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<strong>CMS</strong>-1403-FC<br />

The methodology for developing Medicare drug payment<br />

allowances based on the manufacturers’ <strong>submitted</strong> ASP data<br />

is specified in 42 CFR part 414, subpart K. We initially<br />

established this regulatory text in the CY 2005 PFS final<br />

rule with comment period (69 FR 66424). We further<br />

described the formula we use to calculate the payment<br />

amount for each billing code in the CY 2006 PFS proposed<br />

rule (70 FR 45844) and final rule with comment period<br />

(70 FR 70217). With the enactment of the MMSEA, the<br />

formula we use changed beginning April 1, 2008. Section<br />

112(a) of the MMSEA requires us to calculate payment<br />

amounts using a specified volume-weighting methodology. In<br />

addition, section 112(b) of the MMSEA sets forth a special<br />

rule for determining the payment amount for certain<br />

inhalation drugs.<br />

For each billing code, we calculate a volume-weighted,<br />

ASP-based payment amount using the ASP data <strong>submitted</strong> by<br />

manufacturers. Manufacturers submit ASP data to us at the<br />

11-digit National Drug Code (NDC) level, including the<br />

number of units of the 11-digit NDC sold and the ASP for<br />

those units. We determine the number of billing units in<br />

an NDC based on the amount of drug in the package. For<br />

example: a manufacturer sells a box of four vials of a<br />

drug. Each vial contains 20 milligrams (mg). The billing<br />

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