D-2.1. Day one

The formulary addition process begins when the drug manufacturer submits the completed COI requesting the inclusion of their drug to the TDCI. HHSC pharmacists start by reviewing the Centers for Medicare & Medicaid Services (CMS) rebate file (medicaid.gov/medicaid/prescription-drugs/medicaid-drug-rebate-program/) to determine if the drug has a rebate agreement. If the National Drug Code (NDC) is not on the CMS rebate file within six months, the process stops.

Next, staff will identify whether the U.S. Food and Drug Administration (FDA) includes the drug on the Orphan Drug Product designation database (accessdata.fda.gov/scripts/opdlisting/oopd).

HHSC pharmacists will determine if the drug is eligible as a clinician-administered drug (CAD) via the medical benefit.

  • If the drug is not covered as a medical benefit, then staff proceed to Section 2.2.
  • If the drug is covered as a medical benefit, staff use clinical expertise to determine if the CAD is appropriate for distribution through a pharmacy:
    • If the drug is not appropriate for distribution through a pharmacy, then it becomes a medical benefit and is not added to the TDCI (refer to Section 3).
    • If the drug is appropriate for distribution through a pharmacy, then staff proceed to Section 2.2.

D-2.2. Population Impact

HHSC pharmacists will estimate the potential use of the drug by people enrolled in Medicaid by reviewing the following:

  • NDC package inserts and indications
  • Compendia and epidemiology clinical studies
  • Texas Medicaid claim and encounter utilization (in situations when a manufacturer replaces one NDC with another)
  • CMS website (medicaid.gov/medicaid/prescription-drugs/medicaid-drug-rebate-program/) to identify if other states have reported drug utilization data for the NDC). The data includes state, drug name, NDC, number of prescriptions, and dollars reimbursed if available.
  • Other sources, such as specialty pharmacies, manufacturers, and various foundations

The pharmacist will determine if the drug requires clinical prior authorization and, if needed, develops the criteria.  Using clinical judgment and the information gathered above, the pharmacist will then estimate the number of people enrolled in fee-for-service and managed care who meet the coverage requirements.

D-2.3. Cost Per Prescription

The HHSC pharmacist estimates the cost per prescription by doing the following:

  1. Querying First Data Bank to obtain the National Average Drug Acquisition Cost or the Wholesale Acquisition Cost price. If those price points are not available, staff use the Average Wholesaler Pricing and the Net Cost to Wholesaler price from the COI. The pharmacist does not include the dispensing fee in the cost estimate.
  2. Reviewing the drug package insert and determining any requirements with the potential to limit the quantity or duration of drug therapy
  3. Calculating the maximum quantity allowed and the estimated cost per prescription.

D-2.4.1. Ends Day 30

The HHSC pharmacist estimates the fiscal impact by doing the following:

  1. Calculating the estimated number of prescriptions by multiplying the estimated number of people who may use the drug by the average number of prescriptions per year.
  2. Calculating the estimated cost by multiplying the estimated number of prescriptions by the cost per prescription.
  3. Calculating the federal financial participation and general revenue (GR) of the estimated costs determined above.
  4. For orphan drugs and any drug for which the estimated GR FFS cost meets or exceeds $500,000 per state fiscal year or results in a managed care capitation rate adjustment, engages Forecasting staff for further evaluation:
    1. If there is potential for a drug to equal or exceed $500,000 GR FFS costs per state fiscal year or result in a managed care capitation rate adjustment, then the drug is referred to Forecasting for further analysis.
    2. If VDP identifies the drug as an orphan, then the drug is added to the TDCI. VDP will coordinate with Forecasting to prepare and submit the required orphan drug notification within 60 days as required under Special Provision 17. As noted above, LBB is not required to approve orphan drugs.

D-2.5.1. Begins Day 31

HHSC Forecasting staff project the fiscal impact to obtain rate approval for the drug’s potential addition by performing the following:

  1. Obtaining data to perform their analysis. This is an interactive process with VDP staff to obtain drug pricing, rebate revenue data, potential drug cost offsets, and utilization assumptions. Other data collection varies by drug.
  2. Completing gross drug cost projection analysis based on the number of utilizers, cost per prescription, and ingredient cost.
  3. Calculating net drug cost by incorporating rebate revenue estimates for federal and supplemental (if applicable) rebates.
  4. Calculating overall net cost impact after consideration of any potential cost offsets resulting from the drug's utilization.

D-2.6.1. Ends Day 90, As Needed

The fiscal analysis is reviewed internally and prepared for submission to external parties.

  1. Actuarial Analysis reviews to determine if the expected cost of the drug requires an adjustment to managed care rates.
  2. Actuarial analysis makes a recommendation regarding risk status.
  3. Based on a drug’s estimated fiscal impact, Provider Finance Department (PFD) determines what type of notice to or approval from the LBB is required. If approval is needed, VDP and the Financial Services Division coordinate to obtain the necessary approval.