Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems; Quality Reporting Programs; Overall Hospital Quality Star Rating; Hospital Price Transparency; and Notice of Closure of a Teaching Hospital and Opportunity To Apply for Available Slots

We note that several commenters made comments on the Inflation Reduction Act Medicare Drug Price Negotiation Program, provider status for pharmacists under Medicare Part B, Most Favored Nation-style reference pricing, among other topics that were not discussed in the CY 2026 OPPS/ASC proposed rule. These topics are out of scope for purposes of this notice and comment rulemaking, but we will consider these comments as we consider these issues for future rulemaking. 1. Criteria for Packaging Payment for Drugs, Biologicals, and Radiopharmaceuticals a. Packaging Threshold

In accordance with section 1833(t)(16)(B) of the Act, the threshold for establishing separate APCs for payment of drugs and biologicals was set to $50 per administration during CYs 2005 and 2006. In CY 2007, we used the four-quarter moving average Producer Price Index (PPI) levels for Pharmaceutical Preparations (Prescription) to trend the $50 threshold forward from the third quarter of CY 2005 (when the Pub. L. 108-173 mandated threshold became effective) to the third quarter of CY 2007. We then rounded the resulting dollar amount to the nearest $5 increment to determine the CY 2007 threshold amount of $55. Using the same methodology as that used in CY 2007 (which is discussed in more detail in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68085 through 68086)), we set the packaging threshold for establishing separate APCs for drugs and biologicals at $140 for CY 2025 (89 FR 94237).

Following the CY 2007 methodology, for the CY 2026 OPPS/ASC proposed rule, we proposed to use the most recently available four quarter moving average PPI levels to trend the $50 threshold forward from the third quarter of CY 2005 to the third quarter of CY 2026 and round the resulting dollar amount ($141.67) to the nearest $5 increment, which yields a figure of $140. In performing this calculation, we used the most recent forecast of the quarterly index levels for the PPI for Pharmaceuticals for Human Use (Prescription) (Bureau of Labor Statistics series code WPUSI07003) from IGI. IGI is a nationally recognized economic and financial forecasting firm with which CMS contracts to forecast various price indexes including the PPI Pharmaceuticals for Human Use (Prescription). Based on these calculations, we proposed a packaging threshold for CY 2026 of $140 for drugs, biologicals, and therapeutic radiopharmaceuticals. We also proposed that if more recent data subsequently become available after the publication of the CY 2026 OPPS/ASC proposed rule, we would use such updated data, if appropriate, to determine the final CY 2026 OPPS drug packaging threshold amount in the CY 2026 OPPS/ASC final rule with comment period.

We finalized in section II.A.3.c. of the CY 2025 OPPS/ASC final rule with comment period (89 FR 94238 through 94241) to pay separately for diagnostic radiopharmaceuticals with a per-day cost above the packaging threshold for CY 2025 of $630. We also finalized that starting in CY 2026 and subsequent years, we would update this threshold by the PPI for Pharmaceuticals for Human Use (Prescription) (Bureau of Labor Statistics series code WPUSI07003) from IHS Global, Inc (IGI). For the diagnostic radiopharmaceutical packaging threshold, we finalized using the same methodology as that used in CY 2007 (which is discussed in more detail in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68085 and 68086)) to calculate the update to the OPPS drug packaging threshold. Specifically, we finalized that, starting for the CY 2026 rulemaking, we would use the most recently available four quarter moving average PPI levels to trend the final current year (CY 2025) threshold forward from the third quarter of the data year (CY 2024) to the third quarter of the current year (CY 2025) and round the resulting dollar amount to the nearest $5 increment. In the CY 2026 OPPS/ASC proposed rule, we proposed a technical refinement to this policy to use the most recently available four-quarter moving average PPI levels to trend the CY 2025 final threshold forward from the third quarter of CY 2025 to the third quarter of the payment year (CY 2026) and round the resulting dollar amount to the nearest $5 increment. We believed using the most recently available four quarter moving average PPI levels more appropriately updates the packaging threshold from CY 2025 for payment in CY 2026. For the CY 2026 OPPS/ASC proposed rule, we used the most recently available four quarter moving average PPI levels to trend the $630 diagnostic radiopharmaceutical packaging threshold forward from the third quarter of CY 2025 to the third quarter of CY 2026 and we rounded the resulting dollar amount ($654.23) to the nearest $5 increment, which yielded a figure of $655. We also proposed that if more recent data subsequently becomes available after the publication of the CY 2026 OPPS/ASC proposed rule, we would use such updated data, if appropriate, to determine the final CY 2026 diagnostic radiopharmaceutical packaging threshold amount in the CY 2026 OPPS/ASC final rule with comment period. For CY 2027 and subsequent updates, we therefore proposed to trend the CY 2025 threshold of $630 forward using the four-quarter moving average PPI levels for Pharmaceuticals for Human Use, Prescription for CY 2025 (third quarter) forward using the PPI for Pharmaceuticals for Human Use, Prescription for the applicable payment year (third quarter).

We received public comments on these proposals. The following is a summary of the comments we received and our responses.

Comment: Some commenters supported the drug packaging threshold. One commenter stated that a static threshold would fail to account for rapid drug inflation. This same commenter urged CMS to implement a transparent and predictable methodology for adjusting the threshold annually to reflect drug price inflation.

Response: We thank the commenters for their support. We believe using the

four-quarter moving average PPI levels for Pharmaceuticals for Human Use, Prescription to adjust the OPPS drug packaging threshold through notice and comment rulemaking is a transparent and predictable methodology that has been in use under the OPPS for many years.

Comment: Several commenters did not support CMS following the proposed methodology to update the OPPS drug packaging threshold. These commenters had concerns that the packaging threshold approach introduces financial and operational concerns, especially when multiple packaged drugs are used during a procedure. Commenters recommended using a different inflation factor, maintaining the current threshold, or rolling back the threshold.

Response: We appreciate these perspectives; however, we believe that the PPI update factor provides aggregate changes in the selling prices of pharmaceuticals, which makes it an appropriate factor with which to update the OPPS drug packaging threshold to ensure that as costs change over time, the threshold continues to identify products appropriate for payment packaging, a fundamental principle of a prospective payment system. For CY 2026, the update to the inflation factor results in the same rounded final OPPS drug packaging threshold for CY 2026 compared to CY 2025.

After consideration of public comments, we are finalizing our proposal to use the most recently available four-quarter moving average PPI levels to trend the $50 threshold forward from the third quarter of CY 2005 to the third quarter of CY 2026 and round the resulting dollar amount to the nearest $5 increment for the OPPS drug packaging threshold. We proposed that if more recent data subsequently become available after the publication of the CY 2026 OPPS/ASC proposed rule, we would use such updated data, if appropriate, to determine the final CY 2026 OPPS drug packaging threshold amount in the CY 2026 OPPS/ASC final rule with comment period. Using the most recent forecast of the quarterly index levels for the PPI for Pharmaceuticals for Human Use (Prescription) (Bureau of Labor Statistics series code WPUSI07003) from IGI, we trended the $50 threshold forward from the third quarter of CY 2005 to the third quarter of CY 2026 and round the resulting dollar amount ($140.13) to the nearest $5 increment, which yields a figure of $140.

We refer readers to section II.A.3.c.(2). of this final rule with comment period for additional details regarding the diagnostic radiopharmaceutical packaging threshold comment and response discussion. We are finalizing our proposal to update the CY 2025 $630 threshold amount by the four-quarter moving average PPI levels for Pharmaceuticals for Human Use, Prescription to trend the $630 threshold forward. Specifically, we are using the most recently available forecast of the four-quarter moving average PPI levels for Pharmaceutical for Human Use, Prescription from the third quarter of 2025 to the third quarter of 2026, and to round the resulting dollar amount to the nearest $5 increment. We also proposed, and are subsequently finalizing, that if more recent data are subsequently available (for example, a more recent estimate of the PPI for Pharmaceuticals for Human Use, Prescription), we would use such data, if appropriate, to determine the CY 2026 diagnostic radiopharmaceutical packaging threshold in the final rule. Based on this methodology, using the most recent data available for this final rule, we trended the $630 threshold forward and rounded the resulting dollar amount ($656.65) to the nearest $5 increment, which yields a final diagnostic radiopharmaceutical packaging threshold figure of $655 per day for CY 2026. b. Packaging of Payment for HCPCS Codes That Describe Certain Drugs, Certain Biologicals, and Certain Radiopharmaceuticals Under the Cost Thresholds

To determine the proposed CY 2026 packaging status for all nonpass- through drugs, biologicals, diagnostic and therapeutic radiopharmaceuticals that are not policy packaged, we calculated, on a HCPCS code-specific basis, the per day cost of all drugs, biologicals, and therapeutic radiopharmaceuticals that had a HCPCS code in CY 2024 and were paid (via packaged or separate payment) under the OPPS. We used data from CY 2024 claims processed through December 31, 2024, for this calculation. However, we did not perform this calculation for those drugs and biologicals with multiple HCPCS codes that include different dosages, as described in section V.B.1.d. of this final rule with comment period, or for the following policy-packaged items that we proposed to continue to package in CY 2026: anesthesia drugs; drugs, biologicals, and contrast agents and other drugs that function as supplies when used in a diagnostic test or procedure; and drugs and biologicals that function as supplies when used in a surgical procedure. Consistent with our policy described in section V.B.5. of this final rule with comment period, in situations where we have no claims data and must determine if these products exceed the per-day cost threshold, we estimated the average number of units of each product that would typically be furnished to a patient during one day in the hospital outpatient setting and utilized the ASP methodology to determine whether their payment will be packaged as well as their payment status indicators.

To calculate the per day costs for drugs, biologicals, diagnostic radiopharmaceuticals, and therapeutic radiopharmaceuticals to determine their proposed packaging status in CY 2026, we used the methodology that was described in detail in the CY 2006 OPPS proposed rule (70 FR 42723 through 42724) and finalized in the CY 2006 OPPS final rule with comment period (70 FR 68636 through 68638). For each drug and biological HCPCS code, we used an estimated payment rate based on the ASP methodology, which is generally ASP plus 6 percent (which is the payment rate we proposed for separately payable drugs and biologicals) for CY 2026, as discussed in more detail in section V.A.1. and V.B.2. of the CY 2026 OPPS/ASC proposed rule to calculate the CY 2026 proposed rule per day costs. We used the manufacturer-submitted ASP data from the fourth quarter of CY 2024 (data that were used for payment purposes in the physician's office setting, effective April 1, 2025) to determine the CY 2026 OPPS/ASC proposed rule per day cost.

As is our standard methodology, for CY 2026, we proposed to use payment rates based on the ASP data from the fourth quarter of CY 2024 for budget neutrality estimates, packaging determinations, impact analyses, and completion of Addenda A and B to the CY 2026 OPPS/ASC proposed rule (which are available via the internet on the CMS website) because these are the most recent data available for use at the time of development of the CY 2026 OPPS/ASC proposed rule. These data also are the basis for drug payments in the physician's office setting, effective April 1, 2025. Exceptions to our standard methodology include:

For therapeutic radiopharmaceuticals that do not have pass-through status as of April 1, 2025, and do not have an ASP-based payment rate, we did not use a payment rate based on WAC or AWP for those items, consistent with our policy described in section V.B.3.a. of this final rule with comment period. Instead, we used their arithmetic mean unit cost derived from the CY 2024 hospital claims data to determine their per day cost.

For diagnostic radiopharmaceuticals that do not have pass- through status as of April 1, 2025, we used their mean unit cost derived from the CY 2024 hospital claims data to determine their per day cost. We did not use an ASP-based, WAC-based, or AWP-based payment rate for those items unless there was no mean unit cost reported for the product, consistent with our finalized policy described in section V.B.3.b of this final rule with comment period.

For items other than diagnostic or therapeutic radiopharmaceuticals that did not have either an ASP-based payment rate, a payment rate based on WAC, or a payment rate based on AWP, we used the arithmetic mean unit cost of the items derived from the CY 2024 hospital claims data to determine their per day cost.

We proposed to package drugs, biologicals, and therapeutic radiopharmaceuticals with a per day cost less than or equal to $140 and identify items with a per day cost greater than $140 as separately payable unless they are policy-packaged. For diagnostic radiopharmaceuticals, we proposed to package those items with a per day cost less than or equal to $655 and identify items with a per day cost greater than $655 as separately payable. Consistent with our past practice (72 FR 667580), we cross-walked historical OPPS claims data from the CY 2024 HCPCS codes that were reported to the CY 2024 HCPCS codes that we display in Addendum B to the CY 2026 OPPS/ASC proposed rule (which is available on the CMS website) \72\ for proposed payment in CY 2026.

\72\ https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient.

Our policy during previous cycles of OPPS rulemaking has been to use updated ASP and claims data to make final determinations of the packaging status of HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals for the OPPS/ASC final rule with comment period (71 FR 68086; 78 FR75022; 89 FR 94238). We note that it is also our policy to make an annual packaging determination for a HCPCS code only when we develop the OPPS/ASC final rule with comment period for the update year (71 FR 68086). Only HCPCS codes that are identified as separately payable in the final rule with comment period are subject to quarterly updates. For our calculation of per day costs of HCPCS codes for drugs, biologicals, and radiopharmaceuticals in the CY 2026 OPPS/ ASC proposed rule, we proposed to use ASP data from the fourth quarter of CY 2024, which is the basis for calculating payment rates for drugs and biologicals in the physician's office setting using the ASP methodology, effective April 1, 2025, along with updated hospital claims data from CY 2024. We note that we also proposed to use these data for budget neutrality estimates and impact analyses for the CY 2026 OPPS/ASC proposed rule.

We proposed that payment rates for HCPCS codes for separately payable drugs and biologicals included in Addenda A and B of the CY 2026 OPPS/ASC final rule with comment period would be based on ASP data from the second quarter of CY 2025. These data are the basis for calculating payment rates for drugs and biologicals in the physician's office setting using the ASP methodology, effective October 1, 2025. These payment rates would then be updated in the January 2026 OPPS update, based on the most recent ASP data to be used for physicians' office and OPPS payment as of January 1, 2026. For drugs and biologicals that do not currently have a payment rate based on ASP, WAC, or AWP, for therapeutic radiopharmaceuticals that do not currently have an ASP payment rate, and for all diagnostic radiopharmaceuticals, we will calculate their arithmetic mean unit cost from all of the CY 2024 claims data and updated cost report information available for the CY 2026 final rule with comment period to determine their final per day cost.

Consequently, the final rule with comment period packaging status of some HCPCS codes for drugs, biologicals, and radiopharmaceuticals in the CY 2026 OPPS/ASC proposed rule may be different from the same drugs' HCPCS codes' packaging status determined based on the data used for this final rule with comment period. Under such circumstances, we proposed to continue to follow the established policies initially adopted for the CY 2005 OPPS final rule with comment period (69 FR 65780) is in order to more equitably pay for those drugs whose costs fluctuate relative to the proposed CY 2026 OPPS drug packaging threshold and the drug's payment status (packaged or separately payable) in CY 2026. These established policies have not changed for many years and are the same as described in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70434). Specifically, for CY 2026 and subsequent years, consistent with our historical practice, we proposed to apply the following policies to those HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals whose relationship to the drug packaging threshold changes based on the updated drug packaging threshold and on the final updated data:

HCPCS codes for drugs, biologicals, and radiopharmaceuticals that were paid separately in CY 2025 and that are proposed for separate payment in CY 2026, and that then have per day costs equal to or less than the CY 2026 final rule drug packaging threshold or diagnostic radiopharmaceutical packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2026 final rule, would continue to receive separate payment in CY 2026.

HCPCS codes for drugs, biologicals, and radiopharmaceuticals that were packaged in CY 2025 and that are proposed for separate payment in CY 2026, and that then have per day costs equal to or less than the CY 2026 final rule drug packaging threshold or diagnostic radiopharmaceutical packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2026 final rule, would remain packaged in CY 2026.

