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Medical Drug Coding And Reimbursement 101

Medical drug coding and reimbursement in the United States garners high interest among stakeholders in the pharmaceutical industry value chain. Yet, the coding and reimbursement process often leaves many scratching their heads. IPD Analytics often receives questions on the different kinds of codes as well as how manufacturers apply to receive those codes. We also field questions on medical drug coding and reimbursement for not otherwise classified drugs and biosimilars.

This article will cover the most commonly used terms in medical drug coding and reimbursement, including various code types (HCPCS, Ambulatory Payment Classification, Current Procedural Terminology, and Not Otherwise Classified), as well as how manufacturers can obtain these codes.

Key Terms in Coding and Reimbursement

In order to understand coding and reimbursement, we need to first define the stakeholders and systems responsible for creating codes.

Centers for Medicare & Medicaid Services (CMS)

A federal agency within the Department of Health and Human Services that oversees the administration of Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP), as well as programs such as the Health Insurance Marketplace. CMS also produces the Healthcare Common Procedure Coding System (HCPCS) and Ambulatory Payment Classifications (APC) codes.

Healthcare Common Procedure Coding System (HCPCS)

A collection of standardized codes that represent medical procedures, supplies, products, and services. HCPCS codes are used in the processing of health insurance claims by Medicare and other payers. There are several different types of drug-related HCPCS codes including A, B, C, J, P, Q, and S-codes. The letters indicate how the code starts (for example, J3490).

HCPCS Code Use Cases

J-codes are considered permanent drug codes, and are the codes that most people refer to when they reference HCPCS codes.

A-codes are used for transportation, medical and surgical supplies, miscellaneous and experimental codes, as well as radiopharmaceutical products.

B-codes are for enteral and parenteral therapy products.

C-codes are temporary codes for the Hospital Outpatient Prospective Payment System, also called the OPPS. C-codes are utilized to report drugs, biologicals, Magnetic Resonance Angiography, or MRAs, and devices that must be used by OPPS hospitals.

P-codes are pathology and laboratory codes some of which are for blood related products.

Q-codes are temporary codes. In some cases the drug covered by a Q-code will receive a permanent code at which time the Q code would be deleted.

S-codes are not payable codes when billed directly to Medicare and are intended for commercial payer use only.

Ambulatory Payment Classifications (APC) Codes

Codes that may be used for reimbursement to hospitals for outpatient services as part of the outpatient prospective payment system.

Current Procedural Terminology (CPT) Codes

Codes generally used to bill for procedural services, such as office visits, drug administration, and other in-office services. A small number of CPT codes were created for billing vaccines, toxoids, and immune globulins as well. These codes are created by the American Medical Association (AMA).

Not Otherwise Classified (NOC) Drug Codes

Until a drug has received a permanent code, it is billed and reimbursed using a not otherwise classified drug code. Not otherwise classified drug codes can be confusing for some providers to use since they cover many different drugs and require detailed NDC-level billing resulting in an increased occurrence of medical claim rejection and resubmission. The time and effort associated with resubmission is daunting, and, for some, make the cost of using that drug outweigh the benefits. Some providers may simply wait until the permanent code is assigned, and by that time the drug may have lost momentum as far as marketing and distribution is concerned.

How to Obtain a Code

The process manufacturers go through to obtain codes for their drugs includes many specific deadlines and timelines that need to be met in order to get a code in a timely manner. The most detailed process is for HCPCS Codes, so we will start there.


Beginning in 2020, CMS changed the HCPCS coding process for drugs and biologics from an annual to a quarterly process. Manufacturers or their designated representative must submit an application to CMS to request the addition of a new code, revision of an existing code, or deletion of an existing code based on the applicable coding cycle.

Submission and decision deadlines may vary, so refer to the CMS Coding Process for the latest available information.

As part of the process, CMS reviews all applications and releases decisions for granting or denying new HCPCS codes. There's an entire decision tree that you can refer to at that gives you a little more background on how they make those decisions. Manufacturers of drugs denied a code assignment in one quarter may resubmit a new application in the following quarter provided there is additional information that CMS should consider related to the assignment of a code for the drug.

It’s important to note that a manufacturer must have FDA approval for its drug or biologic prior to submission of a HCPCS application. Previously, under the annual coding cycle process manufacturers were allowed to submit a HCPCS application prior to FDA approval if the product was expected to receive approval by March 31 in the same year the application was submitted.

Q and C Codes

Manufacturers cannot specifically request a Q-code for a product. Consequently, there's no separate application process. Q-codes are considered temporary codes for products that have an operational need for code assignment before the traditional process can be completed. CMS determines which products need Q-codes and assigns them on a quarterly basis. Q-codes can be used for billing by all provider types using the same procedure as when billing with a J-code. Further, once CMS creates a J- code, or another permanent code for the product, the Q-code will be deleted.

There is a separate application process for requesting a C-code. CMS reviews all applications for C-codes on a quarterly basis. Assignment of a C-code is not guaranteed. Once CMS creates a J-code, or any other permanent code for the product, the C-code will be deleted.

CPT Codes

Applications for new CPT codes can be submitted by a manufacturer or their designated representative to the AMA three times yearly. There are specific deadlines and process dates, but in general, the review of applications takes place over the three months following the application deadline for the CPT editorial panel meeting. Applications are presented to the CPT editorial panel for discussion, and possible decision, unless they're withdrawn by the applicant. Unlike Q and C codes, CPT codes are generally not deleted. If CMS creates a HCPCS code for the same product, the provider can bill with either the CPT or the HCPCS code.


Generally, the process is the same for billing of biosimilars as it is for other medications. Beginning on April 1, 2018, CMS began creating separate codes for each biosimilar. Prior to that date, biosimilars for the same reference product were billed together using the same HCPCS code. To distinguish between biosimilars billed under the same HCPCS code, a modifier was required to identify which product was used. For claims with dates of service on or after April 1, 2018, each biosimilar should be billed using its unique code. A modifier is no longer required when billing.

Understanding the Basics of Medical Drug Coding and Reimbursement

In the complex world of coding and reimbursement, understanding the various terms, stakeholders, and coding processes is essential to formulating a winning strategy.

To learn more about how IPD Analytics helps payers, providers, and suppliers navigate medical drug coding and reimbursement, take a look at our CODESOURxCE solution.


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