Administrative Rules of the State of Montana

BEFORE THE DEPARTMENT OF PUBLIC

HEALTH AND HUMAN SERVICES OF THE

STATE OF MONTANA

In the matter of the adoption of New Rule I and the amendment of ARM 37.86.105, 37.86.1101, and 37.86.1105 pertaining to Medicaid physician administered drug reimbursement and pharmacy outpatient drug reimbursement

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NOTICE OF PUBLIC HEARING ON PROPOSED ADOPTION AND AMENDMENT

TO: All Concerned Persons

1. On December 2, 2009, at 1:30 p.m., the Department of Public Health and Human Services will hold a public hearing in the auditorium of the Department of Public Health and Human Services Building, 111 North Sanders, Helena, Montana, to consider the proposed adoption and amendment of the above-stated rules.

2. The Department of Public Health and Human Services will make reasonable accommodations for persons with disabilities who wish to participate in this rulemaking process or need an alternative accessible format of this notice. If you require an accommodation, contact Department of Public Health and Human Services no later than 5:00 p.m. on November 23, 2009, to advise us of the nature of the accommodation that you need. Please contact Rhonda Lesofski, Department of Public Health and Human Services, Office of Legal Affairs, P.O. Box 4210, Helena, Montana, 59604-4210; telephone (406) 444-4094; fax (406) 444-9744; or e-mail [email protected].

3. The rule as proposed to be adopted provides as follows:

RULE I CALCULATION OF THE STATE MAXIMUM ALLOWABLE COST, THE ESTIMATED ACQUISITION CHARGE, AND PROVIDER'S USUAL AND CUSTOMARY CHARGE (1) The state maximum allowable cost (SMAC) is the state average acquisition cost per drug determined by direct pharmacy survey, wholesale survey, and other relevant cost information.

(a) The department will review SMAC rates on an ongoing basis and adjust the rates as necessary to reflect prevailing market conditions and ensure reasonable access by providers to drugs at or below the applicable SMAC rate.

(b) Pharmacies and providers that are enrolled in Montana Medicaid are required, as a condition of participation, to submit, upon request, to the department, or its designee, acquisition cost information, product availability information, and other information deemed relevant by the department for the efficient operation of the pharmacy benefit. Information will be provided in the format requested by the department or its designee. Providers will not be reimbursed for this information and will submit information to the department or its designee within 30 days following a request for such information unless the department or its designee grants an extension upon written request of the pharmacy or provider.

(2) The estimated acquisition cost (EAC) for a drug is:

(a) the direct price charged by manufacturers to retailers;

(b) 85% of the average wholesale price (AWP) if there is no direct price available to providers in the state; or

(c) a department set SMAC for specified drugs or drug categories when the department determines that acquisition cost is lower than (2 )(a) or (b) based on national pricing data.

(3) The usual and customary charge is the price the provider charges a typical customer in the provider's typical course of business.

AUTH: 53-6-101, 53-6-113, MCA

IMP: 53-6-101, 53-6-113, MCA

4. The rules as proposed to be amended provide as follows, new matter underlined, deleted matter interlined:

37.86.105 PHYSICIAN SERVICES, REIMBURSEMENT/GENERAL REQUIREMENTS AND MODIFIERS (1) through (3)(b) remain the same.

(4) Reimbursement to physicians for physician-administered drugs which are billed under HCPCS "J" and "Q" codes is made ~~either~~ according to a the department's fee schedule ~~established by the department and updated at least annually based upon the Montana estimated acquisition cost or maximum allowable cost, as defined in ARM 37.86.1101~~ or the provider's usual and customary charge, whichever is lower. ~~No dispensing fee is paid to physicians.~~ The department's fee schedule is updated at least annually based upon:

(a) the Medicare Average Sale Price (ASP) Fee Schedule set at 42 CFR 414.904 (2009) if there is an ASP fee;

(b) the RBRVS fee as defined in ARM 37.85.212 if there is an RBRVS fee;

(d) the by-report amount as defined in ARM 37.85.212.

~~(a)~~ (5) The maximum allowable cost limitation shall not apply in those cases where the physician certifies in their own handwriting that in their medical judgment a specific brand name drug is medically necessary for a particular patient. Acceptable certification statements are "brand necessary" or "brand required". A check-off box on a form or a rubber stamp is not acceptable.

(5) remains the same but is renumbered (6).

