(1) Drugs will be paid for on the basis of the Montana "estimated acquisition cost", "the federal maximum allowable 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 "federal maximum allowable cost", or 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) The dispensing fee for filling prescriptions shall be determined for each pharmacy provider annually.

(a) The dispensing fee is based on the pharmacy's average cost of filling prescriptions. The average cost of filling a prescription will be based on the direct and indirect costs that can be allocated to the cost of the prescription department and that of filling a prescription, as determined from the Montana Dispensing Fee Questionnaire. A provider's failure to submit, upon request, the dispensing fee questionnaire properly completed will result in the assignment of the minimum dispensing fee offered. A copy of the Montana Dispensing Fee Questionnaire is available upon request from the department.

(b) The dispensing fees assigned shall range between a minimum of $2.00 and a maximum of $4.94.

(c) Out-of-state providers will be assigned a $3.50 dispensing fee.

(d) If the individual provider's usual and customary average dispensing fee for filling prescription is less than the foregoing method of determining the dispensing fee, then the lesser dispensing fee shall be applied in the computation of the payment to the pharmacy provider.

(3) In-state pharmacy providers that are new to the Montana Medicaid program will be assigned an interim $4.94 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 $4.94 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) The department shall reimburse pharmacies for compounding drugs only if the client's drug therapy needs cannot be met by commercially available dosage strengths and/or forms of the therapy.

(a) Prescription claims for compound drugs shall be billed and reimbursed using the National Drug Code (NDC) number and quantity for each compensable ingredient in the compound.

(b) No more than 25 ingredients may be reimbursed in any compound.

(c) Reimbursement for each drug component shall be determined in accordance with ARM 37.86.1101.

(d) Prior authorization requirements for individual components of a compound must be met for reimbursement purposes.

(e) Prior authorization shall be required to be reimbursed for a dispensing fee over $12.50.

(f) The dispensing fee for each compounded drug shall be $12.50, $17.50, or $22.50 based on the level of effort required by the pharmacist.

(g) The department does not consider reconstitution to be compounding.

(h) The department will publish guidelines for billing the different level of effort fees.

(5) Reimbursement for outpatient drugs provided to Medicaid recipients in state institutions shall be as follows:

(a) for institutions participating in the state contract for pharmacy services, the rates agreed to in that contract. Such reimbursement shall not exceed, in the aggregate, reimbursement under (1); or

(b) for institutions not participating in the state contract for pharmacy services, the actual cost of the drug and dispensing fee. Such reimbursement shall not exceed, in the aggregate, reimbursement under (1).

(6) Full-benefit dual eligible recipients qualify for pharmaceutical drug coverage under Medicare Part D prescription drug plans (PDPs) on January 1, 2006 under 42 USC 1302, 1395w-101 through 1395w-152 (2005), the Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA). For purposes of the MMA and this rule, the term full-benefit dual eligible has the same meaning as stated in 42 CFR 423.772.

(7) The MMA allows PDPs to exclude from coverage the drug classes listed in 42 USC 1396r-8(d)(2) (2005). Montana Medicaid may also exclude these drugs and has chosen to do so except for the prescription and nonprescription drugs identified on the department's drug formulary. On January 1, 2006, Montana Medicaid's reimbursement for outpatient drugs provided to full-benefit dual eligible recipients, for whom third party payment is not available, will be limited to the excluded drugs identified on the department's drug formulary.