Fact Sheets





Physicians who administer drugs in their offices to Medicare beneficiaries under Medicare’s Supplementary Medical Insurance Program (Part B) will have the option of obtaining many of these drugs under a new competitive acquisition program (CAP) starting on July 1, 2006.  The CAP program was established through an interim final rule issued on July 6, 2005 by the Centers for Medicare & Medicaid Services (CMS).


In order to improve overall access to drugs furnished under Part B and to increase interest in the program, certain aspects of the CAP were revised in two rules issued today. A final rule (CMS-1502-FC) contains revisions aimed at improving the bidding process, increasing the number of drugs that can be furnished under the CAP, improving access to newly approved drugs, clarifying how unused drugs should be treated under CAP, and establishing a framework by which vendors may enter into arrangements with CAP physicians for the collection of coinsurance and related information.  An interim final rule with comment period (CMS-1325-IFC3) addresses the issue of including sales of drugs furnished under the CAP in Average Sales Price calculations.



The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) contains several important provisions related to drug coverage and payment. Currently, Medicare Part B covers a limited number of outpatient drugs and biologicals, including drugs furnished incident to a physician's service, drugs furnished under the durable medical equipment (DME) benefit, certain oral anti-cancer drugs, and oral immunosuppressive drugs. Section 303 (d) of the Act requires the implementation of a competitive acquisition program (CAP) for Medicare Part B drugs not paid on a cost or prospective payment system basis.  Beginning in 2006, physicians will be given a choice between buying and billing these drugs under the average sales price (ASP) system, or obtaining these drugs from vendors selected in a competitive bidding process. Whether the physician elects to participate in the CAP or to continue purchasing drugs on the marketplace, Medicare will continue to directly pay for administration of these drugs.


The CAP is a voluntary program that offers physicians an option to acquire drugs from vendors who are selected in a competitive bidding process.  The vendors would then be responsible for billing the program and collecting any applicable deductible and coinsurance for drugs included in the CAP.  This program could save physicians time and paperwork and, in the long term, could lower drug costs for beneficiaries and the Medicare program.


This rule applies only to certain drugs covered under Medicare Part B which are administered to a Medicare beneficiary incident to a physician service. This rule does not apply to drugs included in the Medicare prescription drug benefit (Medicare Part D) which goes into effect January 1, 2006.


Program Structure:

CMS carefully reviewed the many comments received in response to the July 6, 2005 interim final rule and identified areas in which the program could be improved.   In order to address these comments, two rules are being issued today.   The final Medicare Physician Fee Schedule Rule for 2006 (CMS-1502-FC) revises certain aspects of the CAP including:


  • Establishing processes for approved vendors to furnish additional drugs under the CAP.


  • Establishing processes for approved vendors to furnish newly approved drugs under the CAP.


  • Improving consistency between the CAP policy and Medicare Part B drug policy on unused drugs.


  • Updating the list of CAP drugs to incorporate the latest changes in the drug marketplace.


  • Establishing framework for vendors to enter into arrangements with CAP physicians for the collection of coinsurance, issuing ABNs, and other appropriate activities, provided such agreements comply with Stark and all appropriate anti-fraud provisions


This final rule addresses issues that are most urgent to begin CAP implementation. Other issues raised in the comments will be fully considered and addressed at a later time.


An interim final rule with comment period, also issued today, will exclude units of drugs supplied under the CAP from ASP calculations for a period of up to 3 years, at which time the policy will be re-evaluated.   In addition, this rule revises the definition of unit to reflect the exclusion of units of CAP drugs administered to beneficiaries by participating CAP physicians. 


Vendor Selection:

The bidding process for the first round of CAP year will begin upon publication of this rule in the Federal Register. Applications and additional bidding information will be available at the following website:


In order to become approved CAP vendors, applicants must demonstrate that they meet rigorous standards set out in the regulation for quality, program integrity, financial stability, and service.  In addition, applicants must submit an 855B form and be approved by CMS as a Medicare supplier. Upon meeting these criteria, successful applicants will be chosen on the basis of the bid which cannot exceed a weighted average of ASP+6%, and will then be offered a contract to furnish drugs under the CAP.


Beneficiaries – No Change in Care or Costs:

The CAP program will not change how Medicare beneficiaries receive Part B drug treatments from a physician.   Moreover, we do not anticipate that any significant change in beneficiary out of pocket cost will result from the implementation of the CAP in 2006.   Long term, costs could decrease somewhat.


Physician Participation:

Physician participation in the program is voluntary.   Physicians have complete freedom to choose to obtain their drugs in the marketplace and Medicare will continue to pay them for such drugs under the ASP system or other applicable payment methodology. 


For physicians choosing to participate in the CAP program for Part B drugs, obtaining drugs from a vendor under the CAP is intended to be simple and efficient.   Physicians would simply select one of the approved CAP vendors during the physician election process.  The physician would order drugs needed for specific beneficiaries from the vendor, and administer them to the beneficiaries.  The physician would not bill Medicare for the drugs but would bill Medicare only to administer the drugs.  The vendor, rather than the physician, would bill Medicare for the drugs, and would be responsible for collecting any deductibles and coinsurance from the beneficiary. 


The CAP does not seek to change physician’s prescribing habits.  Physicians can acquire medically necessary drugs that are not included in the CAP program directly in the marketplace, as they do now.


Physicians will elect to participate in this program on annual basis. During the election process, physicians will choose a vendor to be the physician’s sole source of Part B drugs in the particular category.   The initial physician election process is scheduled to begin April 3, 2006.    


Additional Information:

Additional information about the CAP, including links to the interim final rule and previous CAP rules, information for vendors, and bidding documents may be found on the following website: