Transitional pass-through for additional costs of innovative medical devices, drugs, and biologicals
(A) In general
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(A) In general
The Secretary shall provide for an additional payment under this paragraph for any of the following that are provided as part of a covered OPD service (or group of services):
(i) Current orphan drugs A drug or biological that is used for a rare disease or condition with respect to which the drug or biological has been designated as an orphan drug under section 360bb of title 21 if payment for the drug or biological as an outpatient hospital service under this part was being made on the first date that the system under this subsection is implemented.
(ii) Current cancer therapy drugs and biologicals and brachytherapy A drug or biological that is used in cancer therapy, including (but not limited to) a chemotherapeutic agent, an antiemetic, a hematopoietic growth factor, a colony stimulating factor, a biological response modifier, a bisphosphonate, and a device of brachytherapy or temperature monitored cryoablation, if payment for such drug, biological, or device as an outpatient hospital service under this part was being made on such first date.
(iii) Current radiopharmaceutical drugs and biological products A radiopharmaceutical drug or biological product used in diagnostic, monitoring, and therapeutic nuclear medicine procedures if payment for the drug or biological as an outpatient hospital service under this part was being made on such first date.
(iv) New medical devices, drugs, and biologicals A medical device, drug, or biological not described in clause (i), (ii), or (iii) if— (I) payment for the device, drug, or biological as an outpatient hospital service under this part was not being made as of December 31, 1996 ; and (II) the cost of the drug or biological or the average cost of the category of devices is not insignificant in relation to the OPD fee schedule amount (as calculated under paragraph (3)(D)) payable for the service (or group of services) involved.
A drug or biological that is used for a rare disease or condition with respect to which the drug or biological has been designated as an orphan drug under section 360bb of title 21 if payment for the drug or biological as an outpatient hospital service under this part was being made on the first date that the system under this subsection is implemented.
A drug or biological that is used in cancer therapy, including (but not limited to) a chemotherapeutic agent, an antiemetic, a hematopoietic growth factor, a colony stimulating factor, a biological response modifier, a bisphosphonate, and a device of brachytherapy or temperature monitored cryoablation, if payment for such drug, biological, or device as an outpatient hospital service under this part was being made on such first date.
A radiopharmaceutical drug or biological product used in diagnostic, monitoring, and therapeutic nuclear medicine procedures if payment for the drug or biological as an outpatient hospital service under this part was being made on such first date.
A medical device, drug, or biological not described in clause (i), (ii), or (iii) if—
(I) payment for the device, drug, or biological as an outpatient hospital service under this part was not being made as of December 31, 1996 ; and
(II) the cost of the drug or biological or the average cost of the category of devices is not insignificant in relation to the OPD fee schedule amount (as calculated under paragraph (3)(D)) payable for the service (or group of services) involved.
payment for the device, drug, or biological as an outpatient hospital service under this part was not being made as of December 31, 1996 ; and
the cost of the drug or biological or the average cost of the category of devices is not insignificant in relation to the OPD fee schedule amount (as calculated under paragraph (3)(D)) payable for the service (or group of services) involved.
The following provisions apply for purposes of determining whether a medical device qualifies for additional payments under clause (ii) or (iv) of subparagraph (A):
(i) Establishment of initial categories (I) In general The Secretary shall initially establish under this clause categories of medical devices based on type of device by April 1, 2001 . Such categories shall be established in a manner such that each medical device that meets the requirements of clause (ii) or (iv) of subparagraph (A) as of January 1, 2001 , is included in such a category and no such device is included in more than one category. For purposes of the preceding sentence, whether a medical device meets such requirements as of such date shall be determined on the basis of the program memoranda issued before such date. (II) Authorization of implementation other than through regulations The categories may be established under this clause by program memorandum or otherwise, after consultation with groups representing hospitals, manufacturers of medical devices, and other affected parties.
(ii) Establishing criteria for additional categories (I) In general The Secretary shall establish criteria that will be used for creation of additional categories (other than those established under clause (i)) through rulemaking (which may include use of an interim final rule with comment period). (II) Standard Such categories shall be established under this clause in a manner such that no medical device is described by more than one category. Such criteria shall include a test of whether the average cost of devices that would be included in a category and are in use at the time the category is established is not insignificant, as described in subparagraph (A)(iv)(II). (III) Deadline Criteria shall first be established under this clause by July 1, 2001 . The Secretary may establish in compelling circumstances categories under this clause before the date such criteria are established. (IV) Adding categories The Secretary shall promptly establish a new category of medical devices under this clause for any medical device that meets the requirements of subparagraph (A)(iv) and for which none of the categories in effect (or that were previously in effect) is appropriate.
