WSR 07-11-143



(Health and Recovery Services Administration)

[ Filed May 22, 2007, 11:02 a.m. ]

     Original Notice.

     Preproposal statement of inquiry was filed as WSR 07-04-017.

     Title of Rule and Other Identifying Information: Part 3 of 4: WAC 388-530-4200 Therapeutic consultation services (TCS), 388-530-5000 Billing requirements -- Pharmacy claim payment, 388-530-5050 Billing requirements -- Point-of-sale (POS) system/prospective drug use review (Pro-Dur), 388-530-5100 Billing requirements -- Unit dose, 388-530-6000 Mail-order services, 388-530-7000 Reimbursement, 388-530-7050 Reimbursement -- Dispensing fee determination, 388-530-7100 Reimbursement -- Pharmaceutical supplies, and 388-530-7150 Reimbursement -- Compounded prescriptions.

     Hearing Location(s): Blake Office Park East, Rose Room, 4500 10th Avenue S.E., Lacey, WA 98503 (one block north of the intersection of Pacific Avenue S.E. and Alhadeff Lane. A map or directions are available at or by calling (360) 664-6097), on June 26, 2007, at 10:00 a.m.

     Date of Intended Adoption: Not earlier than June 27, 2007.

     Submit Written Comments to: DSHS Rules Coordinator, P.O. Box 45850, Olympia, WA 98504, delivery 4500 10th Avenue S.E., Lacey, WA 98503, e-mail, fax (360) 664-6185, by 5:00 p.m. on June 26, 2007.

     Assistance for Persons with Disabilities: Contact Stephanie Schiller by June 19, 2007, TTY (360) 664-6178 or (360) 664-6097 or by e-mail at

     Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The health and recovery services administration (HRSA) is amending chapter 388-530 WAC, Pharmacy services. A complete reorganization of the pharmacy chapter was necessary prior to the implementation of the new ProviderOne point-of-sale system and also to be in compliance with the reimbursement changes mandated by the Centers for Medicare/Medicaid Services (CMS) regarding the new FUL, AMP, and ASP pricing. Changes include:

Organizing the sections in a logical order;
Removing redundant or outdated sections;
Clarifying the existing language;
Eliminating circular references;
Clarifying department billing requirements;
Updating WAC references.

     Reasons Supporting Proposal: See above.

     Statutory Authority for Adoption: RCW 74.08.090.

     Statute Being Implemented: RCW 74.04.050, 74.08.090, 74.09.530, and 74.09.700.

     Rule is not necessitated by federal law, federal or state court decision.

     Name of Proponent: Department of social and health services, health and recovery services administration, governmental.

     Name of Agency Personnel Responsible for Drafting: Wendy Boedigheimer, P.O. Box 45504, Olympia, WA 98504-5504, (360) 725-1306; Implementation and Enforcement: Siri Childs, P.O. Box 45506, Olympia, WA 98504-5506, (360) 725-1564.

     No small business economic impact statement has been prepared under chapter 19.85 RCW. The department has analyzed the proposed rule and concluded that no new costs will be imposed on businesses affected by them. The preparation of a comprehensive SBEIS is not required.

     A cost-benefit analysis is required under RCW 34.05.328. A preliminary cost-benefit analysis may be obtained by contacting Siri Childs, P.O. Box 45506, Health and Recovery Service Administration, Olympia, WA 98504-5506, phone (360) 725-1564, fax (360) 586-9727.

May 16, 2007

Stephanie E. Schiller

Rules Coordinator

WAC 388-530-4200   Therapeutic consultation service (TCS).   (1) The department provides a therapeutic consultation service (TCS) to aid appropriate utilization of prescription drugs, improve quality of care and health care outcomes for clients, and promote cost effectiveness.

     (2) TCS review is required when a drug claim exceeds the limits set by the department on brand name prescriptions per calendar month, number of total prescriptions per calendar month, or number of prescriptions per calendar month by drug class. Drugs on the Washington preferred drug list (PDL) do not count against the limit.

     (3) Through TCS, the department provides a complete drug profile review for each client who exceeds monthly prescription limits. The department excludes the following from per calendar month limits:

     (a) Antidepressants;

     (b) Antipsychotics;

     (c) Chemotherapy;

     (d) Contraceptives;

     (e) HIV;

     (f) Immunosuppressants; and

     (g) Hypoglycemia rescue agents.

     (4) When a pharmacy provider submits a claim that exceeds the per-calendar-month prescription limitation for a client, the department notifies the pharmacy provider that a TCS review is required.

