RULES AND REGULATIONS
DEPARTMENT OF PUBLIC WELFARE
[ 55 PA. CODE CH. 1121 ]
Pharmaceutical Services; Amendments to Pharmacy Payment Methodology
[42 Pa.B. 2015]
[Saturday, April 14, 2012]The Department of Public Welfare (Department) amends Chapter 1121 (relating to pharmaceutical services) to read as set forth in Annex A under the authority in sections 201(2), 403(b) and 403.1 of the Public Welfare Code (code) (62 P. S. §§ 201(2), 403(b), 403.1), as amended by the act of June 30, 2011 (P. L. 89, No. 22) (Act 22).
Omission of Proposed Rulemaking
On July 1, 2011, the General Assembly enacted Act 22, which amended the code. Act 22 added several new provisions to the code, including section 403.1. Section 403.1(a)(1) and (4) of the code authorizes the Department to promulgate final-omitted regulations under the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1102—1208), known as the Commonwealth Documents Law (CDL) to establish rules, regulations, procedures and standards for the nature and extent of assistance and to revise provider payment rates. Section 204(1)(iv) of the CDL (45 P. S. § 1204(1)(v)) authorizes an agency to omit or modify notice of proposed rulemaking when a regulation relates to Commonwealth grants or benefits. The Medical Assistance (MA) Program is a Commonwealth grant program through which eligible recipients receive coverage of certain health care benefits, including pharmaceuticals. In addition, to ensure that the Department's expenditures for State Fiscal Year (FY) 2011-2012 do not exceed the aggregate amount appropriated by the General Assembly, section 403.1 of the code expressly exempts these regulations from the Regulatory Review Act (71 P. S. §§ 745.1—745.12), section 205 of the CDL (45 P. S. § 1205) and section 204(b) of the Commonwealth Attorneys Act (71 P. S. § 732-204(b)).
The Department is amending Chapter 1121 in accordance with section 403.1(a)(1) and (4) of the code because this final-omitted rulemaking pertains to the MA Program provider payments for compensable services. Further, consistent with section 403.1(c) of the code, this final-omitted rulemaking is necessary to ensure that expenditures for State FY 2011-2012 for assistance programs administered by the Department do not exceed the aggregate amount appropriated for the program by the General Appropriations Act of 2011.
Purpose
The purpose of this final-omitted rulemaking is to amend the current regulations in Chapter 1121 as follows:
• To set the dispensing fee paid to pharmacies at $2 for prescriptions for compensable noncompounded legend and nonlegend drugs and $3 for compensable compounded prescriptions.
• To set the dispensing fee paid to pharmacies for prescriptions for compensable legend and nonlegend drugs and compensable compounded prescriptions for MA recipients with a pharmacy benefit resource, which is a primary third-party payer, to MA at $0.50 to cover the pharmacy's cost to transmit the claim to the MA program for secondary payment.
• To revise the calculation of wholesale acquisition cost (WAC) when establishing the estimated acquisition cost (EAC) as follows:
o For brand name drugs, the WAC calculation is being amended to the lowest WAC listed for the drug in available Nationally recognized pricing services, plus 3.2%.
o For generic drugs, the WAC calculation is being amended to the lowest WAC listed for the drug in available Nationally recognized pricing services.
• To modify the provision relating to the frequency of the update to the EAC for individual drugs from a monthly to an at least monthly basis.
Background
The Department administers the MA Program under Title XIX of the Social Security Act (act) (42 U.S.C.A. §§ 1396—1396w-5) for low-income individuals, pregnant women, infants and children, and individuals who are aged, blind or disabled. In addition, the Department administers an MA program for General Assistance MA recipients, principally single adults, which is funded solely by State funds and is not mandated by the Federal government. Both MA programs provide a wide array of medically necessary healthcare services, supplies and equipment to approximately 2.1 million indigent persons. Pharmaceutical services are among the healthcare services covered by the MA Program.
Since 2005, the Department has implemented a series of initiatives in the MA Program designed to provide cost effective pharmaceutical services while enhancing quality, addressing health and safety concerns, and improving administrative efficiencies. Initiatives included implementation of a payment methodology more consistent with other public and private third-party payers in this Commonwealth; implementation and expansion of a Preferred Drug List; expansion of utilization management programs including quantity limits, clinical prior authorizations, early refill and appropriate age edits; increasing the generic dispensing rate to 76%; maximization of Federal and supplemental rebates; selective contracting with specialty pharmacies for costly specialty drugs; automated prior authorization; and a comprehensive Retrospective Drug Use Review program for provider educational interventions. These sophisticated, industry-standard, pharmacy management tools enabled the Department to realize significant cost savings, minimize the per-member per-month increase in pharmacy expenditures and increase quality of care without compromising access or imposing overly burdensome requirements on providers.