(iii) Period for which category is in effect Subject to subparagraph (K), a category of medical devices established under clause (i) or (ii) shall be in effect for a period of at least 2 years, but not more than 3 years, that begins— (I) in the case of a category established under clause (i), on the first date on which payment was made under this paragraph for any device described by such category (including payments made during the period before April 1, 2001 ); and (II) in the case of any other category, on the first date on which payment is made under this paragraph for any medical device that is described by such category.
(iv) Requirements treated as met A medical device shall be treated as meeting the requirements of subparagraph (A)(iv), regardless of whether the device meets the requirement of subclause (I) of such subparagraph, if— (I) the device is described by a category established and in effect under clause (i); or (II) the device is described by a category established and in effect under clause (ii) and an application under section 360e of title 21 has been approved with respect to the device, or the device has been cleared for market under section 360(k) of title 21 , or the device is exempt from the requirements of section 360(k) of title 21 pursuant to subsection ( l ) or (m) of section 360 of title 21 or section 360j(g) of title 21 .
Nothing in this clause shall be construed as requiring an application or prior approval (other than that described in subclause (II)) in order for a covered device described by a category to qualify for payment under this paragraph.
(I) In general The Secretary shall initially establish under this clause categories of medical devices based on type of device by April 1, 2001 . Such categories shall be established in a manner such that each medical device that meets the requirements of clause (ii) or (iv) of subparagraph (A) as of January 1, 2001 , is included in such a category and no such device is included in more than one category. For purposes of the preceding sentence, whether a medical device meets such requirements as of such date shall be determined on the basis of the program memoranda issued before such date.
(II) Authorization of implementation other than through regulations The categories may be established under this clause by program memorandum or otherwise, after consultation with groups representing hospitals, manufacturers of medical devices, and other affected parties.
The Secretary shall initially establish under this clause categories of medical devices based on type of device by April 1, 2001 . Such categories shall be established in a manner such that each medical device that meets the requirements of clause (ii) or (iv) of subparagraph (A) as of January 1, 2001 , is included in such a category and no such device is included in more than one category. For purposes of the preceding sentence, whether a medical device meets such requirements as of such date shall be determined on the basis of the program memoranda issued before such date.
The categories may be established under this clause by program memorandum or otherwise, after consultation with groups representing hospitals, manufacturers of medical devices, and other affected parties.
(I) In general The Secretary shall establish criteria that will be used for creation of additional categories (other than those established under clause (i)) through rulemaking (which may include use of an interim final rule with comment period).
(II) Standard Such categories shall be established under this clause in a manner such that no medical device is described by more than one category. Such criteria shall include a test of whether the average cost of devices that would be included in a category and are in use at the time the category is established is not insignificant, as described in subparagraph (A)(iv)(II).
(III) Deadline Criteria shall first be established under this clause by July 1, 2001 . The Secretary may establish in compelling circumstances categories under this clause before the date such criteria are established.
(IV) Adding categories The Secretary shall promptly establish a new category of medical devices under this clause for any medical device that meets the requirements of subparagraph (A)(iv) and for which none of the categories in effect (or that were previously in effect) is appropriate.
The Secretary shall establish criteria that will be used for creation of additional categories (other than those established under clause (i)) through rulemaking (which may include use of an interim final rule with comment period).
Such categories shall be established under this clause in a manner such that no medical device is described by more than one category. Such criteria shall include a test of whether the average cost of devices that would be included in a category and are in use at the time the category is established is not insignificant, as described in subparagraph (A)(iv)(II).
Criteria shall first be established under this clause by July 1, 2001 . The Secretary may establish in compelling circumstances categories under this clause before the date such criteria are established.
The Secretary shall promptly establish a new category of medical devices under this clause for any medical device that meets the requirements of subparagraph (A)(iv) and for which none of the categories in effect (or that were previously in effect) is appropriate.
Subject to subparagraph (K), a category of medical devices established under clause (i) or (ii) shall be in effect for a period of at least 2 years, but not more than 3 years, that begins—
(I) in the case of a category established under clause (i), on the first date on which payment was made under this paragraph for any device described by such category (including payments made during the period before April 1, 2001 ); and
(II) in the case of any other category, on the first date on which payment is made under this paragraph for any medical device that is described by such category.
in the case of a category established under clause (i), on the first date on which payment was made under this paragraph for any device described by such category (including payments made during the period before April 1, 2001 ); and
in the case of any other category, on the first date on which payment is made under this paragraph for any medical device that is described by such category.
