The Pharmacy Provider Procedure Manual (PPPM) is a comprehensive resource for pharmacy providers enrolled with the Texas Health and Human Services Commission (HHSC). The Texas Vendor Drug Program (VDP) publishes this manual with information about benefits, policies, and procedures for outpatient pharmacy claims and rebates.

The manual contains into the following sections:

1. Introduction
2. Contact Information
3. Enrollment
4. Managed Care
5. System Requirements
6. Eligibility
7. Coordination of Benefits
8. Drug Policy
9. Formulary Coverage
10. Drug Utilization Review
11. Prior Authorization
12. Pricing and Reimbursement
13. 340B Resources
14. Payment
15. Audits
16. Drug Rebates
17. Documents
18. Forms

Copyright Acknowledgments

Microsoft Corporation requires the following notice in publications containing trademarked product names: "Microsoft® and Windows® are either registered trademarks or trademarks of Microsoft Corporation in the United States and other countries."

The mission of the Texas Vendor Drug Program is to:

• Provide statewide access to covered outpatient drugs and quality pharmaceutical care for people enrolled in Medicaid, the Children’s Health Insurance Program (CHIP), the Children with Special Health Care Needs Services Program (CSHCN), the Healthy Texas Women Program (HTW), and the Kidney Health Care Program (KHC) efficiently and cost-effectively, and;
• Manage the drug formulary, preferred drug list, clinician-administered drug program, and rebate programs to maximize revenue.

Congress established the Texas Medical Assistance Program, or Medicaid, under Title XIX of the Social Security Act of 1965 to pay medical bills for low-income persons who had no other way to pay for care. The program began Sept. 1, 1967, under Title XIX (Medicaid) of the 1965 Amendments to the Social Security Act and SB 2, The Medical Assistance Act of 1967. The Texas Medicaid drug benefit has been an optional service available to all people enrolled in Texas Medicaid since Sept. 1, 1971.

Pharmacy providers enrolled in Medicaid are uniquely positioned to help clients with their pharmacy benefits. Pharmacy providers need to know what pharmacy items Medicaid pays for, which products require prior authorization, and who to contact with questions about claim processing. HHSC provides the resources in this section to assist pharmacy providers in accomplishing this.

Medicaid

Medicaid is a state and federal cooperative program authorized under Title XIX of the Social Security Act and Chapter 32 of the Texas Human Resources Code. It pays for certain medical and health care costs for qualifying people. Pharmacy providers must enroll with HHSC before dispensing outpatient prescriptions to people enrolled in traditional Medicaid or Medicaid managed care. HHSC is responsible for outpatient drugs for people enrolled in traditional Medicaid.

Children's Health Insurance Program

Children in Texas without health insurance and who are not served by, or eligible for, other state-assisted health programs may be able to get low-cost or free health coverage from the Children’s Health Insurance Program (CHIP). Enrollment as a Medicaid pharmacy provider is a prerequisite for pharmacy participation in CHIP.

HHSC manages the CHIP formulary, but MCOs deliver CHIP prescription benefits.

Children with Special Health Care Needs Services Program

The Children with Special Health Care Needs (CSHCN) Services Program provides services and benefits to children 20 and younger with special health care needs and people of any age with cystic fibrosis. It is not a Medicaid program.

Enrollment as a Medicaid pharmacy provider is a prerequisite for pharmacy participation in the CSHCN Services Program.

Kidney Health Care Program

The Kidney Health Care (KHC) Program helps people with end-stage renal disease receive health care services. The program's drug benefit assists with costs for four covered drugs per month and coordinates with Medicare Part D on deductibles, co-insurance amounts, and Part D gap (or "donut hole") expenditures, where the person is responsible for 100 percent of drug costs.

People eligible for Medicaid do not qualify for KHC drug benefits. Benefits available to people enrolled in KHC depend on treatment status, eligibility for benefits from other programs (such as Medicare, Medicaid, or private insurance), and availability of funds.

Enrollment as a Medicaid pharmacy provider is a prerequisite for pharmacy participation in the KHC program.

Healthy Texas Women Program

The Healthy Texas Women (HTW) Program provides access to women’s health and family planning services to eligible women, offering services to low-income women who are 15 through 44 years of age. HHSC only reimburses pharmacy providers for the outpatient prescription products on the HTW formulary.  Family planning drugs and supplies are exempt from the three prescriptions-per-month limits for up to a six-month supply.  The program does not cover emergency birth control.

Enrollment as a Medicaid pharmacy provider is a prerequisite for pharmacy participation in the HTW program.

HHSC is subject to federal and state rules, statutes, and regulations. Refer to citations in the Rules and Statutes Handbook.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA – Public Law 104-191) protects personal health information. People have certain rights concerning their health information, including setting boundaries on how entities use it, establishing proper safeguards, and holding violators accountable. The HIPAA Privacy regulations went into effect on April 14, 2003.

Personal health information may be verbal, written, or electronic communication created, received, or maintained by HHSC. It relates to any person's past, present, or future physical or mental health.

Protected Health Information (PHI) is available to pharmacy providers daily. PHI includes any health care data plus any other identifying information allowing someone to use the data to identify a specific person. Data may include claim information, prior authorizations, medical records, or consent forms.

The pharmacy should never release PHI to anyone who does not need to know the information. If you are asked about a person's PHI and do not feel the person asking needs to know, immediately refer to your supervisor. You should discuss questions or concerns about PHI with your management.

Mailing Address

Vendor Drug Program (MC-2250)

Texas Health and Human Services

701 W. 51st St., Austin, TX 78751

Visitor information and directions

Telephone

• 800-435-4165
• Pharmacy Benefits Access Help Desk
• Monday to Friday, 8:30 a.m. to 5:15 p.m. (central)

This number is only for pharmacy providers. Have your pharmacy’s 10-digit National Provider Identifier (NPI) number and the appropriate cardholder ID number ready to expedite your call.

Fax

512-491-1958 - help desk

Website

www.txvendordrug.com

The VDP website includes news, information, and resources needed for pharmacy participation in Texas Medicaid. All content is free, and no account is necessary to access services. We encourage all pharmacy providers to provide proper education and instruction so all employees can take full advantage of these resources.

Ombudsman

The Office of the Ombudsman helps when a program's normal complaint process cannot or does not satisfactorily resolve the issue. You can submit your request online.

Advisory Committees

• hhs.texas.gov/about-hhs/leadership/advisory-committees

File and Form Viewing Information

• hhs.texas.gov/file-viewing-information

Forms

• hhs.texas.gov/laws-regulations/forms

Live and Archived Meetings

• hhs.texas.gov/about/live-archived-meetings

Meeting and Events

• hhs.texas.gov/about/meetings-events

Open Records Policy and Procedures

• hhs.texas.gov/about-hhs/communications-events/open-records-policy-procedures

Prescription Drug Price Disclosure Program

• texasrx.org

Records and Statistics

• hhs.texas.gov/about-hhs/records-statistics

Reports and Presentations

• hhs.texas.gov/laws-regulations/reports-presentations

Rulemaking

• hhs.texas.gov/regulations/policies-rules/health-human-services-rulemaking

Texas Administrative Code

• hhs.texas.gov/regulations/policies-rules/texas-administrative-code

Mailing Address

CSHCN Services Program (MC 1938)

Texas Health and Human Services

P.O. Box 149030, Austin, TX 78714-9947

Telephone

800-252-8023 - CSHCN Services Program (toll-free)

512-776-7150 - CSHCN Services Program (Austin area)

Fax

512-206-3988

Website

hhs.texas.gov/services/disability/children-special-health-care-needs-program

Mailing Address

KHC Program (MC 1938)

Texas Health and Human Services

P.O. Box 149347, Austin, TX 78714-9347

Telephone

800-222-3986 - KHC Program (toll-free)

512-776-7150- KHC Program (Austin area)

Fax

512-776-7162

Website

hhs.texas.gov/services/health/kidney-health-care

Telephone

800-925-9126 - TMHP Contact Center
Monday-Friday, 7:00 a.m. to 7:00 p.m. (central)

Select Option 2 (Provider Inquiries), then Option 1 (Client Eligibility), and then follow the prompts to find enrollment status and the name of the person's MCO.

Email

provider.relations@tmhp.com

Website

tmhp.com/contact

Telephone

800-MEDICARE (800-633-4227)

Website

medicare.gov

• Contact Medicare
  • medicare.gov/forms-help-other-resources/contact-medicare
• Medicare End Stage Renal Disease
  • medicare.gov/basics/end-stage-renal-disease

Pharmacy providers with a current license or registration with the Texas State Board of Pharmacy (TSBP) or is licensed under the laws of another state and is free from any pharmacy board restriction may apply to become a Texas Medicaid pharmacy provider. As defined and limited by federal and state laws, prescribing providers authorized and licensed to practice the healing arts and choose to provide pharmaceuticals may also apply to become pharmacy providers. HHSC maintains open enrollment for in-state pharmacies licensed as Class A or C by the TSBP. Pharmacies holding any other class of pharmacy license may be subject to special application procedures.

Refer to TAC Section 354.1801 (Subchapter F: Requirements for Participation). In addition, pharmacy providers must follow federal and state laws relating to counseling and patient medication records, including TAC Section 291.33(c) (Operational Standards) and 291.34(c)(3) (Records). Refer to the Records Retention section for the time required to store pharmacy records.

Prescribing providers enroll through the TMHP Provider Enrollment and Management System (PEMS). Federal law requires HHSC to deny fee-for-service claims for drugs or products prescribed by non-enrolled providers.

Enrollment with HHSC as a Medicaid provider is a prerequisite for participation in the other state programs administered by VDP:

• Children's Health Insurance Program (CHIP)
• Children with Special Health Care Needs (CSHCN) Services Program
• Healthy Texas Women (HTW) Program
• Kidney Health Care (KHC) Program

Enrollment in Medicaid is also a prerequisite for participation in any Medicaid or CHIP managed care pharmacy network. MCOs must allow any Medicaid-enrolled pharmacy provider willing to accept the terms and conditions of the MCO or pharmacy benefits manager (PBM) contract to enroll in the network. Pharmacies providers should contact the client's specific MCO for details.

Pharmacy providers enroll, re-enroll, revalidate, and submit change of ownership requests through the TMHP Provider Enrollment and Management System (PEMS) as of April 1, 2021.

TMHP provides PEMS computer-based training modules on the TMHP Learning Management System (LMS). An LMS account, including a username and password, is required to access training courses. Instructions on creating an LMS account are available on the TMHP LMS Account Login web page. Refer to the TMHP Online Resources section for more information.

Enrollment Fee

All pharmacy providers pay an application fee to offset the cost of the required background checks. This fee is paid to TMHP during the enrollment process. HHSC does accept payments or applications sent to HHSC or VDP offices.

The fee for applications submitted between Jan. 1 and Dec. 31, 2023, is $688.00.

The fee for applications submitted between Jan. 1 and Dec. 31, 2024, is $709.00.

Pharmacies participating in Medicare or in another state’s Medicaid program may submit proof of payment of the fee to satisfy the application fee requirement in Texas.

Supplemental Forms

Refer to the Enrollment Forms for the following supplemental forms used during the enrollment process:

• Application for Texas Identification Number (HHS Form 4109)
  • Usage: new enrollment, revalidation, change in ownership
• Direct Deposit Authorization (CPA Form 74-176)
  • Usage: new enrollment, revalidation, change in ownership, change in banking information
• Ownership Transfer Affidavit (HHS Form 1332)
  • Required only when pharmacy providers request a change in ownership. Pharmacy providers must submit the form when initiating an application through PEMS.

Refer to the Pharmacy Operations Forms section for the following forms:

• Pharmacy Electronic Remittance Advice Agreement (HHS Form 1316)
• Pharmacy Eligibility Verification Portal Access Form (HHS Form 1317)

Supporting Documentation

TMHP may require other supporting documents depending on the pharmacy's business organization. PEMS will alert applicants to which supporting documentation is required.