In an effort to ensure that expenditures for assistance programs administered by the Department do not exceed the aggregate amount appropriated for the program by the General Appropriations Act of 2011, the Department has taken steps to implement additional initiatives to further reduce costs while still providing needed care to MA recipients, including limiting pharmacy benefits for recipients 21 years of age and older to six prescriptions per calendar month and limiting certain dental benefits for recipients 21 years of age and older. Despite these and other cost saving efforts, the Department must identify more ways to achieve necessary cost savings. The Department has determined that changing the method of payment for pharmacy services will produce savings, with the least impact on services and care provided to MA recipients.
Changes to Dispensing Fees
Federal law requires that State Medicaid pharmacy payments for drugs1 include a drug cost based on the EAC,2 plus a reasonable dispensing fee established by the Department. See 42 CFR 447.512 (relating to drugs: aggregate upper limits of payment). In December 2010, The Lewin Group issued a report titled ''Potential Federal and State-by-State Savings if Medicaid Pharmacy Programs were Optimally Managed'' (Lewin report) (http://www.lewin.com/publications/publication/436/). Based on its analysis of 2009 Centers for Medicare and Medicaid Services (CMS) Medicaid Fee-for-Service (FFS) data and using what it characterized as typical Medicare Part D dispensing fees estimated at $1.90 for brand drugs and $2.20 for generic drugs, the Lewin report concluded that Federal and State Medicaid pharmacy expenditures could be reduced by, among other things, decreasing dispensing fees.3
Currently, the Department pays a $4 dispensing fee for prescriptions for compensable, noncompounded brand name and generic drugs and a $5 dispensing fee for compensable compounded prescriptions in the MA FFS program. In deciding whether these fees could be reduced, the Department reviewed the State Medicaid prescription reimbursement information available on the CMS web site. For the quarter ending September 2011, CMS reported that states are paying a dispensing fee ranging from a low of $1.75 (New Hampshire) to a high of $14.01 (Oregon) for brand name drugs and generic drugs. The wide variance in dispensing fees paid by other state Medicaid programs is attributable, in part, to the different methods that states use to determine EAC. Given these differences and because, as previously mentioned, the dispensing fees of the Medicaid programs have been criticized as too high, the Department concluded that it was appropriate to consider other factors in determining whether to change the MA FFS dispensing fees.
Rather than focusing on other state Medicaid payments, the Department decided that a comparison of the current MA FFS dispensing fees with the fees paid by other third-party payers in this Commonwealth would provide a more accurate and realistic view of what a reasonable dispensing fee should be. The Department found that, with the exception of the Pharmaceutical Assistance Contract for the Elderly program, which also pays a $4 dispensing fee, the Department's MA FFS dispensing fees are higher than, and in most cases more than double, the dispensing fees paid by all of the Department's contracted HealthChoices managed care organizations (MCO), the Pennsylvania Employees Benefits Trust Fund, private commercial third-party prescription drug programs in this Commonwealth and Medicare Part D plans.
The HealthChoices MCOs, which furnish pharmacy services to 57% of the MA population, pay dispensing fees between $0.96 and $2 for brand name drugs and between $0.97 and $2.29 for generic drugs. Notwithstanding these fees, HealthChoices MA MCO enrollees continue to have access to pharmacy services to the same extent as members of the general public in the HealthChoices geographic areas.
While specific information on dispensing fees paid by private commercial third-party plans is not made public, the Department did consider the information that is generally available for these payers. According to the Lewin report, state Medicaid programs pay pharmacies dispensing fees that are ''more than twice the amount paid by private sector health plans.'' Lewin report at 12. In its 2011 ''Prescription Drug Benefit Cost and Plan Design Report,'' which provides an overview of trends in prescription drug coverage, plan design, utilization and drug costs as reported by United States employers, the Pharmacy Benefit Management Institute noted that the average dispensing fee for both brand and generic drugs is $1.54. Consistent with these reports, several of the Department's HealthChoices MCOs advised the Department that the dispensing fees in their private commercial book of business are under $2. Further, according to Mercer Government Human Services Consultant, the Department's actuary contractor, its commercial clients based in this Commonwealth or who have a significant number of employees located in this Commonwealth pay dispensing fees ranging from $1 to $1.50.
The MA program cannot ignore that the dispensing fees paid to pharmacies in this Commonwealth by the HealthChoices MCOs, Medicare and private commercial third-party plans are significantly lower than those paid by the FFS program. The amendment to § 1121.55 (relating to method of payment) implements a dispensing fee in the MA FFS program that is comparable with the dispensing fees adopted by the HealthChoices MCOs, Medicare Part D plans and private commercial third-party plans.
The Department is also amending § 1121.55(a) with respect to the dispensing fee when the MA recipient has a medical resource that includes coverage of pharmacy services and is a primary third-party payer to MA. In these situations, the pharmacy agreed to accept the third-party resource's dispensing fee to cover the cost of dispensing the drug. Rather than paying a $2 dispensing fee for prescriptions for compensable noncompounded legend and nonlegend drugs and $3 for compensable compounded prescriptions, the Department will pay a $0.50 dispensing fee to account for the pharmacy's cost to transmit the claim to the MA program for secondary payment. This fee is intended to cover any additional transaction costs that the pharmacies incur to transmit the claims for processing. The industry average claim transaction fee ranges from $0.20 to $0.35. The Department's $0.50 dispensing fee accounts for small independent pharmacies with lower claims volume and the potential for higher fees.