HCPCS codes for drugs, biologicals, and radiopharmaceuticals for which we proposed packaged payment in CY 2026 but that then have per-day costs greater than the CY 2026 final rule drug packaging threshold or diagnostic radiopharmaceutical packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2026 final rule, would receive separate payment in CY 2026.

We did not receive public comments on this provision, and therefore, we are finalizing as proposed. c. Policy-Packaged Drugs, Biologicals, and Radiopharmaceuticals

As mentioned earlier in this section, under the OPPS, we package several categories of nonpass-through drugs, biologicals, and radiopharmaceuticals, regardless of the cost of the products. Because the products are packaged according to the policies in 42 CFR 419.2(b), we refer to these packaged drugs, biologicals, and radiopharmaceuticals as “policy-packaged” drugs, biologicals, and radiopharmaceuticals. These policies are either longstanding or based on longstanding principles and inherent to the OPPS and are currently as follows:

Anesthesia, certain drugs, biologicals, and other pharmaceuticals; medical and surgical supplies and equipment; surgical dressings; and devices used for external reduction of fractures and dislocations (Sec. 419.2(b)(4));

Intraoperative items and services (Sec. 419.2(b)(14));

Drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure (including but not limited to, diagnostic radiopharmaceuticals with per-day costs at or below the per-day diagnostic radiopharmaceutical packaging threshold for the applicable year, contrast agents, and pharmacologic stress agents) (Sec. 419.2(b)(15)); and

Drugs and biologicals that function as supplies when used in a surgical procedure (including, but not limited to, skin substitutes and similar products that aid wound healing and implantable biologicals) (Sec. 419.2(b)(16)).

The policy at Sec. 419.2(b)(16) is broader than the policy at Sec. 419.2(b)(14). As we stated in the CY 2015 OPPS/ASC final rule with comment period: “We consider all items related to the surgical outcome and provided during the hospital stay in which the surgery is performed, including postsurgical pain management drugs, to be part of the surgery for purposes of our drug and biological surgical supply packaging policy” (79 FR 66875). The category described by Sec. 419.2(b)(15) is large and includes diagnostic radiopharmaceuticals that have a per day cost below the finalized diagnostic radiopharmaceutical packaging threshold that we discuss in section II.A.3. of this final rule with comment period, contrast agents, stress agents, and some other products. The category described by Sec. 419.2(b)(16) currently includes skin substitutes and some other products. We believe it is important to reiterate that cost consideration is not a factor when determining whether an item is a surgical supply (79 FR 66875).

We received public comments on these policies. The following is a summary of the comments we received and our responses.

Comment: One commenter suggested CMS should develop a policy that covers drugs that are administered at the time of ophthalmic surgery, that are direct substitutes for postoperative medications, or that have an FDA-approved indication to treat/prevent post-operative issues, such as pain, inflammation, or infection, separately under Medicare Part B.

Response: We thank the commenter for their suggestion. We believe such a policy already exists under 42 CFR 419.2(b)(16)), in which drugs and biologicals that function as supplies when used in a surgical procedure (including, but not limited to, skin substitutes and similar products that aid wound healing and implantable biologicals) have their payment policy-packaged into the procedures in which the product is used. We believe these drugs function as supplies and are supportive to the procedures in which they are used, which maintains the important packaging principles of the OPPS to encourage efficiencies.

We did not propose any changes to our policy for policy-packaged drugs, biologicals, and radiopharmaceuticals; therefore, after consideration of comments received, we are continuing the policies at 42 CFR 419.2(b). d. Packaging Determination for HCPCS Codes That Describe the Same Drug or Biological but Different Dosages

In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490 through 60491), we finalized a policy to make a single packaging determination for a drug, rather than an individual HCPCS code, when a drug has multiple HCPCS codes describing different dosages because we believe that adopting the standard HCPCS code-specific packaging determinations for these codes could lead to inappropriate payment incentives for hospitals to report certain HCPCS codes instead of others. We continue to believe that making packaging determinations on a drug-specific basis eliminates payment incentives for hospitals to report certain HCPCS codes for drugs and allows hospitals flexibility in choosing to report all HCPCS codes for different dosages of the same drug or only the lowest dosage HCPCS code. Therefore, we proposed to continue our policy to make packaging determinations on a drug-specific basis, rather than a HCPCS code-specific basis, for those HCPCS codes that describe the same drug or biological but different dosages in CY 2026.

To propose a packaging determination that is consistent across all HCPCS codes that describe different dosages of the same drug or biological, we aggregated both our CY 2024 claims data and our pricing information, which is based on the ASP methodology, generally ASP plus 6 percent, across all of the HCPCS codes that describe each distinct drug or biological in order to determine the mean units per day of the drug or biological in terms of the HCPCS code with the lowest dosage descriptor. The following drugs did not have pricing information available for the ASP methodology for the CY 2026 OPPS/ASC proposed rule; and, as is our current policy for determining the packaging status of other drugs, we used the mean unit cost available from the CY 2024 claims data to make the proposed packaging determinations for them: HCPCS code J3472 (Injection, hyaluronidase, ovine, preservative free, per 1000 usp units); HCPCS code J7100 (Infusion, dextran 40,500 ml); and HCPCS code J7110 (Infusion, dextran 75,500 ml).

For all other drugs and biologicals that have HCPCS codes describing different doses, we then multiplied the proposed weighted average ASP methodology based payment rate, which is generally ASP plus 6 percent, per-unit payment amount across all dosage levels of a specific drug or biological by the estimated units per day for all HCPCS codes that describe each drug or biological from our claims data to determine if the estimated per day cost of each drug or biological is less than or equal to the proposed CY 2026 drug packaging threshold of $140 (in which case all HCPCS codes for the same drug or biological would be packaged) or greater than the proposed CY 2026 drug packaging threshold of $140 (in which case all HCPCS codes for the same drug or biological would be separately payable). The proposed and final packaging status of each drug and biological HCPCS code to which this methodology would apply in CY 2026 is displayed in Table 107. BILLING CODE 4120-01-P

[GRAPHIC] [TIFF OMITTED] TR25NO25.149

BILLING CODE 4120-01-C

We proposed that our policy to make packaging determinations on a drug-specific basis, rather than a HCPCS code-specific basis, for those HCPCS codes that describe the same drug or biological but different dosages in CY 2026 would also apply to diagnostic radiopharmaceuticals. This is because, as with drugs and biologicals, we believe that adopting standard HCPCS code-specific packaging determinations for radiopharmaceutical codes could lead to inappropriate payment incentives for hospitals to report certain HCPCS codes instead of others. To propose a packaging determination that is consistent across all HCPCS codes that describe different dosages of the same diagnostic radiopharmaceutical, we would aggregate our CY 2024 claims data across all the HCPCS codes that describe each distinct diagnostic radiopharmaceutical to determine the mean units per day of the diagnostic radiopharmaceutical in terms of the HCPCS code with the lowest dosage descriptor. We would then analyze the aggregate per day cost of the diagnostic radiopharmaceutical to determine if the per day cost is less than or equal to the proposed CY 2026 diagnostic radiopharmaceutical packaging threshold of $655 (in which case all HCPCS codes for the same diagnostic radiopharmaceutical would be packaged) or greater than the proposed CY 2026 diagnostic radiopharmaceutical packaging threshold of $655 (in which case all HCPCS codes for the same diagnostic radiopharmaceutical would be separately payable). There are currently no diagnostic radiopharmaceuticals that this policy would apply to.

We did not receive any public comments on our proposal, and we are finalizing our proposal without modification, and confirm that the final CY 2026 drug packaging threshold remains at $140 per day as described in section V.B.1.a. of this final rule with comment period. All parts of the proposal are finalized without modification. 2. Payment for Drugs and Biologicals Without Pass-Through Status That Are Not Packaged a. Payment for Specified Covered Outpatient Drugs (SCODs) and Other Separately Payable Drugs and Biologicals

Section 1833(t)(14) of the Act defines certain separately payable radiopharmaceuticals, drugs, and biologicals and mandates specific payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a “specified covered outpatient drug” (known as a SCOD) is defined as a covered outpatient drug, as defined in section 1927(k)(2) of the Act, for which a separate APC has been established and that either is a radiopharmaceutical agent or a drug or biological for which payment was made on a pass-through basis on or before December 31, 2002.

Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and biologicals are designated as exceptions and are not included in the definition of SCODs. These exceptions are--

A drug or biological for which payment is first made on or after

January 1, 2003, under the transitional pass-through payment provision in section 1833(t)(6) of the Act.

A drug or biological for which a temporary HCPCS code has not been assigned.

During CYs 2004 and 2005, an orphan drug (as designated by the Secretary).

Section 1833(t)(14)(A)(iii) of the Act requires that payment for SCODs in CY 2006 and subsequent years be equal to the average acquisition cost for the drug for that year as determined by the Secretary, subject to any adjustment for overhead costs and considering the hospital acquisition cost survey data collected by the Government Accountability Office (GAO) in CYs 2004 and 2005, and later periodic surveys conducted by the Secretary as set forth in the statute. If hospital acquisition cost data are not available, the law requires that payment be equal to payment rates established under the methodology described in section 1842(o), section 1847A, or section 1847B of the Act, as calculated and adjusted by the Secretary as necessary for purposes of paragraph (14). We refer to this alternative methodology as the “statutory default.” Most physician Part B drugs are paid at ASP plus 6 percent in accordance with section 1842(o) and section 1847A of the Act.

Section 1833(t)(14)(E)(ii) of the Act provides for an adjustment in OPPS payment rates for SCODs to consider overhead and related expenses, such as pharmacy services and handling costs. Section 1833(t)(14)(E)(i) of the Act required MedPAC to study pharmacy overhead and related expenses and to make recommendations to the Secretary regarding whether, and if so how, a payment adjustment should be made to compensate hospitals for overhead and related expenses. Section 1833(t)(14)(E)(ii) of the Act authorizes the Secretary to adjust the weights for ambulatory procedure classifications for SCODs to consider the findings of the MedPAC study.\73\

\73\ Medicare Payment Advisory Committee. June 2005 Report to the Congress. Chapter 6: Payment for pharmacy handling costs in hospital outpatient departments. Available at https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/June05_ch6.pdf.

It has been our policy since CY 2006 to apply the same treatment to all separately payable drugs and biologicals, which include SCODs, and drugs and biologicals that are not SCODs. Therefore, we apply the payment methodology in section 1833(t)(14)(A)(iii) of the Act to SCODs, as required by statute, but we also apply it to separately payable drugs and biologicals that are not SCODs, which is a policy determination rather than a statutory requirement. For CY 2023 and subsequent years, we finalized a policy to apply section 1833(t)(14)(A)(iii)(II) of the Act to all separately payable drugs and biologicals, including SCODs. Although we do not distinguish SCODs in this discussion, we note that we are required to apply section 1833(t)(14)(A)(iii)(II) of the Act to SCODs; but we also are applying this provision to other separately payable drugs and biologicals, consistent with our history of using the same payment methodology for all separately payable drugs and biologicals.

For a detailed discussion of our OPPS drug payment policies from CY 2006 to CY 2012, we refer readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 68383 through 68385). In the CY 2013 OPPS/ ASC final rule with comment period (77 FR 68386 through 68389), we first adopted the statutory default policy to pay for separately payable drugs and biologicals at ASP plus 6 percent based on section 1833(t)(14)(A)(iii)(II) of the Act. We have continued this policy of paying for separately payable drugs and biologicals at the statutory default for CYs 2014 through 2025.

In the case of a drug or biological during an initial sales period in which data on the prices for sales of the drug or biological are not sufficiently available from the manufacturer, section 1847A(c)(4) of the Act permits the Secretary to make payments that are based on WAC. Under section 1833(t)(14)(A)(iii)(II) of the Act, the amount of payment for a separately payable drug equals the average price for the drug for the year established under, among other authorities, section 1847A of the Act. As explained in greater detail in the CY 2019 PFS final rule, under section 1847A(c)(4) of the Act, although payments may be based on WAC, unlike section 1847A(b) of the Act (which specifies that payments using ASP or WAC must be made with a 6 percent add-on), section 1847A(c)(4) of the Act does not require that a particular add-on amount be applied to WAC-based pricing for this initial period when ASP data are not available. Consistent with section 1847A(c)(4) of the Act, in the CY 2019 PFS final rule (83 FR 59661 to 59666), we finalized a policy that, effective January 1, 2019, WAC-based payments for Part B drugs made under section 1847A(c)(4) of the Act will utilize a 3 percent add-on in place of the 6 percent add-on that was being used according to our policy in effect as of CY 2018. For the CY 2019 OPPS, we followed the same policy finalized in the CY 2019 PFS final rule (83 FR 59661 to 59666). Since CY 2020, we have continued to utilize a 3 percent add-on instead of a 6 percent add-on for drugs that are paid based on WAC pursuant to our authority under section 1833(t)(14)(A)(iii)(II) of the Act (84 FR 61318 and 85 FR 86039), which provides, in part, that the amount of payment for a SCOD is the average price of the drug in the year established under section 1847A of the Act. We also apply this provision to non-SCOD separately payable drugs, biologicals, and certain radiopharmaceuticals. Because we establish the average price for a drug paid based on WAC under section 1847A of the Act as WAC plus 3 percent instead of WAC plus 6 percent, we believe it is appropriate to price separately payable drugs paid based on WAC at the same amount under the OPPS. Our policy to pay for drugs and biologicals at WAC plus 3 percent, rather than WAC plus 6 percent, applies whenever WAC-based pricing is used for a drug, biological, or radiopharmaceutical under section 1847A(c)(4). When WAC-based pricing is used for a drug, biological, or radiopharmaceutical, but not under section 1847A(c)(4), the payment of WAC plus 6 percent would apply. We refer readers to the CY 2019 PFS final rule (83 FR 59661 to 59666) for additional background on this policy.

Consistent with our current policy, payments for separately payable drugs, biologicals, and radiopharmaceuticals are included in the budget neutrality adjustments, under the requirements in section 1833(t)(9)(B) of the Act. Also, the budget neutral weight scalar is not applied in determining payments for these separately payable drugs and biologicals.

Separately payable drug, biological, and radiopharmaceutical payment rates were listed in Addenda A and B to the CY 2026 OPPS/ASC proposed rule (available on the CMS website).\74\ These addenda provided the proposed CY 2026 payment rates based on the ASP methodology for separately payable nonpass-through drugs, biologicals, and radiopharmaceuticals, with exceptions for certain radiopharmaceuticals previously discussed, and the ASP methodology for pass-through drugs, biologicals, and radiopharmaceuticals. Except for proposed payment rates for certain radiopharmaceuticals, these rates were based either on ASP information that is the basis for calculating payment rates for drugs and biologicals in the physician's office

setting effective April 1, 2025, or WAC, AWP, or mean unit cost from CY 2024 claims data and updated cost report information available for the proposed rule. For nonpass-through therapeutic radiopharmaceuticals, payment rates were based on ASP data or mean unit cost. We proposed to pay separately at mean unit cost for diagnostic radiopharmaceuticals with per day costs above the proposed threshold; the payment rates proposed for qualifying diagnostic radiopharmaceuticals are entirely mean unit cost if available. See section II.A.3.c.(3) for the finalized policy regarding payment of qualifying diagnostic radiopharmaceuticals. In general, these published proposed payment rates will not be the same as the actual January 2026 payment rates. This is because payment rates for drugs, biologicals, and therapeutic radiopharmaceuticals with ASP information for January 2026 will be determined through the standard quarterly process where ASP data submitted by manufacturers for the third quarter of CY 2025 (July 1, 2025, through September 30, 2025) will be used to set the payment rates that are released for the quarter beginning in January 2026 in December 2025. In addition, in Addenda A and B to the CY 2026 OPPS/ASC proposed rule, payment rates for drugs, biologicals, and therapeutic radiopharmaceuticals for which there was no ASP, WAC, or AWP information available for April 2025, as well as all separately payable diagnostic radiopharmaceuticals, were based on mean unit cost in the available CY 2024 claims data.

\74\ https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient.