     (5) The TCS review process includes all of the following:

     (a) Pharmacy provider requirements:

     (i) The pharmacy provider notifies the prescriber that the prescriber or prescriber designee must call the TCS toll-free telephone number to begin a TCS review according to subsection (2) of this section; and

     (ii) If the TCS review cannot take place due to the prescriber's or prescriber designee's unavailability, the pharmacy provider has the option to dispense an emergency supply of the requested drug only when given in an emergency. The department must receive justification within seventy-two hours of the fill date, excluding weekends and Washington state holidays.

     (b) Prescriber requirements:

     (i) When the pharmacy provider contacts the client's prescriber as described in subsection (5)(a)(i) of this section, the prescriber or prescriber designee calls the TCS toll-free telephone number to contact the department designee (designated clinical pharmacist) to begin a TCS review;

     (ii) After the prescriber or prescriber designee and the department designee review the client's drug profile and discuss clinically sound options and cost effective alternative drug(s), the prescriber does one of the following:

     (A) Changes the prescription to an alternate drug or preferred drug and contacts the client's pharmacy with the new prescription;

     (B) Provides the department designee with medical justification for the requested drug and the department designee authorizes the drug under the provisions of medical necessity as defined in WAC 388-500-0005; or

     (C) Does not agree to prescribe an alternate drug or preferred drug and does not provide medical justification for the requested drug. The department designee authorizes only a one-month supply of the requested drug.

     (c) The department designee responsibilities:

     (i) Notifies the pharmacy provider by facsimile, electronic mail, or telephone call, the results of the TCS review.

     (ii) Notifies the department's clinical program staff when concerns for client safety are identified during the TCS reviews.

     (iii) Contacts other prescribers identified during the TCS review when opportunities to further improve the client's healthcare outcome are discovered.


WAC 388-530-5000   Billing requirements--Pharmacy claim payment.   (1) When billing the department for pharmacy services, providers must:

     (a) Use the appropriate department claim form or electronic billing specifications;

     (b) Include the actual eleven-digit national drug code (NDC) number of the product dispensed from a rebate eligible manufacturer;

     (c) Bill the department using metric decimal quantities which is the National Council for Prescription Drug Programs (NCPDP) billing unit standard;

     (d) Meet the general provider documentation and record retention requirements in WAC 388-502-0020; and

     (e) Maintain proof of delivery receipts.

     (i) When a provider delivers an item directly to the client or the client's authorized representative, the provider must be able to furnish proof of delivery including signature, client's name and a detailed description of the item(s) delivered.

     (ii) When a provider mails an item to the client, the provider must be able to furnish proof of delivery including a mail log.

     (iii) When a provider uses a delivery/shipping service to deliver items, the provider must be able to furnish proof of delivery and it must:

     (A) Include the delivery service tracking slip with the client's name or a reference to the client's package(s); the delivery service package identification number; and the delivery address.

     (B) Include the supplier's shipping invoice, with the client's name; the shipping service package identification number; and a detailed description(s).

     (iv) Make proof of delivery receipts available to the department, upon request.

     (2) When billing drugs under the expedited authorization process, providers must insert the authorization number which includes the corresponding criteria code(s) in the appropriate data field on the drug claim.

     (3) Pharmacy services for clients on restriction under WAC 388-501-0135 must be prescribed by the client's primary care provider and are paid only to the client's primary pharmacy, except in cases of:

     (a) Emergency;

     (b) Family planning services; or

     (c) Services properly referred from the client's assigned pharmacy or physician/ARNP.


WAC 388-530-5050   Billing requirements--Point-of-sale (POS) system/prospective drug use review (Pro-DUR).   (1) Pharmacy claims for drugs and other products listed in the department's drug file and billed to the department by national drug code (NDC) are adjudicated by the department's point-of-sale (POS) system. Claims must be submitted for payment using the billing unit standard identified in WAC 388-530-5000.

     (2) All pharmacy drug claims processed through the POS system undergo a system-facilitated prospective drug use review (Pro-DUR) screening as a complement to the Pro-DUR screening required of pharmacists.

     (3) If the POS system identifies a potential drug therapy problem during Pro-DUR screening, a message will alert the pharmacy provider indicating the type of potential problem. The alerts regarding possible drug therapy problems include, but are not limited to:

     (a) Therapeutic duplication;

     (b) Duration of therapy exceeds the recommended maximum period;

     (c) Drug-to-drug interaction;

     (d) Drug disease precaution;

     (e) High dose;

     (f) Ingredient duplication;

     (g) Drug-to-client age conflict;

     (h) Drug-to-client gender conflict; or

     (i) Refill too soon.

