Medi-Cal Drug Rebate Home Page
Dispute Resolution Frequently Asked Questions
General Questions:
Program Specific Questions:
Other Questions:
What is California’s reimbursement rate?
Medi-Cal reimburses pharmacies billing for drugs at the Estimated Acquisition Cost (EAC) plus a dispensing fee.
From about 1989 until November 30, 2002, Medi-Cal calculated EAC as the lowest of:
- AWP minus 5% for most drugs
- Direct price for certain manufacturers
- Federal Upper Limit (FUL) price for certain drugs
- State Maximum Allowable Ingredient Cost (MAIC) price for certain drugs
- The pharmacy’s charge
Legislation was enacted December 1, 2002 for AWP-10%, but for rebate purposes it became effective the first day of the month of the following quarter (January 1, 2003). During this time Medi-Cal calculated EAC as the lowest of:
- AWP minus 10%
- Federal Upper Limit (FUL) price for certain drugs
- State Maximum Allowable Ingredient Cost (MAIC) price for certain drugs
- The pharmacy’s charge
Legislation was enacted September 1, 2004 for AWP-17%, but for rebate purposes it became effective the first day of the month of the following quarter (October 1, 2004). The rate is now the lowest of:
- AWP-17%
- Selling Price (Selling price will be based on Average Sales Price)
- MAIC
- FUL
- Provider charge
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What is California’s pharmaceutical dispensing fee?
Effective October 1, 2004 (4Q04 Invoices) California’s dispensing fee became $7.25 per claim, except that claims with a Place of Service Code of 4, C, F, G, H, I, M, or N, which indicate Long Term Care Claims, are reimbursed an $8.00 dispensing fee per claim. A previous 10-cent per claim reduction was also eliminated.
From 1986 until August 31, 2004, California’s pharmaceutical dispensing fee was $4.05.
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What is California’s reimbursement rate reduction history?
From 1995 to September 2004 California reduced the amount that it reimburses each claim by the following amounts for the following periods. Manufacturers may want to take these amounts into consideration when setting outliers in drug rebate claims review.
Rate Reduction History
- Jan 1, 1995 - 50-cent reduction per claim
- Jan 1, 2000 - 25-cent reduction per claim
- July 1, 2002 - 10-cent reduction per claim
- Oct 1, 2002 - 50-cent reduction per claim, except LTC claims (using the place of service codes 4, C, F, G, H, I, M, or N) have a 10-cent reduction
- July 1, 2004 - 10-cent reduction per claim
- Sep 1, 2004 - claim reduction ended
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What is California’s maximum number of days supply when dispensing drugs?
California has a 100-day maximum days supply for most drugs. This is different from other states that may only have a 30-day maximum dispensing practice; however, most claims (75 to 80%) are for 30 days or less.
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Why does Medi-Cal reimburse Kaiser at such a low rate?
The reimbursed dollars are not always the best indicator of what was actually dispensed. Other Health Coverage or Third Party Liability (TPL) information may not always be entered as part of the Medi-Cal claim. It is normal to see Kaiser Permanente claims for their fee-for-service Medi-Cal patients being reimbursed for a co-pay of $5 - $30 with no TPL data. For that reason, most Kaiser claims are correct and the units are correctly invoiced for rebates.
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Can normal prescription practices vary and/or be overridden?
Yes. A Treatment Authorization Request (TAR) can be used to override normal prescription practices (i.e. prescriptions in excess of six prescriptions at a time for one beneficiary, quantities larger than usual dispensing quantities, drugs not on the List of Contract Drugs, etc.)
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Why do I need to submit Average Manufacturers Price (AMP) data on certain NDCs?
Only those labelers who have agreed to pay California a state supplemental rebate based on AMP need to provide AMP data. Because your labeler signed one or more AMP-based supplemental rebate contract(s) for certain NDC(s), you must send AMP data updates quarterly to California. Medi-Cal uses the AMP to calculate the supplemental rebate due.
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When is Average Manufacturer Pricing (AMP) data due in California?
AMP information for each NDC must be submitted to the California Department of Health Care Services (DHCS) fiscal intermediary, Hewlett-Packard Enterprise Services (HP), prior to the Centers for Medicare & Medicaid Services (CMS) deadline. The CMS deadline is 30 days after the end of each quarter.
