CO 295 denial code

Claim adjustment reason code 295. Often reported as CO 295.

Pharmacy DIR 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 295 means

The payment was adjusted for pharmacy direct and indirect remuneration (DIR), fees or credits applied after the original claim.

DIR covers price concessions and fees that flow between pharmacies, pharmacy benefit managers, and plans after the claim is paid, often based on performance measures. This code marks an adjustment tied to those amounts.

It is mostly relevant to pharmacies. The amounts usually come from contract terms rather than errors on the claim.

Group codes seen with 295

On a remittance, 295 comes after a group code. These are the ones it is most often reported with:

• CO 295 (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 contract includes DIR fees or performance based adjustments.
• A retroactive price concession was applied to the claim.
• Pharmacy performance measures changed the amount owed.

What to do next

1. Review the pharmacy network agreement for DIR terms.
2. Reconcile the adjustment against DIR reports from the pharmacy benefit manager.
3. Question adjustments that do not match the contract or the performance data.

Related codes

• 265 (reason code) Drug administrative cost adjustment
• 45 (reason code) Charge exceeds the allowed amount