Titles of Regulations: 12VAC30-50. Amount, Duration, and Scope of Medical and Remedial Care Services (amending 12VAC30-50-210).

12VAC30-80. Methods and Standards for Establishing Payment Rates; Other Types of Care (amending 12VAC30-80-40).

Statutory Authority: § 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: January 1, 2014.

Effective Date: January 16, 2014.

Agency Contact: Brian McCormick, Regulatory Supervisor, Department of Medical Assistance Services, 600 East Broad Street, Suite 1300, Richmond, VA 23219, telephone (804) 371-8856, FAX (804) 786-1680, or email brian.mccormick@dmas.virginia.gov.

Basis: Section 32.1-325 of the Code of Virginia grants to the Board of Medical Assistance Services the authority to administer and amend the Plan for Medical Assistance. Section 32.1-324 of the Code of Virginia authorizes the Director of the Department of Medical Assistance Services (DMAS) to administer and amend the Plan for Medical Assistance according to the board's requirements. The Medicaid authority as established by § 1902(a) of the Social Security Act (42 USC § 1396 et seq.) provides governing authority for payments for services.

Supplemental Rebates - Section 4401 of the federal Omnibus Budget Reconciliation Act of 1990 added § 1927 to the Social Security Act (42 USC § 1396r-8). This provided for the Commonwealth to receive supplemental rebates on pharmaceutical products purchased by Medicaid for fee-for-service recipients, in addition to the rebates received under the manufacturers' CMS agreement. Payments of supplemental rebates by the pharmaceutical manufacturers to the Commonwealth does not affect DMAS payment methodology for pharmacy services.

Unit Dose Drugs Dispensing Fee - Chapter 890, Item 297 NNNN of the 2011 Acts of Assembly directed DMAS to discontinue paying the dispensing fee of $5.00 to nursing facilities for drugs dispensed to residents via unit dose systems.

Drug Threshold Program - The need for regulations controlling the use of high numbers of prescription drugs no longer exists. DMAS' authority for this change derives from its general authority set out in § 32.1-325 of the Code of Virginia, which provides for administering and amending the State Plan for Medical Assistance.

Purpose: This suggested regulatory action will not affect the health, safety, or welfare of the citizens of the Commonwealth. The federally mandated drug rebate program does benefit the Commonwealth by permitting DMAS to recover some of its expenditures for legend drugs.

Supplemental Rebates - The supplemental rebate program, implemented by DMAS in 2004, saves the Commonwealth of Virginia millions of dollars per year in the cost of legend drugs provided to fee-for-service Medicaid recipients. This rebate program helps DMAS offset some of its expenditures while at the same time assuring that fee-for-service Medicaid recipients have access to clinically appropriate medications in all covered therapeutic drug classes. The proposed changes to the supplemental rebate agreement described in 12VAC30-80-40 A 9 reduce the time necessary to execute new contracts and renew existing contracts, and increase the flexibility of DMAS and its pharmaceutical manufacturing partners in the contracting process, thereby enhancing a cost effective and clinically appropriate pharmacy program that saves the Commonwealth money.

Unit Dose Drugs Dispensing Fee - The discontinuing of the dispensing fee for unit dose drugs dispensed by nursing facility pharmacies will save DMAS a small expenditure.

Drug Threshold Program - The need for the provisions establishing prior authorization requirements when high numbers of prescription drugs is monitored by the Drug Utilization Review Board.

Rationale for Using Fast-Track Process: This proposed regulatory change is being promulgated through the fast-track rulemaking process because it is noncontroversial: (i) it reduces the time and effort needed to execute contracts and revisions to these contracts without reducing or modifying existing terms or conditions of the supplemental rebate agreements between DMAS and pharmaceutical manufacturers; (ii) it eliminates a dispensing fee that is no longer necessary; and (iii) it removes prior authorization requirements for using high numbers of prescription drugs because it has been replaced with the Drug Utilization Review program. No opposition is expected as a result of this suggested fast-track regulatory action.

Substance: The sections of the State Plan that are affected by this action are the Methods and Standards for Establishing Payment Rates; Other Types of Care: Fee for Services Reimbursement for Pharmacy Services (12VAC30-80-40) and the Amount, Duration, and Scope of Services: Pharmacy Services (12VAC30-50-210).

Supplemental Rebates - Prior to 2004, DMAS did not collect rebates for expenditures for legend drugs and spent almost $499 million for this service. In 2005, DMAS' gross expenditures for prescribed drugs were almost $612 million with almost $11 million in manufacturers' rebates. In 2007, with the implementation of the federal Medicare Part D program (which reimburses for a significant amount of the legend drugs required by Virginia Medicaid individuals), DMAS saw its gross expenditures for prescribed drugs decrease to almost $228 million with a concomitant decrease in the manufacturers' rebates to slightly more than $2 million.