Enrollment Completion

Pharmacy providers must submit all required enrollment information to determine if the pharmacy meets the requirements for participation. The enrollment process typically takes 60 business days after receiving all information necessary to process the application. Requests for exceptions to the enrollment process, risk category (according to the MCS Medicaid Provider Enrollment Compendium), and provider types requiring additional state approval may extend the length of the application process. Refer to the TMHP Provider Enrollment Frequently Asked Questions (PDF) for more information.

TMHP will send the applying provider an email to confirm enrollment and instructions to sign the Pharmacy Enrollment Agreement. The document will outline the terms and conditions agreed to in the application process. The date a pharmacy receives this email constitutes the enrollment effective date. Enrollment is not retroactive, transferable, or assignable. Pharmacies can only submit claims on or after the enrollment date.

The HHSC Master Provider File is the list of all providers approved to provide Medicaid services and is maintained by TMHP. A pharmacy should allow up to 2 weeks to appear on the Master Provider File after being notified by TMHP of successful enrollment. Once TMHP includes a pharmacy on the Master Provider File, the pharmacy is eligible to contract with MCOs.

Pharmacy providers performing medical services must enroll with Texas Medicaid for reimbursement for Title XIX (Medicaid) benefits. Refer to TMHP Provider Enrollment for an application. Refer to TMHP Provider Support Services to find contact information for TMHP provider relations representatives in your area.

The 340B Drug Pricing Program is a federal program overseen by the Health Resources and Services Administration (HRSA) Office of Pharmacy Affairs. The program requires drug manufacturers to provide outpatient drugs to certain health care entities at significantly reduced prices so the remaining funds can provide services to more eligible clients and provide more comprehensive services.

Covered entities with pharmacies wanting to participate in the 340B program must do the following:

• Enroll pharmacies as described in the Enrollment section of this chapter
• Inform MCOs of their intent to participate as a 340B provider
• Submit the provider number on NPI; the covered entity will use the number to dispense 340B drugs to HRSA for inclusion in the HRSA's 340B Medicaid Exclusion File

Refer to the 340B Resources for additional information.

MCOs must implement specific clinical prior authorizations for clients enrolled in Medicaid managed care. Usage of all other clinical prior authorizations will vary between MCOs at the discretion of each MCO. MCOs cannot establish a clinical prior authorization for a drug without approval by HHSC, and no prior authorization can be more stringent than what was approved.

The Clinical Prior Authorization Assistance Chart shows the prior authorizations used by each MCO and those used for traditional Medicaid. Pharmacy providers should contact the client's specific MCO for details.

Refer to the Prior Authorization section for more about clinical prior authorization criteria.

HHSC defines a complaint as any dissatisfaction expressed by telephone or in writing by the pharmacy provider. The definition of complaint does not include a misunderstanding or a problem of misinformation resolved promptly by clearing up the misunderstanding or supplying the appropriate information to the provider's satisfaction.

Pharmacy providers submit pharmacy complaints to the appropriate MCO. Refer to the MCO's website to obtain information regarding complaints and appeals processes and the MCO's procedure manual.

Each MCO must resolve pharmacy provider complaints within 30 days from the date the MCO receives the complaint. The MCOs are also required to resolve pharmacy provider complaints received by HHSC and referred to the MCOs no later than the due date requested by HHSC.

Pharmacy providers must exhaust the complaints or grievance process with the MCO before filing a complaint with HHSC. If a pharmacy provider believes it did not receive the entire due process from the MCO after completing this process, you may file a complaint with HHSC. Pharmacy providers should contact the client's specific MCO for details.

Download the Managed Care Complaint Process flyer to make this information available to pharmacy staff.

HHSC requires each MCO to adhere to the Medicaid and CHIP formularies and the Medicaid Preferred Drug List. An MCO cannot establish a drug as non-preferred.

Pharmacy providers must enroll in Medicaid through the Provider Enrollment and Management System (PEMS) before participating in any managed care network. Refer to the Enrollment Process section for information about the enrollment process

Each MCO contracts with a pharmacy benefits manager (PBM) to process prescription claims. The PBM contracts with individual pharmacies. The MCO must allow any enrolled pharmacy provider willing to accept the financial terms and conditions of the contract to enroll in the MCO’s network. Each MCO develops its participating pharmacy network for the delivery of services.

HHSC contracts with managed care organizations (MCO) and pays each MCO monthly to coordinate health services for people enrolled in Medicaid or Children’s Health Insurance Program (CHIP) MCOs. HHSC delivers most Medicaid and all CHIP prescription drug benefits through managed care. Each MCO contracts directly with pharmacy benefit managers (PBM) to create pharmacy provider networks people can use to fill prescriptions.

The type of Medicaid coverage a person receives depends on where the person lives and their health. The following are the Medicaid managed care programs in Texas:

STAR

STAR is a program for children, newborns, pregnant women, and some families and children. People in STAR get all their services through an MCO.

STAR+PLUS

STAR+PLUS is a program for people who have disabilities or are 65 or older. People in STAR+PLUS also receive their essential medical services and long-term services through an MCO.

STAR Health

STAR Health is a program for children who receive coverage through the Texas Department of Family and Protective Services. STAR Health also is for young adults who were previously in foster care.

STAR Kids

STAR Kids is a program for children and adults 20 and younger who have disabilities.

STAR+PLUS Medicare-Medicaid Plans

HHSC and the federal Centers for Medicare and Medicaid Services (CMS) have set up combined Medicare-Medicaid plans for people in those counties with both Medicare and Medicaid coverage, known as dual eligibles. With one plan, Medicare and Medicaid benefits work together to better meet the client’s healthcare needs by offering essential health care and long-term services.

The Managed Care Organization (MCO) Resources search contains pharmacy-related information pertaining to all HHSC-contracted MCOs. Users can search the database by submitting a combination of the following fields:

• MCO name
• Program name (i.e., STAR, CHIP, STAR-PLUS, etc.)
• Service area (location)
• Pharmacy benefit manager (PBM) name

The search results return the above four fields with all records meeting your search criteria. Users can click the hyperlink in the MCO Name column for more details.

The search details include the following information:

• MCO name
• Service area
• Program
• PBM name and effective date
• How to contact the MCO to enroll as a pharmacy and durable medical equipment provider
• Pharmacy, member, and prior authorization call center phone numbers
• Pharmacy claims billing information (BIN, PCN, and Group ID fields)
• Links to MCO websites

HHSC updates the search weekly, usually every Monday morning. The data used in the search is also available for download as a delimited text file. Refer to the VDP Website Handbook for search instructions and information about the data.

The HHSC real-time point-of-sale claim system processes outpatient pharmacy claims, verifies state assistance program eligibility, and sends a weekly payment file to the Texas Comptroller of Public Accounts to process payment.

• HHSC processes outpatient pharmacy claims for fee-for-service Medicaid, the Children with Special Health Care Needs (CSHCN) Services program, the Kidney Health Care (KHC) program, and Healthy Texas Women (HTW) program.
• The system performs over 100 separate edits, including validation of the submission format; pharmacy, prescriber, and product; identifying prior authorization requirements or other known insurances; and calculating reimbursement.
• The system responds with information regarding the client's eligibility, the program’s allowed payable amount, applicable prospective drug utilization review messages, and applicable error codes and messages.
• The system allows pharmacy providers to query program eligibility, prescription benefits, and managed care enrollment status. Refer to the Eligibility section to learn more about real-time eligibility verification.
• All claims are treated as actual transactions and processed for adjudication. The system does not differentiate between claims submitted for payment and those immediately reversed after verifying coverage or payment amounts. Pharmacy providers should not submit these "test" claims so HHSC can ensure the system's integrity. Instead, pharmacy providers should do the following:
  • Refer to the Formulary Search to verify drug coverage and prior authorization requirements
  • Refer to the Drug Policy section for additional resources about individual drugs and products

Maintenance

The system undergoes regularly scheduled weekly maintenance between 11 p.m. Saturdays and 1 a.m. Sundays (central time). The system will not accept or process claims during this time.

HHSC will announce extended maintenance hours on the VDP website and through the email notification service.

Network switch companies offer a centralized telecommunication link between the pharmacy and HHSC. Pharmacy providers should handle all arrangements with switching companies.

HHSC accepts transactions from the following switch companies:

• Change Healthcare (formerly Emdeon)
• QS/1 Data Systems
• Relay

The current telecommunications standard for pharmacy claim transactions is the National Council for Prescription Drug Programs (NCPDP) version D.0. Claim transactions submitted in any other version will reject.

Refer to the pharmacy payer sheets for specific transaction, segment, and field requirements and, for the E1 transaction, detailed messaging returned in the “Additional Message Information” field (526-FQ).

Following an online claim transmission by a pharmacy, the system will return a response to indicate the outcome of processing. If the claim passes all edits, the system returns a “paid” response with the allowed amount for the paid claim. A “rejected” response will be returned when a claim fails one or more edits. Pharmacy providers should consult with their software provider for a list of NCPDP standard reject codes.

Electronic prescribing (e-prescribing, or eRx) allows a prescriber to electronically send an accurate, error-free, and understandable prescription directly to a pharmacy. It also provides the ability to verify eligibility and formulary data for people, prior to and during the prescribing process, and view medication history for the previous 12-month period. This is enabled with the authorized exchange of data between the payer and the prescriber. Full support of e-prescribing is available for traditional Medicaid, CSHCN, KHC, and HTW claims (via SureScripts) and for Medicaid managed care pharmacy claims.

Brand Medically Necessary

If an e-prescription is received by a pharmacy with “dispense as written” (DAW) indicated but without the free text message ("Brand Medically Necessary") or additional note, pharmacy providers must contact the prescriber for a new prescription. Once the pharmacy receives the e-prescription with both data elements, the prescription may be transmitted with the values below. Refer to the Claims Billing (B1) Transaction payer sheets for specific transaction, segment, and field requirements.

Failure of the pharmacy to produce electronic records indicating the proper DAW and “Brand Medically Necessary” in the free text message for the prescription will result in the claim subject to recoupment. All non-electronic “Brand Medically Prescriptions” (for controlled and non-controlled substances), must continue to comply with current policy and Texas State Board of Pharmacy rules.

Pharmacy providers can use the following tools to verify a person’s enrollment status, certain prescription benefits, managed care participation, and Medicare coverage. Pharmacy providers should always verify eligibility with the same processor used to process the claim.

It is common for people eligible for Medicaid to have one or more additional sources of coverage for health care services.  Third Party Liability (TPL) refers to the legal obligation of third parties to pay part or all of the expenditures for medical assistance. By law, all other available third party resources must meet their legal obligation to pay claims before Medicaid pays for the care of a person eligible for Medicaid. 

This section identifies claim limitations for claims processed by HHSC (for traditional Medicaid, CSHCN, HTW, and KHC programs) or by the managed care organization. Pharmacy providers should contact the client's specific MCO for details.

HHSC maintains the Texas Drug Code Index (TDCI), or formulary, for the following programs:

• Medicaid
• Children’s Health Insurance Program (CHIP)
• Children with Special Health Care Needs (CSHCN) Services Program
• Healthy Texas Women (HTW) Program
• Kidney Health Care (KHC) Program

We require drug manufacturers to complete the TDCI Certification of Information (COI) to request the addition of drugs and products to the formulary. The COI is for Medicaid formulary only. Manufacturers do not request addition to the CHIP, CSHCN, HTW, or KHC programs.

MCOs must adhere to the Medicaid and CHIP formularies.

Drugs classified with Drug Efficacy Study Implementation (DESI) values "5" or "6" are not covered. 

Pharmacy and prescribing providers, managed care organizations, drug manufacturers, and other stakeholders may request expedited formulary coverage, an expedited preferred drug list change, or notify HHSC about potential drug shortages impacting prescribing choice and pharmacy claim processing by using the Drug Shortage Notification and Expedited Formulary or Preferred Drug List Request (HHS Form 1315).

