A new biologic approved under a BLA enters the Part B buy-and-bill market facing two separate timing gaps. First, it may not have a permanent J-code at launch, forcing providers to bill under not-otherwise-classified (NOC) codes or temporary Q-codes while CMS processes the HCPCS application. Second, even after a code is assigned, reimbursement is based on wholesale acquisition cost (WAC) until average sales price (ASP) data catches up, typically two quarters later. Both gaps create revenue risk for manufacturers and billing uncertainty for providers.
This article is for market access directors, commercial operations leads, and revenue-cycle managers at biotech companies launching provider-administered biologics.
The HCPCS Level II coding cycle for new drugs
CMS maintains the Healthcare Common Procedure Coding System (HCPCS) Level II, which includes J-codes for drugs and biologics administered by infusion or injection in physician offices and hospital outpatient departments. Without a J-code, a new biologic cannot be billed through standard Medicare claims processing.
How new J-codes are assigned
The HCPCS coding cycle follows a quarterly public meeting and decision process:
| Step | Timing | Description |
|---|---|---|
| Application submitted | Anytime via MEARIS | Manufacturer requests a new code through CMS's Medicare Electronic Application Request Information System |
| Public meeting | Quarterly (B1 in spring, B2 in fall) | CMS holds a public meeting to discuss preliminary coding determinations |
| CMS decision | After public meeting | CMS issues its final coding determination with an effective date |
| Code effective | January 1, April 1, July 1, or October 1 | New codes take effect at the start of a calendar quarter |
CMS holds biannual public meetings. The B1 2026 meeting is scheduled for June 1, 2026. A drug approved in, say, Q1 2026 may receive a J-code effective July 2026 or January 2027, depending on when the application was filed and which meeting cycle it falls into.
What happens before a permanent code exists
Before a permanent J-code is assigned, providers have three billing options:
NOC (not-otherwise-classified) codes: J3490 (unclassified drugs), J3590 (unclassified biologics), or J9999 (NOC antineoplastic drugs). These require manual pricing by the Medicare Administrative Contractor (MAC) and include the drug name, NDC, and dosage in the claim narrative.
Temporary Q-codes: CMS may assign a temporary Q-code to separately identify a new product, particularly for biosimilars or products not therapeutically equivalent to an existing coded product. For example, Q5160 was assigned for Jobevne (bevacizumab-nwgd) in the Q3 2025 cycle before its market entry.
WAC-based pricing: Under 42 CFR 414.904(e)(4), for new single-source drugs and biologics where no ASP data exists yet, MACs set the payment limit at WAC + 3% (reduced from WAC + 6% effective January 1, 2019).
Interim billing risk
Billing under NOC codes carries operational risk:
- Claims may be delayed because MACs must manually price each claim
- MACs may request additional documentation (drug name, NDC, dosage in the narrative field)
- Claims are subject to higher denial rates than standard J-code claims
- Revenue recognition for the manufacturer's provider customers is uncertain during the interim period
The ASP two-quarter lag and what it means at launch
Even after a J-code is assigned, reimbursement does not immediately reflect the actual transaction price. CMS calculates ASP quarterly using manufacturer-reported sales data, but there is a built-in two-quarter lag.
How the lag works
Under 42 CFR 414.904:
- Manufacturers report ASP data for each NDC to CMS quarterly.
- Sales data from Q1 (January–March) is submitted in April and used to calculate the payment limit for the Q3 (July) file.
- This means Q1 sales prices are reflected in Q3 reimbursement.
For a new biologic launched in Q1, the timeline looks like this:
| Quarter | What happens | Reimbursement basis |
|---|---|---|
| Q1 (launch) | Product enters market, no ASP data | WAC + 3% |
| Q2 | First ASP data reported by manufacturer | WAC + 3% continues |
| Q3 | Q1 sales data used for ASP calculation | First ASP-based payment limit published |
| Q4 | Q2 sales data refines the ASP | ASP-based payment reflects more mature pricing |
Why this matters for buy-and-bill economics
Under buy-and-bill, the physician practice or hospital outpatient department purchases the drug, administers it, and then bills Medicare for reimbursement. The practice acts as a de facto pharmacy: it carries inventory risk, manages ordering and storage, and collects the difference between acquisition cost and reimbursement.