If new pricing information becomes available for payment for the quarter beginning in January 2026, we will price payment for these drugs, biologicals, therapeutic radiopharmaceuticals, and diagnostic radiopharmaceuticals based on their newly available information. Finally, there may be drugs, biologicals and therapeutic radiopharmaceuticals that had ASP, WAC, or AWP information available for the proposed rule (reflecting April 2025 ASP data) that do not have ASP, WAC, or AWP information available for the quarter beginning in January 2026. These drugs, biologicals and therapeutic radiopharmaceuticals would then be paid based on arithmetic mean unit cost data derived from CY 2024 hospital claims. Therefore, the proposed payment rates listed in Addenda A and B to the CY 2026 OPPS/ASC proposed rule were not for January 2026 payment purposes and were only illustrative of the CY 2026 OPPS payment methodology using the most recently available information at the time of issuance of the CY 2026 OPPS/ASC proposed rule.

As previously discussed, we proposed that payment rates for HCPCS codes for separately payable drugs and biologicals included in Addenda A and B of this CY 2026 OPPS/ASC final rule with comment period would be based on ASP data from the second quarter of CY 2025. These data are the basis for calculating payment rates for drugs and biologicals in the physician's office setting using the ASP methodology, effective October 1, 2025. These payment rates would then be updated in the January 2026 OPPS update, based on the most recent ASP data to be used for physicians' office and OPPS payment as of January 1, 2026. For drugs and biologicals that do not currently have a payment rate based on ASP, WAC, or AWP, for therapeutic radiopharmaceuticals that do not currently have an ASP payment rate, and for all diagnostic radiopharmaceuticals, we would calculate their arithmetic mean unit cost from all of the CY 2024 claims data and updated cost report information available for the CY 2026 final rule with comment period to determine their final per day cost.

We note that payment amounts for most drugs separately payable under Medicare Part B are determined using the methodology in section 1847A of the Act, and in many cases, payment is based on the average sales price (ASP) plus a statutorily mandated 6 percent add-on.

In CY 2025, we clarified that only ASP data or, if ASP data are not available, mean unit cost data, would be used to set payment rates for separately payable nonpass-through therapeutic radiopharmaceuticals under the OPPS. For CY 2026, we did not propose any changes to our policies for payment for separately payable therapeutic or diagnostic radiopharmaceuticals other than the technical update that was proposed to the diagnostic radiopharmaceutical packaging threshold update factor as discussed in section V.B.1. of this final rule with comment period.

For CY 2026, we did not propose any additional changes to our policies for payment for separately payable drugs, biologicals, and radiopharmaceuticals. We proposed to continue our payment policy that has been in effect since CY 2013 to pay for separately payable drugs and biologicals in accordance with section 1833(t)(14)(A)(iii)(II) of the Act (the statutory default).

We received public comments on these proposals. The following is a summary of the comments we received and our responses.

Comment: Several commenters supported our proposals related to the separate payment for separately payable non-passthrough drugs and biologicals under the OPPS.

Response: We thank the commenters for their support.

Comment: Several commenters suggested technical improvements for CMS to consider regarding the operationalization of drug payment. Suggestions included improving transparency regarding updates to the CMS Average Sales Price Pricing Files, the OPPS/ASC Addenda Files, and the NCCI Medically Unlikely Edits. A commenter also suggested enabling a timelier issuance of J-codes to improve transparency for new drugs and to accelerate the rate at which ASP data is utilized following ASP reporting to CMS by the manufacturer. Two commenters requested CMS designate additional resources, including career staff and guidance, for communication with the pharmaceutical industry to increase transparency and ensure timely inclusion of new products in the OPPS payment files. One commenter indicates that uncertainty regarding Medicare payment often causes providers to hesitate or delay adoption of new therapies. Additionally, one commenter suggested CMS develop a drug-intensive policy for ASC rate setting similar to the current device-intensive policy. Additionally, two commenters recommended CMS increase transparency regarding packaging status post pass-through expiration and include the expected packaging status of a drug as part of the rulemaking process.

Response: We thank the commenters for their feedback and recommendations. While these comments are generally out of scope for purposes of this rulemaking, we will take these comments into consideration for future rulemaking, future issuance of sub-regulatory guidance, and future internal process improvements. Based on these comments we may also consider publishing additional files, documents, and data as part of the rulemaking process in future years.

After consideration of public comments, we are finalizing, without modification, our proposals to continue our payment policy for separately payable drugs and biologicals in accordance with section 1833(t)(14)(A)(iii)(II) of the Act. b. Biosimilar Biological Products

For CY 2024, we finalized the exception of biosimilars from the OPPS threshold packaging policy when their

reference products are separately paid (88 FR 81783 through 81785). This policy allows for separate payment for biosimilars even if the biosimilar's per-day cost is below the packaging threshold if the biosimilar's reference product is separately paid. This policy removes the financial incentive to use a more expensive separately payable biological and promotes biosimilar use as a lower cost alternative to higher cost reference products.

Payment rates for drugs and biologicals (including biosimilars) under Medicare Part B are determined using the methodology in section 1847A of the Act, and in many cases, payment is based on the average sales price (ASP) plus a statutorily mandated 6 percent add-on. Additionally, section 11403 of the IRA requires that a qualifying biosimilar be paid at ASP plus 8 percent of the reference product's ASP rather than 6 percent during the applicable 5-year period. Section 1847A(b)(8)(B)(ii) of the Act defines the applicable 5-year period for a qualifying biosimilar for which payment has been made using ASP (that is, payment under section 1847A(b)(8) of the Act) as of September 30, 2022, as the 5-year period beginning on October 1, 2022. For a qualifying biosimilar for which payment is first made using ASP during the period beginning October 1, 2022, and ending December 31, 2027, the statute defines the applicable 5-year period as the 5-year period beginning on the first day of such calendar quarter of such payment (88 FR 81783). These payment rates are published in the quarterly release of Addendum B or ASP pricing files.

Comment: A few commenters supported the continuation of our biosimilar packaging exception policy that was implemented in CY 2024. The commenters stated they support policies that encourage a competitive marketplace and do not penalize price competition. Furthermore, a commenter suggested CMS expand the current biosimilar packaging exception policy to all biosimilars regardless of the reference product's packaging status. Another commenter expressed concerns regarding the OPPS packaging policy and believed it hinders competition against the reference products.

Response: We thank the commenters for their support of continuing our biosimilar packaging exception policy. We believe the current policy supports both our intent to promote the use of biosimilars as a less expensive alternative to the reference products while also preserving our longstanding OPPS packaging intent to create incentives for efficiency. We continue to believe packaging is an essential component of a prospective payment system and do not support categorically excepting all biosimilars from the threshold packaging policy.

After consideration of public comments we received, we are finalizing our proposal without modification to continue the exception of biosimilars from the OPPS threshold packaging policy when their reference products are separately paid. For CY 2026, we will pay separately for these biosimilars even if their per-day cost is below the threshold packaging policy when their reference products are separately paid. c. Invoice Drug Pricing for CY 2026

In the CY 2025 OPPS/ASC final rule with comment period (89 FR 94243 to 94244), we finalized that, for separately payable drugs or biologicals for which CMS does not provide a payment rate in Addendum B, which would indicate to MACs that CMS does not have pricing information (specifically, that ASP, WAC, AWP, and mean unit cost information is not available to determine a payment rate), MACs would calculate the payment based on provider invoices. The drug or biological invoice cost would be the net acquisition cost minus any rebates, chargebacks, or post-sale concessions. Before calculating an invoice-based payment amount, MACs would use the provider invoice to determine that: (a) the drug is not policy packaged; and (b) the per- day cost of the drug, biological, therapeutic radiopharmaceutical or diagnostic radiopharmaceutical is above the threshold packaging amount, as applicable. If both conditions are met, the MACs would use the provider invoice amount to set a payment rate for the separately payable drug, biological, or radiopharmaceutical until its payment amount becomes available to CMS. We generally expect invoice pricing to be temporary, lasting two to three quarters, for qualified drugs required to report ASP under section 1847A of the Act. For drug products that are not required to report ASP under section 1847A of the Act (that is, diagnostic pharmaceuticals), invoice pricing may be used on a longer-term basis until a MUC can be calculated. We finalized the invoice pricing policy for drugs to be effective January 1, 2026, with the intent to make technical updates to outpatient hospital claims and to allow providers time to prepare for any operational changes. We noted that the National Uniform Billing Committee (NUBC) created a value code that would allow for the reporting of invoice prices of drugs, biologicals, and radiopharmaceuticals for CY 2026 for the purpose of this policy. The NUBC value code created is 92 (Drug/ Biologic Invoice Cost), with the definition of: “Invoice Cost of drug/ biologic. For use with Revenue Category 0636 when required by federal regulation.” We proposed a technical clarification to this policy in the CY 2026 OPPS/ASC proposed rule. Previously, we stated that MACs would use the provider invoice to determine that: (1) the drug is not policy packaged; and (2) the per-day cost of the drug, biological, therapeutic radiopharmaceutical or diagnostic radiopharmaceutical is above the threshold packaging amount, as applicable. However, we proposed to clarify that CMS will determine whether the first condition is met, whether the drug is not policy packaged; however, the MAC will continue to determine whether the second condition is met, whether the per-day cost of the drug, biological, therapeutic radiopharmaceutical or diagnostic radiopharmaceutical is above threshold packaging amount, as applicable.

