Montana Administrative Register Notice 37-495 No. 3   02/11/2010    
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In the matter of the adoption of New Rule I and the amendment of ARM 37.86.105, 37.86.1101, and 37.86.1105 pertaining to Medicaid physician administered drug reimbursement and pharmacy outpatient drug reimbursement









TO:  All Concerned Persons


1.  On November 12, 2009, the Department of Public Health and Human Services published MAR Notice No. 37-495 pertaining to the public hearing on the proposed adoption and amendment of the above-stated rules at page 2120 of the 2009 Montana Administrative Register, Issue Number 21.


            2.  The department has amended the above-stated rules as proposed.


            3.  The department has adopted the following rule as proposed with the following changes from the original proposal.  Matter to be added is underlined.  Matter to be deleted is interlined.




AUTH:  53-6-101, 53-6-113, MCA

IMP:  53-6-101, 53-6-113, MCA


            4.  The department noticed there is a grammatical error in the catchphrase of Rule I (37.86.1106).  It should read ". . . STATE MAXIMUM ALLOWABLE CHARGE. . ." not ". .  .STATE MAXIMUM ALLOWABLE COST. . . ".  The department is changing the word "cost" to "charge".


            5.  The department has thoroughly considered the comments and testimony received.  A summary of the comments received and the department's responses are as follows:


COMMENT #1:  It was stated that adequate reimbursement to pharmacies for dispensing generic drugs is important to maintain reasonable access and contain costs.  The department should increase the dispensing fees for generic drugs.  It would be cost effective for the department to increase generic utilization instead of implementing a state maximum allowable cost (SMAC.)


RESPONSE #1:  The department agrees it is important to maintain adequate reimbursement for dispensing generic drugs to maintain Montana Medicaid recipient's access to pharmaceuticals and to contain costs.  The department disagrees that increasing the dispensing fee is necessary to adequately reimburse pharmacies for dispensing generic drugs.  Montana Medicaid's utilization rate for generics is 72.61% and its generic substitution rate is 95.52%.  Montana Medicaid's current maximum dispensing fee of $5.04 is one of the highest in the state for third party payors and one of the highest in the nation for state Medicaid programs.  Implementing the SMAC stated in these rules is consistent with the federal requirements to reimburse pharmacies at estimated acquisition costs and eliminate overpayments allowed by the current reimbursement methodology. 


COMMENT #2:  It was suggested that the definition of multisource drug be a drug that has three or more "A" rated therapeutically equivalent drug products sold by different manufacturers that are readily available for purchase nationally and in Montana.  Any other definition risks basing drug product reimbursement on an unstable pricing structure, which could reduce access to generic drugs for Medicaid recipients.


RESPONSE #2:  The department disagrees that the definition of multisource drugs should be changed.  The existing definition does not result in an unstable pricing structure.  The department has addressed generic availability in its mandatory generic policy.  Generic mandatory logic typically does not engage until there are two or more "A" rated therapeutically equivalent drug products in addition to the trademarked product in the marketplace.  The first generics may be available at a significantly discounted rate to pharmacies.  The rule allows the department to actively monitor the Montana marketplace to calculate the Medicaid reimbursement that approximates actual acquisition cost as required by federal law.


COMMENT #3:  It was proposed that SMAC be calculated using drug price information obtained from multiple nationally recognized data sources because pharmacies are not appropriate sources of information for determining actual acquisition cost for setting a price based on SMAC.  The commentor suggests that the department use nationally recognized data sources. 


RESPONSE #3:  The department plans to use a variety of sources to arrive at an equitable price for generics but the actual cost of a drug to a Montana pharmacy is the best source of data.  Pharmacy level data is a more appropriate source for determining acquisition costs to set a price based on SMAC than national data sources.  The survey of in-state pharmacy providers is the most accurate means of determining a Montana pharmacy's actual acquisition cost and the availability of a product across Montana.


The department's survey process is designed to be minimally disruptive to pharmacy operations.  The commentor's proposal to use only nationally available pricing information would not provide Montana-specific acquisition cost or availability. 


COMMENT #4:  It was requested that pharmacies be given the right to comment on, contest, or appeal the SMAC rates set by the department.


RESPONSE #4:  Any party has the right to comment on SMAC rates set by the department.  The right to a hearing is based on statute and case law.  Hearing rights are described in ARM Title 37, chapter 5 and are not changed in these rules.


COMMENT #5:  A commentor suggested that the department amend the definition of average manufacture price (AMP) to include language that has also been proposed in federal legislation.


RESPONSE  #5:  The department does not agree that the definition of AMP should be amended.  Amendment was not proposed in this rule change notice.  The department is not basing any pricing off of AMP.  AMP is federally defined term that is currently subject to litigation and proposed amendment.


COMMENT #6:  It was proposed that a contract amendment to the Medicaid provider contract with pharmacists address changes in average wholesale price (AWP.)


RESPONSE #6:  The department disagrees that the provider contract should be amended regarding AWP at this time.  AWP and the Medicaid provider contract are not the subject of this rulemaking.


COMMENT  #7:  It was proposed that the department change its reimbursement methodology to wholesale acquisition cost (WAC) multiplied by 110% plus a dispensing fee of $5.25 for branded products, and 200% of the federal upper limit plus a dispensing fee of $9.50 for generic drugs. 


RESPONSE #7:  The department does not agree that 110% of WAC plus a dispensing fee is the appropriate reimbursement methodology for Montana Medicaid.  The reimbursement method would exceed the amount the Montana Legislature appropriated.  The commentor's proposal for the department to pay 200% of the federal upper limit as reimbursement for generic drugs is prohibited by federal law 42 CFR, parts 447.331-333.


COMMENT # 8:  A commentor proposed that the department pay an undetermined fee for any other professional services rendered by a pharmacy, adjusted annually for inflation.


RESPONSE #8:  Professional service fees in addition to the dispensing fee are outside the scope of the rule proposed, and no funds have been allocated to allow for payment.


COMMENT #9:  A commenter stated that the department could collect data on actual acquisition cost for a drug from sources other than Montana pharmacies and that Montana pharmacies should be compensated for compiling and providing this information. 


RESPONSE #9:  The department disagrees with the commentor.  See response #3.


COMMENT # 10:  It was stated that the department was a party to the AWP settlement and is required by the terms of the settlement to offset the judicially mandated adjustment to AWP by increasing dispensing fee.


RESPONSE #10:  The department disagrees.  Montana Medicaid was not a party to the AWP settlement (First DataBank lawsuit settlement).  The AWP settlement does not impose a legal obligation to offset the downward adjustment to AWP.


COMMENT #11:  A commentor generally supports the rule changes.  The federal upper limit should be eliminated.   The commentor supports the new SMAC methodology but wants the dispensing fee carefully monitored to cover actual costs. The commentor supports a higher dispensing fee that should cover the actual costs associated with filing a prescription.  For example, some patients require weekly packaging of some medications.  This may reduce costs and is good treatment but it is an overhead cost to the pharmacy that should be reimbursed.


RESPONSE #11:  The department appreciates the comment and agrees that the dispensing fee and pricing structure must be monitored to promote the equitable reimbursement of pharmacies for quality patient care and cost containment.


            6.  The department intends to apply these rules effective March 1, 2010. 




/s/  Geralyn Driscoll                                       /s/  Anna Whiting Sorrell                              

Rule Reviewer                                               Anna Whiting Sorrell, Director

                                                                        Public Health and Human Services


Certified to the Secretary of State February 1, 2010.


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