     (4) The department provides pharmacy providers with a list of codes from which to choose in overriding POS system alert messages. These codes come from the national council for prescription drug programs (NCPDP).

     (5) The dispensing pharmacist evaluates the potential drug therapy conflict and enters applicable NCPDP codes representing their professional interaction.

     (a) If the resolution to the conflict satisfies department requirements, the claim will be processed accordingly.

     (b) If the resolution to the conflict does not satisfy department requirements, the department requires prior authorization. This includes all claims for which an alert message is triggered in the POS system and an NCPDP override code is not appropriate.

     (6) The department requires providers to retain documentation of the justification for the use of payment system override codes as described in subsections (4) and (5) of this section. The department requires the documentation be retained for the same period as that described in WAC 388-502-0020.

     (7) POS/Pro-DUR screening is not applicable to pharmacy claims included in the managed care capitated rate.


WAC 388-530-5100   Billing requirements--Unit dose.   (1) To be eligible for a unit dose dispensing fee from the department, a pharmacy must:

     (a) Notify the department in writing of its intent to provide unit dose service;

     (b) Identify the nursing facility(ies) to be served;

     (c) Indicate the approximate date unit dose service to the facility(ies) will commence; and

     (d) Follow department requirements for unit dose payment.

     (2) Under a unit dose delivery system, a pharmacy must bill only for the number of drug units actually used by the medical assistance client in the nursing facility, except as provided in subsections (3), (4), and (5) of this section. It is the unit dose pharmacy provider's responsibility to coordinate with nursing facilities to ensure that the unused drugs the pharmacy dispensed to clients are returned to the pharmacy for credit.

     (3) The pharmacy must submit an adjustment form or claims reversal of the charge to the department for the cost of all unused drugs returned to the pharmacy from the nursing facility on or before the sixtieth day following the date the drug was dispensed, except as provided in subsection (5) of this section. Such adjustment must conform to the nursing facility's monthly log as described in subsection (7) of this section.

     (4) The department pays a unit dose provider a dispensing fee when a provider-packaged unit dose prescription is returned, in its entirety, to the pharmacy. A dispensing fee is not paid if the returned prescription is for a drug with a manufacturer-designated unit dose national drug code (NDC). In addition to the dispensing fee paid under this subsection, the provider may bill the department one unit of the tablet or capsule but must credit the department for the remainder of the ingredient costs for the returned prescription.

     (5) Unit dose providers do not have to credit the department for federally designated schedule two drugs which are returned to the pharmacy. These returned drugs must be disposed of according to federal regulations.

     (6) Pharmacies must not charge clients or the department a fee for repackaging a client's bulk medications in unit dose form. The costs of repackaging are the responsibility of the nursing facility when the repackaging is done:

     (a) To conform with a nursing facility's drug delivery system; or

     (b) For the nursing facility's convenience.

     (7) The pharmacy must maintain detailed records of medications dispensed under unit dose delivery systems. The pharmacy must keep a monthly log for each nursing facility served, including but not limited to the following information:

     (a) Facility name and address;

     (b) Client's name and patient identification code (PIC);

     (c) Drug name/strength;

     (d) National drug code (NDC);

     (e) Quantity and date dispensed;

     (f) Quantity and date returned;

     (g) Value of returned drugs or amount credited;

     (h) Explanation for no credit given or nonreusable returns; and

     (i) Prescription number.

     (8) Upon the department's request, the pharmacy must submit copies of the logs referred to in subsection (7) of this section.

     (9) When the pharmacy submits the completed annual prescription volume survey to the department, it must include an updated list of all nursing facilities currently served under unit dose systems.


WAC 388-530-6000   Mail-order services.   The department provides a contracted mail-order pharmacy service for client use. The mail-order contractor is selected as a result of a competitive procurement process.

     (1) The contracted mail-order pharmacy service is available as an option to all medical assistance clients, subject to the:

     (a) Scope of the client's medical care program;

     (b) Availability of services from the contracted mail-order provider; and

     (c) Special terms and conditions described in subsection (2) and (3) of this section.

     (2) The mail-order prescription service may not dispense medication in a quantity greater than authorized by the prescriber. (See RCW 18.64.360(5), Nonresident pharmacies.)

