August 5, 2020

Gist of J Codes


Question: Can drugs be purchased under both an employer’s pharmacy and medical benefits?

Answer: Yes.

However, the way drugs are billed when they are dispensed by a doctor’s office or an infusion center is different than drugs purchased from a pharmacy–and a lot more expensive.

Infused drugs, or drugs you can’t administer yourself, are often billed under the medical benefit (not the pharmacy benefit) of your health insurance plan. These are often referred to in the healthcare benefits business as “J code” drugs. This comes from the way the drugs are billed.

The Healthcare Common Procedure Coding System (HCPCS) is the system by which medical procedures are billed. HCPCS has two medical code sets: HCPCS Level I and II. HCPCS Level I codes are the Current Procedural Terminology (CPT) code set, and they are used by medical practitioners to bill for claims on medical procedures with your healthcare insurance.

HCPCS Level II codes or J Codes are the billing codes used for the medical devices, supplies, and drugs when billing for claims to healthcare insurance. Each infused drug, or non-oral, non-self-administered drug that may be used in the inpatient, outpatient hospital, doctor’s office, or infusion center is assigned a temporary and then permanent J code when it is released into the market in order to be able to bill for it with medical claims.

There are also ICD-10 codes that come into play with J code drugs as well, which are codes for diseases that physicians or medical professionals are treating in billing. ICD-10 stands for the the International Classification of Diseases, Tenth Revision.


J Code Graph


Why do we care?

Drugs billed under the medical plan for self-funded employers should be a major concern for CFOs and HR professionals for three major reasons:


  1. J Code drug billing may lack transparency – drug costs are based upon an entirely different sales price than drugs dispensed from a pharmacy.
  2. Many J Code drugs are often very expensive (such as chemotherapy, for example) and costs are increased or “marked up” by the hospital or doctor’s office before the medical claim is submitted.
  3. The place where the drug is infused (doctor’s office, infusion center, hospital, or at home) can drive up the cost of the claim and can vary the cost of the claim by as much as 3X.

There are better ways to manage the cost of J code drugs and at Apex Benefits we have proven strategies to reduce the cost of J code drugs and their impact on your self-funded plan’s medical spend. With more specialty, high dollar, and infused drugs entering the market each and every day, it’s important to stay on top of this complex area of spend for your plan.