Comment: A commenter sought clarification regarding “invoice pricing”. The commenter stated that “invoice pricing” by nature does not reflect post sale adjustment and that the CMS text on this subject, “The drug or biological invoice cost would be the net acquisition cost minus any rebates, chargebacks, or post-sale concessions” may create confusion and result in unintended consequences.

Response: We thank the commenter for seeking clarification on this subject. The invoice pricing policy aims to enhance transparency and accuracy in the determination of payment rates for drugs and biologicals when CMS lacks pricing information. By using the net acquisition cost and accounting for various post-sale adjustments, this policy ensures that the payment rates reflect the true cost incurred by providers. Therefore, in the CY 2026 OPPS/ASC proposed rule, we defined “invoice pricing” to be net acquisition cost minus any rebates, chargebacks, or post-sale concessions. To illustrate the calculation of the net acquisition cost: if the acquisition cost of a unit of drug X is $10, and the rebate was $2. The net acquisition cost of drug X per unit is $8 ($10-$2). Therefore, the invoice price to submit to the MAC is $8 per unit.

After consideration of the public comments we received, we are implementing this policy without modification in CY 2026. We refer readers to the previous discussion when we finalized the policy in the CY 2025 OPPS/ASC final rule with comment period (89 FR 94243 to 94244).

For a complete history of the OPPS payment policy for radiopharmaceuticals, we refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65811), the CY 2006 OPPS final rule with comment period (70 FR 68655), and the CY 2010 OPPS/ASC final rule with comment period (74 FR 60524).

We received public comments on our payment policy for radiopharmaceuticals in general. The following is a summary of the comments we received and our responses.

Comment: One commenter requested that CMS determine HCPCS specific radiopharmaceutical offsets and include preliminary nuclear medicine APC offset data with the proposed rule in order to inform public comments. Additionally, this commenter requested that CMS restore the radiopharmaceutical edits used in nuclear medicine procedures to increase the accuracy of claims data used to set rates for both separately payable diagnostic radiopharmaceuticals as well as the nuclear medicine APCs.

Response: We appreciate the commenter's feedback; however, we are not reinstating the radiolabeled product edits for nuclear medicine procedures, which required a diagnostic radiopharmaceutical to be present on the same claim as a nuclear medicine procedure for payment to be made under the OPPS. As previously discussed in the CY 2020 OPPS/ ASC final rule with comment period (85 FR 86033 and 86034), the edits were in place between CY 2008 and CY 2014 (78 FR 75033). We believe the period of time in which the edits were in place was sufficient for hospitals to gain experience reporting procedures involving radiolabeled products and to become accustomed to ensuring that they code and report charges so that their claims fully and appropriately reflect the costs of those radiolabeled products. As with all other items and services recognized under the OPPS, we expect hospitals to code and report their costs appropriately, regardless of whether there are claims processing edits in place. We welcome ongoing dialogue and engagement from interested parties regarding suggestions for payment changes for consideration in future rulemaking. We will take into consideration additional files and data that may be helpful to readers as supplements to future notice and comment rulemaking. a. Payment Policy for Therapeutic Radiopharmaceuticals

In the CY 2023 OPPS/ASC final rule with comment period, we adopted as final our proposal to continue our longstanding payment policy for therapeutic radiopharmaceuticals for CY 2023 and subsequent years. Accordingly, this payment policy for therapeutic radiopharmaceuticals will continue to apply in CY 2026.

Specifically, our policy of paying for separately payable pass- through therapeutic radiopharmaceuticals under the ASP methodology adopted for separately payable drugs and biologicals described in section V.A.1. of this CY 2026 OPPS/ASC final rule will continue to apply for CY 2026. We will pay for separately payable nonpass-through therapeutic radiopharmaceuticals through a modified ASP methodology where we pay at ASP plus 6 percent if ASP data are available. However, if ASP information is unavailable for a separately payable nonpass- through therapeutic radiopharmaceutical, we will continue to base the payment rate on arithmetic mean unit cost data derived from hospital claims. Our policy not to use WAC or AWP to establish payment for separately payable nonpass-through therapeutic radiopharmaceuticals if ASP is not available will continue for CY 2026. We explained our rationale in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60524 through 60525) when we first adopted our policy to apply the principles of separately payable drug pricing to therapeutic radiopharmaceuticals.

For a full discussion of ASP-based payment for therapeutic radiopharmaceuticals, we refer readers to the CY 2010 OPPS/ASC final rule with comment period (74 FR 60520 through 60521). We will rely on CY 2024 mean unit cost data derived from hospital claims data for payment rates for separately payable nonpass-through therapeutic radiopharmaceuticals for which ASP data are unavailable and update the payment rates for these products according to our usual process for updating the payment rates for separately payable drugs and biologicals on a quarterly basis if updated ASP information becomes available.

The CY 2026 payment rates for separately payable nonpass-through therapeutic radiopharmaceuticals are included in Addenda A and B of this final rule with comment period (which are available on the CMS website).\75\

\75\ https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient.

Though we made no proposal regarding payment for therapeutic radiopharmaceuticals, we received public comments that were generally in support of these policies. We thank the commenters for their support. We are continuing our policies unchanged for CY 2026. b. Payment Policy for Diagnostic Radiopharmaceuticals Without Claims Data

For CY 2025, we finalized, as described in the CY 2025 OPPS/ASC final rule (89 FR 93948 through 93963), to pay separately at arithmetic mean unit cost for diagnostic radiopharmaceuticals with a per day cost above our diagnostic radiopharmaceutical packaging threshold ($655 for CY 2026). We also finalized our policy to pay for pass-through diagnostic radiopharmaceuticals based on ASP, WAC, and AWP.

We continue to believe that paying for nonpass-through diagnostic radiopharmaceuticals using arithmetic mean unit cost would appropriately pay for the average price of a nonpass-through separately payable diagnostic radiopharmaceutical, as discussed in section II.A.3.c of this final rule with comment period. In our view, MUC is an appropriate proxy for the average price for a diagnostic radiopharmaceutical for a given year, as it is calculated based on the average costs for a particular year and is directly reflective of the actual cost data that hospitals submit to CMS. As we stated in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60523), we believe that WAC or AWP is not an appropriate proxy to provide OPPS payment for radiopharmaceuticals because these pricing methodologies do not include discounts. Specifically, the absence of appropriate ASP reporting could result in payment for a separately payable diagnostic radiopharmaceutical based on WAC or AWP indefinitely, a result which we believe would be inappropriate, as these pricing metrics do not capture all of the pricing discounts that may be reflected in the ASP.

Additionally, in the CY 2025 OPPS/ASC final rule with comment period (89 FR 93948 through 93963), we finalized to base the initial payment for new diagnostic radiopharmaceuticals with HCPCS codes that do not have pass-through status or claims data on ASP, and on the WAC for these products if ASP data for these diagnostic radiopharmaceuticals are not available. To further clarify, these products will be paid based on ASP plus 6 percent, and

at WAC plus 3 or 6 percent according to the policy in section V.B.2.a. of this final rule with comment period if ASP data are not available.

