OBJECTIVES: In 2005, the Medicare Prescription Drug, Improvement and Modernization Act (MMA) of 2003 requires payment for drugs administered in the physician’s office at a new rate of average sales price plus 6%. This study provides a conceptual view of the change and suggests a conceptual modification. METHODS: When the MMA imposed the new drug payment method, it also increased payment for drug administration. We postulate these relative weights used for the fee increases are diluted because they are specialty-specific rather than specific to practice type. This dilution defeats the original purpose of resource-based practice expenses. EVALUATION OF RESULTS: Resource-based methods for 2005 related to drugs and their administration were collected and deconstructed. Legislative rationales for the new drug payment method and for the differential in transitional procedure payments (32% add-on in 2005 versus 3% add-on in 2006) were identified. Computations utilizing the new methods were evaluated for indications of resource-based level of effort applications. CONCLUSIONS: Because the drug payment method is new and untested, we estimate a 2-year implementation period is needed before evaluations can occur. We also believe the present formula for indirect cost allocation within a specialty does not sufficiently distinguish between a practice that provides these high-technology drugs (high resource consumption) versus other practices that do not (lower resource consumption). We propose a new add-on component within the practice expense formula. This new component provides the practice that administers high-technology drugs with a higher indirect cost weight than a practice that does not. Thus the higher resource consumption within the same specialty is recognized by a weighting factor incorporated into the existing practice expense formula. This adjustment to the payment formula would achieve equitable recognition of resource consumption and assist in ensuring access to proper care by beneficiaries.