WSR 07-11-144



(Health and Recovery Services Administration)

[ Filed May 22, 2007, 11:03 a.m. ]

     Original Notice.

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

     Title of Rule and Other Identifying Information: Part 4 of 4: WAC 388-530-7200 Reimbursement -- Out-of-state prescriptions, 388-530-7250 Reimbursement -- Miscellaneous, 388-530-7300 Reimbursement -- Requesting a change, 388-530-7350 Reimbursement -- Unit does drug delivery, 388-530-7400 Reimbursement -- Compliance packaging services, 388-530-7500 Reimbursement -- Drug rebate requirement, 388-530-7600 Reimbursement -- Clients enrolled in managed care, 388-530-7700 Reimbursement -- Dual eligible clients/medicare, 388-530-7800 Reimbursement -- Clients with third party liability, 388-530-7900 Drugs purchased under the Public Health Service (PHS) Act, 388-530-8000 Reimbursement method -- Estimated acquisition cost (EAC), 388-530-8050 Reimbursement -- Federal upper limit (FUL), 388-530-8100 Reimbursement -- Maximum allowable cost (MAC), and 388-530-8150 Reimbursement -- Automated maximum allowable cost (AMAC).

     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Removing redundant or outdated sections;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;
Adding information on Medicare Part D, managed care, and dual eligible clients;
Eliminating circular references;
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 388-530-7200   Reimbursement--Out-of-state prescriptions.   (1) The department reimburses out-of-state pharmacies for prescription drugs provided to an eligible client within the scope of the client's medical care program if the pharmacy:

     (a) Contracts with the department to be an enrolled provider; and

     (b) Meets the same criteria the department requires for in-state pharmacy providers.

     (2) The department considers pharmacies located in bordering areas listed in WAC 388-501-0175 the same as in-state pharmacies.


WAC 388-530-7250   Reimbursement--Miscellaneous.   The department reimburses for covered drugs, devices, and pharmaceutical supplies provided or administered by nonpharmacy providers under specified conditions, as follows:

     (1) The department reimburses for drugs administered or prepared and delivered for individual use by an authorized prescriber during an office visit according to specific program rules found in:

     (a) Chapter 388-531 WAC, Physician-related services;

     (b) Chapter 388-532 WAC, Reproductive Health/Family Planning Only/TAKE CHARGE; and

     (c) Chapter 388-540 WAC, Kidney services.

     (2) Providers who are purchasers of Public Health Services (PHS) discounted drugs must comply with PHS 340b program requirements. (See WAC 388-530-7900).

     (3) The department may request providers to submit a current invoice for the actual cost of the drug, device, or pharmaceutical supply billed. If an invoice is requested, the invoice must show the:

     (a) Name of the drug, device, or pharmaceutical supply;

     (b) Drug or product manufacturer;

     (c) NDC of the product(s);

     (d) Drug strength;

     (e) Product description;

     (f) Quantity; and

     (g) Cost, including any free goods associated with the invoice.

     (4) The department does not reimburse providers for the cost of vaccines obtained through the state department of health (DOH). The department does pay physicians, advanced registered nurse practitioners (ARNP), and pharmacists a fee for administering the vaccine.


WAC 388-530-7300   Reimbursement--Requesting a change.   Upon request from a pharmacy provider, the department may reimburse at actual acquisition cost (AAC) for a drug that would otherwise be reimbursed at maximum allowable cost (MAC) when:

     (1) The availability of lower cost equivalents in the marketplace is severely curtailed and the price disparity between AAC for the drug and the MAC reimbursement affects clients' access; and

     (2) An invoice documenting actual acquisition cost relevant to the date the drug was dispensed is provided to the department.


WAC 388-530-7350   Reimbursement--Unit dose drug delivery systems.   (1) The department pays for unit dose drug delivery systems only for clients residing in nursing facilities, except as provided in subsections (7) and (8) of this section.

     (2) Unit dose delivery systems may be either true or modified unit dose.

     (3) The department pays pharmacies that provide unit dose delivery services the department's highest allowable dispensing fee for each unit dose prescription dispensed to clients in nursing facilities. The department reimburses ingredient costs for drugs under unit dose systems as described in WAC 388-530-7000.

     (4) The department pays a pharmacy that dispenses drugs in bulk containers or multidose forms to clients in nursing facilities the regular dispensing fee applicable to the pharmacy's total annual prescription volume tier. Drugs the department considers not deliverable in unit dose form include, but are not limited to, liquids, creams, ointments, ophthalmic and otic solutions. The department reimburses ingredient costs as described in WAC 388-530-7000.

