Tennessee Pharmacists Association
TennCare Payment Changes

On March 2, 2017, TennCare held a stakeholder webinar to discuss plans to roll out its proposal to move pharmacy payments from its current Average Wholesale Price (AWP) plus dispensing fee model to an Actual Acquisition Cost (AAC) plus Professional Dispensing Fee (PDF) model.

CLICK HERE for a copy of the presentation by Myers and Stauffer LLC and Mercer, related to these payment changes.

Pharmacists are strongly encouraged to review the following information and the presentation, in order to determine how these changes will affect your pharmacy practice going forward. 

TennCare has indicated that it plans to incorporate the following fee changes into its program, starting on April 1, 2017:


Initial AAC Survey Process

  • All pharmacy providers were selected to participate (83% response rate).
  • Provider survey letters were mailed December 21, 2016.
  • Invoices from December 1, 2016, to December 31, 2016, were requested.
  • All brand and generic drug purchases from all wholesale suppliers were requested.
  • Follow-up reminders were mailed January 6, 2017.
  • Survey responses were due January 18, 2017.
  • Responses were accepted through January 27, 2017, for use in analysis.
Ongoing AAC Survey Process
  • State-specific rates will be calculated for all Tennessee Medicaid-covered drugs.
  • Randomly-selected pharmacy providers will be surveyed every 6 months, requesting invoice purchase records from the previous month.
    • Chain/Independent
    • Urban/Rural
  • Rates will be updated on a weekly basis to reflect changes in published pricing and/or help desk calls.

TennCare is proposing to use the following calculations for Actual Acquisition Cost:

TennCare Table
TennCare Table

PDF Survey Results: 
  • 1,194 pharmacies (or 67.1%) of the 1,779 pharmacies which received the PDF Survey request from TennCare responded to the survey.
  • 264 of the 1,194 survey responses were discarded as “non-usable.”
  • 930 (or 52.3%) of the PDF survey responses were considered usable responses to the PDF survey.
PDF Implementation Specifics:
  • TennCare will provide pharmacies with final guidance before April 1, 2017, pending ongoing conversations with CMS.
  • Compounding reimbursement will not change, except Level 1 will be reimbursed at $10.00 for high volume pharmacies and $10.09 low volume pharmacies.
  • Ambulatory tier assignment will be based on volume reported by each pharmacy in the Cost of Dispensing survey, and TennCare will notify pharmacies in writing with their individual Professional Dispensing Fee prior to April 1, 2017.
    • Pharmacy chains will be assigned a single PDF, based on the average volume per location.
    • Policy decisions around new pharmacies, pharmacies with new ownership, or pharmacies who did not complete the survey will be forthcoming, pending discussions with CMS.
    • TennCare annual attestation and the repeat PDF survey process are still to be determined.
  • OTC’s will be priced with the same algorithm as legend, prescription drugs pursuant to a prescription written by a Tennessee Medicaid prescribing provider.
    • OTC coverage will change and final guidance will be provided to pharmacies by TennCare prior to April 1, 2017, pending final CMS guidance.
TennCare is proposing to use the following calculations for Professional Dispensing Fees:
TennCare Table

TPA is monitoring this situation and will continue to provide guidance to members as more information becomes available.