Discarded Drugs

To meet the definition of refundable single-dose container or single-use package drug (hereinafter referred to as refundable drug), a product must meet the following criteria:

• Must be a separately payable single-source drug or biological or a biosimilar biological product for which payment has been made under Medicare Part B;

• Must be furnished from a single-dose container or single-use package; and

• All national drug codes (NDCs) assigned to the drug’s billing and payment code must be single-dose containers or single-use packages, as described in each product’s labeling.

The following exclusions apply:

• Radiopharmaceuticals (therapeutic or diagnostic) or imaging agents

• Certain drugs or biologicals requiring filtration during preparation (prior to dilution and administration) for which unused portions must be discarded after the filtration process

• Drugs approved or licensed by the Food and Drug Administration (FDA) on or after November 15, 2021, until the last day of the sixth full quarter for which the drug has been marketed (as reported to CMS) for the first reported sale for any NDCs of such drug

Related link: Definition of refundable single-dose container or single-use package drug (42 CFR § 414.902)

Discarded amounts of a refundable drug are identified using Medicare claim modifiers to denote billing units of such drug that are unused and discarded. Providers are required to report discarded amounts on the claims they submit to Medicare using the JW modifier, and providers are required to attest that no amounts were discarded using the JZ modifier. Providers report:

• The JW modifier on claims for drugs with discarded drug amounts from single-dose containers or single-use packages separately payable under Part B (87 FR 69710 through 69734)
• The JZ modifier is required 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 is reported on a claim to attest that no amount of drug was discarded and eligible for payment (87 FR 69718 through 69719).

Related links:

• JW-JZ Modifier FAQs (Updated 10/16/2023)

• JW Modifier and JZ Modifier Policy HCPCS Codes (PDF) (Updated 03/07/2024). This includes a non-exhaustive list of specific billing and payment codes to which only single-dose containers are assigned, and thus may require use of the JW or JZ modifiers depending on the setting of use.

An applicable percentage is a percentage used in the calculation of the discarded drug refund. This percentage is required to be at least 10 percent, unless an increased applicable percentage applies, as finalized in notice-and-comment rulemaking.

The following list specifies drugs with an increased applicable percentage as described at 42 CFR § 414.940(d)(2), (3), and (4):

• 35 percent for a drug that is reconstituted with a hydrogel and has variable dosing based on patient-specific characteristics

• 90 percent for a drug with a low volume dose contained within 0.1 mL or less

• 45 percent for a drug with a low volume dose contained within 0.11 mL up to 0.4 mL

• 26 percent for a drug designated an orphan drug under Section 526 of the Federal Food, Drug, and Cosmetic Act (FD&C Act) for rare disease(s) or condition(s) and approved by the FDA only for one or more indications within such designated rare disease or condition (or diseases or conditions) and is furnished to fewer than 100 unique beneficiaries per calendar year (CY)

• Increased applicable percentage for orphan drugs as described at 42 CFR § 414.940(d)(5) will be determined using claims data for the CY in which the refund quarter occurs (or the CY and up to two previous CYs if claims data is available) and communicated in reports to manufacturers.

Related link: Drugs with Increased Applicable Percentage (PDF) (Updated 03/01/2024)

Yes, manufacturers may request an increase to their applicable percentage for a refundable drug because of the drug’s unique circumstances by February 1 of the CY prior to the year that the increase would apply. (42 CFR § 414.940(e))

1. To request consideration for an increased applicable percentage, manufacturers must submit the following information to DiscardedDrugs@cms.hhs.gov:

2. A written request that a drug be considered for an increased applicable percentage based on its unique circumstances;

3. FDA-approved labeling for the drug, or, if the drug is not yet approved, documentation of the FDA acceptance of the application for review;

4. Justification for the consideration of an increased applicable percentage based on such unique circumstances; and

5. Justification for the requested increase in the applicable percentage.

An application for a drug that is not FDA-approved by February 1 must:

• Receive FDA approval by August 1 and

• Submit the FDA-approved label to CMS by September 1 of the CY prior to the year the increased applicable percentage would apply.

Please note: As required by section 1847A(h)(3)(B)(ii), the Secretary may only increase the applicable percentage for a refundable drug that has unique circumstances through notice-and-comment rulemaking. Thus, after reviewing each timely application, we plan to discuss our analysis and propose increased applicable percentages, if any, in the Physician Fee Schedule (PFS) rulemaking. We will also summarize any applications for which we do not propose an increase in the applicable percentage.