     (5) The department pays a pharmacy that dispenses drugs prepackaged by the manufacturer in unit dose form to clients in nursing facilities the regular dispensing fee applicable under WAC 388-530-7050. The department reimburses ingredient costs for drugs prepackaged by the manufacturer in unit dose form as described in WAC 388-530-7000.

     (6) The department limits its coverage and payment for manufacturer-designated unit dose packaging to the following conditions:

     (a) The drug is a single source drug and a multidose package for the drug is not available;

     (b) The drug is a multiple source drug but there is no other multidose package available among the drug's generic equivalents; or

     (c) The manufacturer-designated unit dose package is the most cost-effective package available or it is the least costly alternative form of the drug.

     (7) The department reimburses a pharmacy provider for manufacturer-designated unit dose drugs dispensed to clients not residing in nursing facilities only when such drugs:

     (a) Are available in the marketplace only in manufacturer-designated unit dose packaging; and

     (b) Would otherwise be covered as an outpatient drug. The unit dose dispensing fee does not apply in such cases. The department pays the pharmacy the dispensing fee applicable to the pharmacy's total annual prescription volume tier.

     (8) The department may pay for unit dose delivery systems for clients of the division of developmental disabilities (DDD) residing in approved community living arrangements.


WAC 388-530-7400   Reimbursement--Compliance packaging services.   (1) The department reimburses pharmacies for compliance packaging services provided to clients considered at risk for adverse drug therapy outcomes. Clients who are eligible for compliance packaging services must not reside in a nursing home or other inpatient facility, and must meet (a) and either (b) or (c) of this subsection. The client must:

     (a) Have one or more of the following representative disease conditions:

     (i) Alzheimer's disease;

     (ii) Blood clotting disorders;

     (iii) Cardiac arrhythmia;

     (iv) Congestive heart failure;

     (v) Depression;

     (vi) Diabetes;

     (vii) Epilepsy;

     (viii) HIV/AIDS;

     (ix) Hypertension;

     (x) Schizophrenia; or

     (xi) Tuberculosis.

     (b) Concurrently consume two or more prescribed medications for chronic medical conditions, that are dosed at three or more intervals per day; or

     (c) Have demonstrated a pattern of noncompliance that is potentially harmful to the client's health. The client's pattern of noncompliance with the prescribed drug regimen must be fully documented in the provider's file.

     (2) Compliance packaging services include:

     (a) Reusable hard plastic containers of any type (e.g., medisets); and

     (b) Nonreusable compliance packaging devices (e.g., blister packs).

     (3) The department pays a filling fee and reimburses pharmacies for the compliance packaging device and/or container. The frequency of fills and number of payable compliance packaging devices per client is subject to limits specified by the department. The department does not pay filling or preparation fees for blister packs.

     (4) Pharmacies must use the CMS-1500 claim form to bill the department for compliance packaging services.


WAC 388-530-7500   Drug rebate requirement.   (1) The department reimburses for outpatient prescription drugs only when they are supplied by manufacturers who have a signed drug rebate agreement with the federal department of health and human services (DHHS), according to 42 U.S.C. 1396r-8. The manufacturer must be listed on the list of participating manufacturers as published by CMS.

     (2) The fill date must be within the manufacturer's beginning and ending eligibility dates to be reimbursed by the department.

     (3) The department may extend this rebate requirement to any outpatient drug reimbursements as allowed or required by federal law.

     (4) The department may exempt drugs from the rebate requirement, on a case-by-case basis, when:

     (a) It determines that the availability of a single source drug or innovator multiple source drug is essential to the health of beneficiaries; and

     (b) All other rebate exemption requirements of SSA Sec 1927 (42 U.S.C. 1396r-8) (3) are also satisfied.


WAC 388-530-7600   Reimbursement--Clients enrolled in managed care.   Except as specified under the department's managed care contracts, the department does not reimburse providers for any drugs or pharmaceutical supplies provided to clients who have pharmacy benefits under department-contracted managed care plans. The managed care plan is responsible for payment.


WAC 388-530-7700   Reimbursement--Dual eligible clients/medicare.   For clients who are dually-eligible for medical assistance and medicare benefits, the following applies:

     (1) Medicare Part B, the department pays providers for:

     (a) An amount up to the department's maximum allowable fee for drugs medicare does not cover, but the department covers; or

     (b) Deductible and/or coinsurance amounts up to medicare's or the department's maximum allowable fee, whichever is less, for drugs medicare and the department cover; or

     (c) Deductible and/or coinsurance amounts for clients under the qualified medicare beneficiary (QMB) program for drugs medicare covers but the department does not cover.

