CO-307: Medicare Drug Price Negotiation Refund
The MFP drug price adjustment is a contractual write-off mandated by federal law. Post the adjustment and do not bill the patient for the difference.
What Does CO-307 Mean?
CO-307 is the standard pairing, indicating the MFP adjustment is a contractual obligation under the Medicare Drug Price Negotiation Program. The difference between your billed amount and the Maximum Fair Price is a contractual write-off that you cannot pass to the patient. This adjustment is mandated by federal law and is not negotiable at the claim level — the MFP is set through a formal negotiation process between CMS and the drug manufacturer.
When CARC 307 appears on a remittance, the payer is applying a pricing adjustment mandated by the Medicare Drug Price Negotiation Program, a key provision of the Inflation Reduction Act. Under this program, CMS negotiates Maximum Fair Prices for selected high-cost prescription drugs used in Medicare Part B and Part D. When a provider bills for one of these negotiated drugs at a price above the MFP, the payer adjusts payment down to the MFP level.
This is not a denial in the traditional sense — the claim is processed and paid, but the payment is adjusted to reflect the legally mandated negotiated price. The adjustment amount represents the difference between what you billed (typically based on your acquisition cost or average sales price) and the MFP that CMS established through the negotiation process. The Medicare Transaction Facilitator coordinates the refund data between manufacturers and dispensing entities.
CARC 307 is a relatively new code (effective March 2025) that providers dispensing or administering negotiated drugs will encounter with increasing frequency as CMS adds more drugs to the negotiation program. The code requires accompanying remark codes that provide specific details about the drug and the negotiation program parameters.
Common Causes
| Cause | Frequency |
|---|---|
| Drug billed above Maximum Fair Price (MFP) The drug was billed at a price exceeding the Maximum Fair Price negotiated under the Medicare Drug Price Negotiation Program (part of the Inflation Reduction Act), and the payer is adjusting payment to the MFP level | Most Common |
| MFP refund adjustment from manufacturer The manufacturer is required to refund the difference between the actual acquisition cost and the Maximum Fair Price, and this adjustment appears on the remittance to reflect the negotiated pricing | Most Common |
| Medicare Transaction Facilitator processing The Medicare Transaction Facilitator (MTF) processed the refund-related data between the manufacturer and dispensing entity, triggering this adjustment code on the remittance | Common |
How to Resolve
Verify the adjustment against CMS-published Maximum Fair Prices and post the difference as a contractual allowance.
- Validate the MFP calculation Compare the adjusted payment against the CMS-published Maximum Fair Price for the specific drug, dosage, and applicable period. Confirm the math is correct based on the units billed.
- Post the contractual adjustment Record the MFP adjustment as a contractual allowance. Update drug pricing in your system to bill at or near the MFP for future claims.
- Track MFP adjustments Monitor MFP adjustments across claims to ensure consistency and identify any calculation errors early. Flag discrepancies for follow-up with the payer.
This is a standard contractual adjustment. The amount is a provider write-off per your payer contract.
Common RARC Pairings
The RARC code tells you exactly what triggered the CO-307:
| RARC | Description |
|---|---|
| N898 | Alert: This adjustment is related to the Medicare Drug Price Negotiation Program. |
How to Prevent CO-307
- Update drug pricing tables to reflect CMS-published Maximum Fair Prices as soon as they become effective
- Monitor CMS announcements for new drugs added to the negotiation program and their applicable pricing periods
- Coordinate with pharmacy and purchasing departments to align acquisition costs with MFP expectations
- Implement automated pricing checks that flag drug claims subject to MFP adjustments before submission
General Prevention
- Stay current with CMS-published Maximum Fair Prices for drugs selected under the Medicare Drug Price Negotiation Program
- Update drug pricing tables in billing systems to reflect MFP rates as they become effective to minimize adjustment volumes
- Monitor CMS announcements regarding new drugs added to the negotiation program and their effective dates
- Coordinate with pharmaceutical wholesalers to ensure acquisition cost data aligns with MFP requirements
- Track MFP refund adjustments systematically to ensure all expected refunds are received and properly reconciled
Also Filed As
The same CARC 307 may appear with different Group Codes:
Related Denial Codes
Sources
- https://x12.org/codes/claim-adjustment-reason-codes
- https://www.cms.gov/inflation-reduction-act-and-medicare/medicare-drug-price-negotiation
- Codes maintained by X12. Visit x12.org for official definitions.