CO 265 denial code

Claim adjustment reason code 265. Often reported as CO 265.

Drug administrative cost adjustment

Unofficial reference. This is our own plain-English explanation, not the official code text. Payer rules differ. Verify with the payer and the official X12 code list. AlphaPrefix is not affiliated with X12, CMS or any payer. Data last updated Nov 11, 2026.

What 265 means

A pharmaceutical claim was adjusted for administrative costs, and the code is used only on pharmacy claims.

Here the payer adjusted the drug claim for administrative cost, meaning overhead or handling charges billed with the medication rather than the drug itself.

It is part of the pharmacy only set of codes, so it should not appear on medical claims. The pharmacy contract normally sets what administrative charges, if any, are paid.

Group codes seen with 265

On a remittance, 265 comes after a group code. These are the ones it is most often reported with:

• CO 265 (Contractual Obligation): The provider's side of the ledger. The reduction comes from the payer contract or a rule the provider has to follow, and the patient normally cannot be billed for it.

The payer chooses the group code for each adjustment, so the same reason code can appear with another group code on your remittance. Read the two together. More about group codes.

Common causes

• The pharmacy billed an administrative fee the plan does not pay separately.
• The administrative amount exceeded what the contract allows.
• The plan's pricing builds administrative cost into the dispensing fee instead.

What to do next

1. Check the pharmacy contract for administrative fee terms.
2. Confirm the fee was billed in the correct field and not duplicated in the dispensing fee.
3. Ask the pharmacy benefit manager to explain adjustments that do not match the contract.

Related codes

• 262 (reason code) Drug delivery cost adjustment
• 266 (reason code) Drug compounding cost adjustment