HHSC encourages reporting drug shortages impacting multiple pharmacies and distributors, which will continue to adversely affect individuals enrolled in Medicaid if they are not resolved promptly. HHSC will update the formulary and preferred drug list in response to validated drug shortages. The process ensures notification of alternative recommendations to short supply, the timeline of the shortage, and the availability of the drug for use.

Requestors should provide as much of the following information on the form:

• Reason for reporting the backorder, allocation, recall, discontinuation, or short supply  
• Extent of shortage, if known
• Estimated length of issue timeline
• Product NDC change
• Formulary status request 
• Alternatives
• Published notices or resources (such as FDA, American Society of Health System Pharmacists, etc.)

Alternative recommendations should consider all available options to prevent additional demands leading to further shortages.

Epocrates is a publisher of mobile device software applications designed to provide information about drugs to doctors and other health care professionals. The Texas Medicaid formulary and Preferred Drug List are available on the Epocrates drug information system. The service is free and provides instant access to information about the Texas Medicaid formulary through the internet or a handheld device.

Once registered, users can select the “Texas Medicaid” formulary option, allowing searches by drug name to determine which products are preferred, non‐preferred, or subject to clinical prior authorization criteria. Epocrates does not mirror the HHSC designations differentiated by dosage form. In these situations, Epocrates accompanies the designation with an explanatory message.

• Epocrates website
• Sign in/Register with Epocrates
• Epocrates online

This section identifies certain drug requirements for claims processed by HHSC (for traditional Medicaid, CSHCN, HTW, and KHC programs) or by MCOs. If the MCO gives no guidance for processing, the pharmacy provider should contact the MCO for claim submission requirements.

HHSC

HHSC limits clients enrolled in traditional Medicaid to a 180-day supply per calendar year. The claims system will reject claims with error code “76” and the message “Days Supply Limited per Year by Program. Contact Pharmacy Benefits Access” in the “Additional Message Information” field (526-FQ). HHSC clinician staff determine coverage, and no form is required.

Traditional Medicaid

HHSC requires prior approval with documentation of an appropriate diagnosis. Refer to the Growth Hormone clinical prior authorization criteria document for more information.

CSHCN Services Program

HHSC requires prior authorization for specific diagnoses involving growth hormone deficiency. If an initial or extension request cannot be approved, the request may be sent to program staff for medical review and reconsideration. Prescribing providers complete and submit the Biosynthetic Growth Hormone Products Prior Authorization Request (CSHCN) (HHS Form 1327).

Prescribing providers send the completed form to the CSHCN-enrolled pharmacy, which submits the form. A program-approved provider must complete and sign this form annually, certifying that the client requires these medications.

Traditional Medicaid

Pharmacy providers must submit one compound claim when the drugs are of the same active ingredient, from the same drug manufacturer, and are the same drug formulation, intended for use with each dose. The multi-ingredient compound claim should contain one line item per NDC. Refer to the multi-ingredient compounds section for claim submission requirements.

CSHCN Services Program

Products are covered and used in the treatment of hemophilia. Claims are processed and paid by TMHP.

In Dec. 2021, the Food and Drug Administration (FDA) began issuing Emergency Use Authorizations (EUA) for oral COVID-19 antiviral therapies. ;HHSC allows Molnupiravir and Paxolvid at no cost to clients enrolled in Medicaid, CHIP, and the CSHCN Services Program.

COVID-19 oral antivirals must be approved or have a EUA by the FDA, and healthcare providers must order per criteria specified by the FDA approval or authorization.

The EUA requires Paxlovid and Molnupiravir oral antivirals to be accessed by prescription only. HHSC does not require prior authorization for these medications and is not authorized by the FDA to prevent COVID-19.

Paxlovid treats mild-to-moderate COVID-19 in adults and children 12 years and older at high risk for progression to severe COVID-19. Healthcare providers should initiate Paxlovid after diagnosis of COVID-19 within five days of symptom onset.

Molnupiravir treats mild-to-moderate COVID-19 in adults 18 years and older. The medication is indicated to treat individuals with a confirmed diagnosis of COVID-19 who are at high risk for progression-to-severe COVID-19 and for whom alternative treatment options authorized by the FDA are not accessible or clinically appropriate. Healthcare providers should initiate Molnupiravir after diagnosis of COVID-19 and within five days of symptom onset.

Refer to the Texas Department of State Health Services Information for Hospitals and Healthcare Professionals for more information about Paxlovid and Molnupiravir.

The medication has no ingredient cost because the federal government has purchased treatment courses. DSHS will distribute the medicines to pharmacies. Pharmacies should submit a dispensing fee of no less than $8.08 at a minimum because of no ingredient cost.

HHSC allows COVID-19 at-home test kits at no cost to people enrolled in Medicaid, CHIP, CSHCN, HTW, and KHC. HHSC allowed the benefit for clients in fee-for-service Medicaid, CSHCN, HTW, and KHC as of Jan. 3, 2022, and since Jan. 17, 2022, for clients enrolled in managed care.

Clients may obtain COVID-19 at-home test kits from a Medicaid-enrolled retail pharmacy with or without a prescription from a prescribing provider. An adjudicated pharmacy claim is required for reimbursement of a COVID-19 at-home test.

A list of products is available through the Formulary search (txvendordrug.com/formulary/formulary-search). Users can search by product name, the 11-digit NDC, or click the "COVID-19 vaccine" checkbox to review details about each test kit. HHSC selected these products based on their status under the Emergency Use Authorization (EUA) from the U.S. Food and Drug Administration.

Clients may obtain a maximum quantity of 4 tests per calendar month. Pharmacies can process prescriptions using single packs (1 test) or multi-pack test kits (2 tests), equaling a total of 4 at-home COVID-19 tests per month. For example:

• 1 single pack kit (1 test) allows 4 kits per calendar month
• 1 multi-pack kit (2 tests) allows 2 kits per calendar month

Quantities dispensed can be up to the maximum allowed of 4 tests per calendar month with or without a prescription. Pharmacies must submit a separate claim for each transaction of a COVID-19 test kit.

Without a Prescription

Pharmacies must use the information below for pharmacy claims without a prescription. Refer to the Claims Billing (B1) Transaction payer sheets for specific transaction, segment, and field requirements.

• NPI: 3070440003 in the "Prescriber ID" field (411-DB)
• Provider last name: Test Kit Prescriber
• Provider first name: COVID
• Address: HHSC
• License: CTK001

Refills are not authorized when there is no prescription.

With a Prescription

When processing a prescription from a prescriber for a COVID-19 test kit, the prescribed quantity and applicable refills may not exceed the maximum benefit limit of 4 tests per calendar month.

In FFS Medicaid, HTW, KHC, and CSHCN, pharmacy claims exceeding the maximum quantity of 4 tests per calendar month will reject with NCPDP reject code "76" (Plan limitation exceeded) and the message "Only 4 COVID-19 tests allowed per calendar month" in the "Additional Message Information" field (526-FQ).

COVID-19 at-home test kits will have a reimbursement rate maximum price with no dispensing, delivery, or incentive fees and will not count against an FFS client's 3-prescription-per-calendar-month limit.

On Jan. 31, 2020, the Secretary of Health and Human Services declared the 2019 novel coronavirus (COVID-19) was a public-health emergency for the United States as of Jan. 27, 2020. In Dec. 2020, the Food and Drug Administration (FDA) began issuing Emergency Use Authorizations for COVID-19 vaccines. A list of COVID-19 products is available through the Formulary search (txvendordrug.com/formulary/formulary-search). Users can search by product name, the 11-digit NDC, or click the "COVID-19 vaccine" checkbox to review details about each vaccine.

Immunization Program Portal

The federal government distributes the COVID-19 vaccines. Pharmacies, retail clinics, providers, and other care sites receiving and administering the COVID-19 vaccine must complete the Centers for Disease Control and Prevention (CDC) COVID-19 Vaccination Program Provider Agreement.

Providers should contact the Texas Department of State Health Services (DSHS) Immunization Program to register through the Texas DSHS Immunization Portal.

Claim Processing

HHSC set the fee-for-service (FFS) reimbursement rate to align with Medicare. For vaccines requiring a single or two doses, the FFS initial dose's administration reimbursement rate is $40.00. HHSC bases reimbursement on the submitted value in the "Incentive Amount Submitted" field (438-E3). The claim will pay $0 if the field is blank.

The Public Readiness and Emergency Preparedness Act allows certain providers to order and administer the COVID-19 vaccine, including pharmacists and pharmacy interns. To process a pharmacy vaccine administration claim, pharmacy staff should submit the following:

Pharmacies will receive a rejection for FFS claims when submitting a second dose claim if a client received their first dose from a non-Medicaid pharmacy. If your second dose claim is correct, the pharmacy can submit the following information to bypass the rejection:

HHSC

Some drugs are only payable when submitted as part of a multi-ingredient compound claim.  After searching for a drug using the Formulary Drug search, refer to the drug details page and locate the "Compound-only Use by Program" section.

Not all drugs in a multi-ingredient compound claim are payable. Refer to the System Requirements section for instruction on how to receive payment for non-covered products part of a multi-ingredient compound claim.

HHSC provides coverage for certain cough and cold products for Medicaid clients. Covered products in this category include analgesics, antihistamines, antitussives, decongestants, and expectorants.

Cough and cold combination products for children less than 2 years are not covered. This excludes single entity antihistamines. Other uses of cough and cold products for children less than 6 years are subject to clinical prior authorization. Products containing acetaminophen, ibuprofen, or narcotics for children less than 6 years are not covered.

Products require prior authorization if the product is not indicated for the person’s age. Products containing a narcotic will require prior authorization if a child is between 6 and 12 years old.

Traditional Medicaid

HHSC requires prior authorization for claims for Kalydeco, Orkami, Symdeko, and Trikafta. Prescribing providers complete and submit the Cystic Fibrosis Treatment Agents Prior Authorization Request (Medicaid) (HHS Form 1338).

CSHCN Services Program

HHSC requires prior authorization for the following specific cystic fibrosis treatment agents:

• HHSC covers Kalydeco and Pulmozyme for treating cystic fibrosis as prescribed by a program-approved pulmonologist and may approve treatment for six months with subsequent approval for one year.  Pharmacy providers can only dispense one month’s supply at a time.
• HHSC covers Cayston and inhaled Tobramycin for treating cystic fibrosis as prescribed by a program-approved pulmonologist and limits an administration cycle of 28 days of treatment followed by 28 days with no agent treatment.
  • Pharmacy providers can submit an eligibility verification transaction to find a client's most current period of approval for Tobramycin. Refer to the Eligibility Verification (E1) Transaction for specific transaction, segment, field requirements, and response messages.

Prescribing providers complete and submit the Cystic Fibrosis Treatment Products Authorization Request (HHS Form 1143). The provider must submit the form annually, certifying the client requires these medications. Providers must supply medical necessity documentation for clients with a diagnosis other than cystic fibrosis.

Traditional Medicaid

There is no preferred brand of diabetic test strip for Medicaid. Prescribers may choose any test strip on the Medicaid formulary.

Medicaid Managed Care

Some MCOs have a preferred brand of glucose monitoring test strips. If no brand is listed, the prescriber may choose any brand on the Medicaid Formulary. Note that MCOs must cover all test strips even if they are non-preferred.

Traditional Medicaid

HHSC requires prior authorization for Emflaza (deflazacort). Deflazacort is FDA-approved for the treatment of Duchenne muscular dystrophy (DMD) in clients 2 years and older. Prescribing providers complete and submit the Emflaza Standard Prior Authorization Addendum (HHS Form 1347).