Changes to WAC Calculation
The Department is also revising the payment methodology for the drug cost component under § 1121.56 (relating to drug cost determination). In 2005, the Department amended the regulations governing the payment methodology for both brand name and generic drugs making the payment for the drug cost component of reimbursement more consistent with other public and private third-party payers. This amendment added WAC to the ''lower of'' payment methodology, establishing the EAC for brand name drugs at the lower of the lowest WAC listed for the drug in available Nationally recognized pricing services plus 7% or the lowest average wholesale price (AWP) listed for the drug in available Nationally recognized pricing services minus 14% for brand name drugs. The EAC for generic drugs was established at the lower of the lowest WAC listed for the drug in available Nationally recognized pricing services plus 66%, the lowest AWP listed for the drug in available Nationally recognized pricing services minus 25% or the State Maximum Allowable Cost (MAC) established by the Department. This ''lower of'' payment methodology assured the Department a payment methodology that is efficient and economic without compromising quality or access.
The Department is amending § 1121.56 to reflect the original intent of the 2005 amendment to the regulation. Because the current metrics to determine the AWP and WAC pricing are not equalized, when determining the EAC for a drug claim, the AWP metric is almost always the ''lower of'' amount when compared to the current WAC metric and typically is the amount used to determine the drug cost component of the payment to the pharmacy. Current predictions within the pharmacy industry are that eventually AWP will be phased out. In 2011, First Data Bank, one of the three Nationally recognized pricing services, stopped publishing AWP. Although Micromedex and Medi-Span, the other two pricing services, continue to publish AWP, most public and private industry stakeholders are seeking to identify a replacement benchmark metric for standardized drug pricing. If the National pricing services discontinue publishing AWP, the consequence will be that the MA Program will pay for the drug cost component at the higher WAC metric. Therefore, the Department must equalize the AWP and WAC metrics now to avoid unintended increases in payments of drug claims in the future.
The amendment to § 1121.56 equalizes the calculation of AWP and WAC by amending the WAC calculation to equal the result of the AWP calculation. Specifically, for brand name drugs, the WAC calculation is the lowest WAC listed in the available Nationally recognized drug pricing services, plus 3.2%. For generic drugs, it is the lowest WAC listed in the Nationally recognized pricing services. The AWP calculation, however, is not changing. The amendment will have minimal impact on pharmacy providers, as most drug claims are paid using the AWP metric. The amendment will not have an impact on consumers.
Public Process
The Department published advance public notice at 42 Pa.B. 1002 (February 18, 2012) announcing its intent to amend the method of payment for pharmacy services under Chapter 1121. The Department invited interested persons to comment. In addition, the Department discussed these pharmacy amendments with the Medical Assistance Advisory Committee at its meeting on February 23, 2012.
The Department also posted the draft regulation on the Department's web site on February 24, 2012, with a 15-day comment period. The Department again invited interested persons to submit written comments regarding the regulation to the Department. The Department received 32 topically-related comments from 20 commentators. The Department also discussed the Act 22 regulations and responded to questions at the House Health Committee hearing on March 8, 2012.
The Department considered all comments in response to the draft regulation.
Discussion of Comments
The following is a summary of the major comments received within the public comment period and the Department's responses to those comments.
Comment
Some commentators stated the changes may lead to the closing of some community pharmacies and others stated the changes would force pharmacies to discontinue services to MA recipients, both of which would result in limited access to pharmacy services for MA recipients. Some commentators also stated that the changes threaten the viability of long-term care pharmacies. Others also expressed concern about access for residents of rural areas and residents of long-term care facilities.
Response
The amended pharmacy payments are consistent with payments made by other public and private third-party payers and those MA recipients and beneficiaries continue to have access to pharmacy services to the same extent as members of the general public. Therefore, the changes to the pharmacy payments do not adversely affect provider participation and access to service, even in rural areas and long-term care facilities.
• The HealthChoices MCOs furnish pharmacy services to 57% of the MA population. Most of the MCOs pay lower ingredient rates for brand and generic medications and all pay dispensing fees between $0.96 and $2 for brand name drugs and between $0.97 and $2.29 for generic drugs.
• 42% of the MA recipients who qualify for pharmacy services are dual eligible recipients (eligible for both Medicare and Medicaid). Most dual eligible recipients receive their drug coverage under Medicare Part D. (Pharmacy coverage for a dual eligible recipient in the MA program is limited to over-the-counter drugs, benzodiazepines and barbiturates not covered by Part D plans.) Typical Medicare Part D dispensing fees are estimated at $1.90 for brand drugs and $2.20 for generic drugs.
• A published report indicated a National average dispensing fee for both brand and generic drugs of $1.54 in the commercial sector.
