Tennessee Pharmacists Association
TennCare

On January 21, 2016, the Centers for Medicare and Medicaid Services (CMS) published the federal Covered Outpatient Drugs Final Rule (CMS-2345-FC). The regulation requires state Medicaid programs, including TennCare, to update their reimbursement methodology for covered outpatient drugs. Under the final rule, states must reimburse covered outpatient drugs at actual acquisition cost plus a dispensing fee. The regulation requires all states to be in compliance with the reimbursement requirements of the final rule by April 1, 2017. Earlier this week, TPA staff participated in a Pharmacy Stakeholder Meeting hosted by the Bureau of TennCare by webinar to outline this upcoming shift from Average Wholesale Price (AWP) to Actual Acquisition Cost (AAC).

To view a recording of the webinar, please CLICK HERE.

To view a copy of the slides from the webinar, please CLICK HERE.

TennCare Pharmacy Providers will need to complete TWO SURVEYS (AAC and Professional Dispensing Fee). The surveys will be conducted by Myers & Stauffer LLC and Mercer, with whom the State has contracted to develop and maintain a comprehensive reimbursement methodology that offers its Pharmacy Providers accuracy, consistency and transparency in the rate-setting process, while complying with the new federal mandates.


ACTUAL ACQUISITION COST

Myers & Stauffer LC will be conducting a comprehensive study to determine the Actual Acquisition Costs (AAC) of drugs to TennCare participating Pharmacies.

What You Need To Know About AAC: 

  • Acquisition-based pricing will be submitted by TennCare participating pharmacies.
  • State-specific rates are calculated for all TennCare-covered drugs.
  • Rates will be updated on a weekly basis to reflect changes in published pricing.
  • TennCare has determined AAC reimbursement will be based on one of the methodologies below:

Who Will Be Surveyed Through The AAC Survey: 

  • ALL TennCare Pharmacy Providers will receive a notice to participate in the initial AAC survey on or before December 30, 2016.
  • ALL TennCare Pharmacy Providers will be required to submit responses to the initial AAC survey (either electronically or print) on or before January 18, 2017.
  • Randomly-Selected TennCare Pharmacy Providers will be surveyed every 6 months on an ongoing basis, requiring invoice purchase records from the most recent 30-day period.
  • Wholesale Suppliers may submit purchasing history directly to Myers and Stauffer. Pharmacies are encouraged to work with their wholesale suppliers to submit records to Myers and Stauffer.

What Information Should Be Submitted Through The AAC Survey: 

  • National Drug Code (NDC)
  • Purchase price of drug (drug ingredient cost only)
  • Quantity purchased
  • Purchase date for each product
  • “Item number” to NDC crosswalk, if item numbers or other proprietary nomenclature is used on invoices

Contact Information For Questions And Additional Information On The AAC Survey:


PROFESSIONAL DISPENSING FEE

Mercer will be conducting a professional cost of dispensing survey.

What You Need To Know About The Professional Dispensing Fee: 

  • The Professional Dispensing Fee will replace the current TennCare Dispensing Fee.
  • This is intended to reflect professional services and costs associated with filling a Medicaid prescription.
  • TennCare reserves the ability to adjust this fee and create a differential dispensing fee for certain provider types and services.

Who Will Be Surveyed Through The Professional Dispensing Fee Survey: 

  • ALL TennCare Pharmacy Providers will receive a notice to participate in the Professional Dispensing Fee survey on or before December 30, 2016.
  • ALL TennCare Pharmacy Providers will be required to submit responses to the Professional Dispensing Fee survey (either electronically or in print) on or before January 13, 2017.

How To Prepare NOW for the Professional Dispensing Fee Survey: 

  • Gather your financial statements or tax returns from the last completed fiscal year. (The survey will accept 2015 tax returns and will use inflation factors to adjust for 2016).
  • Compile demographic information (such as pharmacy contact information and pharmacy type).
  • Compile prescription counts (same time period as financial statements or tax returns).
  • Prepare floor plan information (square footage or measurements of the pharmacy prescription dispensing area and non-pharmacy, or front-end, areas).
  • A signature (either electronic or printed and scanned) is required for response to this survey.