A medical device shall be treated as meeting the requirements of subparagraph (A)(iv), regardless of whether the device meets the requirement of subclause (I) of such subparagraph, if—
(I) the device is described by a category established and in effect under clause (i); or
(II) the device is described by a category established and in effect under clause (ii) and an application under section 360e of title 21 has been approved with respect to the device, or the device has been cleared for market under section 360(k) of title 21 , or the device is exempt from the requirements of section 360(k) of title 21 pursuant to subsection ( l ) or (m) of section 360 of title 21 or section 360j(g) of title 21 .
the device is described by a category established and in effect under clause (i); or
the device is described by a category established and in effect under clause (ii) and an application under section 360e of title 21 has been approved with respect to the device, or the device has been cleared for market under section 360(k) of title 21 , or the device is exempt from the requirements of section 360(k) of title 21 pursuant to subsection ( l ) or (m) of section 360 of title 21 or section 360j(g) of title 21 .
(i) Drugs and biologicals Subject to subparagraph (G), the payment under this paragraph with respect to a drug or biological shall only apply during a period of at least 2 years, but not more than 3 years, that begins— (I) on the first date this subsection is implemented in the case of a drug or biological described in clause (i), (ii), or (iii) of subparagraph (A) and in the case of a drug or biological described in subparagraph (A)(iv) and for which payment under this part is made as an outpatient hospital service before such first date; or (II) in the case of a drug or biological described in subparagraph (A)(iv) not described in subclause (I), on the first date on which payment is made under this part for the drug or biological as an outpatient hospital service.
(ii) Medical devices Payment shall be made under this paragraph with respect to a medical device only if such device— (I) is described by a category of medical devices established and in effect under subparagraph (B); and (II) is provided as part of a service (or group of services) paid for under this subsection and provided during the period for which such category is in effect under such subparagraph.
Subject to subparagraph (G), the payment under this paragraph with respect to a drug or biological shall only apply during a period of at least 2 years, but not more than 3 years, that begins—
(I) on the first date this subsection is implemented in the case of a drug or biological described in clause (i), (ii), or (iii) of subparagraph (A) and in the case of a drug or biological described in subparagraph (A)(iv) and for which payment under this part is made as an outpatient hospital service before such first date; or
(II) in the case of a drug or biological described in subparagraph (A)(iv) not described in subclause (I), on the first date on which payment is made under this part for the drug or biological as an outpatient hospital service.
on the first date this subsection is implemented in the case of a drug or biological described in clause (i), (ii), or (iii) of subparagraph (A) and in the case of a drug or biological described in subparagraph (A)(iv) and for which payment under this part is made as an outpatient hospital service before such first date; or
in the case of a drug or biological described in subparagraph (A)(iv) not described in subclause (I), on the first date on which payment is made under this part for the drug or biological as an outpatient hospital service.
Payment shall be made under this paragraph with respect to a medical device only if such device—
(I) is described by a category of medical devices established and in effect under subparagraph (B); and
(II) is provided as part of a service (or group of services) paid for under this subsection and provided during the period for which such category is in effect under such subparagraph.
is described by a category of medical devices established and in effect under subparagraph (B); and
is provided as part of a service (or group of services) paid for under this subsection and provided during the period for which such category is in effect under such subparagraph.
Subject to subparagraph (E)(iii), the amount of the payment under this paragraph with respect to a device, drug, or biological provided as part of a covered OPD service is—
(i) subject to subparagraph (H), in the case of a drug or biological, the amount by which the amount determined under section 1395u( o ) of this title (or if the drug or biological is covered under a competitive acquisition contract under section 1395w–3b of this title , an amount determined by the Secretary equal to the average price for the drug or biological for all competitive acquisition areas and year established under such section as calculated and adjusted by the Secretary for purposes of this paragraph) for the drug or biological exceeds the portion of the otherwise applicable medicare OPD fee schedule that the Secretary determines is associated with the drug or biological; or
(ii) in the case of a medical device, the amount by which the hospital’s charges for the device, adjusted to cost, exceeds the portion of the otherwise applicable medicare OPD fee schedule that the Secretary determines is associated with the device.
subject to subparagraph (H), in the case of a drug or biological, the amount by which the amount determined under section 1395u( o ) of this title (or if the drug or biological is covered under a competitive acquisition contract under section 1395w–3b of this title , an amount determined by the Secretary equal to the average price for the drug or biological for all competitive acquisition areas and year established under such section as calculated and adjusted by the Secretary for purposes of this paragraph) for the drug or biological exceeds the portion of the otherwise applicable medicare OPD fee schedule that the Secretary determines is associated with the drug or biological; or
in the case of a medical device, the amount by which the hospital’s charges for the device, adjusted to cost, exceeds the portion of the otherwise applicable medicare OPD fee schedule that the Secretary determines is associated with the device.
