ASP Plus 6 Percent: How Medicare Part B Pays for Drugs, and What Is Left After Sequestration
ASP plus 6 is the formula behind most Medicare Part B drug payments: the payment limit for a separately payable drug is its average sales price (ASP), the manufacturer’s volume-weighted net price to U.S. purchasers after rebates and discounts, plus 6 percent. Medicare has priced Part B drugs this way since January 1, 2005, and publishes the limits quarterly.
For a medical oncology practice the 6 percent is the margin that pays for pharmacy staff, carrying inventory and the occasional unpaid dose. This article explains what reduces it.
Where you see it
| Place | What it shows |
|---|---|
| Medicare Part B Drug Payment Limit File (the quarterly “ASP file”) | One row per HCPCS code: dosage unit, payment limit, the coinsurance percentage, and notes such as “inflation-adjusted coinsurance” or “8% of reference add-on applied” |
| NDC-HCPCS Crosswalk | Which NDCs feed each code’s ASP, with package size and billable units |
| Remittance advice | The allowed amount on a J-code line is the payment limit times units; CO-253 is the sequestration cut on Medicare’s share |
| Practice management fee schedule | Where the quarterly limits must be loaded to set expected allowed amounts |
| Pharmacy invoice | The acquisition cost the payment limit is measured against |
How the number is built
Manufacturers report ASP data to CMS each quarter, and CMS turns it into payment limits with a two-quarter lag: the October 2026 file is based on second-quarter 2026 ASP data, as the file’s own header says. The payment limit is 106 percent of the ASP for a single-source drug; for a multiple-source code it is 106 percent of the volume-weighted ASP of all products under the code.
| Situation | Payment limit |
|---|---|
| Drug on the quarterly file | ASP plus 6 percent |
| New drug, no ASP yet | Wholesale acquisition cost plus up to 3 percent (dates of service from January 1, 2019), or invoice pricing, until an ASP-based limit exists |
| Not on the ASP or NOC file | The MAC prices from WAC or invoice |
| Biosimilar | Its own ASP plus 6 percent of the lesser of the reference product’s WAC or ASP |
| Qualifying biosimilar (ASP not above the reference product’s) | Its own ASP plus 8 percent of the reference product’s, for a five-year period under IRA section 11403 |
| Radiopharmaceuticals | Not ASP; priced by the contractor, often from invoice |
The payment limit is an allowed amount, not a payment. Medicare pays 80 percent of it, the patient or a supplemental plan pays 20 percent, and the deductible applies first.
What sequestration does to the 6
Sequestration takes 2 percent of Medicare’s share of every fee-for-service payment, shown on the remittance as CO-253. It does not touch the patient’s 20 percent. The practice therefore collects 78.4 percent from Medicare and 20 percent from the patient: 98.4 percent of the allowed amount. On a drug, 98.4 percent of ASP plus 6 is ASP plus 4.3 percent. Base drug margin calculations on 4.3 percent, not 6.
The Inflation Reduction Act in 2026
Three IRA provisions reach the drug line today, and a fourth arrives in 2028.
- Inflation-adjusted coinsurance. For calendar quarters starting April 1, 2023, when a Part B rebatable drug’s price has risen faster than inflation, the patient’s coinsurance is 20 percent of an inflation-adjusted payment amount rather than 20 percent of the full payment limit, and Medicare pays the difference. The October 2026 file lists the percentage beside each code: denosumab (J0897) is 17.885 percent, daratumumab (J9145) 19.508 percent, pertuzumab (J9306) 19.948 percent. The manufacturer owes CMS a rebate for the excess; the practice is paid the full limit, split differently.
- The 340B modifier. Since January 1, 2025 every 340B covered entity, hospital-based or not, reports modifier TB on separately payable Part B drug lines acquired through 340B, and JG is retired. 340B units are excluded from the manufacturer’s rebate, and the modifier is how CMS finds them. It does not change the payment.
- Biosimilars at plus 8. Qualifying biosimilars receive ASP plus 8 percent of the reference product’s ASP for five years. For biosimilars paid as of September 30, 2022, the period began October 1, 2022, so it runs through September 30, 2027. For a biosimilar first paid between October 1, 2022 and December 31, 2027, the five years run from the first quarter of payment.
- Negotiation. On January 27, 2026 CMS selected 15 drugs for the third negotiation cycle, the first to include drugs payable under Part B, with maximum fair prices effective January 1, 2028. The oncology drugs on the list (Erleada, Kisqali, Verzenio, Lenvima) are oral drugs; no infused cancer drug was selected. On July 16, 2026 CMS issued draft guidance on how manufacturers will provide the MFP to Part B providers, either prospectively or by refunding the difference between acquisition cost and the MFP within 14 days through the Medicare Transaction Facilitator; comments closed September 18, 2026 and the final guidance was pending as of this writing. The Claims Processing Manual already refers to “106 percent of the maximum fair price” for a selected reference biological, so the add-on survives negotiation.