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What happens if I don't turn in the AMP data timely?
Labelers should be aware that if they do not submit their data for two consecutive quarters, their California Supplemental AMP contract may either be terminated or not renewed when the current contract expires. Without an active contract, DHCS can make the labeler’s drug available only through prior authorization.
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Where do I submit the AMP data?
AMP data for Supplemental contracts is submitted to the DHCS Fiscal Intermediary, ACS, by formatted diskette or email.
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How do I submit the AMP data to ACS?
The DHCS AMP coordinator will make sure all labeler AMP contacts have received the "AMP Coordinator reminder email letter" and any "revised" AMP data submission instructions two weeks prior to the CMS deadline. The address to submit AMP is included in the letter, and is also noted here:
ACS
Drug Rebate Unit
Attention: Rebate Unit, Supervisor
820 Stillwater Road
West Sacramento, CA 95605
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What if my AMP or Rebate Per Unit (RPU) data changes?
If a labeler makes a change in AMP data, the labeler must submit that updated data to CMS, which in turn will notify DHCS, by tape, in the following quarters. DHCS’ rebate system will then adjust the labelers account status on the rebate accounting system and report the new amounts on the next invoice.
The labelers must also report AMP data revisions to the states on a quarterly basis. AMP data is loaded into the Rebate and Accounting Information System (RAIS) once per quarter, so any changes will need to be reported to DHCS the following quarter.
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What if my AMP or RPU changes produce a credit?
The Department will process the labeler’s request to apply their credits towards future invoices provided that the labeler previously reported AMP data revisions to CMS for federal rebates and ACS for supplemental rebates. Reporting AMP data changes on the Prior Quarter Adjustment Statement (PQAS) form only is not acceptable, and does not follow CMS AMP reporting guidelines.
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What if I have problems with my AMP data?
If there are any problematic submissions, ACS normally will contact the labeler for resubmission and log this information. If a labeler is chronically late and/or inaccurate, then a detailed history of the labeler's data submission compliance will be given to the labeler's government representative. Consistently flawed data submissions may result in the Department terminating the rebate contract.
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What if I can't find a copy of my contract?
Labelers must submit a written request, on the labeler's letterhead to DHCS. The request can be faxed to DHCS at 916-552-9563 or mailed to this address:
California Department of Health Care Services
Drug Contracting Branch
Attn: Chief
P.O. Box 997417, MS 4604
Sacramento, CA 95899-7417
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What qualifies a Provider as a Public Health Services (PHS) entity in California and eligible for 340B pricing?
The 340B PHS program is a federal program that allows eligible entities to buy drugs at very low prices. The provider must be, for example, a Disproportionate Share Hospital (DSH), Federally Qualified Health Center (FQHC), Indian Health Center or other qualifying entity. Additional information about the 340B PHS Program can be found at: http://www.hrsa.gov/opa/introduction.htm (Not DHCS).
The billing provider must pass the discount on to Medi-Cal by only billing actual acquisition cost plus the dispensing/professional fee allowed in state statute. There are no rebates on drugs that PHS facilities purchase through a PHS contract.
Some examples of PHS providers:
- County Hospitals
- University of California Hospitals
A complete listing can be found here: http://opanet.hrsa.gov/opa/Login/MainMenu.aspx (Not DHCS).
Note: Although a provider may have a PHS contract, the provider may not have purchased the drug through that contract. In order to verify that, we request that labelers send us the pertinent chargeback data for the PHS facilities, to verify the units are not rebatable.
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What are the Federal and State Laws regarding the Drug Rebate Program in California?
Federal Law
State Law
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Welfare and Institutions (W&I) Code Section 14105
Relates to Medi-Cal Drug Rebate Program. To view the web site, go to: http://www.leginfo.ca.gov/index.html (Not DHCS), click the California Law button, select Welfare and Institutions Code, and enter a law section in the search engine field. For example, enter 14105.35 to access that section of law. For Assembly or Senate Bills select Bill Information.