(i) In general The total of the additional payments made under this paragraph for covered OPD services furnished in a year (as estimated by the Secretary before the beginning of the year) may not exceed the applicable percentage (specified in clause (ii)) of the total program payments estimated to be made under this subsection for all covered OPD services furnished in that year. If this paragraph is first applied to less than a full year, the previous sentence shall apply only to the portion of such year. This clause shall not apply for 2018 or 2020.
(ii) Applicable percentage For purposes of clause (i), the term “applicable percentage” means— (I) for a year (or portion of a year) before 2004, 2.5 percent; and (II) for 2004 and thereafter, a percentage specified by the Secretary up to (but not to exceed) 2.0 percent.
(iii) Uniform prospective reduction if aggregate limit projected to be exceeded If the Secretary estimates before the beginning of a year that the amount of the additional payments under this paragraph for the year (or portion thereof) as determined under clause (i) without regard to this clause will exceed the limit established under such clause, the Secretary shall reduce pro rata the amount of each of the additional payments under this paragraph for that year (or portion thereof) in order to ensure that the aggregate additional payments under this paragraph (as so estimated) do not exceed such limit.
The total of the additional payments made under this paragraph for covered OPD services furnished in a year (as estimated by the Secretary before the beginning of the year) may not exceed the applicable percentage (specified in clause (ii)) of the total program payments estimated to be made under this subsection for all covered OPD services furnished in that year. If this paragraph is first applied to less than a full year, the previous sentence shall apply only to the portion of such year. This clause shall not apply for 2018 or 2020.
For purposes of clause (i), the term “applicable percentage” means—
(I) for a year (or portion of a year) before 2004, 2.5 percent; and
(II) for 2004 and thereafter, a percentage specified by the Secretary up to (but not to exceed) 2.0 percent.
for a year (or portion of a year) before 2004, 2.5 percent; and
for 2004 and thereafter, a percentage specified by the Secretary up to (but not to exceed) 2.0 percent.
If the Secretary estimates before the beginning of a year that the amount of the additional payments under this paragraph for the year (or portion thereof) as determined under clause (i) without regard to this clause will exceed the limit established under such clause, the Secretary shall reduce pro rata the amount of each of the additional payments under this paragraph for that year (or portion thereof) in order to ensure that the aggregate additional payments under this paragraph (as so estimated) do not exceed such limit.
(i) In general The Secretary may not publish regulations that apply a functional equivalence standard to a drug or biological under this paragraph.
(ii) Application Clause (i) shall apply to the application of a functional equivalence standard to a drug or biological on or after December 8, 2003 , unless— (I) such application was being made to such drug or biological prior to December 8, 2003 ; and (II) the Secretary applies such standard to such drug or biological only for the purpose of determining eligibility of such drug or biological for additional payments under this paragraph and not for the purpose of any other payments under this subchapter.
(iii) Rule of construction Nothing in this subparagraph shall be construed to effect the Secretary’s authority to deem a particular drug to be identical to another drug if the 2 products are pharmaceutically equivalent and bioequivalent, as determined by the Commissioner of Food and Drugs.
The Secretary may not publish regulations that apply a functional equivalence standard to a drug or biological under this paragraph.
Clause (i) shall apply to the application of a functional equivalence standard to a drug or biological on or after December 8, 2003 , unless—
(I) such application was being made to such drug or biological prior to December 8, 2003 ; and
(II) the Secretary applies such standard to such drug or biological only for the purpose of determining eligibility of such drug or biological for additional payments under this paragraph and not for the purpose of any other payments under this subchapter.
such application was being made to such drug or biological prior to December 8, 2003 ; and
the Secretary applies such standard to such drug or biological only for the purpose of determining eligibility of such drug or biological for additional payments under this paragraph and not for the purpose of any other payments under this subchapter.
Nothing in this subparagraph shall be construed to effect the Secretary’s authority to deem a particular drug to be identical to another drug if the 2 products are pharmaceutically equivalent and bioequivalent, as determined by the Commissioner of Food and Drugs.
In the case of a drug or biological whose period of pass-through status under this paragraph ended on December 31, 2017 , and for which payment under this subsection was packaged into a payment for a covered OPD service (or group of services) furnished beginning January 1, 2018 , such pass-through status shall be extended for a 2-year period beginning on October 1, 2018 .