Comment
Several commentators recommended increasing use of generic medications, medication therapy management (MTM) programs and requiring mandatory cost sharing for certain recipients as alternative methods to achieve savings.
Response
The MA program already requires generic substitution and generic drug utilization increased from 67.03% in 2008 to 76% in 2011. The MA Program monitors the cost of brand name and generic drugs and the impact of Federal and supplemental rebates on net cost to the Department and maximizes the use of generic drugs when they are cost effective. In some instances, the cost of the brand drug after rebates (Federal and supplemental) is less than the cost of the generic equivalent after the Federal rebate. When the brand drug costs the Department less than the generic equivalent, the Department designates the brand name drug as preferred in the FFS program. This pricing is unique to the FFS delivery system in the Medicaid program.
Although the Department does not have an MTM program for high risk patients, the Department has a disease management program and an intensive care management program in FFS. These programs serve to educate MA recipients, coordinate care and lower the total cost of health care.
The Department may consider cost sharing options provided for in the Deficit Reduction Act of 2005 (Pub. L. No. 109-171) in the future.
Comment
Several commentators disagree with the decrease in dispensing fees stating that the new fees will be ''difficult'' for the pharmacies, the cost of dispensing medications falls into the range of $5 to $10 and the dispensing of compounded products takes much skill and time to accomplish.
Response
As previously provided, the amendment to § 1121.55 implements a dispensing fee in the MA FFS program that is comparable with the dispensing fees adopted by the HealthChoices MCOs, Medicare Part D plans and private commercial third-party plans. The payments made by these public and private third-party payers are accepted by pharmacies Statewide and have not compromised access to patients. The amended dispensing fees in the FFS program bring the Department in line with current pharmacy industry standards and continue to recognize compounding with a higher $3 dispensing fee.
Comment
Several commentators commented on the changes to the EAC. Two commentators estimated reductions in payment for brand-name medications by $7.57 per prescription and $3.45 per prescription on generic medications. One of the commentators inquired regarding the Department's savings estimates, including the payment for generic medications.
Response
The Department disagrees with these estimated reductions in payment for brand name and generic medications. The Department, however, is unable to respond to the specific numbers because the commentators did not provide an explanation of how they estimated the reductions or provide any data to support the estimated reductions.
The Department's reported savings were estimated based on paid claims history. During calendar year 2011, the FFS program paid 9,091,734 pharmacy claims.
Because of the significant differential among generic prices, a literal crosswalk from AWP and WAC is more difficult than the crosswalk from AWP to WAC for brand name drugs. Information from retail pricing surveys was used to estimate the WAC-5% metric for the equivalency to AWP-25%. The actual impact in terms of payment to pharmacies is minimal based on an analysis of 2011 FFS Pharmacy Claims data. Only 3.64% of generic claims would have been paid using the WAC minus 5% metric. The 3.64% is comprised of claims that were billed at the usual and customary charge or paid at the current WAC plus 66% payment metric. The remaining 96.4% of generic claims were paid using AWP minus 25%, the Federal Upper Limit or at the State MAC and would continue to be paid on that basis.
Despite the minimal impact, the Department recognizes that the cost of generics to pharmacies may vary according to the pharmacy size and volume of business and can range on average anywhere from WAC to WAC-6%. In recognition of these differences and after consideration of the comments received on this provision, the Department changed the regulation to amend the calculation of WAC when establishing the EAC for generic drugs from ''the lowest WAC listed for the drug in available Nationally recognized pricing services, minus 5%'' to ''the lowest WAC listed for the drug in available Nationally recognized pricing services.''
Comment
Two commentators inquired whether the Department will update the EAC on a daily or weekly basis. In addition, one commentator questioned what data will be used to determine the WAC metric and whether the data will be available to pharmacies to verify the accuracy.
Response
Currently, in accordance with § 1121.56(b), the EAC is updated monthly. The Department, however, is amending subsection (b) to change ''monthly'' to ''at least monthly'' to provide the flexibility for more frequent updates to the ingredient cost component of reimbursement.
The MA program uses three Nationally recognized pricing services, First Data Bank, Micromedex and Medi-Span, when determining the ''lower of'' payment. Drug pricing information from each of these pricing services is available by subscription.
Comment
Several commentators stated that the Department did not allow sufficient time for review and comment of the regulations.
Response
The Department engaged in a transparent public process through which the Department solicited and received numerous comments and input from stakeholders and other interested parties.
As previously mentioned, the Department published advance public notice at 42 Pa.B. 1002 announcing its intent to amend the method of payment for pharmacy services under Chapter 1121. The Department invited interested persons to comment. The Department also posted the draft regulation on the Department's web site on February 24, 2012. The Department again invited interested persons to submit written comments, on or before March 9, 2012, regarding the regulation to the Department. As a final-omitted regulation under Act 22, the Department was not required to have a public comment process. However, to encourage transparency and public input the Department provided an opportunity for comment by publishing the notice and posting the draft regulation on the Department's web site. This public comment process provided sufficient opportunity for interested parties to submit comments, as supported by the number of comments that were submitted.
