
• On November 8, 2019, CMS issued instructions effective April 1, 2020, to allow for expansion of the list of new renal dialysis drugs and biological products that become eligible for the TDAPA. See CR 11514 -  (PDF)Refinement of the Transitional Drug Add-on Payment Adjustment (TDAPA) (PDF).
• On November 23, 2020, CMS issued instructions effective January 1, 2021, indicating that calcimimetics are no longer paid for under the ESRD PPS using the TDAPA (42 C.F.R. § 413.234(c)) and instead are paid for through the ESRD PPS base rate and are eligible for outlier payments as ESRD outlier services under 42 C.F.R. § 413.237.  See CR 12011 - Implementation of Changes in the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) and Payment for Dialysis Furnished for Acute Kidney Injury (AKI) in ESRD Facilities for Calendar Year (CY) 2021 (PDF).
• On February 24, 2022, CMS issued instructions effective April 1, 2022, indicating that Korsuva™ (difelikefalin) qualifies for the TDAPA under the ESRD PPS.  See CR 12583 - Quarterly Update to the End-Stage Renal Disease Prospective Payment System (ESRD PPS). (PDF)
• These instructions were updated on March 15, 2022, to reflect TDAPA background and policy. See CR 12583 - Quarterly Update to the End-Stage Renal Disease Prospective Payment System (ESRD PPS) (PDF) and MM12583 (PDF).
• The JW modifier should be used by ESRD facilities on the 72x claim to report the amount of Korsuva™ that is discarded and eligible for payment under the ESRD PPS.
• On July 27, 2023, CMS issued instructions effective October 1, 2023, indicating that Jesduvroq® (daprodustat) qualifies for the TDAPA under the ESRD PPS. See CR 13275 - Quarterly Update to the End-Stage Renal Disease Prospective Payment System (ESRD PPS) (PDF) and MM13275 (PDF) (PDF).
• On May 9, 2024, CMS issued instructions effective July 1, 2024, indicating that DEFENCATH® (taurolidine and heparin) qualifies for the TDAPA under the ESRD PPS. See CR 13608 Quarterly Update to the End-Stage Renal Disease Prospective Payment System (ESRD PPS) (PDF) and MM13608 (PDF).

CMS will continue to issue instructions on an ongoing basis regarding implementation and discontinuation of the TDAPA for new renal dialysis drugs and biological products.

Recent TDAPA Approvals:

In April 2024, CMS approved CorMedix’s DEFENCATH® (taurolidine and heparin) for the TDAPA under the ESRD PPS. Implementation instructions are included in the TDAPA Administrative Issuances section above. The TDAPA payment period is July 1, 2024, through June 30, 2026. This was CMS’s fourth approval of a drug or biological product for the TDAPA under the ESRD PPS since the TDAPA’s inception. 

Previous TDAPA Approvals:

In July 2023, CMS approved GlaxoSmithKline’s Jesduvroq™ (daprodustat) for the TDAPA under the ESRD PPS. Implementation instructions are included in the TDAPA Administrative Issuances section above. The TDAPA payment period is October 1, 2023, through September 30, 2025. This was CMS’s third approval of a drug or biological product for the TDAPA under the ESRD PPS since the TDAPA’s inception.

In December 2021, CMS approved Vifor Pharma and Cara Therapeutics’ Korsuva™ (difelikefalin) for the TDAPA under the ESRD PPS. Implementation instructions are included in the TDAPA Administrative Issuances section above. Payment began on April 1, 2022, and continued through March 31, 2024. This was CMS’s second approval of a drug or biological product for the TDAPA under the ESRD PPS since the TDAPA’s inception. 

Payment Amounts for New Renal Dialysis Drugs and Biological Products Currently Eligible for the TDAPA:

Please see Drugs and Biological Products Eligible for the TDAPA (PDF) for quarterly pricing updates. 