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Assembly Bill 2377, 1994
Relates to 10% State Supplemental Rebates. (Effective date of 7/1/94 and a sunset date of 12/1/96)
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Senate Bill 391, 1997
Amended Welfare & Institutions Code 14105.33-Relates to State Supplemental interest and penalty. (Effective date 10/1/97 still in effect)
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Senate Bill 485, 1992
Amended Welfare & Institutions Code 14105.33-Relates to State Supplemental Rebates. (Effective dates 7/1/92 through 9/30/93)
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What types of programs are involved in the Department of Health Care Services Drug Rebate Program?
The following programs are involved in the DHCS Drug Rebate Program:
- Medi-Cal (Medicaid; federal rebate).
- Medi-Cal Supplemental (state supplemental rebate)
- FPACT (Family Planning Access to Treatment; Medicaid waivered, rebate-eligible plan)
- Medical Claims (HCPCS) (HealthCare Procedure Code Set).
- FPACT Medical Claims (HCPCS)
- Compounds billed with HCPCS
- COHS (County Organized Health System); (Health Insuring Organization, Medicaid waivered, rebate-eligible plan).
- COHS Supplemental (COHS state supplemental rebate).
- CMSP (state supplemental rebate program ended 2001; County Medical Service (medically indigent program)
- CCS/GHPP (California Children’s Services-Genetically Handicapped Persons Program).
- Blood Factors (federal rebates)
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What are "Medi-Cal" rebates?
"Medi-Cal" rebate is California’s term for the federal rebate program. Medi-Cal is the name of California’s Medicaid health care program. Invoicing for drug rebates under this program began for 1st quarter 1991 and continues to the present.
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What are "Medi-Cal supplemental" rebates?
"Medi-Cal supplemental" rebates are rebates labelers have agreed to pay the state in addition to the federal rebates. This program began in 1991. DHCS puts drugs for which labelers have agreed to pay a supplemental rebate on a "List of Contract Drugs". Drugs on the "List" are generally not subject to the prior authorization otherwise required for many drugs.
Negotiating supplemental contracts by DHCS Pharmacists is an ongoing process as most contracts are for three years.
Other Supplemental programs were:
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Senate Bill 485, 1992 (Effective dates 7/1/92 through 9/30/93)
This required DHS to obtain supplemental rebates during this period. These rebates were in addition to any rebates provided to the California Medicaid program under the terms of the CMS rebate agreement. Any manufacturer refusing to provide these supplemental rebates was put on prior authorization status for all of their drugs, (each prescription would have to be approved on a case-by-case basis with a TAR). Any manufacturer who was providing a rebate for a product in excess of the applicable amount indicated as supplemental did not have to provide an additional supplemental rebate for that product.
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Assembly Bill 2377, 1994 (Effective date of 7/1/94 and a sunset date of 7/1/96)
This added Welfare & Institutions Code Section 14105.335 which required pharmaceutical manufacturers to pay a supplemental rebate, in addition to the federal rebate, for each of their drugs reimbursed by Medi-Cal equal to 10% of AMP.
This provision required the Department to place the drug products of any manufacturer refusing to provide the 10% supplemental rebates on prior authorization status. Drugs that were added to the Medi-Cal List of Contract Drugs pursuant to Welfare & Institutions Code Section 14105.43 or 14133.2 (AIDS drugs and cancer drugs) did not require supplemental rebates.
Note: The sunset date of 7/1/96 was later extended to 12/31/96 through a contract document. The original contract and the extended contract were administered via an "All Manufacturers" letter.
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Assembly Bill 3483, 1996 (Effective date 7/22/96 with and sunset date of 1/1/97)
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Senate Bill 391 Solis, 1997 (Effective date 10/1/97 still in effect)
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Are supplemental rebates subject to interest charges?
Yes, the Welfare & Institutions Code 14105.33 was amended to impose interest and interest penalties on State Supplemental Rebates, beginning with the 4th quarter of 1997.
- If a quarter’s supplemental payment is not received within 38 days from the date the invoice is postmarked, interest calculated at the CMS rate (Weekly Federal Treasury-bill rate) is due.
- If a quarter’s supplemental payment is not received within 69 days of the invoice postmark date, an interest penalty of 10 percentage points must be added to the weekly T-bill rate under the CMS interest formula. The interest and the state 10% penalty continue to accrue until the day payment is postmarked to us.
