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Frequently Asked Questions

Frequently Asked Questions are used to provide additional information and/or statutory guidance not found in State Medicaid Director Letters, State Health Official Letters, or CMCS Informational Bulletins. The different sets of FAQs as originally released can be accessed below.

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Is the use of the FUL file mandatory for all states?

States are required to implement the limits set by the ACA FULs in their reimbursement methodologies as of the effective date of the final rule with comment, that is, April 1, 2016. The FULs are to be applied as an aggregate upper limit, so the states have flexibility to determine payment rates for individual drugs in accordance with the approved State plan, such that the total reimbursement for all drugs to which the FUL applies does not exceed the FUL in the aggregate. Many states have FULs as part of their ""lower of"" logic in their state plans already. While we recognize that many states will be using NADAC or their own AAC methodology, and many of these values will be below the FULs, we still ask that states include in their state plans, either as a part of their lower of methodology or in a separate entry or description in the state plan, how they intend to meet the FULs in the aggregate.

FAQ ID:94736

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Is there a possibility for a product to have an FUL and not a NADAC?

CMS will not publish a FUL price for a FUL product group where the agency does not have a corresponding NADAC to compare to the 175 percent of the weighted average of AMPs for the FUL product group. For further information please see the Methodology and Data Elements Guide on the Medicaid.gov website at on the Medicaid.gov website at https://www.medicaid.gov/Medicaid-CHIP-Program-Information/ByTopics/Benefits/Prescription-Drugs/Federal-Upper-Limits.html.

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FAQ ID:94741

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If a state is using the current FUL as part of their fee-for-service (FFS) lower-of reimbursement algorithm, can the state begin using the new AMP-based FULs on April 1, 2016 without filing a SPA?

States are required to apply the ACA FULs, in the aggregate, as of the effective date of the final rule with comment, that is, April 1, 2016. A SPA is not required to begin applying the ACA FULs in the aggregate.

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FAQ ID:94746

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Since the FULs are effective April 1, 2016, but States have 4 quarters to revise and submit a SPA it seems to imply that ingredient cost reimbursement changes and PDF changes do not need to occur simultaneously. Is this correct, or do they need to occur at the same time as part of the SPA? For example, could a State start utilizing new AMP-based FULs on April 1, 2016, but not change their PDF until April 1, 2017?

Pharmacy provider reimbursement rates should be consistent with efficiency, economy, and quality of care while assuring sufficient beneficiary access, in accordance with section 1902(a)(30)(A) of the Act. As states revise their reimbursement for the ingredient cost of a drug to stay within the FUL, they should also consider whether their current dispensing fee continues to provide adequate reimbursement for the cost of dispensing a prescription to a Medicaid beneficiary, as well as the need to submit a SPA. If a state determines that any change to reimbursement rates are needed, they are responsible for submitting a SPA demonstrating compliance with applicable requirements in the final rule with comment.

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FAQ ID:94751

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Can CMS provide further clarification regarding what is meant by "nationwide availability," especially with respect to drugs that are experiencing shortages?

A FUL will only be calculated when pharmaceutically and therapeutically equivalent multiple source drug products are available for purchase by retail community pharmacies on a nationwide basis (see 81 FR 5300, 5302-5304).

CMS plans to regularly monitor the availability of drugs by reviewing the FDA drug shortage list for drugs that have a FUL calculated, but are not likely to have enough supply in the market to meet current demand. Further, CMS plans to monitor weekly pricing changes available to us in the most current national survey of pricing to consider changes to the multiplier used to calculate the FULs, based on average retail community pharmacies' acquisition costs. It is also important to note that CMS currently publishes a monthly and weekly file of NADAC pricing values, which states can use to monitor those changes in average retail community pharmacies' acquisition costs as they apply the FUL aggregate reimbursement. CMS will not calculate a FUL for a given drug if the agency determines that there is a lack of availability of that drug to retail community pharmacies on a nationwide basis.

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FAQ ID:94756

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Are 340B ceiling prices available to states? If not, how are states supposed to ensure that reimbursement is not greater than the 340B ceiling price plus a PDF?

The 340B ceiling prices can be calculated by the states using the formula in section 340B of the Public Health Service Act, which is based on the average manufacturer price (AMP) minus the unit rebate amount (URA).

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FAQ ID:94761

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In the SMD letter (#16-001) published on February 11, 2016, CMS indicated that states that pay IHS and Tribal providers through encounter rates can continue to pay that rate and that it will satisfy the requirements of 42 CFR 447.518(a)(2), which specify that the state's payment must be in accordance with the definition of AAC. Can CMS please clarify that reimbursement at the encounter rate is available to all states, not just those that already reimburse using the encounter rate.

Reimbursement to IHS and Tribal providers through the encounter rate is an option available to all states as a means to satisfying the requirement to reimburse such providers in accordance with the requirements at 42 CFR 447.518(a)(2).

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FAQ ID:94766

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Are drugs reimbursed through the encounter rate eligible for rebates through the Medicaid Drug Rebate Program?

As stated in the above response, reimbursement to IHS and Tribal providers through the encounter rate is an option available to all states as a means to satisfying the requirement to reimburse such providers in accordance with the requirements at 42 CFR 447.518(a)(2). However, states that choose to utilize the encounter rate for reimbursement should be aware that since it is an "all-inclusive rate" (or bundled payment), any drug included in that rate is not eligible for rebates through the Medicaid Drug Rebate Program, as it does not meet the definition of a ""covered outpatient drug"" at section 1927(k)(2) and (3) of the Act. In order to meet the definition of ""covered outpatient drug"" and therefore be eligible for rebates, amongst other requirements, there must be a direct reimbursement for the drug and it cannot be reimbursed as part of a bundled payment.

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FAQ ID:94771

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Please verify that the AAC methodology for determining Medicaid reimbursement will only apply to FFS and that Medicaid MCOs that are paid a capitated fee by the state for benefits that include provision of Covered Outpatient Drugs are permitted to establish payment terms with prescription drug providers that do not take AAC into account.

The provisions of this final rule related to pharmacy payments do not apply to MCO payment or reimbursement methodologies, including MCO providers participating in the 340B program.

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FAQ ID:94776

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Is there a threshold for determining the amount of prescriptions that are delivered through the mail that will exempt a specialty pharmacy from the Retail Community Pharmacy definition? The rule uses the term "primarily" - is this to be interpreted as greater than 50 percent of prescriptions? Is it based on number of prescriptions or sales volume?

As noted in the comment and response in the preamble to the final rule (81 FR 5216), CMS declined to set a threshold in order to allow flexibility to recognize changes that take place in the pharmaceutical marketplace with regard to mail order business. CMS further noted that manufacturers may make reasonable assumptions that a pharmacy is a retail community pharmacy when the majority of the drugs are not dispensed through the mail. A "majority" is generally determined as greater than 50 percent, which could be interpreted as greater than 50 percent. In addition, in cases where a single entity owns both a retail community pharmacy and a mail order pharmacy, manufacturers may exclude the sales to the mail order side of business and include sales to the retail community pharmacy side when calculating AMP, and include the mail order sales when they are calculating AMP for a 5i drug not generally dispensed through retail community pharmacies. Since the definition of retail community pharmacy at 1927(k)(11) of the Act excludes a pharmacy that "dispenses prescription medications primarily through the mail", CMS believes the number of prescriptions dispensed would be a reasonable basis to determine whether the pharmacy dispenses "primarily through the mail."

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FAQ ID:94781

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