The current supplemental rebate contracting policy requires DMAS and pharmaceutical manufacturers to execute an 18-page to 20-page contract each time there is a change in the types of supplemental drugs to be included in the supplemental rebate program by a specific pharmaceutical manufacturer. The supplemental rebate contracts and amendments in current regulation are the model supplemental rebate contracts A, B, and C and amendments 1 and 2.

DMAS proposes to develop one Supplemental Drug Rebate Agreement and one Supplemental Drug Rebate Amendment. Additional changes to these documents by either the manufacturer or DMAS would be made through addenda to the original agreement. Renewals to the agreement would be made through an amendment to the original agreement.

Unit Dose Drugs Dispensing Fee - In 2003, DMAS implemented a unit dose dispensing fee of $5.00 per member per month as a means of reimbursing nursing home pharmacies for the packaging of individual doses of medication for their Medicaid residents. This dispensing fee compensated nursing facility pharmacies for the time and materials to perform in-house packaging as was the practice at the time.

Community pharmacies are also paid a dispensing fee for their pharmacy services for individuals who live in their communities. Community pharmacies do not use unit dose packaging systems for drugs dispensed to individuals who are not institutionalized.

With the implementation of the Medicare Part D prescription drug program in 2006, the vast majority of Medicaid recipients residing in nursing facilities became eligible for Medicare Part D prescription drug benefits. As a result, the payment of the dispensing fee for unit dose prescription drugs covered by DMAS was no longer necessary. Although DMAS still covers drugs not covered by Medicare Part D (benzodiazepines, barbiturates, and over the counter medications) and prescription drugs for nursing facility residents enrolled in the Medicaid program but not eligible for Medicare Part D, the vast majority by volume of unit dose prescriptions are provided by Medicare Part D plans.

Additionally, DMAS determined in a recent analysis of pharmacy reimbursement that nursing facility pharmacies are no longer packaging unit dose prescriptions in-house but are receiving prepackaged unit dose prescriptions directly from external pharmacies thereby making the unit dose dispensing fee no longer necessary. DMAS estimates that the elimination of this unnecessary unit dose dispensing fee will save the agency approximately $323,708 in General Fund dollars for the state fiscal year 2012.

Drug Threshold Program - DMAS is proposing the removal of the pharmacy threshold program. This program, adopted by DMAS in 2004, required prior authorization for fee-for-service non-institutionalized Medicaid patients whose volume of prescriptions for legend drugs exceeded nine unique prescriptions within 180 days and institutionalized Medicaid patients whose volume of legend drugs exceeded nine unique prescriptions within 30 days. The definition of prior authorization as it relates to the pharmacy threshold program is eliminated as is the description of the program in 12VAC30-50-210 A 7 d (1) through (4).

The elimination of the pharmacy threshold program in current state regulation is proposed in this regulatory change because this function has been assumed by the Virginia Drug Utilization Review Board (DUR Board), and therefore is no longer needed. The DUR Board carries out reviews at least semiannually of high prescription use by patients and targets prescribers of these patients through individual notifications that includes relevant peer-reviewed clinical standards specific to these patients' diagnoses.

In addition, pharmacists are informed at the point of sale through prospective DUR (Pro-DUR) edits if prescriptions have exceeded nine unique prescriptions within 180 days or 30 days, depending on the non-institutional or institutional status of patients. This DUR Board function achieves the objectives of the pharmacy threshold program by reducing over-prescribing without clinical justification and informs prescribers and pharmacists about patients who have received excessive, clinically questionable prescriptions.

Issues: The issues are as follows:

Supplemental Rebates - The primary advantages to this regulatory change are to decrease the time and paperwork and increase the flexibility of DMAS and its pharmaceutical manufacturing partners by modifying the supplemental rebate agreement and amendment. There are no known disadvantages to this regulatory change.

Unit Dose Drugs Dispensing Fee - This change has a small advantage for the agency in that it will save slightly more than $300,000 in expenditures. It would be a slight disadvantage to the nursing facilities that have been receiving these dispensing fees.

Drug Threshold Program - There are no advantages or disadvantages to anyone regarding the removal of this text. This function has been assumed by the Drug Utilization Review Board so this additional service limit text is not necessary.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The proposed changes 1) discontinue the $5 per individual per month unit dose fee paid to nursing home pharmacies by Virginia Medicaid, 2) modify the supplemental rebate contracting process, and 3) repeal the regulatory language regarding the pharmacy threshold program.

Result of Analysis. There is insufficient data to accurately compare the magnitude of the benefits versus the costs. Detailed analysis of the benefits and costs can be found in the next section.

Estimated Economic Impact. Pursuant to Chapter 890 Item 297 NNNN of the 2011 Appropriation Act, one of the proposed changes permanently discontinues the $5 per individual per month unit dose fee paid by Medicaid for individuals residing in a nursing facility. This dispensing fee is to compensate nursing home pharmacies for time and material costs associated with performing in-house packaging. This change was implemented in July 2011.

