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PA Bulletin, Doc. No. 04-2253

NOTICES

DEPARTMENT OF
PUBLIC WELFARE

Pricing of Pharmacy Claims

[34 Pa.B. 6718]

   The purpose of this notice is to announce that effective January 1, 2005, EDS, the Department of Public Welfare's (Department) contractor for the Provider Reimbursement and Operations Management Information System (PROMISeTM), will assume responsibility for drug cost determination in pricing claims for pharmacy services. The Department is not changing its payment methodology for pharmacy services as specified in 55 Pa. Code §§ 1121.55 and 1121.56 (relating to method of payment; and drug cost determination), but this administrative change may affect payment for some pharmacy services.

   PROMISeTM is the new HIPAA-compliant claims processing and management information system implemented by the Department in March 2004. The PROMISeTM contract was awarded to EDS through a competitive bid consistent with Commonwealth procurement guidelines and requirements. PROMISeTM incorporates claims processing and information management activities for the Office of Medical Assistance Programs, including administration of the Drug Reference File. The Drug Reference File includes the complete list of all drugs covered under the Medical Assistance Program and drug-related data used to process and price pharmacy claims.

   Before March 2004, the Department administered the Drug Reference File. The process to support updates of drug-related data on the Drug Reference File, including updates to Average Wholesale Price (AWP) and State Maximum Allowable Cost (MAC), as specified in 55 Pa. Code § 1121.56(b), required the Department to create and forward to the pricing service on a monthly basis a tape of the Drug Reference File. The pricing service refreshed all of the drug-related data and returned the file to the Department. The Department then forwarded the tape to the Medical Assistance Management Information System (MMIS) front-end claims contractor (replaced by PROMISeTM), and the MMIS contractor loaded the tape information into its system for pharmacy claims processing and payment.

   Advances in information technology have made it unnecessarily administratively burdensome, time consuming, costly and inconsistent with current industry standards for the Department to continue to administer the Drug Reference File. The incorporation of information management activities such as the administration of the Drug Reference File into the PROMISeTM contract has enabled the Department to increase administrative efficiencies by eliminating multiple tape exchanges with both the pricing service and the claims processor on a monthly basis. As a component of administering the Drug Reference File under PROMISeTM, EDS contracts directly with all three Nationally recognized pricing services, thereby also eliminating the need for the Department to contract directly with a pricing service.

   When EDS assumes responsibility for drug cost determination for all pharmacy claims effective January 1, 2005, the methodology for determining drug cost, specified in 55 Pa. Code § 1121.56, will not change. Drug cost will continue to be based on the lower of the Estimated Acquisition Cost (EAC) (AWP minus 10%) or the State MAC. The EAC will also continue to be updated on a monthly basis. The only change will be that AWP is determined by reviewing all three Nationally recognized pricing services, and choosing the lowest AWP calculation among the three, rather than limiting review to one pricing service. Despite changes in the baseline AWP which may result in a lower payment for some drugs, the Department's payment methodology will continue to be recognized as one of the most generous methodologies among public and private payers in the Commonwealth and Nationally.

Fiscal Impact

   Savings for this change is estimated at $7.917 million ($3.712 million in State funds) during Fiscal Year 2004-2005 and at $25.464 million ($11.710 million in State funds) during Fiscal Year 2005-2006.

Contact Person

   Interested persons are invited to submit written comments to this notice by December 28, 2004, to the Department at the following address: Department of Public Welfare, Office of Medical Assistance Programs, c/o Deputy Secretary's Office, Attention: Regulations Coordinator, Room 515, Health and Welfare Building, Harrisburg, PA 17120.

   Persons with a disability who require an auxiliary aid or service may submit comments by using the AT&T Relay Services at (800) 654-5984 (TDD users) or (800) 654-5988 (voice users).

ESTELLE B. RICHMAN,   
Secretary

   Fiscal Note: 14-NOT-405. No fiscal impact; (8) recommends adoption. This public notice provides for estimated savings to the Medical Assistance--Outpatient Appropriation of $3,712,000 during the remainder of Fiscal Year 2004-05 and $11,710,000 for Fiscal Year 2005-06.

[Pa.B. Doc. No. 04-2253. Filed for public inspection December 17, 2004, 9:00 a.m.]


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