If the WAC also is unavailable, we proposed to make payment for new diagnostic radiopharmaceuticals at 95 percent of the products' most recent AWP. We believe the volume of products in this category will typically be very low; however, in these rare situations, we believe it would be appropriate to use ASP, WAC, or AWP until a MUC is established for new diagnostic radiopharmaceuticals with HCPCS codes that do not have passthrough status or claims data.

We received public comments on these proposals. The following is a summary of the comments we received and our responses.

Comment: Commenters were generally supportive of our policy regarding payment for non-passthrough diagnostic radiopharmaceuticals without claims data. While commenters had suggestions regarding payment for diagnostic radiopharmaceuticals with claims data and while on pass- through status, commenters generally supported the policies to pay for diagnostic radiopharmaceuticals without claims data according to the existing methodology.

Response: We thank the commenters for their support.

After consideration of public comments, we are continuing our policy, without modification, to base the initial payment for new diagnostic radiopharmaceuticals with HCPCS codes that do not have pass- through status or claims data on ASP, at ASP plus 6 percent, and on the WAC for these products if ASP data for these diagnostic radiopharmaceuticals are not available. To further clarify, these products will be paid based on ASP plus 6 percent, and at WAC plus 3 or 6 percent according to the policy in section V.B.2.a. of this final rule with comment period if ASP data are not available.

If the WAC also is unavailable, payment for new diagnostic radiopharmaceuticals will be made at 95 percent of the products' most recent AWP. We believe the volume of products in this category will typically be very low; however, in these rare situations, we believe it would be appropriate to use ASP, WAC, or AWP until a MUC is established for new diagnostic radiopharmaceuticals with HCPCS codes that do not have passthrough status or claims data.

Please refer to section II.A.3.c of this final rule with comment period for information regarding our broader payment policies for diagnostic radiopharmaceuticals, including our policy to pay separately for diagnostic radiopharmaceuticals above a certain cost threshold, our policy to pay for separately payable diagnostic radiopharmaceuticals with claims data based on mean unit cost data derived from hospital claims, and a list of the final qualifying diagnostic radiopharmaceuticals with per day costs exceeding the $655 threshold for CY 2026 in Table 7. The final CY 2026 payment rates for separately payable nonpass-through diagnostic radiopharmaceuticals are included in Addenda A and B of this final rule with comment period (which are available on the CMS website).\76\

\76\ https://www.cms.gov/medicare/payment/prospective-payment-systems/hospital-outpatient.

For CY 2026, we proposed to continue our established policy to provide payment for blood clotting factors using the same methodology as other separately payable drugs and biologicals under the OPPS and to continue to pay a furnishing fee. For a full discussion of our established payment policy for blood clotting factors, please refer to the CY 2023 OPPS/ASC final rule with comment period (87 FR 71969 through 71970). In accordance with our policy as finalized in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765), we will announce the actual figure of the percent change in the applicable CPI and the updated furnishing fee calculation based on that figure through the applicable program instructions and posting on the CMS website at https://www.cms.gov/medicare/payment/fee-for-service-providers/part-b-drugs/average-drug-sales-price.

Comment: Commenters supported our proposal to continue to provide payment for the for blood clotting factors using the same methodology as other separately payable drugs and biologicals under the OPPS and to continue to pay a furnishing fee.

Response: We thank the commenters for their support of our policy.

After consideration of public comments, we are finalizing our proposal without modification to pay for clotting factors using the same methodology as other separately payable drugs and biologicals under the OPPS, and to provide a clotting factor furnishing fee. For CY 2026, the blood clotting factor furnishing fee is $0.265. The actual percentage change in the applicable CPI and the updated furnishing fee calculation based on that figure through the applicable program instructions are posted on the CMS website.\77\

\77\ https://www.cms.gov/files/document/r13379cp.pdf.

In the CY 2023 OPPS/ASC final rule with comment period, we adopted as final our proposal to continue our longstanding payment policy for nonpass-through drugs, biologicals, and radiopharmaceuticals with HCPCS codes but without OPPS hospital claims data for CY 2023 and subsequent years. Therefore, for CY 2026, this policy will continue to apply. For a detailed discussion of the payment policy and methodology, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70442 through 70443). Consistent with our policy, because we have no claims data and must determine if these products, drugs, biologicals, therapeutic radiopharmaceuticals, and diagnostic radiopharmaceuticals, exceed the per-day cost threshold, we estimated the average number of units of each product that would typically be furnished to a patient during one day in the hospital outpatient setting and utilized the payment rate for the product, typically the ASP methodology, to determine whether their payment will be packaged as well as their payment status indicators.

We did not make a proposal on this policy. This policy did not receive public comments on this provision. We are continuing this policy unchanged for CY 2026. 6. Requirement in the CY 2026 PFS Proposed Rule for HOPDs and ASCs To Report Discarded Amounts of Certain Single-Dose or Single-Use Package Drugs

Section 90004 of the Infrastructure Investment and Jobs Act (Pub. L. 117-9, November 15, 2021) (“the Infrastructure Act”) amended section 1847A of the Act to re-designate subsection (h) as subsection (i) and insert a new subsection (h), which requires manufacturers to provide a refund to CMS for certain discarded amounts from a refundable single-dose container or single-use package drug. We explained in the CY 2026 OPPS/ASC proposed rule (90 FR 33631) that the CY 2026 Physician Fee Schedule (PFS) proposed rule (90 FR 32538 through 32540) includes proposals related to the discarded drug refund

policy, including proposals that may impact hospital outpatient departments (HOPDs) and ambulatory surgical centers (ASCs). Similar to our past notices in OPPS/ASC proposed rules, such as in the CY 2025 OPPS/ASC proposed rule (89 FR 59370), we wanted to ensure interested parties were aware of these proposals and knew to refer to the CY 2026 PFS proposed rule for a full description of the proposed policy. Interested parties were asked to submit comments on any proposals to implement section 90004 of the Infrastructure Act to the CY 2026 PFS proposed rule. We noted that public comments on these proposals would be addressed in the CY 2026 PFS final rule with comment period.

We refer readers to the CY 2026 PFS final rule with comment period for a summary of comments, our responses, and the finalized policy for CY 2026. 7. CY 2026 Prospective Adjustment to Payments for Non-Drug Items and Services To Offset the Increased Payments for Non-Drug Items and Services Made in CY 2018 Through CY 2022 as a Result of the 340B Payment Policy a. Overview

Under the OPPS, we generally set payment rates for separately payable drugs, and biologicals (hereinafter referred to collectively as “drugs” in this section) under section 1833(t)(14)(A) of the Act). Section 1833(t)(14)(A)(iii)(II) of the Act provides that, if hospital acquisition cost data are not available, the payment amount is the average price for the drug in a year established under sections 1842(o), 1847A, or 1847B of the Act, as the case may be. Payment rates for drugs have usually been established under section 1847A of the Act, which generally sets a default rate of the average sales price (ASP) plus 6 percent. Section 1833(t)(14)(A)(iii)(II) of the Act also provides that the average price for the drug in the year as established under section 1847A of the Act, is calculated and adjusted by the Secretary as necessary for purposes of paragraph (14).

In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59353 through 59371), CMS reexamined the appropriateness of paying the ASP plus 6 percent for drugs acquired through the 340B Drug Pricing Program (hereinafter referred to as the “340B Program”), a Health Resources and Services Administration (HRSA)-administered program that allows covered entities to purchase certain covered outpatient drugs at discounted prices from drug manufacturers. Based on findings of the Government Accountability Office (GAO),\78\ the HHS Office of the Inspector General (OIG),\79\ and the Medicare Payment Advisory Commission (MedPAC) \80\ that 340B hospitals were acquiring drugs at a significant discount under the 340B Program, CMS adopted a policy beginning in 2018 generally to pay an adjusted amount of ASP minus 22.5 percent for certain separately payable drugs or biologicals acquired through the 340B Program. This adjustment amount was based on our concurrence with an analysis by MedPAC that concluded that the estimated average minimum discount of 22.5 percent of ASP adequately represented the average minimum discount that a 340B participating hospital received for separately payable drugs under the OPPS (82 FR 59354 through 59371). Our intent in implementing this payment reduction was to reflect more accurately the actual costs incurred by participating hospitals in acquiring 340B drugs. We stated our belief that such changes would allow Medicare beneficiaries and the Medicare program to pay a more appropriate amount when hospitals participating in the 340B Program furnished drugs to Medicare beneficiaries that were purchased under the 340B Program (82 FR 59353 through 59371).