According to the Department of Medical Assistance Services (DMAS), a majority of nursing home residents became eligible for the Medicare Part D prescription drug program that was implemented in 2006. As a result, the need for the Medicaid unit dose dispensing fee was significantly reduced. In addition, DMAS reports that nursing facility pharmacies no longer package unit dose prescriptions in-house, but receive pre-packaged unit dose prescriptions directly from external pharmacies thereby making the payment of this dispensing fee unnecessary.

The main economic effect of this change will be on pharmacies that used to package unit dose prescriptions in house prior to July 2011. They are expected to lose $647,416 per year in revenues as a result of this change. One half of this amount ($323,708) represents savings to the Commonwealth and the other half represents savings to the federal government, as currently 50% of Virginia Medicaid is paid by federal matching funds. In addition, a reduction in federal funds coming in to the Commonwealth will likely have additional a contractionary economic impact beyond the initial $323,708 reduction in economic activity due to repercussion effects.

Additionally, one of the proposed changes will modify the supplemental rebate contracting process. DMAS collects rebates from manufacturers for expenditures for legend drugs provided to Medicaid fee-for-service recipients. The current rules require DMAS and pharmaceutical manufacturers to execute an 18-20 pages model contract each time there is a change in the types of drugs included in the rebate program. The proposed changes will allow DMAS and pharmaceutical manufacturers to execute an initial contract and effectuate changes through an addendum to the original agreement. This change is expected to reduce the time necessary to execute new contracts and renew existing ones. It will also provide additional flexibility to DMAS and to pharmaceutical manufacturers in the contracting process.

Finally, the proposed changes will repeal the regulatory language regarding the pharmacy threshold program.¹ The pharmacy threshold program aims to reduce excessive prescription of drugs without clinical justification. According to DMAS; however, the program has never been implemented as written in regulations. This function has been assumed by the Drug Utilization Review (DUR) Board since August 2005. The DUR Board is reported to have been carrying out reviews, at least semi-annually, of high prescription use by patients and is targeting prescribers of these patients through individual notifications that include relevant peer-reviewed clinical standards specific to these patients' diagnoses. In addition, pharmacists are informed at the point of sale through prospective DUR edits if prescriptions have exceeded the thresholds. This DUR Board review function is expected to achieve the objectives of the pharmacy threshold program by reducing over-prescriptions without clinical justification and to inform prescribers and pharmacists about patients who have received excessive, clinically questionable prescriptions. Since there does not appear to be any operational differences as a result of this change, no significant economic effect is expected other than achieving consistency between the regulatory language and the practice.

Businesses and Entities Affected. The proposed repeal of unit dose dispensing fee is expected to primarily affect 76 nursing facility pharmacies. The proposed supplemental rebate contract change is expected to primarily affect approximately 20 pharmaceutical manufacturers providing rebates and the Virginia Medicaid program. The drug threshold program applies to all of the approximately 1,857 pharmacies enrolled in Medicaid.

Localities Particularly Affected. The proposed changes apply throughout the Commonwealth.

Projected Impact on Employment. The proposed repeal of the unit dose dispensing fee is expected to reduce revenues of nursing facility pharmacies which may have a negative impact on their demand for labor. Also, simplification of the supplemental rebate contracting process may reduce demand for legal professionals by a small margin.

Effects on the Use and Value of Private Property. The proposed changes are not anticipated to have a direct impact on the use and value of private property. However, a reduction in revenues of nursing facility pharmacies may have a negative impact on their asset values.

Small Businesses: Costs and Other Effects. Only the repeal of unit dose dispensing fee is expected to have a small business impact as most of the nursing home pharmacies are believed to be small businesses. Anticipated economic effects on nursing home pharmacies are discussed above.

Small Businesses: Alternative Method that Minimizes Adverse Impact. There does not seem to be an alternative method that minimizes the adverse impact while achieving the same goals.

Real Estate Development Costs. No impact on real estate development costs is expected.

Legal Mandate. The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Administrative Process Act and Executive Order Number 14 (10). Section 2.2-4007.04 requires that such economic impact analyses include, but need not be limited to, the projected number of businesses or other entities to whom the regulation would apply, the identity of any localities and types of businesses or other entities particularly affected, the projected number of persons and employment positions to be affected, the projected costs to affected businesses or entities to implement or comply with the regulation, and the impact on the use and value of private property. Further, if the proposed regulation has adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include (i) an identification and estimate of the number of small businesses subject to the regulation; (ii) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the regulation, including the type of professional skills necessary for preparing required reports and other documents; (iii) a statement of the probable effect of the regulation on affected small businesses; and (iv) a description of any less intrusive or less costly alternative methods of achieving the purpose of the regulation. The analysis presented above represents DPB's best estimate of these economic impacts.