AUTH: 53-6-101, 53-6-113, MCA

IMP: 53-6-101, 53-6-113, ~~53-6-141~~, MCA

37.86.1101 OUTPATIENT DRUGS, DEFINITIONS (1) "Acquisition cost" means the actual price paid by a provider for a drug.

(2) "Average manufacturer price (AMP)" means, with respect to a covered outpatient drug of a manufacturer for a rebate period, the average price paid to the manufacturer for the drug in the United States by wholesalers for drugs distributed to the retail pharmacy class of trade. The AMP is determined without regard to customary prompt pay discounts extended to wholesalers.

(2) remains the same but is renumbered (3).

~~(3)~~ (4) "Estimated acquisition cost (EAC)" means the calculation of the provider's estimated cost of ~~drugs~~ a drug for which no state maximum allowable cost (SMAC) price has been determined. The EAC is the department's best estimate of what price providers are generally paying in the state for a drug in the package size providers buy most frequently. If actual wholesale cost is not available the EAC is 85% of average wholesale price. ~~The EAC for a drug is:~~

~~(a) the direct price (DP) charged by manufacturers to retailers;~~

~~(b) if there is no available DP for a drug or the department determines that the DP is not available to providers in the state, the EAC is the average wholesale price (AWP) less 15%; or~~

(c) the department may set an allowable acquisition cost for specified drugs or drug categories when the department determines that acquisition cost is lower than (3)(a) or (b) based on data provided by the drug pricing file contractor.

(4) through (5)(d) remain the same but are renumbered (5) through (6)(d).

(7) "Multi-source" means a drug product sold under its generic name whose active ingredients are identical in chemical composition to one or more others sold under trademark that can be purchased from different manufacturers or distributors.

~~(6)~~ (8) "State Mmaximum allowable cost (SMAC)" means the per unit amount the department reimburses a provider for a prescription drug included in the state maximum allowable cost program. SMAC is the upper limit the department will pay for multi-source drugs. In order to establish base prices for calculating the maximum allowable cost, the department hereby adopts and incorporates by reference the methodology for limits of payment set forth in 42 CFR 447.331 and 447.332 (1996). The maximum allowable cost for multi-source drugs will not exceed the total of the dispensing fee established by the department and an amount that is equal to the price established under the methodology set forth in 42 CFR 447.331 and 447.332 for the least costly therapeutic equivalent that can be purchased by pharmacists in quantities of 100 tablets or capsules or, in the case of liquids, the commonly listed size. If the drug is not commonly available in quantities of 100, the package size commonly listed will be the accepted quantity. A copy of the above-cited regulations may be obtained from the Department of Public Health and Human Services, Health Policy and Services Division, 1400 Broadway, P.O. Box 202951, Helena, MT 59620-2951.

(7) remains the same but is renumbered (9).

AUTH: 53-2-201, 53-6-113, MCA

IMP: 53-2-201, 53-6-101, 53-6-111, 53-6-113, MCA

37.86.1105 OUTPATIENT DRUGS, REIMBURSEMENT (1) Drugs will be paid for on the basis of the Montana "estimated acquisition cost" or the "state maximum allowable cost", plus a dispensing fee established by the department, or the provider's "usual and customary charge", whichever is lower; except that the "state maximum allowable cost" limitation shall not apply in those cases where a physician or other licensed practitioner who is authorized by law to prescribe drugs and is recognized by the Medicaid program certifies in their own handwriting that in their medical judgment a specific brand name drug is medically necessary for a particular patient. An example of an acceptable certification would be the notation "brand necessary" or "brand required". A check-off box on a form or a rubber stamp is not acceptable.

(2) through (2)(d) remain the same.

(3) In-state pharmacy providers that are new to the Montana Medicaid program will be assigned an interim $5.04 dispensing fee until a dispensing fee questionnaire, as provided in (2), can be completed for six months of operation. At that time, a new dispensing fee will be assigned which will be the lower of the dispensing fee calculated in accordance with (2) for the pharmacy or the ~~$4.70~~ $5.04 dispensing fee. Failure to comply with the six months dispensing fee questionnaire requirement will result in assignment of a dispensing fee of $2.00.

(4) through (7) remain the same.

AUTH: 53-2-201, 53-6-113, MCA

IMP: 53-2-201, 53-6-101, 53-6-113, ~~53-6-141~~, MCA

5. The Department of Public Health and Human Services (department) is proposing the adoption of new Rule I and the amendment of ARM 37.86.105, 37.86.1101, and 37.86.1105 pertaining to Medicaid physician administered drug reimbursement and Medicaid pharmacy outpatient drug reimbursement. The department administers the Montana Medicaid program, which is a public assistance program jointly funded by the state and federal government. Montana Medicaid pays providers for covered health care service delivered to eligible low income and disabled Montana residents enrolled in Medicaid. Outpatient drugs and physician administered drugs are covered health care services.

