Discarded Drugs

To meet the definition of refundable drug, as defined in Section 1847A(h)(8) of the Act and at 42 CFR § 414.902 , 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
• As stated in 87 FR 69719, 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 exceptions 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
• A drug approved or licensed by FDA on or after November 15, 2021 and for which the date the drug was first marketed (as reported to CMS) does not adequately approximate the date of first payment under Part B due to an applicable national coverage determination, until the last day of the sixth full quarter for which the drug has been covered and paid under Medicare Part B for the first NDC assigned to the billing and payment code of such drug

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 discarded amounts from single-dose containers or single-use packages separately payable under Part B along with the claim for the administered amount of the drug (with no modifier).
• The JZ modifier, which is required on all claims that bill for drugs from single-dose containers or single-use packages 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.

Related links:

• JW-JZ Modifier FAQs (Updated 01/10/2025)
• JW Modifier and JZ Modifier Policy HCPCS Codes (PDF) (Updated 06/20/2025). 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. Section 1847A(h)(3) of the Act specifies that the applicable percentage is 10 percent, but authorizes CMS to increase this percentage as appropriate, through notice and comment rulemaking, in the case that a refundable drug has unique circumstances involving similar loss of product as that described in section 1847A(h)(8)(B)(ii) of the Act. 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 are available).

Related links:

• Drugs with Increased Applicable Percentage (PDF) (Updated 03/01/2024)
• Orphan Drugs with Increased Applicable Percentage for Calendar Quarters in 2024 (PDF) (Updated 05/19/2025)

Yes, as stated at 42 CFR § 414.940(e), manufacturers may apply for 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.

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

1. A written request that a drug be considered for an increased applicable percentage based on its unique circumstances;
2. FDA-approved labeling for the drug, or, if the drug is not yet approved, documentation of the FDA acceptance of the application for review;
3. Justification for the consideration of an increased applicable percentage based on such unique circumstances; and
4. 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.

Note: As required by section 1847A(h)(3)(B)(ii) of the Social Security Act, 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 intend to discuss our analysis and propose increased applicable percentages, if any, in the Physician Fee Schedule (PFS) rulemaking.

The following are not considered unique circumstances warranting an increased applicable percentage at this time as discussed in 88 FR 79057: 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.

The refund amount is 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 estimated total allowed charges for a given quarter are determined by multiplying the total number of units of the drug paid during the quarter (excluding units that were packaged for payment), and the ASP-based payment limit effective during that quarter. Medicare Part B drug payment limits are published and effective on a quarterly basis and CMS uses certain ASP-based payment limits to calculate the refund due for each quarter.

New Refund Quarters

For new refund quarters, as defined at 42 CFR § 414.902, CMS calculates the refund amount due 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).

Updated Refund Quarters

To account for any lagged claims processed after previously calculated refund amounts, CMS calculates the refund amount due for an updated refund quarter, as defined at  42 CFR § 414.902, by completing steps 1 through 3 listed above and then:

• Step (4): Subtracting the refund amount already paid for such refundable drug for such quarter.

If the resulting refund amount due is negative, the amount will be netted from refunds owed for other updated and new refund quarters included in the same report as such updated refund quarter.

If a negative refund amount due remains after it has been netted from other refunds owed in the same report, the unapplied amount may be applied to a future refund report.
 

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. Refer to the question ‘Can a Manufacturer Request an Increased Applicable Percentage for a Refundable Drug?’ for application instructions.

As stated at 42 CFR § 414.940(c)(4), if there is more than one manufacturer of a refundable single-dose container or single-use package drug for a quarter, the refund amount for which a manufacturer is liable is an amount equal to the estimated amount (if any) of the refund amount due multiplied by the percentage of billing unit sales for that manufacturer as reported in the ASP Data Collection System (of the applicable billing and payment code attributed to the National Drug Code).

CMS Discarded Drug Refund reports are sent 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 can view their reports and pay any refunds due through the MPP.

Payment for refund amounts specified in the refund report is due by December 31 of the year in which the report is issued. If an error report is pending, payment will be due by December 31 or no later than 30 days after the error report has been resolved, whichever is later, as stated at 42 CFR § 414.940(b).

As stated at 42 CFR § 414.940(f)(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 issuance of their refund report or reports to submit an error report.

To submit an error report, manufacturers may complete this worksheet and email it as a PDF (.pdf) file or provide all the requested information below in an email to DiscardedDrugs@cms.hhs.gov. All error reports must be reported individually within 30 days of the refund report’s publication date:

• 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

If an error report is pending, payment will be due by December 31 or no later than 30 days after the error report has been resolved, whichever is later, as stated at 42 CFR § 414.940(b).

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 the table below 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.

More detailed information for previous years’ discarded drug refunds, including billing and payment codes for which a manufacturer (or manufacturers) paid a refund, and the combined amount of refund paid for the relevant quarters can be found in the documents posted below. These funds were deposited into the Supplementary Medical Insurance (SMI) Trust Fund, as required by law. 

• CY 2023 New Refund Quarters
• CY 2023 Updated Refund Quarters and CY 2024 New Refund Quarters