Comment
The Department exceeded its authority under Act 22 by issuing final-omitted regulations that change pharmacy reimbursement methods in future years.
Response
Act 22 authorizes the Department to promulgate final-omitted regulations that revise payment rates. To ensure that the Department's expenditures for State FY 2011-2012 do not exceed the amount appropriated by the General Assembly, this final-omitted rulemaking is exempt from the Regulatory Review Act, section 205 of the CDL and section 204(b) of the Commonwealth Attorneys Act. There is nothing in Act 22 that precludes the promulgation of final-omitted regulations that will have an impact in both State FY 2011-2012 and in future years.
Technical Amendments
To promote understanding and application of MA payment for pharmaceutical services, the Department is making several technical corrections to Chapter 1121. These technical corrections do not represent changes to the Department's current MA payment or coverage policies. They reflect and clarify payment for pharmaceutical services that have been in effect under the MA Program, based upon Federal Medicaid requirements and MA payment policies, but have not yet been incorporated into Chapter 1121. These technical corrections are as follows:
• Clarification that in the definition of ''usual and customary charge'' the phrase ''other discounts extended to a particular group of patients'' includes generic drug savings and discount programs.
• Deletion of the requirement for the licensed prescriber to write the prior authorization number on the prescription form as that information is now located in PROMISe, the Department's claims processing system.
• Deletion of the reference to the 5-day grace period and the exclusions to the 5-day grace period for prescriptions filled and delivered to a recipient in a skilled nursing facility, an intermediate care facility or an intermediate care facility for the mentally retarded prior to the normal 30-day cycle. Pharmacy claims are now submitted through PROMISe, the Department's online, point-of-sale claims adjudication system. The Department notified prescribing providers and pharmacies of the requirement for prior authorization of an early refill effective August 4, 2008, by way of MA Bulletin Number 02-08-04, et al, ''Prior Authorization of Early Refills of Prescriptions,'' issued July 18, 2008, and issued handbook pages that include the type of information needed to evaluate requests for early refills of prescriptions for medical necessity.
• Deletion of the following from the list of noncompensable services and items:
o Methadone. Methadone meets the conditions for coverage under the Medicaid Program (see section 1927(a)(1) of the act (42 U.S.C.A. § 1396r-8(a)(1))) and consequently it has been included in the Department's list of covered drugs.
o Drugs prescribed for treatment of pulmonary tuberculosis. These drugs meet the conditions for coverage under the Medicaid Program (see section 1927(a)(1) of the act) and have been included on the Department's list of covered drugs.
o Drugs prescribed for cessation of smoking. In 2002, the Department expanded the scope of covered services for eligible MA recipients to include tobacco cessation drug products and tobacco cessation counseling services and notified all providers of this addition by way of MA Bulletin Number 99-02-02, ''Coverage of Tobacco Cessation Drug Products and Counseling Services,'' issued January 16, 2002.
o Single entity and multiple vitamins with exceptions, legend and nonlegend aqueous saline solutions, legend and nonlegend water preparations and impregnated gauze and identical, similar or related products. In accordance with the CMS Medicaid Drug Rebate Program Release No. 155, issued August 11, 2010, substances that do not meet the definition of a covered outpatient drug as defined in section 1927(a)(1) of the act are considered nondrug products and are not subject to the requirements of the Medicaid Drug Rebate program. The MA program covers these products under the medical supplies and equipment category of service.
o Emollients. Emollients are included on the Department's list of covered drugs.
o Legend and nonlegend food supplements and substitutes. The Department expanded the scope of covered services for eligible MA recipients to include enteral nutritional supplements effective January 1, 2002, and notified providers of this addition by way of MA Bulletin Number 99-01-13, ''Coverage of Enteral Nutritional Supplements,'' issued December 28, 2001.
• Addition of the following to the list of noncompensable services and items:
o Erectile dysfunction (ED) drugs. Prescriptions for ED drugs are noncompensable unless used for a Food and Drug Administration-approved indication other than for the treatment of sexual or ED. The Department notified prescribing providers and pharmacies that effective March 1, 2006, coverage of drugs for the treatment of sexual or ED is eliminated in the Medicaid Program in accordance with notice from CMS by way of MA Bulletin Number 02-06-04, et al, ''Federal Clarification—Elimination of Medicaid Coverage of Drugs for Treatment of Erectile Dysfunction,'' issued March 7, 2006.
Therefore, the Department is amending §§ 1121.2, 1121.53 and 1121.54 (relating to definitions; limitations on payment; and noncompensable services and items) to codify and better clarify the scope and applicability of coverage and payment conditions for pharmaceutical services. These technical amendments do not impose new or additional coverage exclusions or payment conditions and reflect the manner in which these services are currently covered under the Commonwealth's MA Program.
Requirements
The following is a summary of the major provisions of this final-omitted rulemaking.