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¹ Current regulatory language requires prior authorization for prescriptions for legend drugs that exceed nine unique prescriptions within 180 days for non-institutionalized Medicaid fee-for-service patients and within 30 days for institutionalized patients.

Agency's Response to Economic Impact Analysis: The agency concurs with the economic impact analysis prepared by the Department of Planning and Budget.

Summary:

The amendments (i) discontinue the $5.00 per individual per month unit dose fee paid to nursing home pharmacies by Virginia Medicaid, (ii) modify the supplemental drug rebate contracting process, and (iii) repeal the regulatory language regarding the pharmacy threshold program.

12VAC30-50-210. Prescribed drugs, dentures, and prosthetic devices; and eyeglasses prescribed by a physician skilled in diseases of the eye or by an optometrist.

A. Prescribed drugs.

1. Drugs for which Federal Financial Participation is not available, pursuant to the requirements of § 1927 of the Social Security Act (OBRA 90 § 4401), shall not be covered.

2. Nonlegend drugs shall be covered by Medicaid in the following situations:

a. Insulin, syringes, and needles for diabetic patients;

b. Diabetic test strips for Medicaid recipients under 21 years of age;

c. Family planning supplies;

d. Designated categories of nonlegend drugs for Medicaid recipients in nursing homes; and

e. Designated drugs prescribed by a licensed prescriber to be used as less expensive therapeutic alternatives to covered legend drugs.

3. Legend drugs are covered for a maximum of a 34-day supply per prescription per patient with the exception of the drugs or classes of drugs identified in 12VAC30-50-520. FDA-approved drug therapies and agents for weight loss, when preauthorized, will be covered for recipients who meet the strict disability standards for obesity established by the Social Security Administration in effect on April 7, 1999, and whose condition is certified as life threatening, consistent with Department of Medical Assistance Services' medical necessity requirements, by the treating physician. For prescription orders for which quantity exceeds a 34-day supply, refills may be dispensed in sufficient quantity to fulfill the prescription order within the limits of federal and state laws and regulations.

4. Prescriptions for Medicaid recipients for multiple source drugs subject to 42 CFR 447.332 shall be filled with generic drug products unless the physician or other practitioners so licensed and certified to prescribe drugs certifies in his own handwriting "brand necessary" for the prescription to be dispensed as written or unless the drug class is subject to the Preferred Drug List.

5. New drugs shall be covered in accordance with the Social Security Act § 1927(d) (OBRA 90 § 4401).

6. The number of refills shall be limited pursuant to § 54.1-3411 of the Drug Control Act.

7. Drug prior authorization.

a. Definitions. The following words and terms used in these regulations shall have the following meaning meanings unless the context clearly indicates otherwise:

"Clinical data" means drug monographs as well as any pertinent clinical studies, including peer review literature.

"Complex drug regimen" means treatment or course of therapy that typically includes multiple medications, co-morbidities and/or caregivers.

"Department" or "DMAS" means the Department of Medical Assistance Services.

"Drug" shall have the same meaning, unless the context otherwise dictates or the board otherwise provides by regulation, as provided in the Drug Control Act (§ 54.1-3400 et seq. of the Code of Virginia).

"Emergency supply" means 72-hour supplies of the prescribed medication that may be dispensed if the prescriber cannot readily obtain authorization, or if the physician is not available to consult with the pharmacist, including after hours, weekends, holidays and the pharmacist, in his professional judgment consistent with current standards of practice, feels that the patient's health would be compromised without the benefit of the drug, or other criteria defined by the Pharmacy and Therapeutics Committee and DMAS.

"Nonpreferred drugs" means those drugs that were reviewed by the Pharmacy and Therapeutics Committee and not included on the preferred drug list. Nonpreferred drugs may be prescribed but require authorization prior to dispensing to the patient.

"Pharmacy and Therapeutics Committee," "P&T Committee" or "committee" means the committee formulated to review therapeutic classes, conduct clinical reviews of specific drugs, recommend additions or deletions to the preferred drug list, and perform other functions as required by the department.

"Preferred drug list (PDL)" or "PDL" means the list of drugs that meet the safety, clinical efficacy, and pricing standards employed by the P&T Committee and adopted by the department for the Virginia Medicaid fee-for-service program. Most drugs on the PDL may be prescribed and dispensed in the Virginia Medicaid fee-for-service program without prior authorization; however, some drugs as recommended by the Pharmacy and Therapeutics Committee may require authorization prior to dispensing to the patient.

"Prior authorization," as it relates to the PDL, means the process of review by a clinical pharmacist of legend drugs that are not on the preferred drug list, or other drugs as recommended by the Pharmacy and Therapeutics Committee, to determine if medically justified.