Treatment approval criteria for Emflaza include the following:

• Clients 2 years and older with a diagnosis DMD.
• The client has tried prednisone for three months or longer and has one the following adverse events as a result prednisone use:
  • Cushingoid appearance;
  • Central (truncal) obesity;
  • Undesirable weight gain (greater than or equal to 10% body weight gain over a six-month period);
  • Diabetes and/or hypertension that is difficult to manage; or
  • Experienced a severe behavioral adverse event.

For renewal requests, prescribing providers should complete sections 1, 5 and 6 of the form.

Reasons for denial include but are not limited to the following:

• Less than 2 years old
• Use of CYP3A4 in last 90 days
• No previous trial with prednisone

CSHCN Services Program

HHSC will reject claims with NCPDP error code “75” and the message “Prior Authorization not on file.  Contact Pharmacy Benefits Access” in the “Additional Message Information” field (526-FQ).

Erectile dysfunction drugs are not a covered benefit of any program.

Traditional Medicaid

Certain family planning drugs do not count towards a client's three prescription-per-month limitation. Refer to the Formulary search and select the "Family Planning" filter to identify these drugs, which include:

• Oral contraceptives
• Long-acting injectable contraceptives
• Vaginal rings
• Hormone patches
• Certain drugs used to treat sexually transmitted diseases (STDs)

In compliance with Texas Insurance Code, Section 1369.1031, Medicaid provides up to a three-month supply of covered prescription contraceptive drugs the first time a client obtains the drug, then a 12-month supply at one time each subsequent time the client obtains the same drug. This does not apply to contraceptives under the clinician-administered drug benefit.

VDP defines the "same drug" as a drug that can be therapeutically substituted (for example, multiple formulations, strengths, and NDCs).

CSHCN Services Program

The prescribing physician must compose a letter of medical necessity (LMN) on office stationery. Pharmacy providers must submit the LMN by fax to the CSHCN Service Program.

CHIP

CHIP covers birth control for certain diagnoses. Contraceptives are only covered for non-contraceptive medical purposes. Pharmacy providers should contact the client's MCO for details.

Medicaid clients are eligible for direct-acting antiviral (DAA) treatments for Hepatitis C infection. Clients do not have to meet specific METAVIR fibrosis scores, and HHSC does not require clinical prior authorization or illicit drug screenings. Any Medicaid-enrolled provider can prescribe DAA drugs.

HHSC partnered with AbbVie starting Jan. 1, 2023, to increase access to treatment. AbbVie’s product Mavyret is the Medicaid preferred DAA drug and is available without a preferred drug list (PDL) prior authorization. For any non-preferred DAA drugs, HHSC may continue to approve if the client meets at least one of the PDL prior authorization criteria . This applies to both fee-for-service and managed care. The PDL Criteria Guide explains the criteria used to evaluate the non-preferred prior authorization requests.

Refer to the VDP website Preferred Drug page to review the latest edition of the PDL for impacted drugs.

Prescribers may write prescriptions for the entire course of therapy, so clients do not need to request additional refills throughout their treatment duration. Prescribers may choose to write a prescription for the entire treatment cycle or have the client return for further testing if warranted. This quantity limit applies to all Hepatitis C DAA drugs.

Refer to the Formulary search and select “Hepatitis C Agents” from the “PDL Class” filter to identify these drugs.

HHSC provides specific home health supply products as a pharmacy benefit to clients enrolled in Medicaid, CHIP, the CSHCN Services Program, and KHC Program.  The covered products include the following:

• Aerosol Holding Chamber
• Diabetic Lancets
• Diabetic Monitor (talking)
• Diabetic Test Strips
• Hypertonic Salines
• Insulin Needles
• Insulin Syringes
• Oral Electrolyte Replacement Fluid
• Spring Powered Device for Lancet

CMS classifies these products as a Title XIX (Medicaid) home health benefit as either durable medical equipment (DME) or medical supplies. These supplies do not require prior authorization unless otherwise specified.

Pharmacies are not required to enroll as a Medicaid durable medical equipment (DME) provider to supply these products. Pharmacies already enrolled as Medicaid DME providers can submit claims as either a pharmacy benefit or medical benefit. Contact the Texas Medicaid and Healthcare Partnership (TMHP) for instructions about submitting medical claims.

A physician must prescribe all DME and home health supplies. Advanced practice registered nurses and physician assistants cannot prescribe these products to clients enrolled in Medicaid or CHIP.

A list of products is available through the Formulary search (txvendordrug.com/formulary/formulary-search). You can search by product name, the 11-digit NDC, or select the product from the HCPCS Description dropdown. Additional filters are available to find products payable by each program. Products not included in the search are only available through the Medicaid medical benefit.

HHSC

A prescription is required for HHSC to process pharmacy claims for clients enrolled in fee-for-service Medicaid, the CSHCN Services Program, and KHC Program. HHSC does not require the Home Health Services (Title XIX) DME/Medical Supplies Physician Order Form (TMHP Form F00030) for products dispensed by a pharmacy.

The claim system will reject products submitted as part of a multi-ingredient compound claim with NCPDP error code 70 ("Product/Service Not Covered") and include the message "LHHS products are not covered in a compound claim" in the "Additional Message Information" field (526-FQ).

The claim system will reject claims if the submitted quantity exceeds the maximum unit per filling with NCPDP error code 9G ("Product/Service Not Covered"). If the quantity submitted exceeds the maximum unit per month, the claim system will reject claims with NCPDP error code 76 ("Plan Limitation Exceeded").

If the claim exceeds quantity limits, pharmacy providers must attest the submitted quantity is the actual quantity prescribed based on medical necessity by submitting the following values:

Refer to the Claims Billing (B1) Transaction payer sheets for specific transaction, segment, and field requirements.

Refer to the Durable Medical Equipment, Medical Supplies, and Nutritional Products Handbook chapter of the Texas Medicaid Provider Procedures Manual (tmhp.com/resources/provider-manuals/tmppm) for quantity guideline criteria. Refer to the information below for limitations impacting claims paid by HHSC.

Claims for Medicaid do not count towards a client's three prescription-per-month limit. Claims for KHC will count towards a client's four prescription-per-month limit.

HHSC bases its reimbursement rates on the "Home Health DME" Provider Type in the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Fee Schedule and does not reimburse pharmacies a dispensing fee or delivery incentive. Refer to the TMHP Static Fee Schedule page (public.tmhp.com/FeeSchedules/StaticFeeSchedule/FeeSchedules.aspx) for reimbursement rates.

HHSC does not require the TMHP DME Certification and Receipt Form (Form F00018) for pharmacy claims.

Managed care

Pharmacies submit claims for clients enrolled in Medicaid managed care and CHIP to the client's MCO. MCOs have the flexibility to manage a preferred home health supplies list for the limited home health supplies. Pharmacy providers should contact the client's specific MCO for details.

CSHCN Services Program

CSHCN allows 60 days of drug coverage with prior authorization.  The 60-day timeframe provides coverage while the person enrolls and receives approval or denial from the Texas HIV Medications Program.

Contact CSHCN to receive prior authorization. 

Contact the Texas HIV Medication Program at 800-255-1090 or online at dshs.texas.gov/hivstd/meds/. If the person is not eligible for the HIV program, the medications may be an ongoing benefit through the CSHCN Services Program if the person remains eligible.

Traditional Medicaid

HHSC requires prior authorization for Increlex (mecasermin). Prescribing providers complete and submit the Increlex Prior Authorization Request (HHS Form 1357).

Traditional Medicaid

During influenza season, pharmacies may bill for influenza vaccines provided to people seven and older in a pharmacy setting for influenza vaccines available on the Medicaid formulary as part of the pharmacy benefit. The pharmacist administering the vaccine does not have to enroll with TMHP but must follow the Texas State Board of Pharmacy's (TSBP) rules related to certification to immunize and vaccinate. Refer to TAC Section 295.15 (Chapter 295: Administration of Immunizations or Vaccinations by a Pharmacist under Written Protocol of Physician).

Administering pharmacists are health care professionals licensed by the TSBP to practice as a pharmacist, have met and maintained the eligibility requirements outlined in law, and have been certified by the TSBP to administer vaccines.

Administering pharmacists are under the supervision of a physician under state law and may administer immunizations or vaccinations only under a physician’s written protocol authorizing the administration. Pharmacists are employed and remunerated by a pharmacy for their services. If the program’s services are covered and reimbursable, payment may be made to the pharmacy employing the licensed pharmacist. HHSC will reimburse pharmacies for the ingredient costs and applicable administration fees.

Refer to the Formulary search (txvendordrug.com/formulary/formulary-search) for a list of products.

Pharmacy providers should submit the values identified below. Refer to the Claims Billing (B1) Transaction for specific transaction, segment, and field requirements.

Medicaid managed care and CHIP

During influenza season MCOs are required to allow pharmacies to bill for influenza vaccines provided to people aged seven and older in a pharmacy setting. MCOs must cover all influenza vaccines available on the Medicaid and CHIP formularies as part of the pharmacy benefit. MCOs must reimburse pharmacies for the ingredient cost and applicable administration fees for flu vaccines. Pharmacies providers should contact the client's specific MCO for details.

Traditional Medicaid

Insulin syringes are a benefit only when the syringes are for insulin use.  Insulin syringes prescribed for other injectable drugs should be billed as a Medical benefit through TMHP.  Only the insulin counts toward the person's prescription-per-month limit. Insulin syringes and needles are obtained with a physician's or allowed practitioner's prescription from a participating pharmacy and do not require prior authorization. The pharmacy may submit claims for insulin with a day supply based on stability rather than the actual dose.

KHC Program

Prescriptions for syringes and home health supplies count toward the KHC four prescription-per-month limit.

KHC Program

Kidney transplant drugs require prior authorization. Claims reject with error code “75” and the message “Call KHC Program (800) 222-3986” in the “Additional Message Information” field (526-FQ).

Pharmacists may administer long-acting injectable (LAI) antipsychotics and opioid antagonists to treat a substance or opioid use disorder in a pharmacy setting for people in Medicaid with a valid prescription. Pharmacists can administer medications under a physician's delegation as authorized by state law. Refer to Texas Occupation Code section 554.004 (Administration of Medication). Refer to the Formulary search to identify drugs eligible for administration in a pharmacy.

Traditional Medicaid

The pharmacy, not the pharmacist, submits claims for these services using the standard pharmacy claim transaction and is reimbursed for an ingredient cost, dispensing fee, and administration fee for each LAI claim processed. Refer to the Claims Billing (B1) Transaction payer sheets for specific transaction, segment, and field requirements.

Administering pharmacists are health care professionals licensed by the TSBP to practice as a pharmacist, have met and maintained the eligibility requirements outlined in the law, and are under the supervision of a physician. Pharmacists are employed and remunerated by a pharmacy for their services. If the program's services are covered and reimbursable, payment may be made to the pharmacy employing the licensed pharmacist.

Medicaid managed care

The pharmacy benefit allows pharmacists to administer long-acting injectable antipsychotics and opioid antagonists to treat a substance use disorder or opioid use disorder. MCOs must reimburse pharmacies for the ingredient cost, dispensing fee, and applicable administration fees for certain long-acting anti-psychotics, opiate dependence treatments, and emergency treatment for known or suspected opioid overdoses. Pharmacy providers should contact the client's specific MCO for details.

Providers can prescribe and obtain long-acting reversible contraception (LARC) products are on the Medicaid and HTW formularies from certain specialty pharmacies for women enrolled in Medicaid (traditional and managed care) or the HTW Program.

Refer to the Product search and select the "LARC" filter to identify products available through the pharmacy benefit.

LARC products are only available through certain specialty pharmacies working with LARC manufacturers.  Providers who prescribe and obtain LARC products through the specialty pharmacies listed will be able to return unused and unopened LARC products to the manufacturer's third-party processor.

Prescribing providers may continue to obtain LARC products through the existing buy-and-bill process.

Traditional Medicaid

HHSC limits medications to specific quantities per calendar month for each drug. Claims exceeding this limitation will reject with error code “76” and the message “Exceeds Max Product Quantity/Month – MI” in the “Additional Message Information” field (526-FQ).