§ 1121.2. Definitions
The Department is amending the definition of ''usual and customary charge'' to specifically include generic drug savings and discount programs.
§ 1121.53. Limitations on payment
The Department is amending subsection (b)(1)(ii) by deleting the requirement for a licensed prescriber to write the prior authorization number on the prescription form. In addition, subsection (f) is amended to delete the reference to a 5-day grace period to accommodate prescriptions filled and delivered prior to the normal 30-day cycle. Paragraphs (1)—(10), which provided the exemptions to this limitation, are deleted as well.
§ 1121.54. Noncompensable services and items
The Department is making technical corrections that reflect current MA coverage policies. This section is amended to delete the services and items to reflect the current payment policies. The remaining paragraphs were renumbered accordingly.
§ 1121.55. Method of payment
The Department is amending subsection (a)(1) and (2) to change the $4 dispensing fee to a $2 dispensing fee. Subsection (b) is also amended to change the $5 dispensing fee to a $3 dispensing fee. In addition, paragraph (4) is added to provide a $0.50 dispensing fee to cover the cost of the transaction to submit the claim when the MA recipient has a medical resource that includes coverage of pharmacy services and is a primary third-party to MA.
§ 1121.56. Drug cost determination
As stated previously, the Department is amending subsection (a)(1)(i)(A) to change the reference to WAC plus 7% to WAC plus 3.2%. Subsection (a)(1)(ii)(A) is also amended to change the reference to WAC plus 66% to WAC. Subsection (b) is amended to change the frequency of updates to EAC from monthly to at least monthly. Finally, subsection (f) is amended to correct a typographical error and change ''CMF'' to ''CMS,'' which is the Centers for Medicare and Medicaid Services.
Affected Individuals and Organizations
Pharmacies that are enrolled as MA providers will be affected by the changes. MA recipients, however, will not be affected by these changes.
Accomplishments and Benefits
The final-omitted rulemaking aligns the Department's dispensing fee with those of other public and private third-party payers, enables the MA program to ensure the savings intended when the Department adopted the ''lower of'' payment methodology and clarifies the method of payment when the MA recipient has a pharmacy third- party benefit resource. In addition, the technical amendments codify the requirements for coverage and payment and enhance the clarity of the regulations.
Fiscal Impact
The final-omitted rulemaking will result in reduced payments to pharmacies enrolled in the MA program. The Commonwealth will realize $1.589 million ($0.714 million in State funds) in savings in FY 2011-2012.
Paperwork Requirements
There are not additional reports, paperwork or new forms needed to comply with the final-omitted rulemaking.
Regulatory Review Act
Under section 403.1 of the code, this final-omitted rulemaking is not subject to review under the Regulatory Review Act.
Findings
The Department finds that:
(1) Notice of proposed rulemaking is omitted in accordance with section 204(1)(iv) of the CDL, 1 Pa. Code § 7.4(1)(iv) and section 403.1 of the code because the final-omitted rulemaking relates to Commonwealth grants and benefits.
(2) That the adoption of this final-omitted rulemaking in the manner provided by this order is necessary and appropriate for the administration and enforcement of the code.
Order
The Department, acting under the code, orders that:
(a) The regulations of the Department, 55 Pa. Code Chapter 1121, are amended by amending §§ 1121.2 and 1121.53—1121.56 to read as set forth in Annex A, with ellipses referring to the existing text of the regulations.
(b) The Secretary of the Department shall submit this order and Annex A to the Office of General Counsel for approval as to legality and form as required by law.
(c) The Secretary of the Department shall certify and deposit this order and Annex A with the Legislative Reference Bureau as required by law.
(d) This order shall take effect upon publication in the Pennsylvania Bulletin.
GARY D. ALEXANDER,
SecretaryFiscal Note: 14-530. No fiscal impact; (8) recommends adoption.
Annex A
TITLE 55. PUBLIC WELFARE
PART III. MEDICAL ASSISTANCE MANUAL
CHAPTER 1121. PHARMACEUTICAL SERVICES
GENERAL PROVISIONS § 1121.2. Definitions.
The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:
* * * * * Usual and customary charge—The pharmacy's lowest net charge an MA recipient would pay for a prescription as a non-Medicaid patient at the time of dispensing for the same quantity and strength of a particular drug or product, including applicable discounts, such as special rates to nursing home residents, senior citizens or other discounts extended to a particular group of patients, including generic drug discount and savings programs. This lowest net price does not apply to special in-store rates or discounts extended to charitable organizations, religious groups, store employees and their families, nonprofit organizations, members of the medical profession or other similar non-Medicaid groups.
* * * * *
PAYMENT FOR PHARMACEUTICAL SERVICES § 1121.53. Limitations on payment.
(a) The Department will not pay a provider an amount that exceeds the provider's usual and customary charge to the general public.