"Prior authorization," as it relates to the threshold program, means the process of review by a clinical pharmacist of legend drugs with respect to established limits or criteria to determine the appropriateness of all existing prescriptions and newly prescribed medications to help ensure appropriate, quality, and cost-effective prescription drug treatments. The process is also designed to prevent waste and abuse of the pharmacy program by assisting providers and the department in identifying clients who may be accessing multiple physicians and pharmacies.

"State supplemental rebate" means any cash rebate that offsets Virginia Medicaid expenditure and that supplements the federal rebate. State supplemental rebate amounts shall be calculated in accordance with the Virginia Supplemental Drug Rebate Agreement Contract and Addenda.

"Therapeutic class" means a grouping of medications sharing the same Specific Therapeutic Class Code (GC3) within the Federal Drug Data File published by First Data Bank, Inc.

"Utilization review" means the prospective and retrospective processes employed by the agency to evaluate the medical necessity of reimbursing for certain covered services.

b. Medicaid Pharmacy and Therapeutics Committee.

(1) The department shall utilize a Pharmacy and Therapeutics Committee to assist in the development and ongoing administration of the preferred drug list and other pharmacy program issues. The committee may adopt bylaws that set out its make-up and functioning. A quorum for action of the committee shall consist of seven members.

(2) Vacancies on the committee shall be filled in the same manner as original appointments. DMAS shall appoint individuals for the committee that assures a cross-section of the physician and pharmacy community and remains compliant with General Assembly membership guidelines.

(3) Duties of the committee. The committee shall receive and review clinical and pricing data related to the drug classes. The committee's medical and pharmacy experts shall make recommendations to DMAS regarding various aspects of the pharmacy program. For the preferred drug list program, the committee shall select those drugs to be deemed preferred that are safe, clinically effective, as supported by available clinical data, and meet pricing standards. Cost effectiveness or any pricing standard shall be considered only after a drug is determined to be safe and clinically effective.

(4) As the United States Food and Drug Administration (FDA) approves new drug products, the department shall ensure that the Pharmacy and Therapeutics Committee will evaluate the drug for clinical effectiveness and safety. Based on clinical information and pricing standards, the P&T Committee will determine if the drug will be included in the PDL or require prior authorization.

(a) If the new drug product falls within a drug class previously reviewed by the P&T Committee, until the review of the new drug is completed, it will be classified as nonpreferred, requiring prior authorization in order to be dispensed. The new drug will be evaluated for inclusion in the PDL no later than at the next review of the drug class.

(b) If the new drug product does not fall within a drug class previously reviewed by the P&T Committee, the new drug shall be treated in the same manner as the other drugs in its class.

(5) To the extent feasible, the Pharmacy and Therapeutics Committee shall review all drug classes included in the preferred drug list at least every 12 months and may recommend additions to and deletions from the PDL.

(6) In formulating its recommendations to the department, the committee shall not be deemed to be formulating regulations for the purposes of the Administrative Process Act (§ 2.2-4000 et seq. of the Code of Virginia).

(7) Immunity. The members of the committee and the staff of the department and the contractor shall be immune, individually and jointly, from civil liability for any act, decision, or omission done or made in performance of their duties pursuant to this subsection while serving as a member of such board, committee, or staff provided that such act, decision, or omission is not done or made in bad faith or with malicious intent.

c. Pharmacy prior authorization program. Pursuant to § 1927 of the Act and 42 CFR 440.230, the department shall require the prior authorization of certain specified legend drugs. For those therapeutic classes of drugs subject to the PDL program, drugs with nonpreferred status included in the DMAS drug list shall be subject to prior authorization. The department also may require prior authorization of other drugs only if recommended by the P&T Committee. Providers who are licensed to prescribe legend drugs shall be required to obtain prior authorization for all nonpreferred drugs or other drugs as recommended by the P&T Committee.

(1) Prior authorization shall consist of prescription review by a licensed pharmacist or pharmacy technician to ensure that all predetermined clinically appropriate criteria, as established by the P&T Committee relative to each therapeutic class, have been met before the prescription may be dispensed. Prior authorization shall be obtained through a call center staffed with appropriate clinicians, or through written or electronic communications (e.g., faxes, mail). Responses by telephone or other telecommunications device within 24 hours of a request for prior authorization shall be provided. The dispensing of 72-hour emergency supplies of the prescribed drug may be permitted and dispensing fees shall be paid to the pharmacy for such emergency supply.

(2) The preferred drug list program shall include: (i) provisions for an expedited review process of denials of requested prior authorization by the department; (ii) consumer and provider education; (iii) training and information regarding the preferred drug list both prior to implementation as well as ongoing communications, to include computer and website access to information and multilingual material.