     (3) Prescribed medications may be filled by the mail-order pharmacy service within the following restrictions:

     (a) Drugs available from mail-order in no more than a ninety day supply include:

     (i) Preferred drugs (see WAC 388-530-4100);

     (ii) Generic drugs; and

     (iii) Drugs that do not have authorization requirements (see WAC 388-530-3000 through WAC 388-530-3200).

     (b) Drugs available in no more than a thirty-four-day supply:

     (i) Controlled substances (schedules II through V); and

     (ii) Drugs having authorization requirements (see WAC 388-530-3000).

     (c) Other pharmacy restrictions (chapter 388-530 WAC, Pharmacy services) continue to apply.

     (4) The contracted mail-order pharmacy services are reimbursed at levels lower than those established for the regular outpatient pharmacy services.


WAC 388-530-7000   Reimbursement.   (1) The department's total reimbursement for a prescription drug must not exceed the lowest of:

     (a) Estimated acquisition cost (EAC) plus a dispensing fee;

     (b) Maximum allowable cost (MAC) plus a dispensing fee;

     (c) Federal upper limit (FUL) plus a dispensing fee;

     (d) Actual acquisition cost (AAC) plus a dispensing fee for drugs purchased under section 340B of the Public Health Service (PHS) Act;

     (e) Automated maximum allowable cost (AMAC) plus a dispensing fee; or

     (f) The provider's usual and customary charge to the non-medicaid population.

     (2) The department selects the sources for pricing information used to set EAC and MAC.

     (3) The department may solicit assistance from pharmacy providers, pharmacy benefit managers (PBM), other government agencies, actuaries, and/or other consultants when establishing EAC and/or MAC.

     (4) The department reimburses a pharmacy for the least costly dosage form of a drug within the same route of administration, unless the prescriber has designated a medically necessary specific dosage form or the department has selected the more expensive dosage form as a preferred drug.

     (5) If the pharmacy provider offers a discount, rebate, promotion or other incentive which directly relates to the reduction of the price of a prescription to the individual non-medicaid customer, the provider must similarly reduce its charge to the department for the prescription.

     (6) If the pharmacy provider gives an otherwise covered product for free to the general public, the pharmacy must not submit a claim to the department.

     (7) The department does not reimburse for:

     (a) Prescriptions written on pre-signed prescription blanks filled out by nursing facility operators or pharmacists;

     (b) Prescriptions without the date of the original order;

     (c) Drugs used to replace those taken from a nursing facility emergency kit;

     (d) Drugs used to replace a physician's stock supply;

     (e) Outpatient drugs, biological products, insulin, supplies, appliances, and equipment included in other reimbursement methods including, but not limited to:

     (i) Diagnosis-related group (DRG);

     (ii) Ratio of costs-to-charges (RCC);

     (iii) Nursing facility daily rates;

     (iv) Managed care capitation rates;

     (v) Block grants; or

     (vi) Drugs prescribed for clients who are on the department's hospice program when the drugs are related to the client's terminal illness and related condition.


WAC 388-530-7050   Reimbursement--Dispensing fee determination.   (1) Subject to the provisions of WAC 388-530-7000 and the exceptions permitted in WAC 388-530-2000, the department pays a dispensing fee for each covered, prescribed drug.

     (2) The department does not pay a dispensing fee for non-drug items, devices, or pharmaceutical supplies.

     (3) The department adjusts the dispensing fee by considering factors including, but not limited to:

     (a) Legislative appropriations for vendor rates;

     (b) Input from provider and/or advocacy groups;

     (c) Input from state-employed or contracted actuaries; and

     (d) Dispensing fees paid by other third-party payers, including, but not limited to, health care plans and other states' medicaid agencies.

     (4) The department uses a tiered dispensing fee system which pays higher volume pharmacies at a lower fee and lower volume pharmacies at a higher fee.

     (5) The department uses total annual prescription volume (both medicaid and non-medicaid) reported to the department to determine each pharmacy's dispensing fee tier.

     (a) A pharmacy which fills more than thirty-five thousand prescriptions annually is a high-volume pharmacy. The department considers hospital-based pharmacies that serve both inpatient and outpatient clients as high-volume pharmacies.

     (b) A pharmacy which fills between fifteen thousand one and thirty-five thousand prescriptions annually is a mid-volume pharmacy.

     (c) A pharmacy which fills fifteen thousand or fewer prescriptions annually is a low-volume pharmacy.

