Claim Limitations

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.

Prescription Limits

Medicaid

People enrolled in Medicaid are limited to three prescriptions per month except for:

  • Children under 21
  • People enrolled in managed care
  • People enrolled in eligibility waiver programs

Drugs and products not counted as part of the three-prescription limit include the following:

Payment for up to a six-month supply may be allowed for adults with monthly prescription limitations dependent on the drug prescribed.  Quantities should not exceed a one-month (34-day) supply for people with an unlimited number of prescriptions per month.

CHIP

People enrolled in CHIP have unlimited prescriptions, with a few exclusions, including the following:

  • Contraceptive medications prescribed only for the purpose of primary and preventative reproductive health. Refer to the Family Planning Products section for more information. 
  • Medications for weight loss or gain

CSHCN

People enrolled in the CSHCN Services Program have unlimited prescriptions.  The availability of appropriated funds limits the CSHCN Program.  Upon notification to eligible people and providers, services may be adjusted periodically depending on the current availability of funds. If a person is dually enrolled in Medicaid and CSHCN, the Medicaid benefit should be used first, including those limited to 3 monthly prescriptions.

KHC 

The KHC program limits people to four prescriptions per month.  The number of prescriptions per month the program pays per person is based on available KHC funds, and the number of prescriptions covered may change depending on budget limitations.  KHC will send a notification 30 days in advance if the prescription number limitation changes.

The federal Comprehensive Immunosuppressive Drug Coverage for Kidney Transplant Patients Act of 2020 became effective Jan. 1, 2023. The Act extends lifetime Medicare coverage of immunosuppressant drugs for Medicare-eligible kidney transplant recipients indefinitely. This Act only provides coverage of immunosuppressant drugs and does not provide full healthcare coverage. Refer to the Medicare End Stage Renal Disease website for more information.

Refill Authorization

Pharmacy providers should only submit refills when requested by the client, and must not bill Medicaid unless the client has requested the refill. This includes pharmacies using automated refill systems. No partial fill processing is allowed.

Refill Limitations

HHSC allows prescription refills based on the United States Drug Enforcement Administration (DEA) drug schedule as outlined below.

DEA Schedule Refill Limitations

No schedule

Original prescription plus 11 refills within 365 days from the written date of the original prescription
Schedule 3, 4, 5 Original prescription plus 5 refills within 185 days from the written date the original prescription

Refill Utilization

A refill is considered too soon, or early, if the person has not used at least 75% of the previous fill of the medication.

Traditional Medicaid and CSHCN

A refill for certain controlled substances, such as tramadol, is considered too soon if the person has not used at least 90% of the previous fill of the medication. Attention deficit hyperactivity disorder drugs and certain seizure medications are excluded from this requirement.

Refer to the Formulary search, and select the "90% Utilization" filter to identify these drugs.

Claims not meeting the utilization threshold will reject with NCPDP error code "79".  A previous fill may have been from a different pharmacy.

Days Supply

Pharmacy claims are submitted with the number of consecutive days covered by the prescription in the "Days Supply" field (405-D5). Incorrect reporting in this field may impact early refill edits or inaccurate drug use review warnings. Pharmacy providers should divide the quantity by total dosage units per day to identify the correct day supply.

Program Maximum Day Supply
Medicaid 185
CHIP Up to 90
CSHCN 185
KHC 34 unless Medicare is the primary payer; KHC will pay for a 90-day supply if Medicare allows a 90-day supply

Dispense as Written

Pharmacy providers must submit a value "1" in the "Dispense as Written (DAW) / Product Selection code" field (408-D8) when a prescribing provider wants a nonpreferred brand name dispensed and hand writes the phrase "Brand Necessary," "Brand Medically Necessary," "Brand Name Necessary," or "Brand Name Medically Necessary" across the face of the prescription.  The value of “1” will reimburse at the normal calculated cost, including comparison to the submitted "Usual and Customary Charge" and "Gross Amount Due" fields.  The value of “1” is not needed if the brand drug prescribed has preferred status on the Texas Medicaid Preferred Drug List.

If an e-prescription is received by a pharmacy with “dispense as written” indicated but without the free text message ("Brand Medically Necessary") or additional note, the pharmacy must contact the prescriber for a new prescription. Submit the claim once the pharmacy receives the e-prescription with both data elements.

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 (TSBP) rules.

Drug Format

Pharmacies submit claims with the following Product/Service ID fields:

  • 11-digit National Drug Code (NDC) in the "Product/Service ID" field (407-D7)
  • Value "03" in the "Product/Service ID Qualifier” field (436-E1)

The NDC number submitted on the claim transaction must match the NDC number on the package or container dispensed.

The 11-digit NDC number is composed of the following three segments:

  • Labeler
    • 5-digit code assigned by the Food and Drug Administration (FDA) and identifies the drug manufacturer
  • Product
    • 4-digit code assigned by the drug manufacturer and identifies the specific product
  • Package
    • 2-digit code assigned by the manufacturer and identifies the package size

The correct format for pharmacy claim submission is an 11-digit number in a 5-4-2 format. Pharmacy providers must convert any other number, such as a 10-digit number in the 4-4-2, 5-3-2, or 5-4-1 format, before submittal. To correct the NDC place a leading zero in either the labeler code, product code, or package size code to conform to the 5-4-2 format.

Refer to the Multi-ingredient Compounds section for instructions on how to identify the NDC on a multi-ingredient compounds claim.

Drug Unit of Measure

Pharmacy claims are submitted with billing units in the “Unit of Measure” field (600-28):

  • Each (EA), used when the product is dispensed in discreet units
  • Gram (GM), used when a product is measured by its weight
  • Milliliter (ML), used when a product is measured by its liquid volume

Pharmacy providers should be aware of the correct billing units on certain medications to alleviate billing discrepancies, which can lead to potential audit risks. Quantity for milliliters and grams must be divisible by package size. Some products (such as Risperdal Consta, Humira, Enbrel, Lovenox, Neupogen, Pegasys, and Procrit) may have varying units depending on the NDC number.

Refer to the NCPDP B1 Transaction Payer Sheet for the acceptable unit of measure values on a single ingredient and multi-ingredient compound claim.

Prescription Splitting

Pharmacy providers should dispense the same drug in the same strength no more than once per month, per person. An exception to this is only for medications considered too unstable to be dispensed as a one-month supply. HHSC may refer pharmacy providers not compliant with this policy to the HHSC Office of Inspector General.

Quantity Dispensed

Pharmacy providers must submit claims with the amount dispensed at point-of-sale in the "Quantity Dispensed" field (442-E7). The pharmacy must dispense the quantity prescribed or ordered by the prescribing provider except as limited by the policies and procedures described in this manual. When the actual quantity dispensed deviates from the prescribed quantity, the pharmacy must submit for the amount dispensed. Incorrect reporting in this field may prompt drug companies to dispute the claim and cause rebate auditors to review the claim level data.

Drugs such as ear drops, eye drops or ointments, inhalers, and injectable products are packaged in sizes without a whole number. When submitting a claim for a drug packaged in a metric decimal-sized package (e.g. 10.2; 2.5; etc.), the pharmacy should include the decimals on the claim and not round up.

Contact your software vendor for assistance with issues resolving whole number units on the package size and submitting decimal units.

Drug Coverage

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. 

Drug Shortages

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

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.