     (2) Medicare Part D:

     (a) For payment of medicare Part D drugs:

     (i) Medicare is the primary payer for covered Part D drugs;

     (ii) The department pays only the copayment up to a maximum amount set by the centers for medicare and medicaid services (CMS); and

     (iii) The client is responsible for copayments above the maximum amount.

     (b) For drugs excluded from the basic medicare Part D benefits:

     (i) The department offers the same drug benefit as a non-dual eligible client has within those same classes;

     (ii) If the client has another third party insurer, that insurer is the primary payer; and

     (iii) The department is the payer of last resort.


WAC 388-530-7800   Reimbursement--Clients with third-party liability.   (1) The department requires providers to meet the third party requirements of WAC 388-501-0200.

     (2) The following definitions apply to this section:

     (a) "Closed pharmacy network" means an arrangement made by an insurer which restricts prescription coverage to an exclusive list of pharmacies. This arrangement prohibits the coverage and/or payment of prescriptions provided by a pharmacy that is not included on the exclusive list.

     (b) "Private point-of-sale (POS) authorization system" means an insurer's system, other than the department's POS system, which requires that coverage be verified by or submitted to the insurer for authorization at the time of service and at the time the prescription is filled.

     (3) This subsection applies to clients who have a third-party resource that is a managed care entity other than a department-contracted plan, or have other insurance that requires the use of "closed pharmacy networks" or "private point-of-sale authorization system." The department will not pay pharmacies for prescription drug claims until the pharmacy provider submits an explanation of benefits from the private insurance demonstrating that the pharmacy provider has complied with the terms of the third-party's coverage.

     (a) If the private insurer pays a fee based on the incident of care, the pharmacy provider must file a claim with the department consistent with the department's billing requirements.

     (b) If the private insurer pays the pharmacy provider a monthly capitation fee for all prescription costs related to the client, the pharmacy provider must submit a claim to the department for the amount of the client copayment, coinsurance, and/or deductible. The department pays the provider the lesser of:

     (i) The billed amount; or

     (ii) The department's maximum allowable fee for the prescription.


WAC 388-530-7900   Drugs purchased under the Public Health Service (PHS) Act.   (1) Drugs purchased under section 340B of the public health service (PHS) act can be dispensed to medical assistance clients only by PHS-qualified health facilities and must be billed to the department at actual acquisition cost (AAC) as required by laws governing the PHS 340B program.

     (2) Providers dispensing drugs under this section are required to submit their valid medical assistance provider number(s) to the PHS health resources and services administration, office of pharmacy affairs. This requirement is to ensure that claims for drugs dispensed under this section and paid by the department are excluded from the drug rebate claims that are submitted to the manufacturers of the drugs. See WAC 388-530-7500 for information on the drug rebate program.


WAC 388-530-8000   Reimbursement method--Estimated acquisition cost (EAC).   (1) The department determines estimated acquisition cost (EAC) using:

     (a) Acquisition cost data made available to the department; or

     (b) Information provided by any of the following:

     (i) Audit agencies, federal or state;

     (ii) Other state health care purchasing agencies;

     (iii) Pharmacy benefit managers;

     (iv) Individual pharmacy providers participating in the department's programs;

     (v) Centers for medicare and medicaid services (CMS);

     (vi) Other third party payers;

     (vii) Drug file databases; and/or

     (viii) Actuaries or other consultants.

     (2) The department implements EAC by applying a percentage adjustment to available reference pricing from national sources such as wholesale acquisition cost (WAC), average wholesale price (AWP), average sale price (ASP), and average manufacturer price (AMP).

     (3) The department may set EAC for specified drugs or drug categories at a percentage other than that determined in subsection (1)(a) of this section when the department considers it necessary. The factors the department considers in setting a rate for a class of drugs under this subsection include, but are not limited to:

     (a) Product acquisition cost;

     (b) The department's documented clinical concerns; and

     (c) The department's budget limits.

     (4) The department bases EAC drug reimbursement on the actual package size dispensed.

     (5) The department uses the EAC as the department's reimbursement for a drug when the EAC is the lowest of the rates calculated under the methods listed in WAC 388-530-7000, or when the conditions of WAC 388-530-7300 are met.


WAC 388-530-8050   Reimbursement--Federal upper limit (FUL).   (1) The department adopts the federal upper limit (FUL) set by the centers for medicare and medicaid services (CMS).

     (2) The department's maximum payment for multiple-source drugs for which CMS has set FULs will not exceed, in the aggregate, the prescribed upper limits plus the dispensing fees set by the department.

     (3) Except as provided in WAC 388-530-7300, the department uses the FUL as the department's reimbursement rate for the drug when the FUL price is the lowest of the rates calculated under the methods listed in WAC 388-530-7000.