     (6) The department determines a pharmacy's annual total prescription volume as follows:

     (a) The department sends out a prescription volume survey form to pharmacy providers during the first quarter of the calendar year;

     (b) Pharmacies return completed prescription volume surveys to the department each year. Pharmacy providers not responding to the survey by the specified date are assigned to the high volume category;

     (c) Pharmacies must include all prescriptions dispensed from the same physical location in the pharmacy's total prescription count;

     (d) The department considers prescriptions dispensed to nursing facility clients as outpatient prescriptions; and

     (e) Assignment to a new dispensing fee tier is effective on the first of the month, following the date specified by the department.

     (7) A pharmacy may request a change in dispensing fee tier during the interval between the annual prescription volume surveys. The pharmacy must substantiate such a request with documentation showing that the pharmacy's most recent six-month dispensing data, annualized, would qualify the pharmacy for the new tier. If the department receives the documentation by the twentieth of the month, assignment to a new dispensing fee tier is effective on the first of the following month.

     (8) The department grants general dispensing fee rate increases only when authorized by the legislature. Amounts authorized for dispensing fee increases may be distributed non-uniformly (e.g., tiered dispensing fee based upon volume).

     (9) The department may pay true unit dose pharmacies at a different rate for unit dose dispensing.


WAC 388-530-7100   Reimbursement--Pharmaceutical supplies.   (1) The department reimburses for selected pharmaceutical supplies through the pharmacy point-of-sale (POS) system when it is necessary for client access and safety.

     (2) The department bases reimbursement of pharmaceutical items or supplies that are not payable through the POS on department-published fee schedules.

     (3) The department uses any or all of the following methodologies to set the maximum allowable reimbursement rate for pharmaceutical items, devices, and pharmaceutical supplies:

     (a) A pharmacy provider's acquisition cost. Upon review of the claim, the department may require an invoice which must show the name of the item, the manufacturer, the product description, the quantity, and the current cost including any free goods associated with the invoice;

     (b) Medicare's reimbursement rate for the item; or

     (c) A specified discount off the item's list price or manufacturer's suggested retail price (MSRP).

     (4) The department does not pay a dispensing fee for nondrug items, devices, or pharmaceutical supplies. See WAC 388-530-7050.


WAC 388-530-7150   Reimbursement--Compounded prescriptions.   (1) The department does not consider reconstitution to be compounding.

     (2) The department covers a drug ingredient used for a compounded prescription only when the manufacturer has a signed rebate agreement with the federal department of health and human services (DHHS).

     (3) The department considers bulk chemical supplies used in compounded prescriptions as nondrug items, which do not require a drug rebate agreement. The department covers such bulk chemical supplies only as specifically approved by the department.

     (4) The department reimburses pharmacists for compounding drugs only if the client's drug therapy needs are unable to be met by commercially available dosage strengths and/or forms of the medically necessary drug.

     (a) The pharmacist must ensure the need for the adjustment of the drug's therapeutic strength and/or form is well documented in the client's file.

     (b) The pharmacist must ensure that the ingredients used in a compounded prescription are for an approved use as defined in "medically accepted indication" in WAC 388-530-1050.

     (5) The department requires that each drug ingredient used for a compounded prescription be billed to the department using its eleven-digit national drug code (NDC) number.

     (6) Compounded prescriptions are reimbursed as follows:

     (a) The department allows only the lowest cost for each covered ingredient, whether that cost is determined by actual acquisition cost (AAC), estimated acquisition cost (EAC), federal upper limit (FUL), maximum allowable cost (MAC), automated maximum allowable cost (AMAC), or amount billed.

     (b) The department applies current prior authorization requirements to drugs used as ingredients in compounded prescriptions, except as provided under subsection (6)(c) of this section. The department denies payment for a drug requiring authorization when authorization is not obtained.

     (c) The department may designate selected drugs as not requiring authorization when used for compounded prescriptions. For the list of selected drugs, refer to the department's prescription drug program billing instructions.

     (d) The department pays a dispensing fee as described under WAC 388-530-7050 for each drug ingredient used in compounding when the conditions of this section are met and each ingredient is billed separately by the eleven digit NDC.

     (e) The department does not pay a separate fee for compounding time.

     (7) The department requires pharmacists to document the need for each inactive ingredient added to the compounded prescription. The department limits reimbursement to the inactive ingredients that meet the following criteria. To be reimbursed by the department, each inactive ingredient must be:

     (a) A necessary component of a compounded drug; and

     (b) Billed by an eleven digit national drug code (NDC).


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