What Information Will Be Required On The Professional Dispensing Fee Survey: 

1. Profile Information

  • National Provider Identifier (NPI) (10 digits)
  • NCPDP Provider Number
  • Pharmacy Name
  • Street Address
  • Street Address (Additional)
  • City
  • State
  • ZIP Code
  • County
  • Contact Person
  • Contact Person’s Email
  • Telephone Number
  • Fax Number
  • Does the pharmacy dispense 340B Drug Pricing Program (340B) drugs?
  • Type of ownership
  • Was there a change in pharmacy ownership during the reporting period?
  • Was the pharmacy open the entire year? If no, list the number of months the pharmacy was open.
  • Select the appropriate pharmacy type
  • Select the location type of the pharmacy
  • How many years has this location been in business as a pharmacy?
  • Is one or more of the pharmacists who fill prescriptions at this location also an owner of the store or chain?
  • Does the pharmacy provide 24-hour emergency service?
  • How many hours per week is the pharmacy department open? (Maximum of 168)
  • Is the pharmacy open 24 hours a day?
  • What was the square footage for the following areas at the end of the reporting period?
  • Prescription area
  • Non-prescription area
  • Total square footage
  • Refrigerators used for storing prescription medication may be included in Prescription area square footage.
  • Prescription area square footage/Total square footage = Ratio applied to facility expenses.

2. Prescription Statistics

  • Dispensing:
    • How many Medicaid Fee-For-Service prescriptions were filled by this pharmacy during the reporting period?
    • How many Medicare Fee-For-Service prescriptions (if available) were filled by this pharmacy during the reporting period?
    • How many prescriptions (all other types) were filled by this pharmacy during the reporting period?
  • Delivery:
    • How many prescriptions were delivered outside of the pharmacy to the recipient?
    • How many Medicaid prescriptions were delivered outside of the pharmacy to Medicaid beneficiaries?
    • What is the radius of the delivery area expressed in miles?
  • Long-Term Care Practice (only if applicable):
    • How many prescriptions during the reporting period were dispensed for long-term care (LTC) facilities for the following dispensing categories?
      • Unit dose > or = to 28 days
      • Unit dose <28 days
      • Modified unit dose (bingo card/blister packs) > or = to 28
      • Modified unit dose (bingo card/blister packs) < 28
      • No unit dose dispensing > or = to 28
      • No unit dose dispensing < 28
      • Traditional packaging > or = to 28
      • Traditional packaging < 28
      • Other method not described above > or = to 28
      • Other method not described above < 28
  • 340B Covered Entities (only if applicable):
    • Type of 340B covered entity
    • Do you use a 340B administrator?
    • 340B script count for all payers
    • 340B script count for Medicaid BIN: 016820, PCN: P086016820
  • Specialty Practice (only if applicable):
    • Prescription counts and revenue for specialty drugs
    • Blood factor drugs are classified as Hemophilia beginning on page 2 of the Specialty Pharmaceutical Pricing List, found HERE.
    • All other specialty drugs also in the list under anything but the Hemophilia heading.