In the case of a drug or biological whose period of pass-through status under this paragraph ended on December 31, 2017 , and for which payment under this subsection was packaged into a payment for a covered OPD service (or group of services) furnished beginning January 1, 2018 , the payment amount for such drug or biological under this subsection that is furnished during the period beginning on October 1, 2018 , and ending on March 31, 2019 , shall be the greater of—
(i) the payment amount that would otherwise apply under subparagraph (D)(i) for such drug or biological during such period; or
(ii) the payment amount that applied under such subparagraph (D)(i) for such drug or biological on December 31, 2017 .
the payment amount that would otherwise apply under subparagraph (D)(i) for such drug or biological during such period; or
the payment amount that applied under such subparagraph (D)(i) for such drug or biological on December 31, 2017 .
In the case of a drug or biological whose period of pass-through status under this paragraph ended on December 31, 2017 , and for which payment under this subsection was packaged into a payment amount for a covered OPD service (or group of services) beginning January 1, 2018 , the following rules shall apply with respect to payment amounts under this subsection for covered a OPD 15 15 So in original. Probably should be “a covered OPD”. service (or group of services) furnished during the period beginning on October 1, 2018 , and ending on December 31, 2018 :
(i) The Secretary shall remove the packaged costs of such drug or biological (as determined by the Secretary) from the payment amount under this subsection for the covered OPD service (or group of services) with which it is packaged.
(ii) The Secretary shall not make any adjustments to payment amounts under this subsection for a covered OPD service (or group of services) for which no costs were removed under clause (i).
The Secretary shall remove the packaged costs of such drug or biological (as determined by the Secretary) from the payment amount under this subsection for the covered OPD service (or group of services) with which it is packaged.
The Secretary shall not make any adjustments to payment amounts under this subsection for a covered OPD service (or group of services) for which no costs were removed under clause (i).
In the case of a drug or biological furnished in the context of a clinical study on diagnostic imaging tests approved under a coverage with evidence development determination whose period of pass-through status under this paragraph concluded on December 31, 2018 , and for which payment under this subsection was packaged into a payment for a covered OPD service (or group of services) furnished beginning January 1, 2019 , the Secretary shall—
(i) extend such pass-through status for such drug or biological for the 9-month period beginning on January 1, 2020 ;
(ii) remove, during such period, the packaged costs of such drug or biological (as determined by the Secretary) from the payment amount under this subsection for the covered OPD service (or group of services) with which it is packaged; and
(iii) not make any adjustments to payment amounts under this subsection for a covered OPD service (or group of services) for which no costs were removed under clause (ii).
extend such pass-through status for such drug or biological for the 9-month period beginning on January 1, 2020 ;
remove, during such period, the packaged costs of such drug or biological (as determined by the Secretary) from the payment amount under this subsection for the covered OPD service (or group of services) with which it is packaged; and
not make any adjustments to payment amounts under this subsection for a covered OPD service (or group of services) for which no costs were removed under clause (ii).
(i) In general In the case of a device whose period of pass-through status under this paragraph will end on December 31, 2022 , such pass-through status shall be extended for a 1–year period beginning on January 1, 2023 .
(ii) No adjustment for packaged costs For purposes of the 1–year period described in clause (i), the Secretary shall not remove the packaged costs of such device (as determined by the Secretary) from the payment amount under this subsection for a covered OPD service (or group of services) with which it is packaged.
(iii) No application of aggregate limit or budget neutrality Notwithstanding any other provision of this subsection, this subparagraph shall not be taken into account— (I) in applying the limit on annual aggregate adjustments under subparagraph (E) for 2023; or (II) in making any budget neutrality adjustments under this subsection for 2023.
In the case of a device whose period of pass-through status under this paragraph will end on December 31, 2022 , such pass-through status shall be extended for a 1–year period beginning on January 1, 2023 .
For purposes of the 1–year period described in clause (i), the Secretary shall not remove the packaged costs of such device (as determined by the Secretary) from the payment amount under this subsection for a covered OPD service (or group of services) with which it is packaged.
Notwithstanding any other provision of this subsection, this subparagraph shall not be taken into account—
(I) in applying the limit on annual aggregate adjustments under subparagraph (E) for 2023; or
(II) in making any budget neutrality adjustments under this subsection for 2023.
in applying the limit on annual aggregate adjustments under subparagraph (E) for 2023; or
in making any budget neutrality adjustments under this subsection for 2023.