(b) The Department establishes a State MAC which sets a limit on the drug cost component of the payment formula for selected multisource drugs. The State MAC will include a combination of CMS multisource drugs and the Department's MAC drugs and does not apply if the following exist:
(1) The licensed prescriber certifies that a specific brand is medically necessary by doing all of the following:
(i) Writes on the prescription form ''Brand Necessary'' or ''Brand Medically Necessary'' in the prescriber's own handwriting.
(ii) Receives prior authorization from the Department to use the brand name product.
(2) In the case of a telephone prescription, the licensed prescriber sends a properly completed prescription, as described in paragraph (1), to the pharmacist within 15 days of the date of service.
* * * * * (f) Payment to a pharmacy for prescriptions dispensed to a recipient in either a skilled nursing facility, an intermediate care facility or an intermediate care facility for the mentally retarded shall be limited to one dispensing fee for each drug dispensed within a 30-day period.
§ 1121.54. Noncompensable services and items.
Payment will not be made to a pharmacy for the following services and items:
(1) Drugs and other items prescribed for obesity, appetite control or other similar or related habit altering tendencies. Drugs which have been cleared for use in the treatment of hyperkinesis in children and primary and secondary narcolepsy due to structural damage of the brain are compensable if the physician indicates the diagnosis on the original prescription.
(2) Nonlegend drugs in the form of troches, lozenges, throat tablets, cough drops, chewing gum, mouthwashes and similar items.
(3) Pharmaceutical services provided to a hospitalized person.
(4) Drugs and devices classified as experimental by the FDA or whose use is classified as experimental by the FDA.
(5) Drugs and devices not approved by the FDA or whose use is not approved by the FDA.
(6) Placebos.
(7) Legend and nonlegend soaps, cleansing agents, dentifrices, mouthwashes, douche solutions, diluents, ear wax removal agents, deodorants, liniments, antiseptics, irrigants and other personal care and medicine chest items.
(8) Compounded prescriptions when one of the following applies:
(i) Compensable items are used in less than therapeutic quantities.
(ii) Noncompensable items are compounded.
(9) Nonlegend drugs not listed in § 1121.53(d) (relating to limitations on payment).
(10) Drugs prescribed in conjunction with sex reassignment procedures or other noncompensable procedures.
(11) The following items when prescribed for recipients in a skilled nursing facility, an intermediate care facility or an intermediate care facility for the mentally retarded:
(i) Intravenous solutions.
(ii) Noncompensable drugs and items as specified in this section.
(iii) The following nonlegend drugs:
(A) Analgesics.
(B) Antacids.
(C) Antacids with simethicone.
(D) Cough—cold preparations.
(E) Contraceptives.
(F) Laxative and stool softeners.
(G) Ophthalmic preparations.
(H) Diagnostic agents.
(iv) Legend laxatives.
(12) Items prescribed or ordered by a prescriber who has been barred or suspended from participation in the MA Program. The Department will periodically send pharmacies a list of the names of suspended, terminated or reinstated practitioners and the dates of the various actions. Pharmacies are responsible for checking this list before filling prescriptions.
(13) Prescriptions or orders filled by a pharmacy other than the one to which a recipient has been restricted under § 1101.91 (relating to recipient misutilization and abuse). The Department will issue special medical services eligibility cards to restricted recipients indicating the name of the pharmacy to which the recipient is restricted. Pharmacies are responsible for checking the recipient's medical services eligibility card before filling the prescription.
(14) DESI drugs and identical, similar or related products or combinations of these products.
(15) A pharmaceutical service for which payment is available from another public agency or another insurance or health program except for those drugs prescribed through the county mental health/mental retardation programs as specified in § 1121.51 (relating to general payment policy).
(16) FDA approved pharmaceutical products whose indicated use is not to treat or manage a medical condition, illness or disorder.
(17) Legend and nonlegend pharmaceutical products distributed by a company that has not entered into a National rebate agreement with the Federal government as provided under section 4401 of OBRA '90, except for those specific drug products authorized by the Federal government as essential to the health of an MA recipient. The Department will issue a special list comprised of those companies that signed rebate agreements with the Federal government and those products authorized as essential to the health of an MA recipient. Pharmacies are responsible for checking the list before filling the prescription.
(18) Legend and nonlegend cough and cold preparations, except when prescribed for MA recipients under 21 years of age.
(19) Erectile dysfunction drugs unless used for an FDA approved indication other than for the treatment of sexual or erectile dysfunction.
§ 1121.55. Method of payment.
(a) The Department will pay a pharmacy for a compensable legend and nonlegend drug (after deducting the applicable copayment amount, as described in § 1101.63(b) (relating to payment in full)), the lowest of the following amounts:
(1) The EAC for the drug, multiplied by the number of units dispensed, plus a $2 dispensing fee.
(2) The State MAC for the drug, multiplied by the number of units dispensed, plus a $2 dispensing fee.
(3) The provider's usual and customary charge to the general public.
(4) For MA recipients with a pharmacy benefit resource which is a primary third party payer to MA, the lower of the following amounts:
(i) The EAC for the drug, multiplied by the number of units dispensed, plus a $0.50 dispensing fee.