The TDAPA Payment Process for a New Renal Dialysis Drug or Biological Product:

For New Renal Dialysis Drugs or Biological Products Within an Existing ESRD PPS Functional Category (§ 413.234(b)(1)):

Eligibility Criteria

A new renal dialysis drug or biological product used to treat or manage a condition for which there is an ESRD PPS functional category is considered included in the ESRD PPS bundled payment.  The new renal dialysis drug or biological product is paid for using the TDAPA as described in 42 C.F.R. § 413.234(c)(1), unless it is excluded from the TDAPA eligibility under 42 C.F.R. § 413.234(e).

Exclusion Criteria

A new renal dialysis drug or biological product used to treat or manage a condition for which there is an ESRD PPS functional category is not eligible for payment using the TDAPA, as described in 42 C.F.R. § 413.234(c)(1), if the drug is approved by the U.S. Food and Drug Administration (FDA) under § 505(j) of the Federal Food, Drug, and Cosmetic Act (FD&C Act) or the new drug application (NDA) for the drug is classified by FDA as Type 3, 5, 7, or 8; Type 3 in combination with Type 2 or Type 4; Type 5 in combination with Type 2; or Type 9 when the parent NDA is a Type 3, 5, 7 or 8 as described in 42 C.F.R. § 413.234(e)(1) through (7).

Basis of Payment

The TDAPA is based on 100 percent of average sales price (ASP). If ASP is not available, then the TDAPA is based on 100 percent of wholesale acquisition cost (WAC). If WAC is unavailable, then the payment is based on the drug manufacturer's invoice.

Duration of the TDAPA

The TDAPA is paid for 2 years. The TDAPA payment period begins on the effective date of the CMS Change Request (CR). During the time a new renal dialysis drug or biological product is eligible for the TDAPA, it is not an eligible ESRD outlier service as defined under 42 C.F.R. § 413.237(a)(1) and therefore is ineligible for outlier payment.

Payment Process

• CMS notifies the TDAPA applicant of its TDAPA determination.
• CMS adds the new renal dialysis drug or biological product to an existing ESRD PPS functional category through administrative issuance.  Specifically, CMS will include instructions for Medicare Administrative Contractors (MACs) and ESRD facilities about the products approved for the TDAPA in the ESRD PPS via the Change Request (CR) process.
• CMS pays for the new renal dialysis drug or biological product using the TDAPA for a period of 2 years.
• At the end of the TDAPA payment period, the new renal dialysis drug or biological product is paid the post-TDAPA add-on payment adjustment and no changes to the base rate are made.   

Post TDAPA Add-on Payment Adjustment 

Beginning for CY 2024, CMS pays a post-TDAPA add-on payment adjustment on all ESRD PPS claims, which provides increased payment for new renal dialysis drugs or biological products that are considered included in the ESRD PPS base rate following the end of the TDAPA period for those products.  Manufacturers do not need to apply for the post-TDAPA add-on payment adjustment. 

• A new renal dialysis drug or biological product is included in the calculation of the post-TDAPA add-on payment adjustment for a period of 3 years.
• CMS annually calculates the post-TDAPA add-on payment adjustment for each quarter of the upcoming CY, based on the most recent 12 months of claims data.
• The post-TDAPA add-on payment adjustment amount for a drug or biological product is the total expenditure for a new drug divided by total ESRD PPS expenditures during the same period, reduced by a case-mix standardization factor and a 65 percent risk-sharing factor and inflated by the market basket price proxy for pharmaceuticals.
• All Part B drug manufacturers report Average Sales Price (ASP) data for Part B-covered drugs and biologicals and related items, services, supplies, and products that are paid as drugs or biologicals as described on the ASP Reporting website. 
• If CMS does not receive the latest available calendar quarter of ASP data for a drug or biological product, then CMS will not apply the post-TDAPA add-on payment adjustment for that drug or biological product for the upcoming CY or any future CY.
• The amount of the post-TDAPA add-on payment adjustment may vary from quarter to quarter depending on the number of drugs and biological products included in the calculation.
• The amount of the post-TDAPA add-on payment adjustment paid on a claim will be adjusted by the applicable patient-level case-mix adjustment factors.

For New Renal Dialysis Drugs or Biological Products Not Within an Existing ESRD PPS Functional Category (§ 413.234(b)(2)):

Eligibility Criteria

A new renal dialysis drug or biological product used to treat or manage a condition for which there is not an ESRD PPS functional category is not considered included in the ESRD PPS bundled payment.  The new renal dialysis drug or biological product is paid for using the TDAPA as described in § 413.234(c)(2).