\78\ Government Accountability Office. “Medicare Part B Drugs: “Action Needed to Reduce Financial Incentives to Prescribe 340B Drugs at Participating Hospitals.” June 2015. Available at https://www.gao.gov/assets/gao-15-442.pdf.

\79\ Office of Inspector General. “Part B Payment for 340B Purchased Drugs. OEI-12-14-00030”. November 2015. Available at: https://oig.hhs.gov/oei/reports/oei-12-14-00030.pdf.

\80\ Medicare Payment Advisory Commission. March 2016 Report to the Congress: Medicare Payment Policy. March 2016. Available at Medicare Payment Advisory Commission. March 2016 Report to the Congress: Medicare Payment Policy. March 2016. Available at https://www.medpac.gov/document/http-www-medpac-gov-docs-default-source-reports-may-2015-report-to-the-congress-overview-of-the-340b-drug-pricing-program-pdf/.

From January 1, 2018 through September 27, 2022, under the OPPS we generally paid for certain separately payable drugs acquired through the 340B Program at ASP minus 22.5 percent. In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59369 through 59370), we finalized our proposal to adjust the payment rate for separately payable drugs (other than drugs with pass-through payment status and vaccines) acquired under the 340B Program from ASP plus 6 percent to ASP minus 22.5 percent. We also noted that critical access hospitals are not paid under the OPPS and therefore were not subject to the OPPS 340B drug payment adjustment policy. For ease of reference, the OPPS 340B drug payment adjustment policy is hereinafter referred to as the “340B Payment Policy” and refers both to the adjustments made to payment rates for 340B-acquired drugs described here and the corresponding rate adjustment for non-drug services and items described later in section V.B.7.c. of this final rule with comment period. We note that rural sole community hospitals, children's hospitals, and PPS-exempt cancer hospitals were exempted from the adjustments made to payment rates for 340B-acquired drugs primarily due to these hospitals receiving special payment adjustments under the OPPS. In addition, as stated in the CY 2018 OPPS/ASC final rule with comment period, this policy change did not apply to drugs with pass-through payment status, which are required to be paid based on the ASP methodology, or vaccines, which are excluded from the 340B Program.

In the CY 2019 OPPS/ASC final rule with comment period (83 FR 58981), we continued the Medicare 340B payment policies that were implemented in CY 2018 and adopted a policy to pay for non-pass-through 340B-acquired biosimilars at ASP minus 22.5 percent of the biosimilar's ASP, rather than the reference biological product's ASP. Additionally, in the CY 2019 OPPS/ASC final rule with comment period (83 FR 59015 through 59022), we finalized a policy to pay ASP minus 22.5 percent for 340B-acquired drugs furnished in non-exempted off-campus provider-based departments (PBDs) paid under the PFS. We adopted this payment policy for CY 2019 and subsequent years. Also, during the CY 2019 OPPS/ASC rulemaking cycle, we clarified that the 340B payment adjustment applied to drugs priced using either wholesale acquisition cost (WAC) or average wholesale price (AWP), and since the policy was first adopted, we applied the 340B payment adjustment to 340B-acquired drugs priced using these pricing methodologies. The 340B payment adjustment for WAC- priced drugs was WAC minus 22.5 percent. 340B-acquired drugs that were priced using AWP were paid an adjusted amount of 69.46 percent of AWP (83 FR 37125).\81\

\81\ The 69.46 percent of AWP was calculated by first reducing the original 95 percent of AWP price by 6 percent to generate a value that is similar to ASP or WAC with no percentage markup. Then we applied the 22.5 percent reduction to ASP/WAC-similar AWP value to obtain the 69.46 percent of AWP, which was similar to either ASP minus 22.5 percent or WAC minus 22.5 percent.

As discussed further in section V.B.7.f. of the CY 2026 OPPS/ASC proposed rule, the results of this policy meant that hospitals received an estimated $10.6 billion less in 340B drug payments (including money that would have been paid by Medicare and money that would have come from beneficiaries as copayments) than they would have for drugs provided in CY 2018 through September 27th of 2022 had the 340B Payment Policy not been implemented (88 FR 77162). These reduced payments are detailed in Table 108 and are derived from Addendum AAA published with the Final Remedy rule (88 FR 77150). [GRAPHIC] [TIFF OMITTED] TR25NO25.150

For more detailed descriptions of our OPPS payment policy for drugs acquired under the 340B Program during this timeframe, we refer readers to the CY 2018 OPPS/ASC final rule with comment period (82 FR 59353 through 59371); the CY 2019 OPPS/ASC final rule with comment period (83 FR 59015 through 59022); the CY 2020 OPPS/ASC final rule with comment period (84 FR 61321 through 61327); the CY 2021 OPPS/ASC final rule with comment period (85 FR 86042 through 86055); the CY 2022 OPPS/ASC final rule with comment period (86 FR 63640 through 63649); the CY 2023 OPPS/ASC final rule with comment period (87 FR 71972 through 71973); and the CY 2024 OPPS/ASC final rule with comment period 88 FR 81789 through 81792). c. Payment for Non-Drug Items and Services in CY 2018 Through CY 2022

In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59216, 59258), to comply with the statutory budget neutrality requirements under sections 1833(t)(9)(B) and (t)(14)(H) of the Act, we finalized our proposal to redistribute our estimated reduction in payments for separately payable drugs as a result of the 340B Payment Policy by increasing the conversion factor used to determine the payment amounts for non-drug items and services. As further described in the CY 2018 OPPS/ASC final rule with comment period, we used updated CY 2016 claims data and a list of 340B-eligible providers to calculate an estimated impact of $1.6 billion based on the final CY 2018 policy to pay for OPPS 340B-acquired drugs at a payment rate of generally ASP minus 22.5 percent. To effectuate the budget neutrality provisions of the OPPS for CY 2018, we redistributed an estimated $1.6 billion in reduced drug payments from adoption of the final 340B payment methodology to all hospitals paid under the OPPS by increasing the payment rates by 3.19 percent for nondrug items and services furnished by all hospitals paid under the OPPS for CY 2018. We carried through this conversion factor adjustment from CYs 2019 through 2022, increasing payments for non-drug items and services in these CYs. This resulted in approximately $7.769 billion, which for ease of reference in this rule we hereafter refer to as $7.8 billion, in additional spending on non-drug items and services from CYs 2018 through 2022. d. Litigation History of the 340B Payment Policy

The 340B Payment Policy was the subject of extensive litigation. See the Proposed Remedy for the 340B-Acquired Drug Payment Policy for Calendar Years 2018-2022 (hereinafter referred to as the “proposed remedy rule”) for a more comprehensive summary of the litigation history (88 FR 44079 through 44080).

On June 15, 2022, the Supreme Court held that because we had not conducted a survey of hospitals' acquisition costs, we could not vary the payment rates for outpatient prescription drugs by hospital group. See Am. Hosp. Ass'n v. Becerra, 142 S. Ct. 1896, 1906 (2022). The Supreme Court declined to opine on the appropriate remedy, id. at 1903, and on September 28, 2022, the district court vacated the reimbursement rate for 340B-acquired drugs for the remainder of 2022. See Am. Hosp. Ass'n v. Becerra,1:18-cv-2084-RC, 2022 WL 4534617, at *5.\82\ On January 10, 2023, the district court remanded without vacatur to give the agency the opportunity to determine the proper remedy for the reduced payment amounts to 340B hospitals under the payment rates in the final OPPS rules for CY 2018 through CY 2022. See Am. Hospital Ass'n v. Becerra, 1:18-cv-2084-RC, 2023 WL 143337, at *6.\83\

\82\ https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2018cv2084-79.

\83\ https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2018cv2084-86.