Since 2022, the Centers for Medicare and Medicaid Services (CMS) has been reviewing its approach for establishing Healthcare Common Procedure Coding System (HCPCS) Level II codes for products approved under the 505(b)(2) pathway. According to CMS’s current practice, products approved under separate 505(b)(2) New Drug Applications that are not rated as therapeutically equivalent in the Food and Drug Administration’s (FDA) Orange Book are considered single source and assigned a unique J-code.

However, there is no singular J-code naming convention for single source 505(b)(2) products. Typically, if a product has a proprietary brand name, it is included in the descriptor. If there is no brand name, the descriptor includes the manufacturer name. Current conventions have created confusion as manufacturers navigate the system for HCPCS applications and conduct transactions for 505(b)(2) assets. Recently, CMS has had to change J-code descriptions during the regular coding cycle due to changes in product ownership.

In the recent Second Biannual 2024 HCPCS Coding Decisions, CMS summarized public feedback it received on challenges related to this topic:

• Including manufacturer-specific language in the code descriptors for single source 505(b)(2) drugs is not detailed enough to allow providers to identify the correct HCPCS Level II code to bill
• Utilizing the average sales price HCPCS-National Drug Code (NDC) crosswalk is insufficient because the file is not comprehensive

CMS further summarized proposals from commenters:

• A new naming convention for 505(b)(2) HCPCS code descriptors that would replace the manufacturer names with the FDA application number of the single source drug or biological identified by that HCPCS code
• Utilizing the NDC’s FDA approval number and therapeutic equivalence rating from the FDA Orange Book to begin publishing a comprehensive HCPCS-NDC crosswalk file

In CMS’s final decision, it stated that neither NDCs nor FDA application numbers have been included in HCPCS Level II code descriptor language thus far. The agency acknowledged that manufacturer-specific language may not be the long-term solution, as companies and individual drugs are often sold to other entities. Ultimately, CMS declined to finalize any changes, but stated that it would take public feedback into consideration as it continues to refine the HCPCS Level II code set.

Manufacturers planning to launch, acquire, or sell a 505(b)(2) asset in the future should consider how CMS’s evolving coding conventions could impact their products. Regardless of CMS action, manufacturers should ensure that their 505(b)(2) products are included in the HCPCS-NDC crosswalk file with accurate information. Additionally, billing and coding guides for providers help ensure that reimbursement questions that arise in the field can be easily addressed.

To discuss how Avalere’s regulatory and market access experts can help generic manufacturers with 505(b)(2) strategy, connect with us.