Basis of Payment

The TDAPA is based on 100 percent of average sales price (ASP). If ASP is not available, then the TDAPA is based on 100 percent of wholesale acquisition cost (WAC). If WAC is unavailable, then the payment is based on the drug manufacturer's invoice.

Duration of the TDAPA

The TDAPA is paid until sufficient claims data for rate setting analysis for the new renal dialysis drug or biological product is available, but not for less than 2 years. The TDAPA payment and data collection periods for these drugs and biological products begin on the effective date of the applicable CMS ESRD PPS annual update CR for MACs and ESRD facilities.  During the time a new renal dialysis drug or biological product is eligible for the TDAPA, it is not an eligible ESRD outlier service as defined under 42 C.F.R. § 413.237(a)(1) and therefore is ineligible for outlier payment.

Payment Process:

• CMS notifies the TDAPA applicant of its TDAPA determination.
• CMS adds a new ESRD PPS functional category or revises an existing ESRD PPS functional category through rulemaking for the condition that the new renal dialysis drug or biological product is used to treat or manage. CMS will include instructions for MACs and ESRD facilities about the products approved for the TDAPA in the ESRD PPS annual update via the CR process. 
• CMS pays for the new renal dialysis drug or biological product using the TDAPA for a period of at least 2 years until sufficient claims data for rate setting analysis is available. 
• Following payment of the TDAPA, CMS undertakes rulemaking to modify the ESRD PPS base rate, if appropriate, to account for the new renal dialysis drug or biological in the ESRD PPS bundled payment.  The post-TDAPA add-on payment adjustment does not apply for these drugs or biological products.

ASP Conditional Policy for the TDAPA:

• As described in § 413.234(c), if CMS does not receive a full calendar quarter of ASP data for a new renal dialysis drug or biological product within 30 days of the last day of the 3rd calendar quarter after CMS begins applying the TDAPA for the product, CMS will no longer apply the TDAPA for that product beginning no later than 2-calendar quarters after CMS determines a full calendar quarter of ASP data is not available.
• If CMS stops receiving the latest full calendar quarter of ASP data for a new renal dialysis drug or biological product during the applicable time period for the TDAPA, CMS will no longer apply the TDAPA for the product beginning no later than 2-calendar quarters after CMS determines that the latest full calendar quarter of ASP data is not available.

Information regarding the submission of ASP data is available on the Medicare Part B Drug Average Sales Price page.

Timeline for TDAPA Payment for New Renal Dialysis Drugs or Biological Products Within an Existing ESRD PPS Functional Category:

Because applicants are required to provide a Healthcare Common Procedure Coding System (HCPCS) Application Confirmation Number when applying for the TDAPA, the TDAPA application should be submitted after the application for a HCPCS code. The TDAPA and HCPCS application submissions will be reviewed simultaneously on a quarterly basis, by following the CMS Level II HCPCS application deadlines for drugs and biological products. The TDAPA submissions received after the Level II HCPCS quarterly submission deadline will be reviewed in the following quarter.   

Our goal is to provide the TDAPA for qualifying new renal dialysis drugs and biological products in a timely manner. CMS aims for an effective date for applying the TDAPA for a particular product that is one quarter after the effective date of the HCPCS code for the product, or approximately 6 months after the quarterly submission deadline. This timeframe generally allows for sufficient time for CMS analysis, decision-making, and system changes. However, a longer evaluation period may be necessary due to a number of factors, including a CMS request for further information, or the need for a more extensive CMS evaluation to determine eligibility. The effective date for the TDAPA for a particular product will be communicated to the public through administrative issuance with instructions to the ESRD facilities for reporting the drug or biological product on the claim.

Issued CRs are available on the CMS Transmittal page.

Note: Table reflects targeted deadlines.

The contents of this page do not have the force and effect of law and are not meant to bind the public in any way, unless specifically incorporated into a contract.  The contents of this page are intended only to provide clarity to the public regarding existing requirements under the law.