(3) Exclusion of protected groups from pharmacy preferred drug list prior authorization requirements. The following groups of Medicaid eligibles shall be excluded from pharmacy prior authorization requirements: individuals enrolled in hospice care, services through PACE or pre-PACE programs; persons having comprehensive third party insurance coverage; minor children who are the responsibility of the juvenile justice system; and refugees who are not otherwise eligible in a Medicaid covered group.

d. Other pharmacy prior authorization programs. Pursuant to § 1927 of the Act and 42 CFR 440.230, the department shall require the prior authorization of legend drugs when both institutionalized and noninstitutionalized recipients are prescribed high numbers of legend drugs. Over-the-counter drugs and legend drug refills shall not count as a unique prescription for the purposes of prior authorization as it relates to the threshold program.

(1) Prior authorization shall be required for noninstitutionalized Medicaid recipients whose current volume of prescriptions of legend drugs exceeds nine unique prescriptions within 180 days and as may be further defined by the agency's guidance documents for pharmacy utilization review, limitations, and the prior authorization program. This prior authorization shall be required regardless of whether the prescribed drug appears on the preferred drug list of legend drugs. All recipients subject to these prior authorization limits shall be advised of their rights to appeal. Such appeals shall be considered and responded to pursuant to 12VAC30-110.

(2) Prior authorization shall be required for institutionalized Medicaid recipients whose current volume of prescriptions of legend drugs exceeds nine unique prescriptions within 30 days and as may be further defined by the agency's guidance documents for pharmacy utilization review, limitations, and prior authorization program. The prior authorization shall be required regardless of whether the drug is listed on the PDL of legend drugs. All recipients subject to these prior authorization limits shall be advised of their rights to appeal. Such appeals shall be considered and responded to pursuant to 12VAC30-110.

(3) Prior authorization shall consist of prospective and retrospective drug therapy review by a licensed pharmacist to ensure that all predetermined clinically appropriate criteria, as established by the department, have been met before the prescription may be dispensed. Prior authorization shall be obtained through a call center staffed with appropriate clinicians, or through written or electronic communications (e.g., faxes, mail). Responses by telephone or other telecommunications device within 24 hours of a request for prior authorization shall be provided. The dispensing of 72-hour emergency supplies of the prescribed drug may be permitted and dispensing fees shall be paid to the pharmacy for such emergency supply.

(4) Exclusion of protected institutions from pharmacy threshold prior authorization. For the purposes of threshold prior authorization, nursing facility residents do not include residents of the Commonwealth's mental retardation training centers. For the purposes of threshold prior authorization, noninstitutionalized recipients do not include recipients of services at Hiram Davis Medical Center.

e. d. State supplemental rebates. The department has the authority to seek supplemental rebates from pharmaceutical manufacturers. The contract regarding supplemental rebates shall exist between the manufacturer and the Commonwealth. Rebate agreements between the Commonwealth and a pharmaceutical manufacturer shall be separate from the federal rebates and in compliance with federal law, §§ 1927(a)(1) and 1927(a)(4) of the Social Security Act. All rebates collected on behalf of the Commonwealth shall be collected for the sole benefit of the state share of costs. One hundred percent of the supplemental rebates collected on behalf of the state shall be remitted to the state. Supplemental drug rebates received by the Commonwealth in excess of those required under the national drug rebate agreement will be shared with the federal government on the same percentage basis as applied under the national drug rebate agreement.

f. e. Pursuant to 42 USC § 1396r-8(b)(3)(D), information disclosed to the department or to the committee by a pharmaceutical manufacturer or wholesaler which discloses the identity of a specific manufacturer or wholesaler and the pricing information regarding the drugs by such manufacturer or wholesaler is confidential and shall not be subject to the disclosure requirements of the Virginia Freedom of Information Act (§ 2.2-3700 et seq. of the Code of Virginia).

g. f. Appeals for denials of prior authorization shall be addressed pursuant to 12VAC30-110, Part I, Client Appeals.

8. Coverage of home infusion therapy. This service shall be covered consistent with the limits and requirements set out within home health services (12VAC30-50-160). Multiple applications of the same therapy (e.g., two antibiotics on the same day) shall be covered under one service day rate of reimbursement. Multiple applications of different therapies (e.g., chemotherapy, hydration, and pain management on the same day) shall be a full service day rate methodology as provided in pharmacy services reimbursement.

B. Dentures. Dentures are provided only as a result of EPSDT and subject to medical necessity and preauthorization requirements specified under Dental Services.

C. Prosthetic devices.

1. Prosthetic services shall mean the replacement of missing arms, legs, eyes, and breasts and the provision of any internal (implant) body part. Nothing in this regulation shall be construed to refer to orthotic services or devices or organ transplantation services.

2. Artificial arms and legs, and their necessary supportive attachments, implants and breasts are provided when prescribed by a physician or other licensed practitioner of the healing arts within the scope of their professional licenses as defined by state law. This service, when provided by an authorized vendor, must be medically necessary and preauthorized for the minimum applicable component necessary for the activities of daily living.