The following are not considered unique circumstances warranting an increased applicable percentage at this time: weight-based doses, body surface area (BSA)-based doses, varying surface area of a wound, loading doses, escalation or titration doses, tapering doses, and dose adjustments for toxicity (88 FR 79057.)

The refund amount is the amount by which the product of the number of discarded units and the payment limit exceeds the applicable percentage of the estimated total allowed charges for the drug for a given quarter, which is required to be at least 10 percent of total charges for the drug in a given calendar quarter (42 CFR § 414.940). Medicare Part B drug payment limits are published and effective on a quarterly basis. CMS uses certain ASP-based payment limits to calculate the refund due for each quarter by:

• Step (1): Multiplying the total number of discarded drug units based on the JW modifier for applicable claims during the quarter and the drug’s payment limit, as determined under section 1847A(b)(1)(B) or (C) of the Act, for the quarter;

• Step (2): Multiplying the applicable percentage by the total allowed charges for the drug for the quarter; and

• Step (3): Subtracting the product calculated in step (2) from the product calculated in step (1).

An example of this calculation is described in 87 FR 69727.

Please note: Applicable percentages vary based on refundable drugs’ unique circumstances and are described further at 42 CFR § 414.940(d). Manufacturers may apply for an increase to a refundable drug’s applicable percentage. Application instructions are provided in more detail in the previous question above.

CMS will send refund reports via the Manufacturer Payment Portal (MPP). The report will contain: (1) information on the total number of billing units of the refundable drug, if any, that were discarded and (2) the refund amount due for each calendar quarter. Manufacturers will be able to view their reports by line items and pay any refunds due through the MPP. The refund amounts specified in the initial refund report must be paid no later than February 28, 2025.

For subsequent years, reports consisting of information in new refund quarters and updated refund quarters (as defined in 42 CFR § 414.902) will be generated on an annual basis and available in MPP with payment due by December 31 (42 CFR § 414.940(b)(1)).

Manufacturers of refundable drugs may submit an error report to assert that there have been one or more errors in the Discarded Drug Refund Report. Manufacturers have 30 days after receipt of their refund report or reports to submit an error report.

In cases where a manufacturer submits an error report, manufacturers should hold off on paying the amount that is being disputed until the dispute is resolved. Any refund amounts determined upon the resolution will be due by the due date of the invoice or 30 days following the resolution, whichever is later. (Refer to 42 CFR § 414.940(b)(1) and (2).)

To submit a dispute for each asserted error, provide the following information in a written request to DiscardedDrugs@cms.hhs.gov within 30 days of receiving the refund report/invoices:

• Manufacturer name and address

• Name, telephone number, and email address of one or more employees of the manufacturer

• For a mathematical calculation error, include:

• The specific calculation element(s) that the manufacturer disputes

• The proposed corrected calculation

• For any other asserted error, include:

• An explanation of the nature of the error

• How the error affects the refund calculation

• An explanation of why the manufacturer believes that an error occurred

• The proposed correction to the error

• An explanation of why CMS should use the proposed corrected data

Yes, the Secretary of Health and Human Services has authority to impose a civil money penalty of 125 percent of the assessed refund obligation to manufacturers who do not comply with the manufacturer requirement as described in 42 CFR § 414.940(g).

Please refer to Table 1 to contact the most appropriate team with your questions.

Table 1: Discarded Drug Program Contacts

CMS uses P Numbers to identify manufacturer accounts in the Health Plan Management System (HPMS) for various programs such as the Inflation Reduction Act’s Medicare Prescription Drug Inflation Rebate Program and the Medicare Part B Discarded Drug Program. If you are new to the Discarded Drug Program, and have not been issued a P Number, please submit the following information via email to DiscardedDrugs@cms.hhs.gov to request a P Number:

• Manufacturer Legal Name
• Data Universal Numbering System (DUNS) Number
• Employer Identification Number (EIN)
• Primary Contact First and Last Name
• Primary Contact Email Address
• Primary Contact Phone Number
• Subject Line of the Email Should Read “[Manufacturer Name] Request for P Number”

After you send your request, CMS will contact you should we require any additional information to issue a P Number. Once your P Number is issued, a representative from Palmetto GBA, a contractor serving as CMS’ third-party administrator (TPA) for the invoicing and payment processes, will reach out to begin the HPMS onboarding process.