- If a manufacturer made a supplemental overpayment as a result of a dispute resolution, the state owes interest for payments made 38 days after the date of dispute resolution.
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3q1992 through 3q1993
Supplemental rebates were owed pursuant to Senate Bill 485 for each of the labelers’ NDCs. The rebate amount calculation varies depending on the type of drug (single-source, innovator multi-source or non-innovator multiple-source). If an additional existing negotiated supplemental contract existed for any of their NDCs, a combination of the two was owed.
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3q1994 through 4q1996
Supplemental rebates were owed pursuant to Assembly Bill 2377 for each of their NDCs. The rebate amount calculation was 10% of AMP. For manufacturers with separately negotiated supplemental contracts the combination of the two percentages should come up to the 10%. If the negotiated supplemental contract was for more than the 10%, no additional rebate was owed. When doing Supplemental dispute resolution activity, DHCS analysts verify that the 10% Supplemental RPU was calculated and paid correctly.
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Types of supplemental contracts
As noted in the above, these contracts were either mandated by legislation or are the result of negotiations between the labeler and the state.
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What are the rebates based on?
Terms of contracts can be based on AMP or Net Cost or a combination thereof.
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Do I get a separate invoice for supplemental rebates?
Yes. From 4th quarter 2001, ACS has invoiced labelers for federal rebates and Medi-Cal state supplemental rebates on separate invoices. Previously, labelers would calculate the supplemental rebate based on the Medi-Cal invoiced unit utilization and the negotiated terms. They would basically multiply the Medi-Cal units by whatever RPU they had negotiated with the state, and send this amount in addition to their Medi-Cal rebate.
From 4th quarter 2001 forward, DHCS uses the most recent AMP submitted by the labeler or the Net Cost, as needed, applicable needed, to provide the labeler with an estimated invoice dollar amount due.
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What is "FPACT"?
FPACT (Family Planning, Access, Care, and Treatment program) is a Demonstration Project Waiver approved by CMS. Consequently, it is eligible for federal rebates and state supplemental rebates.
FPACT allows for federal matching funds to be used for reproductive health services for medically indigent females.
Prior to December 1, 1999, FPACT was a State-only program. As the result of the approved Federal waiver, the scope of the State-only program changed and put FPACT under Title XIX, thereby making FPACT utilization rebate eligible.
FPACT rebates became effective 12/1/99 causing the first invoice in 4q99 to only contain one month of utilization.
FPACT continues to be rebate eligible through monthly extentions of the original waiver.
Additional information about the FPACT program can be found at: http://www.cdph.ca.gov/programs/FamilyPact/Pages/default.aspx (Not DHCS)
See Additional Information
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Is FPACT utilization subject to supplemental rebates?
Yes, in some cases. Labelers that have executed an agreement to pay state supplemental rebates, with an effective date on or after July 01, 2006, are obligated to pay the state supplemental rebate on FPACT utilization.
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What is "HCPCS"?
"HCPCS" means, Healthcare Common Procedure Coding Set.
HCPCS describes the codes that physicians use to claim reimbursement for the procedures and drugs administered in the physician’s office for Medi-Cal reimbursement.
These claims are for physician-administered injections that are part of the Fee for Service utilization, but were previously not invoiced because HCPCS codes were being used instead of NDCs. Invoices were mailed 2/4/98 retroactively for 4Q96 through 3Q97.
They are typically paper and or batch claims and the HCPCS codes are not as detailed as NDCs. There are numerous drugs with HCPCS. However, rebates are only requested on those codes that are mapped to just one manufacturer/labeler and NDC. If a HCPCS product is mapped to two or more labelers the product is excluded from the invoice.
The following document has a list of HCPCS X-Codes, and their corresponding drug and strength:
http://files.medi-cal.ca.gov/pubsdoco/publications/masters-MTP/Part2/injectlist_m00o03o04o11.doc (DOC)
See Additional Information
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What is "FPACT HCPCS"?
Beginning December 1, 1999, using the same HCPCS code-matching outlined above, physician-administered injections dispensed under the FPACT program were invoiced for a federal rebate under a separate invoice (FPACT HCPCS).