WAC 388-530-8100   Reimbursement--Maximum allowable cost (MAC).   (1) The department establishes a maximum allowable cost (MAC) for a multiple-source drug which is available from at least two manufacturers/labelers.

     (2) The department determines the MAC for a multiple-source drug:

     (a) When drug acquisition cost data is available, the department:

     (i) Identifies what products are available from wholesalers for each drug being considered for MAC pricing;

     (ii) Determines pharmacy providers' approximate acquisition costs for these products; and

     (iii) Establishes the MAC at a level which gives pharmacists access to at least one product from a manufacturer with a qualified rebate agreement (see WAC 388-530-7500(4)).

     (b) When drug acquisition cost data is not available, the department may estimate acquisition cost.

     (3) The MAC established for a multiple-source drug does not apply if the written prescription identifies that a specific brand is medically necessary for a particular client. In such cases, the estimated acquisition cost (EAC) for the particular brand applies, provided authorization is obtained from the department as specified under WAC 388-530-3000.

     (4) Except as provided in subsection (3) of this section, the department reimburses providers for a multiple-source drug at the lowest of the rates calculated under the methods listed in WAC 388-530-7000.

     (5) The MAC established for a multiple-source drug may vary by package size, including those identified as unit dose national drug codes (NDCs) by the manufacturer(s) of the drug.


WAC 388-530-8150   Reimbursement--Automated maximum allowable cost (AMAC).   (1) The department uses the automated maximum allowable cost (AMAC) pricing methodology for multiple-source drugs that are:

     (a) Not on the published maximum allowable cost (MAC); and

     (b) Produced by two or more manufacturers/labelers, at least one of which must have a current, signed federal drug rebate agreement.

     (2) The department establishes AMAC as a specified percentage of the published average wholesale price (AWP). The department may use different percentage discounts from AWP for the estimated acquisition cost (EAC) and AMAC.

     (3) The department sets the percentage discount from AWP for AMAC reimbursement using any of the information sources identified in WAC 388-530-8000.

     (4) The department may set AMAC reimbursement at different percentage discounts from AWP for different multiple source drugs. The department considers the same factors as those in WAC 388-530-8000.

     (5) AMAC reimbursement for all products with the same ingredient, form and strength is at the AMAC determined for the second lowest priced product, or the AMAC of the lowest priced drug from a manufacturer with a current, signed federal rebate agreement.

     (6) The department recalculates AMAC each time the drug file contractor provides a pricing update.

     (7) Except as provided in WAC 388-530-7300, the department reimburses at the lowest of the rates calculated under the methods listed in WAC 388-530-7000.



     The following sections of the Washington Administrative Code are repealed:
WAC 388-530-1100 Covered drugs, devices, and pharmaceutical supplies.
WAC 388-530-1125 Drug rebate program.
WAC 388-530-1150 Noncovered drugs and pharmaceutical supplies and reimbursement limitations.
WAC 388-530-1200 Prior authorization program.
WAC 388-530-1250 Prior authorization process.
WAC 388-530-1260 Therapeutic consultation service.
WAC 388-530-1270 Mail-order services.
WAC 388-530-1280 Preferred drug list(s).
WAC 388-530-1290 Therapeutic interchange program (TIP).
WAC 388-530-1300 General reimbursement methodology.
WAC 388-530-1350 Estimated acquisition cost (EAC) methodology.
WAC 388-530-1360 Certified average wholesale price (CAWP).
WAC 388-530-1400 Maximum allowable cost (MAC) methodology.
WAC 388-530-1405 Automated maximum allowable cost (AMAC).
WAC 388-530-1410 Federal upper limit (FUL) methodology.
WAC 388-530-1425 Payment methodology for drugs purchased under the Public Health Service (PHS) Act.
WAC 388-530-1450 Dispensing fee determination.
WAC 388-530-1500 Reimbursement for compounded prescriptions.
WAC 388-530-1550 Unit dose drug delivery systems.
WAC 388-530-1600 Unit dose pharmacy billing requirements.
WAC 388-530-1625 Compliance packaging services.
WAC 388-530-1650 Reimbursement for pharmaceutical supplies.
WAC 388-530-1700 Drugs and drug-related supplies from nonpharmacy providers.
WAC 388-530-1750 Drugs and pharmaceutical supplies for clients with any third-party coverage.
WAC 388-530-1800 Requirements for pharmacy claim payment.
WAC 388-530-1850 Drug use review (DUR) board.
WAC 388-530-1900 Drug use and claims review.
WAC 388-530-1950 Point-of-sale (POS) system/prospective drug use review (Pro-DUR).
WAC 388-530-2050 Reimbursement for out-of-state prescriptions.

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