The two-quarter ASP lag creates a squeeze in two scenarios:
Scenario 1: Launch pricing above WAC. If the manufacturer's net selling price (after discounts and rebates) is lower than WAC, the provider purchases at a net cost below WAC but is reimbursed at WAC + 3% during the interim period. This is favorable for the provider but may distort the manufacturer's gross-to-net projections.
Scenario 2: Price increases post-launch. If WAC increases after launch but the ASP reimbursement is still based on the prior quarter's lower ASP, providers are reimbursed at a rate below their acquisition cost for up to two quarters. A 2025 analysis by Charles River Associates documented that even a modest WAC increase can leave providers underwater until the ASP catches up.
Scenario 3: Discounts and rebates eroding ASP. Manufacturer discounts (such as volume-based rebates to GPOs or 340B pricing) reduce ASP in subsequent quarters, which then reduces reimbursement. Providers who purchased at higher acquisition costs before the ASP decline are reimbursed at the new, lower rate. This dynamic can discourage adoption of new biologics in buy-and-bill settings during the early quarters.
The J-code application itself: what manufacturers should know
CMS publishes detailed HCPCS coding decisions each quarter. Recent examples illustrate the process:
Q3 2025 coding decisions
- ALHEMO (concizumab-mtci): Novo Nordisk received J7173, "Injection, concizumab-mtci, 0.5 mg," for its anti-TFPI monoclonal antibody for hemophilia. Separately, CMS established J3402, "Injection, remestemcel-l-rknd, per therapeutic dose," for Mesoblast's Ryoncil.
- Jobevne (bevacizumab-nwgd): Biocon Biologics received Q5160, "Injection, bevacizumab-nwgd (jobevne), biosimilar, 10 mg."
- Nipocalimab-aahu: CMS established J9256, "Injection, nipocalimab-aahu, 3 mg."
Key application considerations
- Dosage descriptor convention: CMS assigns dose descriptors at the smallest billable unit (e.g., 10 mg rather than 100 mg/4 mL) to support multi-unit billing, because only 999 units can appear on a single CMS-1500 claim line.
- Brand name in code: CMS generally does not include brand names in HCPCS descriptors unless there is a claims-processing need to separately identify the product.
- Therapeutic equivalence: If a new product is not therapeutically equivalent to a reference listed product in an existing code, CMS may create a separate code.
- Biosimilars: New biosimilars receive separate Q-codes, which may later be consolidated into the reference product's J-code if CMS determines separate billing is no longer needed.
Strategic implications for launch teams
File the HCPCS application early
CMS accepts applications at any time via MEARIS. The manufacturer should submit the application as soon as FDA approval is expected, not after. The quarterly meeting cycle means a late application can push the J-code effective date out by a full quarter.
Model the interim revenue window
Finance teams should model three periods:
- Pre-code period: NOC billing with WAC + 3% reimbursement
- First ASP quarter: Initial ASP-based reimbursement, which may not yet reflect discount structures
- Steady-state ASP: After two full quarters of sales data, ASP reflects actual net pricing
Prepare providers for NOC billing
Provider education materials should include:
- Which NOC code to use during the interim period
- Required claim narrative fields (drug name, NDC, dosage)
- Expected MAC processing timelines
- When the permanent J-code is expected to become effective
Monitor ASP trajectory
After launch, the market access team should track:
- Quarterly ASP filings and published payment limits
- Provider margin (reimbursement minus acquisition cost) each quarter
- The impact of 340B, GPO discounts, and rebate obligations on ASP erosion
- The IRA Part B inflation rebate, which can apply penalties if ASP increases faster than the Consumer Price Index for All Urban Consumers (CPI-U)
Account for the JW/JZ modifier requirements
Effective January 1, 2024, CMS requires providers to use the JW modifier (amount discarded) or JZ modifier (no discarded amount) on all claims for single-dose container drugs under Part B. The Infrastructure Investment and Jobs Act (IIJA) requires manufacturers to refund Medicare for discarded amounts exceeding 10% of the total drug in single-dose containers. This adds another layer of complexity for new biologics during the interim billing period.