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What is a "COHS"?
COHS means County Organized Health System. Their utilization is incorporated into Medi-Cal via a Federal waiver.
See Additional Information
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How many COHS are there?
There are six COHS that incorporate fourteen counties.
- "CalOPTIMA" – Orange County
- "Central California Alliance for Health" – Santa Cruz, Monterey and Merced Counties
- "Health Plan of San Mateo" – San Mateo County (rebate eligibility ended July 01, 2005).
- "Partnership Health Plan" – Solano, Napa, Yolo, Sonoma, Marin and Mendocino Counties
- "CenCal" – Santa Barbara and San Luis Obispo Counties
- "Gold Coast Health Plan" -- Ventura County
Beginning with the first quarter of 2002, COHS claims were invoiced separately from the Medi-Cal invoice for the first time. Fourth quarter 2001 data was included as Outstanding Invoice Items with the first quarter 2002 Invoice.
Prior to fourth quarter 2001, COHS was invoiced together with Medi-Cal.
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What is a "COHS Supplemental"?
Any drug that has a Medi-Cal supplemental contract will also have COHS supplemental invoice.
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What is the "CMSP"?
CMSP stands for County Medical Services Program. CMSP is for medically indigent adults, the working poor. There were rebate contracts with a relatively few manufacturers between 1st quarter 1991 to 2nd quarter 2001.
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What is "CCS/GHPP"?
California Children Services/Genetically Handicapped Persons Program
Protects the parents of children under 21 from the high cost of treatment for chronic illnesses for which they have a genetic predisposition.
A few labelers pay rebates at the federal rate on the utilization of these relatively small, state-only programs. There was no supplemental payment; the rebates are at the federal rebate equivalent.
CMS approved a Medicaid program waiver that is effective September 01, 2005, making CCS drug utilization eligible for rebates. The Department is making the rebate invoicing system changes necessary to generate rebate invoices for CCS/GHPP utilization. When completed, the Department will invoice for CCS rebates retroactively to that date.
See Additional Information
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What are "Blood Factors"?
Program started in 1995.
Often called "Factor 8" or Anti-Hemophilic Factors (AHF).
DHCS reimburses providers of AHF at their acquisition cost plust 20 percent. The Department invoices labelers for the federal rebate; California does not contract for a state supplemental rebate on Blood Factors.
The State Controller’s Office performs the manual process needed to convert the AHF not billed with NDCs to create the rebate invoice. The Department intends to convert all AHF claiming to NDCs.
See Additional Information
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What is the notification process if a labeler has an NDC that is terminated?
Labelers must report a termination date to CMS AND First Data Bank (FDB) in the event an NDC is terminated to ensure the Medi-Cal formulary file has the most current information.
Per CMS, the termination date is the shelf-life expiration date of the last batch sold. Labelers are required to report pricing information for terminated or expired drugs for FOUR QUARTERS beyond the termination date. Labelers must pay rebates for discontinued products that still have effective shelf lives.
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Where should labelers remit rebate payments?
Labelers should, within 38 days of the invoice postmark date, remit rebate payment along with the form required by CMS, Form CMS-304, Reconciliation of State Invoice (ROSI), and the second copy of the invoice to:
Department of Health Care Services
Accounting Section
Attn: Medi-Cal Drug Rebate Accounts Receivable
1501 Capitol Ave Ste. 71.2048 MS 1101
FPACT Payments please include this information:
Attn: FPACT Drug Rebate Accounts Receivable
Account Number: 95921-580200-06
If a payment is for more than one labeler code, a separate ROSI for each labeler is required.
Please do not submit payment to any other address.
To correct payment discrepancies and/or posting errors, labelers should contact Affiliated Computer Services (ACS) staff at (916) 373-2830.
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What kinds of information can California offer pharmaceutical manufacturers?
California has a Rebate Accounting Information System (RAIS) that collects and processes all Medi-Cal drug claims and manufacturers drug rebate invoices. This system has all claims California has processed from 4th quarter 2001 forward. Additionally, Medi-Cal analysts can access all claims detail from a separate data warehouse from 1991 forward. This information is available to corresponding manufacturers as requested.
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