Montana Medicaid uses three methods to calculate the reimbursement it will pay for outpatient drugs - state maximum allowable cost, estimated acquisition cost, and usual and customary charges. These rule changes edit and move existing language regarding the reimbursement methods. The changes also delete a reference to federal regulations regarding federal maximum allowable costs.

These rule changes are necessary to set Montana drug prices at appropriate market driven rates. By implementing a state maximum allowable cost (SMAC) algorithm in the pricing structure the state could save $1.1 million dollars in general fund while ensuring a fair price for medications dispensed at retail pharmacies. Pharmacies use a typical distribution for consumer goods, a pharmacy buys from a wholesaler and sells to a consumer. The wholesaler buys from a manufacturer. Unlike most consumer goods, however, there is often a third party, either an insurance company or the government, also involved at the point of sale to the consumer. The component of the price a pharmacy charges that is paid by the third party is called a "reimbursement". The third party reimbursement is typically based on an estimate of what pharmacies generally pay for a drug, a price list, not on the actual price paid. The third party payer also pays the pharmacist a dispensing fee.

Rule I

As currently stated in ARM 37.86.1105, the reimbursement price Montana Medicaid pays pharmacies for outpatient drugs has two components, the cost of acquiring the drug from a manufacturer and a dispensing fee. The cost of acquiring the drug is estimated based on three possible methods, the state maximum allowable cost (SMAC) method, the estimated acquisition cost (EAC) method, and the usual and customary charges method.

This proposed new rule should be read in conjunction with the amendments to ARM 37.86.1101. Existing language regarding SMAC and EAC is removed from ARM 37.86.1101. Proposed new Rule I is added to describe in more detail how the department applies these three methods to calculate the price Montana Medicaid will pay pharmacies for outpatient drugs.

ARM 37.86.105

The proposed amendment to ARM 37.86.105 states Montana Medicaid current practices for setting reimbursement for physician administered drugs (PADs), which mirror the Medicare average sales price method. There are some exceptions to the method. Most PADs that do not have Medicare associated reimbursement are reimbursed according to ARM 37.86.1101. There are a few remaining PADs that are not reimbursed using either methodology. They will be reimbursed using either a resource based relative value scale (RBRVS) system if there is an RBRVS fee or "by report". These reimbursement methodologies are located in ARM 37.85.212 and will be referenced in the proposed amendment to ARM 37.86.105.

ARM 37.86.1101

ARM 37.86.1101 defines terms used in these rules. The definitions of state maximum allowable cost and estimated acquisition cost are edited and definitions of average acquisition cost and multi-source drug are added.

ARM 37.86.1105

The proposed amendment to ARM 37.86.1105 is to consistently use the term "state maximum allowable cost". This rule currently uses the term "maximum allowable cost".

Fiscal Effect

The proposed adoption of new Rule I and amendment to ARM 37.86.1101 and 37.86.1105 impact approximately 314 providers. The estimated fiscal impact of this change is a decrease of $4.6 million federal expenditures and $1.1 million of state expenditures.

The proposed amendment to ARM 37.86.105 impacts approximately 5,000 providers. The estimated fiscal impact of this change is a decrease of $7,827.81 in federal expenditures and $2,319.72 of state expenditures.

6. The department intends the proposed rule changes to be applied effective January 1, 2010.

7. Concerned persons may submit their data, views, or arguments either orally or in writing at the hearing. Written data, views, or arguments may also be submitted to: Rhonda Lesofski, Department of Public Health and Human Services, Office of Legal Affairs, P.O. Box 4210, Helena, Montana, 59604-4210; fax (406) 444-9744; or e-mail [email protected], and must be received no later than 5:00 p.m., December 10, 2009.

8. The Office of Legal Affairs, Department of Public Health and Human Services, has been designated to preside over and conduct this hearing.

9. The department maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request that includes the name, e-mail, and mailing address of the person to receive notices and specifies for which program the person wishes to receive notices. Notices will be sent by e-mail unless a mailing preference is noted in the request. Such written request may be mailed or delivered to the contact person in 7 above or may be made by completing a request form at any rules hearing held by the department.

10. An electronic copy of this Proposal Notice is available through the Secretary of State's web site at http://sos.mt.gov/ARM/Register. The Secretary of State strives to make the electronic copy of the Notice conform to the official version of the Notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the Notice and the electronic version of the Notice, only the official printed text will be considered. In addition, although the Secretary of State works to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems.

11. The bill sponsor contact requirements of 2-4-302, MCA, do not apply.

/s/ Geralyn Driscoll /s/ Anna Whiting Sorrell

Rule Reviewer Anna Whiting Sorrell, Director

Public Health and Human Services

Certified to the Secretary of State November 2, 2009.