HHSC covers mosquito repellents year-round for the prevention of the Zika virus and other related mosquito-borne diseases for clients enrolled in the following programs:

• Medicaid
• Children's Health Insurance Program (CHIP) and CHIP-Perinatal
• Children with Special Health Care Needs (CSHCN) Services Program
• Healthy Texas Women program (HTW)

HHSC selects products based on guidance from the Centers for Disease Control and Prevention (CDC). Products include the recommended amount of the active ingredient DEET, IR3535, oil of lemon eucalyptus, or Picaridi effective against the Zika virus.

Refer to the Formulary search (txvendordrug.com/formulary/formulary-search) for a list of products. Users can search by product name, the 11-digit NDC, or click the "mosquito repellent" checkbox for a list of all products.

Download the Mosquito Repellent Benefit Information to display information about the benefit in pharmacies or doctor offices. For more information about the Zika virus, refer to the following resources:

• Texas Department of State Health Services (texaszika.org)
• Zika Medicaid Benefit (hhs.texas.gov/services/health/zika-medicaid-benefit)
• CDC: Zika Virus (cdc.gov/zika)

Benefit Specifics

Clients eligible for the benefit include the following demographics:

• Females 10-55 years old
• Pregnant females of any age
• Males 14 and older

HHSC requires a prescription for all clients. Contact the client's health care provider to obtain a prescription for mosquito repellent.

Coverage of mosquito repellents is limited to two cans or bottles per calendar month. Pharmacies should dispense only one can or bottle per fill, with one optional refill available per calendar month.

Mosquito repellent claims do not count against a person's monthly three-prescription limit for people enrolled in traditional fee-for-service Medicaid.

Pharmacies will require a prescription from a valid healthcare provider before dispensing mosquito repellent to clients enrolled in Medicaid.

Other Medicaid benefits available in response to Zika virus prevention include oral contraceptives and long-acting reversible contraceptive products that help to prevent pregnancy. These are available as a Medicaid benefit to eligible individuals. Other covered benefits include family planning services, diagnostic testing, targeted case management, physical therapy, long-term services and support, acetaminophen, and oral electrolytes for Zika virus symptoms, and potential coverage for additional ultrasounds for pregnant women.

Claim Submission

Claims for mosquito repellent must use the client’s provider National Provider Identifier (NPI) as the prescriber NPI on the claim. HHSC converted each product's 12-digit universal product code (UPC) into an 11-digit NDC for claims submission. HHSC identifies mosquito repellents as a generic medication. Pharmacists have the authority to fill the prescription with any covered product unless the prescriber has stated "do not substitute" to specify the active ingredient.

The "Unit of Measure" field (600-28) determines the "Quantity Dispensed" field (442-E7). When processing mosquito repellent claims, pharmacy providers should submit the standard unit in the "Unit of Measure" field. For example, the pharmacy should submit a 170-gram bottle of mosquito repellent with a quantity of 170.

HHSC expects a can of repellent to last 15 days or more and recommends pharmacy providers submit a 15-day supply.

Pharmacy providers may request manual overrides of claims clients outside the eligibility requirements of pregnant women.

• Contact the HHSC Pharmacy Benefits Access Help Desk for clients enrolled in traditional Medicaid, CSHCN, and HTW programs
• Pharmacy providers should contact the client's specific MCO for details

Reimbursement

Pharmacies are required to submit their usual and customary cost for the items.

The traditional Medicaid reimbursement is the usual and customary price to the public or up to a maximum of $6.50 per can or bottle of mosquito repellent (inclusive of product cost and dispensing fee), with the total calendar month maximum of $13.00. Products are not eligible for delivery fees or incentive fees.

Reimbursement may vary between MCOs but may not exceed $6.50 per can or bottle.

Limitations

For many people, substance use disorder starts after initially receiving opioid prescriptions for an episode of acute pain. To encourage the appropriate use of opioids and reduce the over-prescribing of opioids, Texas Medicaid has implemented the requirements in this section. The requirements in this section do not apply to clients who are:

• Receiving hospice care or palliative care
• Being treated for cancer
• Residing in a long-term care facility
• Residing in a facility in which residents receive opioid substitution therapy for the treatment of opioid use disorder (OUD)

The requirements also do not apply to other clients that HHSC elects to exempt based on an objective, confirmable physical pathology known to cause severe chronic pain that is not ameliorated by other therapies and for which opioid treatment is appropriate (e.g., sickle cell disease). If diagnoses are not available in the medical data, prescribers can request exemptions on a case-by-case basis through the pharmacy prior authorization process.

Prospective Safety Edits

HHSC performs the following Medicaid processes automatically during the pharmacy claims submission process.

Morphine Milligram Equivalents

Morphine milligram equivalents (MME) per day is used to compare the potency of one opioid to another. The clinical decision for the MME per day recommendations varies depending on the person's opioid use. Additionally, the Centers for Disease Control and Prevention (CDC) recommends starting opioid treatment with an immediate-release/short-acting formulation at the lowest effective dose instead of an extended-release/long-acting formulation.

A person is considered "opioid-naïve" if the client has taken opioids for a duration that is less than or equal to seven days in the last 60 days. For clients who are opioid- naïve, providers must submit a one-time prior authorization request for:

• An opioid prescription that exceeds a ten-day supply.
• A prescription for a long-acting opioid formulation.
• A claim or combination of claims in which the total daily dose of opioids exceeds 90 MME

The one-time requirement for prior authorization does not apply to subsequent claims because the member will no longer be “opioid-naïve.” The duration of the prior authorization is equal to the days’ supply of the claim.

For clients who are not opioid naïve, prior authorization is required for opioid prescriptions if the total daily dose of opioids exceeds 90 MME. For those clients who may require a tapering plan, providers would determine the development and management of a person-specific course of therapy to help manage withdrawal symptoms. A prescriber may request a tapering plan through the pharmacy prior authorization process on a case-by-case basis. Prior authorization approvals last for six-months.

Days’ Supply Limits

Opioid prescriptions for the treatment of acute pain are rarely required for more than ten days. To reduce the risk of addiction and the diversion of unused opioids, opioid prescriptions for clients who are opioid naïve are limited to a maximum ten-day supply without prior authorization.

Prospective Safety Edits

The Medicaid policies and processes listed below are conducted automatically during the pharmacy claims submission process.

Fee-For-Service Three-prescription Limit

Prescriptions for opioids to treat acute pain for clients who are 21 years and older are exempt from the three-prescription-per-month limit for members in fee-for-service.

Prospective Drug Utilization Review Alerts

Medicaid returns prospective drug utilization review alerts for pharmacists on all claims when:

• opioids and benzodiazepines are used concurrently; and
• opioids and antipsychotics are used concurrently;

Refer to the Prospective Drug Utilization Review section for more information about alerts.

HHSC provides coverage for over-the-counter (OTC) products for Medicaid clients. Specific coverage exceptions for OTC products include the following items when an OTC is an economical and therapeutic alternative to a prescription drug item:

• Analgesics
• Anti-emetics
• Anti-inflammatory agents
• Anti-parasitics
• Dermatological agents
• Enzyme replacements
• Gastrointestinal agents, including:
  • Antacids
  • H-2 antagonists
  • Laxatives
  • Proton pump inhibitors
• Insulin
• Ophthalmic agents
• Opiate dependence treatments
• Oral contraceptives
• Otic agents
• Respiratory agents

Traditional Medicaid, CSHCN Services Program, and KHC Program

HHSC covers some OTC drugs, except for clients residing in a nursing facility. 

CHIP

Insulin, diabetic supplies, and mosquito repellant are the only covered OTC items.

Traditional Medicaid

HHSC requires prior authorization for Oxycontin (oxycodone ER). Prescribing providers complete and submit the OxyContin Standard Prior Authorization Addendum (HHS Form 1353).

Traditional Medicaid

Prescribing providers can write one prescription per person in an amount covering an entire family if a person is diagnosed with lice or scabies.

KHC Program

HHSC will reject peritoneal product claims with NCPDP error code “75” and the message “Prior Authorization not on file, call the Pharmacy Benefit Access” in the “Additional Message Information” field (526-FQ).

Traditional Medicaid

HHSC requires prior authorization for non-preferred phosphate binder agents. Prescribing providers complete and submit the Phosphate Binders Standard Prior Authorization Addendum (HHS Form 1348).

Traditional Medicaid

HHSC reimburses pharmacies an additional $0.50 incentive fee for dispensing premium preferred generic (PPG) drugs on Medicaid claims. The amount appears in the "Incentive Amount Paid" field (521-FL) of the paid claim response. The incentive does not apply to $0.00 total payment amount claims. Refer to the drug pricing and reimbursement for the reimbursement calculation.

Traditional Medicaid

HHSC limits vitamins to females under 50, and will reject claims for improper age or gender:

• Error code 6 ("Product Not Covered for Patient Age – PN")
• Error code 61 ("Product Not Covered for Patient Gender – PN")

Refer to the Formulary Search for the vitamins covered by Medicaid.

Traditional Medicaid

HHSC requires prior authorization for proprotein convertase subtilisin/kexin type 9 (PCSK9) inhibitor agents.  The Food and Drug Administration approved these products for use with diet and adjunct treatment with maximally-tolerated statin therapy in adults with familial hypercholesterolemia or those with atherosclerotic cardiovascular disease (ASCVD) whose low-density lipoprotein cholesterol (LDL-C) is not adequately maintained with the current available treatments. The American Heart Association and American College of Cardiology recommends lifestyle modifications including a healthy diet and physical exercise to improve LDL-C levels.

Prescribing providers complete and submit the PCSK9 Inhibitors Standard Prior Authorization Addendum (HHS Form 1355).  Approvals for are granted for six months.

CSHCN Services Program

The prescribing physician must compose a letter of medical necessity (LMN) on office stationery. The pharmacy provider must submit the LMN by fax to the CSHCN Service Program.

Human Respiratory Syncytial Virus (RSV) causes respiratory tract infections and serious lung disease in infants and children. Synagis (palivizumab) is available for children with high risk of infection.

HHSC bases RSV season dates on the county of residence. RSV appears earlier in some counties and remains active later in other counties. HHSC uses RSV statistics from previous years plus regular virology reports to determine the season's dates for each region and reserves the right to extend or end a season after subsequent review of RSV levels in each region. MCO medical directors can end the RSV season for their MCO by service area if they demonstrate the local virology has dropped below 10% positivity for two consecutive weeks.

Season Schedule

HHSC publishes the current RSV season on the VDP website, broken out by Texas public health region. Providers can find their region using the interaction region map (PDF) and selecting the buttons marked HHS regions and county names.

Pharmacy Information

Any specialty pharmacy enrolled with HHSC may provide Synagis. A pharmacy must enroll in the CSHCN Services Program to provide services to children in the program.

Traditional Medicaid

Prior authorization is a two-step process. The prescribing provider completes the following forms and submits them along with the prescription for Synagis and any supporting information to the Medicaid-enrolled pharmacy.

• Standard Prior Authorization Request
• Synagis Standard Prior Authorization Addendum (HHSC Form 1321)

Refer to the Prior Authorization Requests section for the forms. Failure to submit both forms will result in an authorization denial or delay.

Pharmacy providers then submit the form to the Texas Prior Authorization Call Center.

Medicaid managed care and CHIP

Pharmacy providers should contact the client's specific MCO for prior authorization requirements and forms. MCOs may require further information in addition to the MCO-specific addendum form. Each MCO will have its own addendum form, and it will reflect the MCO's contact information and reconsideration request process. Failure to submit all required forms will result in an authorization denial or delay.

CSHCN Services Program

Prior authorization is a two-step process. The prescribing provider completes the following forms and submits them along with the prescription for Synagis and any supporting information to the CSHCN-enrolled pharmacy.

