Drug Designation Process

20.3.1 – Drug Designation Process (Rev. 13599, Issued: 01-30-26 , Effective: 05-01-26, Implementation: 05-01-26 ) A. Definition of a New Renal Dialysis Drug or Biological Product A “new renal dialysis drug or biological product” is an injectable, intravenous, oral or other form or route of administration drug or biological product that is used to treat or manage a condition(s) associated with ESRD. It must be: (1) approved by the Food and Drug Administration (FDA) on or after January 1, 2020, under section 505 of the Federal Food, Drug, and Cosmetic Act or section 351 of the Public Health Service Act; (2) commercially available, and; (3) designated by CMS as a renal dialysis service under §413.171. B. Determination of Whether a New Renal Dialysis Drug or Biological Product is Included in the ESRD PPS Bundled Payment To determine when a new renal dialysis drug or biological product is included in the ESRD PPS bundled payment, CMS will: • Review the new product’s FDA labeling data and information; • Review the new product’s information presented for obtaining a HCPCS code; and • Conduct an internal medical review following the announcement of the new product’s FDA and HCPCS decision. 1. If the new renal dialysis drug or biological product is used to treat or manage a condition for which there is an existing ESRD PPS functional category, the new renal dialysis drug or biological product is considered included in the ESRD PPS bundled payment, and the following steps occur: • The new renal dialysis drug or biological product is added to the existing ESRD PPS functional category. • Unless excluded, the new renal dialysis drug or biological product is paid for using the Transitional Drug Add-On Payment Adjustment (TDAPA) (see section 20.3.1.C below) if it meets the TDAPA eligibility requirements outlined at §413.234(c)(5). Drugs excluded from TDAPA eligibility, effective January 1, 2020, include drugs approved by the FDA under section 505(j) of the Federal Food, Drug, and Cosmetic Act (FD&C Act) and drugs approved under section 505(c) of the FD&C Act that are classified by FDA as new drug application (NDA) Types 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 Type 3, 5, 7 or 8. NOTE: If not eligible for the TDAPA, the new renal dialysis drug or biological product qualifies as an ESRD outlier service. For more information regarding the outlier policy see §60.D of this chapter. 2. If the new renal dialysis drug or biological product is used to treat or manage a condition for which there is not an existing ESRD PPS functional category, the new renal dialysis drug or biological product is not considered included in the ESRD PPS bundled payment and the following steps occur: • 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. • The new renal dialysis drug or biological product is paid for 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. NOTE: Following payment of the TDAPA, the new renal dialysis drug or biological product qualifies as an ESRD outlier service. C. Transitional Drug Add-On Payment Adjustment (TDAPA) The TDAPA is a payment adjustment under the ESRD PPS for certain new renal dialysis drugs and biological products. To be eligible for the TDAPA a drug must have an HCPCS application submitted in accordance with the official Level II HCPCS coding procedures and have submitted an application for the TDAPA prior to January 1, 2028, or within three years of FDA approval under section 505 of the Federal Food, Drug, and Cosmetic Act or section 351 of the Public Health Service Act. Applications for the TDAPA under the ESRD PPS must be submitted in the electronic application intake system, Medicare Electronic Application Request Information SystemTM (MEARISTM). Information regarding the application process, any renal dialysis drugs and biological products that have been determined eligible for the TDAPA, and their respective payment amounts is available on the CMS website: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/ESRD-Transitional-Drug 1. New renal dialysis drugs and biological products that fall in an existing ESRD PPS functional category and are eligible for the TDAPA. Basis of Payment The TDAPA is based on 100 percent of average sales price (ASP), which CMS receives from the drug or biological product manufacturer. Subject to the ASP conditional policy (described below in § 20.3.1.C.3), if ASP is not available, then the TDAPA is based on 100 percent of wholesale acquisition cost (WAC) and, when WAC is not available, the payment is based on the drug manufacturer's invoice. Duration of the TDAPA The TDAPA for these products is paid for 2 years. The TDAPA payment period begins on the effective date of the CMS Change Request (CR) implementing the TDAPA for the drug or biological product. 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 CFR § 413.237(a)(1) and therefore is ineligible for outlier payment. 2. New renal dialysis drugs and biological products that do not fall in an existing ESRD PPS functional category and are eligible for the TDAPA. Basis of Payment In general, the TDAPA is based on 100 percent of ASP, which CMS receives from the drug or biological product manufacturer. Subject to the ASP conditional policy (described below in 20.3.1.C.3), if ASP is not available, then the TDAPA is based on 100 percent of WAC and, when WAC is not available, the payment is based on the drug manufacturer's invoice. Under 42 CFR § 413.234(c)(4), the TDAPA for phosphate binders is based on 100 percent of ASP plus an additional amount derived from 6 percent of per-patient phosphate binder spending based on utilization and cost data. 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 outlier service as defined under 42 CFR § 413.237(a)(1) and therefore is ineligible for outlier payment. 3. ASP conditional policy 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 the TDAPA is applied, 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. NOTE: for purposes of this conditional policy, in circumstances where a manufacturer submitted ASP data reflecting zero or negative sales during the TDAPA period, CMS is considered to have received the latest full calendar quarter of ASP data, and CMS would not discontinue TDAPA payment under the conditional policy in § 413.234(c). Information regarding the submission of ASP data is available on the CMS website: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice. D. Determination of When an Oral-Only Drug is No Longer Oral-Only An “oral-only drug” is a drug or biological product with no injectable functional equivalent or other form of administration other than an oral form. An “oral-only drug” is no longer considered “oral-only” if an injectable functional equivalent or other form of administration of the oral-only drug is approved by the FDA.