Since the full enactment of the Patient Protection and Affordable Care Act (PPACA) in 2014, it has become necessary for the role of the pharmacist and the responsibilities encompassed in the services of the pharmacy to expand in order to meet the needs of the people they serve and to alleviate some of the strain on the United States healthcare system, in that order.  

According to a report released by the U.S. Department of Health and Human Services (HHS) in May 2016, approximately 2.4 million individuals have gained insurance coverage under the PPACA this year. This addition of 2.4 million people, plus the 17.6 million estimated to have gained coverage between 2010 and 2015, rounds out the total number of covered individuals between the ages of 18-64 to approximately 20 million. This total includes an estimated 6.1 million young adults between the ages of 19 and 25.

The inevitable shortage of primary care physicians (PCPs) has caused many pharmacists to be thrusted into direct-care roles in which they provide services such as administering immunizations, performing wellness and prevention screenings, handling medication therapy management, and addressing chronic condition management, to name a few.

This expansion of roles and increased focus on pharmacy services makes it imperative that operations are as efficient and effective as possible, that pharmacists’ documentation is accurate and complete, and that billed services could withstand an audit should one occur. Let’s face it: our entire healthcare system is overburdened, and resources such as rapidly expanding specialty pharmacy services and questionable increases of non-orphan use for orphan medications threaten payor and employer budgets. Sometimes, it can be hard to see past day-to-day operations and toward the bigger picture of an efficient, compliant, safe, patient-centered pharmacy.

Orphan Drug Use

An article published last week by the American Journal of Managed Care (AJMC) highlighted findings of a study performed by America’s Health Insurance Plans (AHIP) that identified growth in the use of orphan drugs for non-orphan indications (read the article online at

Included in the highlights of the article were statistics related to the pricing of the 46 drugs identified as being used for non-orphan indications, which “suggested an inverse correlation between orphan use and pricing with the cumulative change in price decreasing as the average orphan utilization increased.” 

Of the more than 500 drugs with Food and Drug Administration (FDA) approval for treatment of rare diseases, the AHIP report focused on a sample of 46 orphan drugs, with a finding that 47 percent of them showed usage for non-orphan diseases. The average wholesale prices (AWPs) for the 46 drugs increased by an average of 26 percent from 2012 to 2014, with the largest increase (37 percent) associated with non-orphan disease use (those drugs used as intended for orphan indications showed a lesser increase of 12 percent for the same time period).

This finding brings into question whether the benefits and waivers offered under the Orphan Drug Act have opened the door to exploitation for financial gain.

The AHIP report also touched on another trend impacting the industry: spending on off-label use of medications (orphan and non-orphan). The concern here relates to increased off-label use when the selected treatment lacked scientific evidence. 

The report does point to the benefit of off-label use when scientific evidence exists; however, the bad may outweigh the good in regard to patient safety as well as “wasteful spending, which is particularly problematic for the off-label use of very expensive orphan drugs.”

Read the report in its entirety online at

Billable Units

From 2005 until 2008, Medicare Recovery Audit Contractors (RACs) identified incorrect reporting of HCPCS billable units for drugs as one of the most frequent errors concerning the pharmacy sector. HHS Office of Inspector General (OIG) audits also identified that most incorrect payments were associated with incorrect calculation of billable units (billing unit multipliers).

Selection of the correct HCPCS units and application of the correct conversion factor for reporting of billable units of a drug can be one of the most difficult concepts to understand and control. This fact is demonstrated in the continued audits that produce findings related to incorrect reporting of billable units, resulting in either over- or under-payment for drugs and biologicals administered in the outpatient setting.  Pharmacists should carefully review all documentation and compare to claims submitted to validate that units reported for reimbursement are accurate based on HCPCS descriptions and are consistent with the actual quantity dispensed (and wasted, if appropriate). For an update on current OIG audit outcomes, see the June 2016 article posted on the website for Noridian Healthcare Solutions at

Also consider the coding and billing of Reclast and Zometa, for example. Prior to 2013, there were two codes for zoledronic acid, each representing a different brand name, J3487 – Zometa and J3488 – Reclast.

  • J3487: Injection, Zoledronic Acid (Zometa), 1 Mg
  • J3488: Injection, Zoledronic Acid (Reclast), 1 Mg

Each drug dispensed with a standard dose; Zometa typically billed with four units of J3487 and Reclast typically billed with five units of J3488. However, if a coding error occurred and the HCPCS units were inadvertently reversed, the outcome would be a billing error for each claim submitted. Between July 2013 and December 2013, there was a Q-code, Q2051, that was billed per milligram for either drug. Finally, in 2014, HCPCS J3489 was released, and it remains active for billing per milligram of either drug. However, some payors require use of a modifier to identify when the code is being billed for Reclast, and the modifier will bypass the MUE or allowable unit limit when it is set to four.

Those responsible for pharmacy revenue and billing compliance must remain aware of changes like this, because external auditors frequently target these drugs for audit to ensure adherence with the changes. Pharmacies should flag these drugs for internal audit when there are multiple changes to drug HCPCS codes.

JW Modifier

On June 9, 2016, via transmittal 3538, the Centers for Medicare & Medicaid Services (CMS) officially announced the delayed implementation date of the JW modifier as Jan. 1, 2017. In order to more effectively identify and monitor billing and payment for discarded drugs and biologicals, CMS is revising this policy, effective Jan. 1, 2017, to remove contractors’ discretion by requiring the uniform use of the JW modifier. Physicians and hospitals will be required to use the JW modifier if billing for discarded waste from a single-dose vial (SDV) or single-use package. 