• Standard Prior Authorization Request
• Synagis Standard Prior Authorization Addendum (HHSC Form 1325)

Refer to the Prior Authorization Requests section for the forms. Failure to submit both forms will result in an authorization denial or delay.

Pharmacy providers then submit the form to the CSHCN Services Program.

Traditional Medicaid

Smoking cessation products are exempt from the three-drug limit.

A free, state hotline offering telephone counseling for clients trying to quit smoking is also available. Clients can contact the Texas Quitline at 1-877-YES-QUIT (1-877-937-7848, available in multiple languages) or visit yesquit.org to receive counseling and services such as nicotine patches, gums, or lozenges that may be free to those who qualify.

Traditional Medicaid

Specialty drugs on the biannual Specialty Drug List (SDL) are available as either an outpatient pharmacy benefit, a medical or physician benefit, or both.

Refer to the Texas Medicaid Provider Procedure Manual for brand/generic availability, diagnosis restrictions, and billing information of products covered as a medical or physician benefit. Contact TMHP for form submission requirements.

Medicaid managed care

HHSC provides the SDL to MCOs to identify specialty drugs offered exclusively through the MCO's specialty pharmacy network.

Refer to the Specialty Drug Handbook for the specialty drug rule, how to provide input for the SDL, and the SDL publication schedule.

KHC Program

Stadol is limited to 10 milliliters (or 4 bottles) per calendar month. HHSC will reject claims exceeding this limitation with NCPDP error code “76” (“Plan Limitations Exceeded”) and the message “Exceeds Max Product Quantity/Month – ST” in the “Additional Message Information” field (526-FQ).

Traditional Medicaid

Products containing tramadol and codeine are not available for children younger than 12. HHSC will deny Medicaid claims, including multi-ingredient compound claims, with NCPDP error code “60” (“Product/Service Not Covered For Patient Age”) and include the message “Not Covered For Under Years Of Age” in the “Additional Message Information” field (526-FQ).

HHSC provides specific vitamin and mineral products as a pharmacy benefit to clients 20 years or younger and enrolled in Medicaid, and the CSHCN Services Program. The products are also available through the Medicaid Comprehensive Care Program (CCP) as a medical benefit.

Pharmacies are not required to enroll in the CCP or as a Medicaid durable medical equipment (DME) provider to supply these products. Pharmacies already enrolled as Medicaid CCP or DME providers can submit claims as a pharmacy benefit or medical benefit. Contact the Texas Medicaid and Healthcare Partnership (TMHP) for instructions about submitting medical claims.

Prescribing providers enrolled with Medicaid as DME providers should continue to submit claims for traditional Medicaid clients to TMHP. Refer to the Children's Services Handbook of the Texas Medicaid Provider Procedures Manual (tmhp.com/resources/provider-manuals/tmppm).

A list of products is available through the Product search (txvendordrug.com/formulary/formulary-search). You can search by product name, the 11-digit NDC, or click the "vitamin and mineral" checkbox. Additional filters are available to find products payable by each program. A list of products and their associated condition are below.

The Medicaid CCP may pay for products not available on the search for clients enrolled in traditional Medicaid for particular medical conditions.

HHSC

A prescription is required for HHSC to process pharmacy claims for clients enrolled in fee-for-service Medicaid and the CSHCN Services Program.

HHSC does not require the TMHP CCP Prior Authorization Request Form for products dispensed by a pharmacy. Refer to the Durable Medical Equipment, Medical Supplies, and Nutritional Products Handbook of the Texas Medicaid Provider Procedures Manual (tmhp.com/resources/provider-manuals/tmppm) for quantity guideline criteria.

Claims for traditional Medicaid do not count towards a client's three prescription-per-month limit.

HHSC sets the reimbursement rate at the Average Wholesale Price minus 10.5 percent, minus 8 percent. Pharmacies do not receive a dispensing fee or delivery incentive.

Multi-ingredient compound claims submitted with vitamin or mineral products are not payable. HHSC may consider some compound claims for coverage through CCP.

Claims are limited to a 30-day supply. Pharmacy providers should contact HHSC for liquid formulations greater than this limit. Pharmacies should not dispense refills until the client uses 100% of the supply. Prescriptions are valid for six months after the date written.

The pharmacy must acknowledge the prescribed product is for a medically accepted indication according to the current vitamin and mineral policy by submitting the following values:

HHSC does not require the DME Certification and Receipt Form (TMHP Form F00018) for pharmacy claims.

Managed care

Pharmacies submit claims for clients enrolled in Medicaid managed care and CHIP to the client's MCO. Pharmacies providers should contact the client's specific MCO for details.

Medicaid

Social Security Act Section 1927 (d)(2) and Texas Administrative Code section 354.1923 allow HHSC to prohibit or restrict coverage of weight management drugs. HHSC provides coverage for certain weight management drugs for Medicaid. Specific coverage exceptions for weight management drugs include appetite stimulants, anorexic agents, and fat absorption-decreasing agents.

Weight management drugs (excluding specific coverage exceptions) are not covered for clients enrolled in traditional Medicaid who are 21 years and over. Claims will reject with NCPDP error code 75 and include the message “Prior Authorization not on file. Contact Pharmacy Benefits Access” in the “Additional Message Information” field (526-FQ). HHSC clinician staff determine coverage, and no form is required.

Traditional Medicaid

HHSC requires prior authorization for Xyrem. Prescribing providers complete and submit the Xyrem Prior Authorization Request (HHS Form 1356).

Drug utilization review (DUR) is a process required by federal law in the Omnibus Budget Reconciliation Act of 1990 (OBRA 90) to assure that prescriptions for covered outpatient drugs are appropriate, medically necessary, and not likely to result in adverse medical results.

DUR is designed to educate both prescribing providers and pharmacy providers on how to identify and reduce the frequency of patterns of fraud, abuse, gross overuse, or inappropriate or medically unnecessary care among prescribing providers, pharmacists, and people enrolled in Medicaid. Education and alerts are made available to prescribing providers and pharmacists both prospectively and retrospectively about:

• Medication appropriateness
• Overutilization and underutilization
• Appropriate use of generic products
• Therapeutic duplication
• Drug-disease contraindications
• Drug-drug interactions
• Incorrect drug dosage or duration of drug treatment
• Drug-allergy interactions
• Clinical abuse/misuse

The DUR process assesses data on drug use against predetermined standards, consistent with the following:

1. Compendia consisting of the following:

• American Hospital Formulary Service Drug Information
• United States Pharmacopeia-Drug Information (or its successor publications)
• DRUGDEX Information System

2. Peer–reviewed medical literature

Prospective DUR (ProDUR) is a review of a person’s medication record and prescription drug orders prior to dispensing.

The ProDUR review of drug therapy is performed before each prescription is filled or delivered to the person, typically at the point-of-sale or point of distribution.  This process assists the pharmacist by addressing situations in which potential drug problems may exist.  ProDUR performed prior to dispensing helps pharmacists ensure that the person receives appropriate medications.  This is accomplished by providing information through messaging from the claim submission system to the dispensing pharmacist that may not have been previously available particularly if the person is using more than one pharmacy.

The prospective review includes:

• Screening for potential drug therapy problems due to therapeutic duplication
• Drug-disease contraindications
• Drug-drug interactions (including serious interactions with nonprescription or over-the-counter drugs)
• Incorrect drug dosage or duration of drug treatment
• Drug-allergy interactions
• Clinical prior authorizations
• Clinical abuse/misuse

HHSC uses the compendia and literature as its source of standards for such review.

The ProDUR processes of the VDP pharmacy claims system examines all pharmacy claims.  As a result, drugs that interact, or are affected by previously dispensed medications, can be detected.  VDP recognizes that the pharmacist uses his or her education and professional judgment in all aspects of dispensing.  ProDUR is offered as an informational tool to aid the pharmacist in performing his/her professional duties.  Most ProDUR edits are driven by day supply, making it important that this field is reported correctly.

Retrospective DUR provides for the ongoing periodic examination of claims data and other records to identify patterns of fraud, abuse, gross overuse, or inappropriate or medically unnecessary care among prescribing providers, pharmacists, and people associated with specific drugs or groups of drugs.

The retrospective review also allows for active and ongoing educational outreach in the form of letters or face-to-face discussions to educate prescribing providers on common drug therapy problems with the aim of improving prescribing or dispensing practices.

The Texas DUR Board is an HHSC advisory committee that meets quarterly in Austin to:

• Develop recommendations for the Medicaid preferred drug list
• Suggest clinical prior authorizations on outpatient prescription drugs
• Recommend educational interventions for Medicaid providers
• Review drug utilization across the Medicaid program

The board includes physicians and pharmacists who provide services across the entire Medicaid population, as well as one physician and one pharmacist representing the managed care organizations, and one consumer advocate who represents people enrolled in Medicaid.

Refer to the Texas Drug Utilization Review Board Handbook for more information about board processes and activities.

Prior authorization is a process used to determine if a prescribed procedure, service, or medication is necessary, appropriate, and not likely to cause adverse effects. Prescribing providers must submit an authorization request for the drug before Medicaid pays the claim.

Each MCO administers pharmacy prior authorization services for clients enrolled in managed care. The Texas Prior Authorization Call Center manages prior authorizations for clients in Medicaid fee-for-service.

All clients enrolled in Medicaid adhere to the same formulary. Some drugs on the formulary may require prior authorization. There are two types of prior authorizations impacting a covered Medicaid outpatient drug on the formulary

• Clinical
• Non-preferred

Some drugs or drug classes are subject to both non-preferred and clinical prior authorizations.

The Texas Drug Utilization Review (DUR) Board reviews classes of drugs every quarter and recommends drugs for preferred or non-preferred status on the Texas Medicaid Preferred Drug List (PDL), and establishes recommendations for clinical prior authorizations.

The CSHCN Services Program requires prior authorization for the following drugs:

• Cystic Fibrosis products (includes Cayston, Kalydeco, Pulmozyme, and Tobi)
• Growth Hormone products
• Synagis

Refer to the CSHCN Services Program Prior Authorization Requests for prior authorization request forms and addendums.

Prescribing providers must send a letter of medical necessity on office stationery to the CSHCN Service Program for the following drugs:

• Family planning products
• Human Immunodeficiency Virus (HIV) drugs
• Pulmonary hypertension drugs

Contact the CSHCN Services Program for prior authorization questions.

The program may cover HIV drugs when prior authorized for the treatment of HIV/AIDS, while the person completes the Texas HIV Medication Program eligibility process. Covered HIV medications are subject to change. People have up to 60 days of prior approval while waiting for acceptance or denial from the Texas HIV Program.

After the 60 days prior approval period, the person must contact the Texas HIV Program to obtain these medications. Claims for these drugs will reject with NCPDP code 75 ("Prior Authorization Required") and include the message “Call HIV Program 1-800-255-1090” in the “Additional Message Information” field (526FQ), except when the person is not eligible for the drug from the HIV Program. In these cases, the CSHCN Services Program should be notified and the claim will process for payment under CSHCN.

The Texas Department of Insurance requires HHSC to publish the Texas Standardized Prior Authorization Request Form for Health Care Services (TDI Form NOFR002) for prescribing providers as of Sept. 1, 2015. Refer to TAC Section 19.1820 (Subchapter S: Prior Authorization Request Form for Prescription Drug Benefits, Required Acceptance, and Use).

Providers use this form to request prior authorization by fax or mail. Some medications will require providers to submit an addendum form to capture additional information. Failure to submit both the Standardized Prior Authorization Request and addendum may result in an authorization denial.