3. Eye prostheses are provided when eyeballs are missing regardless of the age of the recipient or the cause of the loss of the eyeball. Eye prostheses are provided regardless of the function of the eye.

D. Eyeglasses. Eyeglasses shall be reimbursed for all recipients younger than 21 years of age according to medical necessity when provided by practitioners as licensed under the Code of Virginia.

12VAC30-80-40. Fee-for-service providers: pharmacy.

Payment for pharmacy services shall be the lowest of items subdivisions 1 through 5 of this section (except that items subdivisons 1 and 2 of this section will not apply when prescriptions are certified as brand necessary by the prescribing physician in accordance with the procedures set forth in 42 CFR 447.512(c) if the brand cost is greater than the Centers for Medicare and Medicaid Services (CMS) upper limit of VMAC cost) subject to the conditions, where applicable, set forth in subdivisions 6 and 7 of this section:

1. The upper limit established by the CMS for multiple source drugs pursuant to 42 CFR 447.512 and 447.514, as determined by the CMS Upper Limit List plus a dispensing fee. If the agency provides payment for any drugs on the HCFA Upper Limit List, the payment shall be subject to the aggregate upper limit payment test.

2. The methodology used to reimburse for generic drug products shall be the higher of either (i) the lowest Wholesale Acquisition Cost (WAC) plus 10% or (ii) the second lowest WAC plus 6.0%. This methodology shall reimburse for products' costs based on a Maximum Allowable Cost (VMAC) list to be established by the single state agency.

a. In developing the maximum allowable reimbursement rate for generic pharmaceuticals, the department or its designated contractor shall:

(1) Identify three different suppliers, including manufacturers that are able to supply pharmaceutical products in sufficient quantities. The drugs considered must be listed as therapeutically and pharmaceutically equivalent in the Food and Drug Administration's most recent version of the Approved Drug Products with Therapeutic Equivalence Evaluations (Orange Book). Pharmaceutical products that are not available from three different suppliers, including manufacturers, shall not be subject to the VMAC list.

(2) Identify that the use of a VMAC rate is lower than the Federal Upper Limit (FUL) for the drug. The FUL is a known, widely published price provided by CMS; and

(3) Distribute the list of state VMAC rates to pharmacy providers in a timely manner prior to the implementation of VMAC rates and subsequent modifications. DMAS shall publish on its website, each month, the information used to set the Commonwealth's prospective VMAC rates, including, but not necessarily limited to:

(a) The identity of applicable reference products used to set the VMAC rates;

(b) The Generic Code Number (GCN) or National Drug Code (NDC), as may be appropriate, of reference products;

(c) The difference by which the VMAC rate exceeds the appropriate WAC price; and

(d) The identity and date of the published compendia used to determine reference products and set the VMAC rate. The difference by which the VMAC rate exceeds the appropriate WAC price shall be at least or equal to 10% above the lowest-published wholesale acquisition cost for products widely available for purchase in the Commonwealth and shall be included in national pricing compendia.

b. Development of a VMAC rate that does not have a FUL rate shall not result in the use of higher-cost innovator brand name or single source drugs in the Medicaid program.

c. DMAS or its designated contractor shall:

(1) Implement and maintain a procedure to add or eliminate products from the list, or modify VMAC rates, consistent with changes in the fluctuating marketplace. DMAS or its designated contractor will regularly review manufacturers' pricing and monitor drug availability in the marketplace to determine the inclusion or exclusion of drugs on the VMAC list; and

(2) Provide a pricing dispute resolution procedure to allow a dispensing provider to contest a listed VMAC rate. DMAS or its designated contractor shall confirm receipt of pricing disputes within 24 hours, via telephone or facsimile, with the appropriate documentation of relevant information, e.g., invoices. Disputes shall be resolved within three business days of confirmation. The pricing dispute resolution process will include DMAS' or the contractor's verification of accurate pricing to ensure consistency with marketplace pricing and drug availability. Providers will be reimbursed, as appropriate, based on findings. Providers shall be required to use this dispute resolution process prior to exercising any applicable appeal rights.

3. The provider's usual and customary charge to the public, as identified by the claim charge.

4. The Estimated Acquisition Cost (EAC), which shall be based on the published Average Wholesale Price (AWP) minus a percentage discount established by the General Assembly (as set forth in subdivision 7 of this section) or, in the absence thereof, by the following methodology set out in subdivisions a through c of this subdivision.

a. Percentage discount shall be determined by a statewide survey of providers' acquisition cost.

b. The survey shall reflect statistical analysis of actual provider purchase invoices.

c. The agency will conduct surveys at intervals deemed necessary by DMAS.