3. Financial Data

  • The formula used for calculating Financial Data will be:
    • Add Direct Pharmacy Expenses and Allowable Allocated Overhead to get the Total Allowable Pharmacy Cost.
    • Divide Total Allowable Pharmacy Costs by either the total number of scripts or Medicaid prescriptions only.
    • The reporting period is the most recently completed fiscal year for which you have complete financial data.
    • Revenue detail is needed to allocate non-facility overhead and allocate the pharmacist’s time.
    • Cost of goods sold (COGS) data is for validation only. It is not part of the dispensing fee calculation and is optional.
  • Direct costs allowed for pharmacy department expenditures:
    • Prescription containers, labels and other pharmacy supplies
    • Professional liability insurance for licensed personnel
    • Pharmacy department licenses, permits, and fees
    • Dues, subscriptions for pharmacy department
    • Delivery expenses (prescription related)
    • Expenses for compounding
    • Bad debts for prescriptions (including uncollected copayments)
    • Computer systems – costs related only to the pharmacy department
    • Claim transmission charges
    • Depreciation directly related to pharmacy department
    • Professional education and training
    • Costs directly attributable to 340B
    • 340B program management
    • Other (list other costs in Comments Section)
    • Other pharmacy department-specific costs not identified elsewhere
    • Number of pharmacist full-time employees (FTEs)
    • Number of other pharmacy department FTEs
    • Pharmacist manager (owner) wages
    • Pharmacist manager (owner) % of time in pharmacy department
    • Pharmacist manager (non-owner) wages
    • Pharmacist manager (non-owner) % of time in pharmacy department
    • Staff pharmacist wages
    • Staff pharmacist % of time in pharmacy department
    • Technician wages
    • Technician % of time in pharmacy department
    • Delivery personnel wages
    • Delivery personnel % of time in pharmacy department
    • Other personnel working in pharmacy department wages
    • Other personnel working in pharmacy department % of time in pharmacy department
    • Pharmacy department payroll taxes
    • Pharmacy department benefits (including health insurance and pension/profit sharing/retirement expenses)
  • Direct costs allowed for non-pharmacy department expenditures:
    • Direct non-pharmacy payroll expenses
    • Overhead facility costs Allocated by square footage
    • Overhead non-facility costs Allocated by percentage of sales
  • Direct costs NOT allowed for non-pharmacy department expenditures: (Personnel costs for non-pharmacy sales are not included in the cost to dispense calculation. Administrative or shared services are allocated by a percentage of pharmacy revenue to total revenue.)
    • Lobbying, advertising, income tax, bad debt
    • Wages for personnel directly attributed to non-pharmacy sales and services.
    • Wages for personnel directly attributed to administrative or shared services.
    • Payroll taxes and benefits not reported elsewhere.
    • General employee expenses attributable to all employee types.
  • Facility Expenses (allocated to the cost of dispensing by percentage of square footage)
    • Rent (explain in Comments if building is owned)
    • Utilities (gas, electric, water and sewer)
    • Real estate taxes
    • Facility insurance
    • Maintenance and cleaning
    • Depreciation expense (e.g., leasehold improvements, furniture, and fixtures)
    • Mortgage interest
    • Other facility-specific costs not identified elsewhere
  • Non-Facility Expenses: (Non-facility expenses are allocated to the cost of dispensing by percentage of revenue.)
    • Marketing and advertising
    • Professional services (e.g., accounting, legal, consulting)
    • Security costs
    • Telephone and data communication
    • Transaction fees/merchant fees/credit card fees
    • Computer systems and support
    • Depreciation (not captured elsewhere)
    • Amortization
    • Office supplies
    • Office expenses
    • Other insurance
    • Taxes other than real estate, payroll, or sales
    • Franchise fees (if applicable)
    • Other interest
    • Charitable contributions
    • Corporate overhead
    • Other costs not included elsewhere (explain in Comments)

4.    Comments and Certification

  • A “Comments” section is available for explanations and additional information since not all costs are accounted for the same.
  • Certification is required. The data must be certified as complete, accurate and truthful to the best of your understanding.

5.    Validation

  • All completed surveys are subject to data validation and will be reviewed for reasonableness and completeness.
  • Validation of results is done through verification of reported data with financial data or tax returns.
  • 20 or more responses are subject to on-site verification.

Contact Information For Questions And Additional Information On The Professional Dispensing Fee Survey:

  • Mercer Tennessee Professional Dispensing Fee Survey Help Desk:
    Scott Banken, CPA
    RxPDFS@mercer.com
    (877) 854-6776 or (612) 642-8722
  • TennCare: 
    Dr. Raymond McIntire
    (615) 507-6497
    Raymond.Mcintire@tn.gov