Reimbursement of outpatient prescription drugs is based on the drug's Actual Acquisition Cost (AAC) according to the Covered Outpatient Final Rule of the Affordable Care Act of 2010.  Pharmacy providers must use the current Texas Drug Code Index as the reference for allowable package sizes of reimbursable legend and non-legend drugs and are reimbursed at AAC plus a reasonable dispensing fee. AAC is defined as an estimate of prices generally and is currently paid in the market by one of the following:

1. Wholesale estimated acquisition cost (WEAC);
2. Long term care pharmacy acquisition cost (LTCPAC); or
3. Specialty pharmacy acquisition cost (SPAC)

The AAC is verifiable by invoice audit conducted by HHSC to include necessary supporting documentation verifying the final cost to the provider. The WEAC, LTCPAC, and SPAC prices are established using market or government sources, which include, but are not limited to:

• Reported manufacturer pricing
• First Databank
• Redbook
• Weighted Average Manufacturer Price as published by the Centers for Medicare & Medicaid Services (CMS)
• National Average Drug Acquisition Cost (NADAC), as published by CMS; or
• Gold Standard pricing service

Pharmacy providers participating in the 340B Drug Pricing Program must identify all outpatient pharmacy claims filled with 340B stock for 340B-eligible people. Refer to the 340B Resources section to learn more about billing requirements for eligible pharmacies.

This methodology applies to the pricing on all claims processed by HHSC as of June 1, 2016.  Retroactive claims are processed with the pricing on the date of service. The change is not related to and does not impact reimbursement rates associated with pharmacy reimbursement through Medicaid managed care.

NADAC pricing is generated by CMS and pricing disputes are directed to CMS. Refer to the Drug Pricing section for pricing contacts.

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.

Payment for legend drug and non‐legend drug (OTC) prescriptions are reimbursed at the lesser of the following:

1. AAC plus a reasonable dispensing fee
2. The Usual and Customary (UAC) price charged the general public
3. The Gross Amount Due (GAD), if provided

The total reimbursement amount is determined by adding $7.93 (the fixed component) to the ingredient cost and dividing the sum by 0.9804 (the variable component). An additional $0.15 is added if the pharmacy has been certified as providing free delivery service to people enrolled in Medicaid. The total reimbursement includes the dispensing fee. The calculated dispensing fee is determined by subtracting the total ingredient cost from the calculated total amount. Another $0.50 is added if the pharmacy dispenses a premium preferred generic.

For example, if the total ingredient cost of a drug is $10.00, the pharmacy's total reimbursement is calculated in the following way:

• $10.00 plus $7.93 = $17.93
• $17.93 divided by 0.9804 = $18.28 
• Pharmacies with a delivery agreement add $0.15 = $18.43 (calculated total amount)
• $18.43 - $10.00 = $8.43 (calculated dispensing fee)
• Pharmacies dispensing a premium preferred generic drug add $0.50 = $18.93 (total reimbursement paid)

If the submitted UAC or GAD price for this item is less than the amount calculated above, the pharmacy will receive payment for the UAC or GAD price. Pharmacy providers should submit their true UAC price for all claims.

The total dispensing fee shall not exceed $200 per prescription.

• Refer to the Enrollment section to learn about the delivery incentive.
• Refer to the Drug Policy section to learn about premium preferred generic drugs.
• Refer to the 340B Resources section to learn more about requirements for the 340B Drug Pricing Program eligible pharmacies.

Certain products may differ from this reimbursed calculation, such as home health supplies, vitamin and minerals, influenza vaccines, and long-acting injectables. Refer to the Formulary search (txvendordrug.com/formulary/formulary-search), and the drug pricing details of each drug for information on specific pricing.

The 340b Drug Pricing Program is a federal program overseen by the Health Resources and Services Administration (HRSA) Office of Pharmacy Affairs. The program requires drug manufacturers to provide outpatient drugs to certain health care entities at significantly reduced prices so the remaining funds can provide services for more eligible clients and provide more comprehensive services. This process allows Medicaid to share in the savings generated by the 340B Program.  340b refers to the section of the Public Health Service Act requirements.

Providers eligible for the 340B program are called covered entities. Federal law requires covered entities to include hospitals and other federal grantees. Each type of covered entity has rules regarding its participation in the program.

Pharmacies identified as a Federally Qualified Health Center (FQHC) do not qualify for reimbursement through Medicaid. FQHCs are reimbursed by a total encounter rate for all services under the Veterans Health Care Act of 1992.

Refer to the HRSA website at hrsa.gov/opa/ for educational resources, eligibility requirements, FQHC information, and registration information about the 340B program.

Covered entities must first enroll in the 340B Program. HRSA assigns the covered entity an identification number upon enrolling in the program. Drug manufacturers use this number to verify the covered entity is allowed to purchase 340B purchased drugs. In addition, each covered entity must designate with HRSA whether it will use 340B discounted drugs and the 340B pricing to bill Medicaid.

HRSA does not specify how covered entities should implement 340B. If the covered entity complies with all 340B Program requirements, it can implement its 340B procedures. Most covered entities choose one or more of the following options to provide outpatient drugs to their clients:

• In-house pharmacy: the covered entity owns drugs, pharmacy, and license; purchases drugs; is fiscally responsible for the pharmacy; and pays the pharmacy provider.
• Contract pharmacy services: the covered entity owns drugs, purchases drugs, pays (or arranges for clients to pay) dispensing fees to one or more contract pharmacies, and contracts with a pharmacy to provide pharmacy services. Refer to Contracted Pharmacies for more information on this process.
• Provider/In-house dispensing: the covered entity owns drugs, employs providers licensed in the state to dispense, holds a license for dispensing for the participating providers, and is fiscally responsible for operating and dispensing costs.

Refer to the Enrollment section for information about how pharmacies enroll in Medicaid.

Many 340B covered entities elect to dispense 340B drugs to clients through contract pharmacy services. The 340B covered entity signs a contract with one or more pharmacies to provide these prescription services. A single covered entity with more than one 340B-eligible pharmacy may have individual contracts for each location or include multiple locations within a single pharmacy services contract. Covered entities are responsible for ensuring compliance of their contract pharmacy arrangement(s) with all 340B Program requirements.

The HRSA Contracted Pharmacies Database must include all contracted pharmacies associated with the covered entity. The covered entity is responsible for compliance with their contract pharmacy arrangement. Refer to the Provider Responsibilities section below for more information.

Covered entities can purchase, receive, and pay for drugs but request that the drugs ship directly to contracted pharmacies.

Refer to the "Notice Regarding 340B Drug Pricing Program - Contract Pharmacy Services" printed in the Federal Register (Vol. 75, number 43, pages 10272-9, March 5, 2010) at https://www.govinfo.gov/content/pkg/FR-2010-03-05/pdf/2010-4755.pdf for more information about the operation and compliance of contract pharmacies.

HRSA Audit Requirements

All covered entities must maintain auditable records and conduct annual audits of contract pharmacies. Independent outside auditors should review their compliance. The covered entity should disclose the finding to HRSA along with the covered entity's plan to address the finding. Refer to the HRSA website at https://www.hrsa.gov/opa/program-integrity/ or the specific MCO for its contract requirements for more information.

Annual HRSA Recertification

HRSA requires covered entities to annually recertify their eligibility to remain in the 340B Program and continue purchasing covered outpatient drugs at discounted 340B prices. As part of the recertification process, entities should ensure the following:

• The HRSA database includes the 10-digit National Provider Identifier (NPI) and 6-digit HHSC-issued Medicaid vendor number
• The entity answered "Yes" to the billing question on the Medicaid contract, "Will you bill Medicaid for drugs purchased at 340B prices?", if you plan to share the 340B savings with Medicaid
• The HRSA quarterly Medicaid Exclusion file includes each of the entity's correct names and physical addresses

Eligible entities with pharmacies participating in the 340B Program must identify all outpatient pharmacy claims filled with 340B purchased drugs for 340B-eligible clients, including fee-for-service Medicaid and managed care, by submitting a value of "20" (340B / Disproportionate Share Pricing/Public Health Service) in the "Submission Clarification Code" field (420-DK). Submitting this value prevents duplicate discounts.

The 340B statute prohibits duplicate discounts, which occur when a covered entity obtains a 340B discount on medication and a Medicaid agency obtains a discount in the form of a rebate from the manufacturer for the same medication. Covered entities must have mechanisms in place to prevent such occurrences. Refer to the HRSA Duplicate Discount Prohibition page (hrsa.gov/opa/program-requirements/medicaid-exclusion/) for more information.

Pharmacy providers may not know at point-of-sale if a claim qualifies as a 340B claim. To qualify as a 340B claim, pharmacies must dispense 340B purchased drugs to a 340B eligible client. If the pharmacy submits the 340B claim without the Submission Clarification Code, the pharmacy must reverse and resubmit the claim once the pharmacy identifies the error. The manufacturer is invoiced if the pharmacy does not correct the claim. The pharmacy and the eligible entity may be held responsible for repaying any incorrectly invoiced amounts to the manufacturer. Manufacturers initially provide pharmacies with drugs at 340B prices, and pharmacies should not invoice the manufacturer after the sale for another rebate.

Fee-For-Service Medicaid, CSHCN, HTW, and KHC

On June 1, 2016, HHSC began basing the reimbursement methodology for calculating the ingredient cost of 340B drugs for pharmacy claims paid to the covered entities on the Wholesale Acquisition Cost (WAC). The information below identifies the drug categories and reimbursement methodologies.

HHSC reimburses new drugs on the market less than six months from the date added to the formulary at WAC minus 23.1 percent. After the drug’s new-to-market date reaches six months, HHSC will base the reimbursement on one of the categories listed in the table above. This methodology is not all-inclusive, and HHSC may price some products manually.

Managed Care

Beginning Dec. 1, 2014, MCOs can create their own 340B reimbursement methodologies. Pharmacy providers should contact the client's specific MCO for details.

A covered entity using 340B purchased drugs in Medicaid managed care must contract with the MCO as a 340B pharmacy and accept the payment terms of their shared-savings model. A shared savings model is an alternative payment model in which providers agree to share a percentage of the net savings they receive to a defined client population. If the covered entity does not accept the terms of an MCO's shared savings model to reimburse 340B purchased drugs, then the covered entity may choose to contract with the MCO as a retail pharmacy.

If the covered entity contracts with an MCO as a retail pharmacy, the entity cannot use 340B purchased drugs.

MCOs may deny claims submitted with a value of "20" for pharmacies not contracted as a 340B pharmacy because the pharmacy should not have filled the claim with 340B purchased drugs. An MCO cannot require its network pharmacy to submit its actual acquisition cost on outpatient drugs and biological products purchased through the 340B program.

Refer to the 340B Resources section for more about 340B claims processing.

All covered entities must use the modifier "U8" when submitting medical claims for 340B clinician-administered drugs as of Sept. 1, 2015. Medical claims for clinician-administered drugs (CAD) (also known as physician-administered drugs) include Healthcare Common Procedure Coding System (HCPCS) codes listed on the Formulary search (txvendordrug.com/formulary/formulary-search). The CAD search identifies the relationship between a rebate-eligible NDC and HCPCS code.

Providers can access the NDC Requirements for the Submission of CAD Claims instruction within the TMHP Learning Management System (LMS) for detailed information about CAD claim submission. Refer to the TMHP Resources section for details about the TMHP LMS and how to register.

The covered entity must correctly submit claims filled with 340B drugs for 340B clients to ensure HHSC does not collect rebates for these drugs. Non-compliance with this requirement may jeopardize a covered entity's 340B status with HRSA. This modifier requirement for 340B clinician-administered drugs applies to Medicaid fee-for-service claims submitted to TMHP and Medicaid managed care claims submitted to the client's MCO.

Providers who believe NDCs are missing for a specific HCPCS procedure code can contact HHSC to request a review. The email should include the procedure codes and corresponding NDCs. Contact the Clinician-administered Drug Administration to request a HCPCS review.

For more information related to the submission of medical claims, call the TMHP Contact Center.

The HHSC drug rebate system receives all outpatient pharmacy and clinician-administered drug claims for all state-administered programs for invoicing. HHSC invoices drug manufacturers for claims when the state pays any amount after deductions for co-pay, coinsurance, or any other payment type. Any amount paid for dual-eligible clients, either directly by the state or through an MCO, is also invoiced if the state pays any amount.

