Ingredient Cost and Reimbursement Methodologies

Texas Medicaid reimburses contracted pharmacy providers according to the “Pharmacy (Non-DME)” fee schedule. The estimated acquisition cost is defined in the Texas Administrative Code Title 1, Section 355.8541 relating to Legend and Non-legend Medication.

Ingredient costs may differ by the type of pharmacy and the benchmark for reimbursement is primarily the National Average Drug Acquisition Cost (NADAC), the benchmark of retail pharmacy acquisition costs developed by CMS as previously discussed. HHSC uses a drug’s wholesale acquisition cost (WAC) price when NADAC pricing is unavailable.

Retail Pharmacy

The ingredient cost is equal to the NADAC price, or (WAC minus 2 percent) if NADAC pricing is not available.

Long-term Care Pharmacy

A long-term care (LTC) pharmacy is defined as one for which the total Medicaid claims for prescription drugs to residents of long term care facilities exceeds 50 percent of the pharmacy’s total Medicaid claims per year. Long term care pharmacies are typically not open to the public for walk-in business.

The ingredient cost is equal to (NADAC minus 2.4 percent), or (WAC minus 3.4 percent) if NADAC pricing is not available.

Specialty Pharmacy

A specialty pharmacy meets all of the following criteria:

  • Processes more than 10% of Medicaid specialty claims per year compared to total claims, as described in Section 354.1853 (relating to Specialty Drugs)
  • Obtains volume-based discounts or rebates on specialty drugs from manufacturers or wholesalers; and
  • Dispenses at least 80 percent of filled prescriptions by shipment through the U.S. Postal Service or another common carrier to customers or healthcare professionals (including physicians and home health providers).

The ingredient cost is equal to (NADAC minus 1.7 percent), or (WAC minus 8 percent) if NADAC pricing is not available.