Physicians and hospitals began questioning the modifier’s requirements immediately following the announcement. Even though the modifier would be required on all outpatient claims for discarded waste, clarification was needed as to whether all drug HCPCS would require the use of the JW modifier and what exceptions may be required as well. CMS released a comprehensive response in the form of a Frequently Asked Questions (FAQ) update on the JW modifier on last Friday, August 26. This FAQ answers many questions that were looming after this announcement including several considerations and exceptions concerning the use of the modifier. The following criteria should be considered when determining if billing for discarded waste is appropriate, including but not limited to:

–      Can discarded waste can be quantified and associated with a single beneficiary?

–      Is the drug separately payable under Part B including OPPS separately payable drugs (SI = K or G)?

–      Is he provider is submitting the applicable HCPCS on a Medicare outpatient claim?

–      Is the drug dose administered and the amount discarded accurately documented in the patient’s legal medical record?

The modifier will not be required if the provider is not reporting discarded waste from an SDV to any payer.  The JW modifier is also not required for:

  • drugs that are not separately payable, including drugs administered in the acute care outpatient hospital setting – and – payment is packaged under the OPPS methodology (SI=N),
  • drugs administered in the acute care inpatient hospital setting,
  • drugs administered in the FQHC setting (not including the influenza, pneumococcal, and Hepatitis B vaccines),
  • drugs administered in the RHC setting (not including the influenza, pneumococcal, and Hepatitis B vaccines),,
  • batch preparation for sterile product repackaging or compounding
  • drugs paid under the Part B Drug Competitive Acquisition Program (CAP).

The JW modifier requirement does apply to Critical Access Hospitals (CAHs) since drugs administered in the outpatient setting of the CAH are separately payable. Do note that eligible and participating 340B providers are not exempt from the requirement to report the JW modifier. The JW modifier is not allowed and would not be appropriate for reporting of overfill wastage.  Medicare forbids billing for overfill, defined as “any amount of drug greater than the amount identified on the package or label”.  See the November 29, 2010 Federal Register to gather more detail regarding Medicare’s overfill policy.

All providers must be certain that each patient’s medical record includes sufficient documentation to support the billed unit of service for both the administered dose and the discarded waste.  Remember, Medicare guidelines state that the program will pay for “the amount of drug that has been discarded, up to the amount that is indicated on the vial or package label. The discarded drug amount is the amount of a single use vial or other single use package that remains after administering a dose/quantity of the drug to a Medicare beneficiary.”

According to CMS, billing for waste from a multi-dose vial is not allowed. Discarded waste may only be billed for a drug preparation from a single-dose vial or single-use package. 


Biosimilars are one of the newest drug payment issues for pharmacies in the U.S., but they have been on European markets since 2006. The PPACA featured language indicating that biological products that have been demonstrated to be biosimilar and interchangeable with FDA-licensed biological, or referenced, products can be used and reimbursed. Biosimilars have the potential to lower costs to patients by providing additional choices, and therefore greater competition, in the market. Zarxio (reference product: Neupogen) and Inflectra (reference product: Remicade) are the only approved biosimilars to date, however additional FDA approvals for biosimilars should occur in the near future.

Providers administering the biosimilar products will need to remain current with coding and billing guidelines to ensure accurate assignment of HCPCS and use of manufacturer specific modifiers.

  • Q5101- Injection, Filgrastim (G-CSF), biosimilar, 1 microgram
    • Modifier ZA- Novartis/Sandoz
    • Q5102- Injection, Infliximab, biosimilar, 10 mg
      • Modifier ZB- Pfizer/Hospira

The Future

With the role of the pharmacist expanding to include more direct care services, pharmacist documentation is now more important than ever as it pertains to closing the gap between patient care and reimbursement. We all know the saying “if it isn’t documented, it wasn’t done,” but there are so many reasons why we must repeat this over and over. Even though hospital reimbursement is not directly related to the professional services of the pharmacist, the department revenue is dependent on correct entry of National Drug Codes (NDCs) to the pharmacy module, accurate conversion of dosed units to billable units based on HCPCS description, and documentation of drug preparation, including doses dispensed as well as volume discarded. 

Having quality guidelines and technology in place now will improve success later, when additional value-based payment methods are put into place. Data is a very powerful tool, so it is advantageous to your organization to ensure accuracy. Providers should be aware of how information flows through the various documentation and charging modules to the patient billing system interface to create claims. Frequent auditing, performed proactively, will help prevent errors that otherwise would not be identified until an external audit occurs.

Pharmacists should take advantage of this time to embrace technology by regularly evaluating pharmacy data within the formulary files and ensuring, at a minimum, that national coverage determinations (NCDs), HCPCS codes, UB revenue codes, and billable unit conversion factors are current and accurate – and that they all are flowing through the interface to the billing system in order to ensure that their organization has every possible advantage in protecting revenue.

Do not be afraid to embrace technology! Government and commercial payors use data analysis tools to identify noncompliance, so why not use that same technology yourself to prevent unnecessary audits.

About the Author

Courtney Boss is a health information management (HIM) analyst for Panacea Healthcare Solutions. Courtney supports the revenue capture department by providing project assistance, auditing services, and technical assistance. Prior to joining Panacea, Courtney performed coding and documentation audits and served as product manager for ICD-10-related software products.

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