5. MAC methodology for specialty drugs. Payment for drug products designated by DMAS as specialty drugs shall be the lesser of subdivisions 1 through 4 of this section or the following method, whichever is least:

a. The methodology used to reimburse for designated specialty drug products shall be the WAC price plus the WAC percentage. The WAC percentage is a constant percentage identified each year for all GCNs.

b. Designated specialty drug products are certain products used to treat chronic, high-cost, or rare diseases; the drugs subject to this pricing methodology and their current reimbursement rates are listed on the DMAS website at the following internet address: http://www.dmas.virginia.gov/downloads/pdfs/pharm-special_mac_list.pdf.

c. The MAC reimbursement methodology for specialty drugs shall be subject to the pricing review and dispute resolution procedures described in subdivisions 2 c (1) and 2 c (2) of this section.

6. Payment for pharmacy services will be as described above; however, payment for legend drugs will include the allowed cost of the drug plus only one dispensing fee per month for each specific drug. Exceptions to the monthly dispensing fees shall be allowed for drugs determined by the department to have unique dispensing requirements. The dispensing fee for brand name and generic drugs is $3.75.

7. The Program pays additional reimbursement for unit dose dispensing systems of dispensing drugs. DMAS defines its unit dose dispensing system coverage consistent with that of the Board of Pharmacy of the Department of Health Professions (18VAC110-20-420). This service is paid only for patients residing in nursing facilities. Reimbursements are based on the allowed payments described above plus the unit dose per capita fee to be calculated by DMAS' fiscal agent based on monthly per nursing home resident service per pharmacy provider. Only one service fee per month may be paid to the pharmacy for each patient receiving unit dose dispensing services. Multisource drugs will be reimbursed at the maximum allowed drug cost for specific multiple source drugs as identified by the state agency or CMS' upper limits as applicable. All other drugs will be reimbursed at drug costs not to exceed the estimated acquisition cost determined by the state agency. The original per capita fee shall be determined by a DMAS analysis of costs related to such dispensing, and shall be reevaluated at periodic intervals for appropriate adjustment. The unit dose dispensing fee is $5.00 per recipient per month per pharmacy provider. An EAC of AWP minus 13.1% shall become effective July 1, 2011. The dispensing fee for brand name and generic drugs of $3.75 shall remain in effect, creating a payment methodology based on the previous algorithm (least of subdivisions of this section) plus a dispensing fee where applicable.

8. Home infusion therapy.

a. The following therapy categories shall have a pharmacy service day rate payment allowable: hydration therapy, chemotherapy, pain management therapy, drug therapy, and total parenteral nutrition (TPN). The service day rate payment for the pharmacy component shall apply to the basic components and services intrinsic to the therapy category. Submission of claims for the per diem rate shall be accomplished by use of the CMS 1500 claim form.

b. The cost of the active ingredient or ingredients for chemotherapy, pain management and drug therapies shall be submitted as a separate claim through the pharmacy program, using standard pharmacy format. Payment for this component shall be consistent with the current reimbursement for pharmacy services. Multiple applications of the same therapy shall be reimbursed one service day rate for the pharmacy services. Multiple applications of different therapies shall be reimbursed at 100% of standard pharmacy reimbursement for each active ingredient.

9. Supplemental rebate agreement. Based on the requirements in § 1927 of the Social Security Act, the Commonwealth of Virginia has the following policies for the supplemental drug rebate program for Medicaid recipients The Commonwealth complies with the requirements of § 1927 of the Social Security Act and Subpart I (42 CFR 447.500 et seq.) of 42 CFR Part 447 with regard to supplemental drug rebates. In addition, the following requirements are also met:

a. The model supplemental rebate agreement between the Commonwealth and pharmaceutical manufacturers for legend drugs provided to Medicaid recipients, submitted to CMS on February 5, 2004, and entitled Virginia Supplemental Drug Rebate Agreement Contract A and Amendment #2 to Contract A has been authorized by CMS.

b. The model supplemental rebate agreement between the Commonwealth and pharmaceutical manufacturers for drugs provided to Medicaid recipients, submitted to CMS on February 5, 2004, and entitled Virginia Supplemental Drug Rebate Agreement Contract B and Amendment #2 to Contract B has been authorized by CMS.

c. The model supplemental rebate agreement between the Commonwealth and pharmaceutical manufacturers for drugs provided to Medicaid recipients, submitted to CMS on February 5, 2004, and entitled Virginia Supplemental Drug Rebate Agreement Contract C, and Amendments #1 and #2 to Contract C has been authorized by CMS.

d. a. Supplemental drug rebates received by the state in excess of those required under the national drug rebate agreement will be shared with the federal government on the same percentage basis as applied under the national drug rebate agreement.

e. b. Prior authorization requirements found in § 1927(d)(5) of the Social Security Act have been met.

f. c. Nonpreferred drugs are those that were reviewed by the Pharmacy and Therapeutics Committee and not included on the preferred drug list. Nonpreferred drugs will be made available to Medicaid beneficiaries through prior authorization.

g. d. Payment of supplemental rebates may result in a product's inclusion on the PDL.