Key regulatory sources
| Source | Reference |
|---|---|
| ASP payment methodology | 42 CFR 414.904 |
| ASP quarterly pricing files | CMS, https://www.cms.gov/medicare/payment/part-b-drugs/asp-pricing-files |
| HCPCS Level II quarterly updates | CMS, https://www.cms.gov/medicare/coding-billing/healthcare-common-procedure-system/quarterly-update |
| HCPCS coding applications (MEARIS) | CMS, https://www.cms.gov/medicare/coding-billing/healthcare-common-procedure-system |
| CMS Claims Processing Manual, Chapter 17 | CMS, https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/clm104c17.pdf |
| ASP FAQs and data collection | CMS, https://www.cms.gov/files/document/frequently-asked-questions-faqs-asp-data-collection.pdf |
| Part B drug payment limits overview | CMS, https://www.cms.gov/files/document/part-b-drug-payment-limits-overview.pdf |
Sources
- CMS, ASP Pricing Files. https://www.cms.gov/medicare/payment/part-b-drugs/asp-pricing-files.
- CMS, ASP Reporting. https://www.cms.gov/medicare/payment/part-b-drugs/asp-reporting.
- CMS, HCPCS Quarterly Update. https://www.cms.gov/medicare/coding-billing/healthcare-common-procedure-system/quarterly-update.
- CMS, 2025 HCPCS Application Summary, Q2 2025 Drugs and Biologicals. https://www.cms.gov/files/document/2025-hcpcs-application-summary-quarter-2-2025-drugs-and-biologicals-posted-07/7/2025.pdf.
- CMS, 2025 HCPCS Application Summary, Q3 2025 Drugs and Biologicals. https://www.cms.gov/files/document/2025-hcpcs-application-summary-quarter-3-2025-drugs-biologicals.pdf.
- CMS, ASP Data Collection FAQs. https://www.cms.gov/files/document/frequently-asked-questions-faqs-asp-data-collection.pdf.
- CMS, Part B Drug Payment Limits Overview. https://www.cms.gov/files/document/part-b-drug-payment-limits-overview.pdf.
- 42 CFR 414.904, "Average sales price as the basis for payment." https://www.law.cornell.edu/cfr/text/42/414.904.
- Bristol Healthcare Services, "CMS 2026 HCPCS Level II Update." https://www.bristolhcs.com/blog/blog-detail/cms-2026-hcpcs-level-ii-update-what-the-latest-changes-mean-for-billing-compliance-and-reimbursement.
- AAPC, "CMS Releases 2026 Update to HCPCS Level II." https://www.aapc.com/blog/93675-cms-releases-2026-update-to-hcpcs-level-ii.
- Charles River Associates, "Insights behind the price curves: Exploring the WAC and ASP relationship for provider-administered drugs," June 2025. https://media.crai.com/wp-content/uploads/2025/06/17150125/Insights-behind-the-price-curves-6-17-2025.pdf.
- AJMC, "Observations Regarding the Average Sales Price Reimbursement Methodology." https://www.ajmc.com/view/observations-regarding-the-average-sales-price-reimbursement-methodology.
- Duke Margolis Center for Health Policy, "Originator Biologics and Biosimilars: Payment Policy Solutions to Promote Biosimilar Competition." https://healthpolicy.duke.edu/sites/default/files/2021-11/Realizing%20the%20Benefits%20of%20Biosimilars%20Part%20B.pdf.
- CMS, Billing and Coding: Additional Claim Documentation Requirements for Not Otherwise Classified (NOC) Drugs. https://www.cms.gov/medicare-coverage-database/view/article.aspx?articleId=54880.