Pharmacy Rebates Exclusions

HHSC only excludes pharmacy claims from the rebate collection process if the pharmacy submits a "20" in the "Submission Clarification Code" field (420-DK), required as of Jan. 1, 2014. It is the responsibility of the covered entity and their contracted pharmacies to correctly report claims filled with 340B stock for 340B-eligible clients to ensure the state does not collect rebates for these drugs.

Clinician-Administered Drug Rebates Exclusions

HHSC only excludes medical claims for outpatient clinician-administered drug claims from the rebate collection process if the provider submits the U8 modifier. It is the responsibility of the provider to correctly report claims identified as 340B stock for 340B-eligible clients to ensure the state does not collect rebates for these drugs.

Covered entities and contracted pharmacies are responsible for the following:

• Correctly reporting claims filled with 340B purchased drugs for 340B-eligible clients to ensure CMS does not collect rebates for these drugs
• Cooperating with drug manufacturers to resolve disputes when either traditional or managed care claims are not labeled appropriately with SCC 20 or U8 modifiers and HHSC invoices for rebates MCOs and pharmacy benefit managers
• Retaining all necessary data, including the submission clarification code 20 or U8 modifier in the encounter data sent to HHSC
• Maintaining their shared-savings model

It is not the responsibility of the MCO to oversee covered entities or for the contracted pharmacies to ensure HHSC does not collect rebates. If the appropriate values are submitted, then it is the responsibility of the MCO to transmit those fields from the covered entities or pharmacy.

The HHSC drug rebate system relies on the correctly submitted values to identify claims excluded from the rebate invoicing process. HHSC does not approve alternative arrangements for preventing duplicate discounts.

HHSC pays enrolled pharmacies for dispensed outpatient pharmaceuticals for people enrolled in:

• Traditional Medicaid
• Children with Special Health Care Needs (CSHCN) Services Program
• Healthy Texas Women (HTW) program
• Kidney Health Care (KHC) Program

Claims for clients enrolled in Medicaid managed care or the Children’s Health Insurance Program (CHIP) are billed through the managed care organization (MCO) and its contracted pharmacy benefits manager. Questions regarding remittance of these claims should be addressed to the MCO. Pharmacy providers should contact the client's specific MCO for details.

All payable Medicaid, CSHCN, HTW, and KHC claims are paid weekly. The payment cycle begins at 12:00:00 a.m. on Friday and ends at 11:59:59 p.m. the following Thursday. Payments are generally issued to financial institutions on Monday night and are posted to each pharmacy's account according to its financial institution's schedule (usually within 72 hours).

Refer to the Payment Delays for the schedule of federal holidays impacting payment.

Payments for claims from all programs will appear on the same payment warrant, direct deposit, and remittance advice.

There will be a one-day delay in payments because of the following federal holidays occurring on Monday:

• Martin Luther King, Jr. Day (third Monday of Jan.)
• Presidents Day (third Monday of Feb.)
• Memorial Day (last Monday of May)
• Labor Day (first Monday of Sept.)
• Columbus Day (second Monday of Oct.)

There will also be a one-day delay in payment when the following holidays occur on Monday:

• New Year’s Day (Jan. 1)
• Independence Day (July 4)
• Veterans Day (Nov. 11)
• Christmas Day (Dec. 25)
• Day After Christmas (Dec. 26)

HHSC will announce any other unscheduled delay.

Pharmacy providers receive the following files each week:

• Standard ASC X12N 835 Health Care Payment/Advice
• VDP payment register in portable document format (PDF)

The files identify paid or reversed claims. Pharmacy providers should examine each document and maintain documents for future reference. Payment files are not mailed, and pharmacy providers must obtain the files from the HHSC Payment File Portal.

Payment File Portal

The Pharmacy Payment File Portal (PFP) (--) is a browser-based portal pharmacy providers use to obtain pharmacy remittance advice files. All Medicaid-enrolled pharmacy providers are eligible to create a free account. The PFP is accessible only through the Microsoft® Internet Explorer® browser.

Refer to the Pharmacy Operations Forms section for the Pharmacy Electronic Remittance Advice Agreement (HHSC Form 1316) and submission instructions. Third-party entities accessing payment information on behalf of pharmacy providers must also complete the form. Changes, terminations and addition of providers for third party entities must be reported by submitting an updated form.

Refer to the Pharmacy Payment section for PFP Correspondence.

State Comptroller

Pharmacies may view their payment information through an account with the Texas Comptroller of Public Accounts. Refer to the State Payee Payment Resources page of the Comptroller's website to learn more.

The HHSC pharmacy claims system considers the fields identified in this section during the claim adjudication process.

HHSC returns the following fields on the paid claim response. Refer to the Claims Billing (B1) Transaction for instructions and payer sheets.

Pharmacy providers with incorrectly billed claims resulting in the pharmacy owing HHSC a refund should adjust the claim within 90 days of the original service date. You should first attempt to reverse the claim. Pharmacies have 720 days from the date of service to reverse the claim online.

If you are unable to reverse the claim, contact the Pharmacy Benefits Access Help Desk. The help desk can reverse claims through the current triennium, or the current fiscal year plus two previous fiscal years.

HHSC cannot electronically adjust claims dated outside the current triennium, and pharmacies must refund HHSC by check or money order. HHSC requires a pharmacy to submit a cover letter and claim-level information about the refund. The pharmacy must include its six-digit Vendor Drug contract ID number and 10-digit NPI on the documentation and the check or money order to expedite the refund.

Refer to the Pharmacy Refunds section of the Contact Information chapter for instruction on how to submit refunds to HHSC.

All pharmacies enrolled with HHSC are subject to periodic audits. These may result from internal HHSC auditors working with the HHSC Inspector General (IG) or Federal Medicaid Integrity contractors working through the Centers for Medicare and Medicaid Services.

Refer to TAC Section 354.1891 (Subchapter F: Vendor Drug Providers Subject to Audit).

Pharmacy claims are sampled and reviewed for accuracy and compliance with state and federal laws and policies governing the pharmacy programs. Any audit findings derived by following procedures developed from accepted and approved audit standards may subject the pharmacy to recoupment. The auditors determine the amount of overpayment in a sample set of claims and then apply a statistical extrapolation formula to estimate the overpayment across the universe of claims the pharmacy provider or supplier submitted over the selected audit period.

Audits determine the pharmacy's compliance with federal and state laws, policies, procedures, and limitations. Auditors will select claims transactions and compare them with documentation on the corresponding prescriptions, invoices, the pharmacy's daily logs, pharmacy delivery logs, etc. Overpayments are considered exceptions subject to restitution to HHSC.

The audit process begins with an engagement letter, or notice of intent to audit, sent to the pharmacy provider. The letter includes the dates of the audit period and the proposed audit date. A request is made that the pharmacy provider provide ample room and proper atmosphere for the auditor to conduct the audit. On-site audit time periods vary between 1 and 3 days. At the end of examination of material relevant to the audit, an oral exit interview is conducted.

The auditors then deliver the draft audit report listing findings, if any, to the pharmacy contact - usually the owner or the pharmacist-in-charge. The pharmacy then has 15 days to provide additional documentation and a response to the draft audit report. The response may include a management rebuttal to address any findings. A final audit report will be issued.

A pharmacy has a right to request an informal hearing to contest the findings of an audit conducted by the HHSC IG or an entity that contracts with the federal government to audit Medicaid pharmacy providers. The informal hearing can be requested if the audit findings do not include findings that the pharmacy engaged in Medicaid fraud. In an informal hearing, an Administrative Law Judge (ALJ) from the HHSC Appeals Division will make the final decision on whether the complete findings of an audit, including any additional documentation provided, are accurate.

Refer to TAC Section 354.1891 (Subchapter F: Vendor Drug Providers Subject to Audit).

Appeals Process

Pharmacy providers will have 15 days from receipt of the final audit report to request an informal hearing. The pharmacy will be notified via certified mail that the informal hearing has been scheduled. The notice is mailed to the pharmacy's address on file with the VDP or to the attorney representing the pharmacy. The date, time, and location of the hearing and any other pertinent details will be provided.

If the informal hearing request was not received within 15 days of the receipt of the final performance audit report, pharmacy providers will be notified via letter that the request was not submitted timely and that an informal hearing will not be scheduled.

If the pharmacy is unable to attend the scheduled hearing then the ALJ must be notified in advance. The ALJ determines if the provider's reasons for absence are acceptable. The hearing is rescheduled if the ALJ deems the provider's absence reasons acceptable and the notification process described above will begin again.

The ALJ will make the final decision. HHSC is available to address questions but will not vote on the matter.

Informal Hearings

Informal hearings will be recorded. The pharmacy provider is notified in advance of the hearing date, time and location and that they may request a copy of the recording free of charge.

A certified letter is sent to the pharmacy provider or to the attorney representing the pharmacy provider indicating the final amount due. The pharmacy provider has 30 days to either:

• Pay the amount in full; or
• Request and have an approved payment plan.

The Medicaid Drug Rebate Program is a partnership between the Centers for Medicare & Medicaid Services (CMS), state Medicaid agencies, and participating drug manufacturers working together to offset the federal and state costs of outpatient prescription drugs dispensed to Medicaid patients. Approximately 600 manufacturers currently participate in this program.

HHSC receives federal funds for prescription claims on drugs made by manufacturers participating in the Medicaid Drug Rebate program. Manufacturers agree to pay rebates according to their state and federal contracts in return for having drugs covered by Medicaid.

Each calendar quarter, rebate administration staff summarize all paid claims by drug and bill the drug companies for their products. The manufacturer pays the invoice but may have questions about the reported utilization. If this occurs, the rebate administrator staff will review the claim level data for the specific drug.

Rebate administration staff will direct questions about managed care claims to the MCO for resolution.

Refer to the Medicaid Clinical Prior Authorization section to learn more.

Refer to the Pharmacy Education Downloadable Materials for more information about these documents.

Refer to the Medicaid Non-preferred Prior Authorization section for more information. Refer to the Preferred Drug List Process to learn how HHSC includes drugs on the PDL.

VDP uses forms for pharmacy enrollment, registering for special system access, requesting prior authorization for drugs, and conducting other business. Refer to the pages in this section for lists of forms by topic. Each form has unique completion and submission instructions.

Some forms cannot be viewed in a web browser and must be opened in Adobe Reader on your desktop system. Refer to the HHSC File Viewing Information (hhs.texas.gov/file-viewing-information) if you have difficulties viewing or downloading forms.

Refer to the enrollment process to learn when HHSC requires these forms. Refer to the Comprehensive Care Program Enrollment section for instructions on using TMHP Form F00012. Refer to the Durable Medical Equipment Provider Enrollment section for instructions on using TMHP Form F00030.

Prescribing providers submit the following forms to request prior authorization for clients enrolled in the CSHCN Services Program. Refer to each form's instruction page for requirements and submission instructions. Refer to the CSHCN Services Program - Prior Authorization Contacts section for program contact information.

Providers must submit each request below with the Texas Department of Insurance (TDI) Texas Standard Prior Authorization Request Form for Prescription Drug Benefits. Failure to submit both forms will result in authorization delay or denial.

Each form has a related drug or drug class-related section in the Formulary Coverage section of this manual.

Prescribing providers use these forms to request prior authorization for clients enrolled in Medicaid fee-for-service. Refer to each form's instruction page, linked below, for submission instructions. Refer to the Medicaid Clinical Prior Authorization section to learn more. 

Providers must submit each request below with the Texas Department of Insurance (TDI) Texas Standard Prior Authorization Request Form for Prescription Drug Benefits. Failure to submit both forms will result in authorization delay or denial.

Each form has a related drug or drug class-related section in the Formulary Coverage section of this manual.

Refer to the Policy Development page (txvendordrug.com/about/policy) for more information.