(ii) The State MAC, multiplied by the number of units dispensed, plus a $0.50 dispensing fee.
(b) The Department will pay a pharmacy for a compensable compounded prescription at the lower of the cost of all ingredients plus a $3 dispensing fee or the provider's usual and customary charge to the general public. For MA recipients with a pharmacy benefit resource which is a primary third party payer to MA, the dispensing fee shall be $0.50.
(c) The provider shall bill the Department at its usual and customary charge to the general public.
§ 1121.56. Drug cost determination.
(a) The Department will base its drug cost for compensable legend and nonlegend drugs on the lower of:
(1) The EAC established by the Department.
(i) For brand name drugs, the EAC is established by the Department as one of the following:
(A) The lowest WAC listed for the drug in available Nationally recognized pricing services, plus 3.2%.
(B) If WAC data are not available from a Nationally recognized pricing service, the lowest AWP listed for the drug in available Nationally recognized pricing services, minus 14%.
(C) If both WAC and AWP cost data are available for the drug from a Nationally recognized pricing service, the lower of the two amounts.
(ii) For generic drugs, the EAC is established by the Department as one of the following:
(A) The lowest WAC listed for the drug in available Nationally recognized pricing services.
(B) If WAC data are not available from a Nationally recognized pricing service, the lowest AWP listed for the drug in available Nationally recognized pricing services, minus 25%.
(C) If both WAC and AWP cost data are available for the drug from a Nationally recognized pricing service, the lower of the two amounts.
(2) The State MAC established by the Department.
(b) The Department will update the EAC for individual drugs at least on a monthly basis as it appears in available Nationally recognized pricing services.
(c) CMS establishes lists that identify and set Federal upper limits for CMS multisource drugs and provides the listing of these drugs and revisions to the list to the Department through Medicaid manual transmittals on a periodic basis.
(d) The Department will determine the State MAC by one of the following methods:
(1) For multisource drugs, the Department will set the State MAC at the lower of the following:
(i) The upper payment limit established by the CMS.
(ii) Provided that the generic product is available at the price established by the Department from at least two wholesalers:
(A) If the generic product is available from more than one manufacturer, the base price of 150% of the lowest acquisition cost for the generic product, unless 150% of the lowest acquisition cost is not at least 120% of the second lowest acquisition cost, in which case the base price will be set at 120% of the second lowest acquisition cost.
(B) If the generic product is available from only one manufacturer, the base price is 120% of the acquisition cost for the generic product.
(2) For disposable insulin syringes, the Department will set the State MAC at the amount listed in the MA Program Fee Schedule.
(e) The Department will update the State MAC:
(1) If the State MAC for a multisource drug is set at the Federal upper payment limit established by CMS, the Department will apply the Federal upper limits for CMS multisource drugs to be effective on the date established by CMS and will describe the update to each pharmacy enrolled in the MA Program when it is available.
(2) The Department will apply the price for all other State MAC multisource drugs every 3 months, and will distribute the update to each pharmacy enrolled in the MA Program.
(f) With the exception of the CMS multisource drugs, the Department will make further additions to the list of State MAC drugs after consultation with the Medical Assistance Advisory Committee as to whether the application of a State MAC is cost effective to the Department for a particular multisource drug. The Department will add the CMS multisource drugs to the State MAC list effective as of the effective date established by CMS.
(g) With the exception of disposable insulin syringes, the State MAC does not apply if the conditions are met as described in § 1121.53(b)(1) and (2) (relating to limitations on payment).
(h) The most common package size for the purposes of determining the product cost is one of the following:
(1) For capsules, tablets and liquids available in breakable package sizes:
(i) The listed package size if only one package size is listed.
(ii) The 100 or pint package size if more than one package size is listed.
(iii) The next smaller package size from the 100 or pint size, excluding a drug company's unit-dose package size, if more than one package size is listed other than the 100 or pint package size.
(iv) The package size closest to the 100 or pint package size, excluding a drug company's unit-dose package size, if the next smaller package is the unit-dose package size.
(2) The listed package size for all dosage forms available for all nonlegend drug products.
(3) The smallest package size for all dosage forms available in nonbreakable packages.
[Pa.B. Doc. No. 12-646. Filed for public inspection April 13, 2012, 9:00 a.m.] _______
1 Drugs available from multiple manufacturers and distributors are often referred to as generic or multisource drugs. Drugs available from only one manufacturer that holds or held the patent for the drug product are referred to as brand name or single source drugs.
2 The EAC is defined in 42 CFR 447.502 (relating to definitions) as the state Medicaid ''agency's best estimate of the price generally and currently paid by providers for a drug marketed or sold by a particular manufacturer or labeler in the package size of the drug most frequently purchased by providers.''
3 The Lewin report also recommended increasing generic dispensing rates, reducing ingredient costs and implementing more effective drug utilization controls as other means to reduce Federal and State Medicaid pharmacy expenditures. As previously noted, the Department has already implemented multiple initiatives consistent with these recommendations.
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