Worked example: one dose of bevacizumab
An illustrative office infusion, October 2026, 400 mg of bevacizumab (J9035, 10 mg per unit, payment limit 75.492). Figures are national, before geographic adjustment, and the invoice prices are invented.
| Line | Amount |
|---|---|
| Allowed: 40 units times 75.492 | 3,019.68 |
| Implied ASP (allowed divided by 1.06) | 2,848.75 |
| Medicare 80 percent | 2,415.74 |
| Sequestration, 2 percent of Medicare’s share (CO-253) | 48.31 |
| Medicare pays | 2,367.43 |
| Patient or supplemental plan, 20 percent | 603.94 |
| Total collected | 2,971.37 |
| Collected over ASP | 122.62, which is 4.3 percent |
| Margin if the invoice was 2,800.00 | 171.37 |
| Margin if the invoice was 2,960.00 | 11.37 |
The same dose of the biosimilar bevacizumab-awwb (Q5107, Mvasi) carries an October 2026 limit of 28.294 per 10 mg with the 8 percent reference add-on applied: 40 units allow 1,131.76. The dollar add-on is smaller than the brand’s even at 8 percent, because it is measured against a lower base; the margin question is still invoice versus 98.4 percent of allowed.
Two things move the margin more than the formula does. The two-quarter lag means that when a manufacturer raises its price, the practice buys at the new price for up to six months while Medicare pays on the old ASP. And any patient balance that goes uncollected reduces the 4.3 percent directly.
What to do
- Load the payment limit file every quarter, the week CMS posts it, and set the expected allowed amount on each J-code from it. With an outdated file, underpayments go unnoticed.
- Reconcile allowed to limit times units on every drug remittance. A short allowed amount is a units error, a modifier problem or the wrong quarter’s limit.
- Track the inflation-adjusted coinsurance codes. The patient’s share on those lines is below 20 percent, so a statement built on 20 percent overbills the patient.
- Report TB if you are a 340B covered entity, on every separately payable Part B drug line, and nothing if you are not.
- Compare invoice to 98.4 percent of allowed, by drug, every quarter. When a drug costs more than it collects, review the purchase price, a biosimilar or the site of care.
- Iridium Suite’s reporting includes a Reimbursement Analyzer that compares what each payer paid to what it allowed, code by code.
Related terms
- Medicare sequestration and CO-253
- Allowed amount
- J-codes and NDC reporting
- JW and JZ modifiers: discarded drug billing
- Chemotherapy administration codes 96413, 96415, 96417
- Pluvicto billing: contractor pricing and the 340B TB modifier
Further reading: CMS, Medicare Part B Drug Payment Limit Files (the quarterly ASP files); CMS Medicare Claims Processing Manual, Chapter 17, sections 10.1 and 20.1.2 (PDF); CMS, Inflation Reduction Act Biosimilars Temporary Payment Increase FAQs (PDF); CMS MLN4800856, Medicare Part B Inflation Rebate Guidance: Use of the 340B Modifier (PDF, January 2026); CMS fact sheet, Selected Drugs for Initial Price Applicability Year 2028 (PDF); CMS fact sheet, Manufacturer Effectuation of the MFP in 2028, draft guidance (July 16, 2026).
Frequently asked
What does ASP plus 6 mean?
Medicare Part B pays for most separately payable drugs at a payment limit equal to the manufacturer's average sales price plus 6 percent. ASP is the volume-weighted net price to all U.S. purchasers after rebates and discounts, reported to CMS each quarter. CMS publishes the resulting payment limits in the Medicare Part B Drug Payment Limit File every quarter.
Why is ASP plus 6 really ASP plus 4.3 percent?
Sequestration reduces Medicare's share of each payment by 2 percent. Medicare pays 80 percent of the allowed amount less 2 percent, which is 78.4 percent, and the patient or supplemental plan pays 20 percent. Together that is 98.4 percent of ASP plus 6, which works out to ASP plus 4.3 percent.
How are biosimilars paid under Medicare Part B?
A biosimilar is paid its own ASP plus 6 percent of the reference product's ASP (or WAC if lower). Under section 11403 of the Inflation Reduction Act, a qualifying biosimilar whose ASP is not above the reference product's receives plus 8 percent of the reference ASP instead, for five years. For biosimilars already on the market, that period began October 1, 2022.
How does the Inflation Reduction Act change Part B drug payment?
Three ways. Since April 1, 2023 the patient's coinsurance on a Part B rebatable drug whose price rose faster than inflation is 20 percent of an inflation-adjusted amount, and Medicare pays the rest. 340B covered entities report modifier TB so their units are excluded from the manufacturer's rebate. And beginning January 1, 2028, the first negotiated maximum fair prices apply to drugs payable under Part B.