Frequently Asked Questions about Medi-Cal Drug Rebates
General Questions
What are "Medi-Cal" rebates?
"Medi-Cal" rebates are California’s federal Medicaid rebate programs. Medi-Cal is California’s health program which provides free or low-cost health coverage for California residents who meet eligibility requirements. Drug manufacturers are required to pay a rebate for all outpatient drugs that are dispensed and paid for by the State’s Medi-Cal program. Invoicing for drug rebates began January 1, 1991 and continues today
What are "Medi-Cal supplemental" rebates?
"Medi-Cal supplemental" rebates are additional rebates drug manufacturers have agreed to pay the state. Supplemental rebates are based on the same utilization as the federal rebate program. Drug manufacturers that have agreed to pay supplemental rebates are included on the State’s Contract Drug List (CDL). Generally, these products are not subject to prior authorization. The Pharmacy Benefit’s Drug Contracting Branch is responsible for managing the program and negotiating contracts. Supplemental rebates are required for all federal programs except for utilization from managed care organizations (MCOs). Supplemental rebates have been part of the California rebate program since 1991. Prior to 1997, supplemental rebates were calculated as a percentage of Average Manufacturer Price (AMP) on all covered drugs. However since 1997, contracts are negotiated on specific drugs. California currently has two types of supplemental contracts: Net Cost and AMP. Supplemental contracts pertain to all rebate programs except for managed care organizations (MCO) that became rebate eligible in 2010.
Are supplemental rebates subject to interest charges?
Yes. Section 14105.33 of the Welfare & Institutions Code was amended in 1997 allowing state supplemental contracts to include interest and penalty provisions. Contracts include the following:
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If a supplemental payment is not received within 38 days from the invoice’s postmark date, interest calculated at the CMS rate (Weekly Federal Treasury-bill rate) is due.
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If a supplemental payment is not received within 69 days from the invoice’s postmark date, an interest penalty of 10 percentage points is added to CMS interest rate. The interest and 10% penalty continue to accrue until the postmark date of the payment.
Do I get a separate invoice for supplemental rebates?
Yes. Beginning 4th quarter 2001, DHCS began sending labelers separate supplemental invoices. Prior to October 2001, labelers were instructed to calculate the supplemental rebate using their Medi-Cal invoice.
What are the Federal and State Laws regarding the Drug Rebate Program in California/Federal Law?
Federal Law:
Social Security Act Section 1927 [42 U.S.C. 1396r-8] (a)
Federal legislation related to the Medicaid (Medi-Cal in California) Drug Rebate Program.
Visit the Social Security webpage for more information.
State Law:
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Welfare and Institutions (W&I) Code Section 14105. Contains information on the Medi-Cal Drug Rebate Program.
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Senate Bill 391, 1997 Amended W & I Code 14105.33. Authorized the State to charge interest and a penalty for late state supplemental rebate payments. (Effective date 10/1/97)
To Access W & I Code, visit the
California Legislative Information website, and select the button labeled "California Law," then select Welfare and Institutions Code. Next enter a section, select the "Enter" button to search.
What types of programs are involved in the Department of Health Care Services Drug Rebate Program?
California invoices drug manufacturers for all federal Medicaid programs, including those incorporated by waiver. In addition, manufacturers receive supplemental invoices if they have entered into a contract with the State.
Programs for which rebates are due include: Medi-Cal (FFS, COHS, Managed Care Organizations (MCOs)), CCS/Healthy Families, GHPP, Blood Factors, FPACT and BCCTP. Separate invoices are mailed for pharmacy, PADs and compound claims for many of the programs.
What is "FPACT"?
Family Planning, Access, Care, and Treatment (FPACT) was a State-only program until December 1, 1999 when CMS approved California’s 1115 waiver. As a result, the program became eligible for Title XIX funding. Effective 4Q1999, the State began invoicing for rebates. With the approval of the waiver, the FPACT program also became eligible for supplemental rebates. The Department of Health Care Services submitted a State Plan Amendment (SPA) to transition the current FPACT waiver into the Medi-Cal State Plan.
The SPA was approved on March 24, 2011 by CMS. As approved by CMS, the SPA transitioned the FPACT waiver into the State Plan with a retroactive effective date of July 1, 2010. Additional information is available on the
FPACT program webpage.
What is a "Physician Administered Drug (PAD)"?
A physician administered drug is any covered outpatient drug provided or administered to a recipient, and billed by a provider other than a pharmacy. Such providers include, but are not limited to, physician offices, clinics and hospitals. A covered outpatient drug is broadly defined as a drug that may be dispensed only upon prescription, and is approved for safety and effectiveness as a prescription drug under the Federal Food, Drug and Cosmetic Act. Physician-administered drugs include both injectable and non-injectable drugs.
What is "HCPCS"?
The Healthcare Common Procedure Coding System (HCPCS) is a national, uniform coding structure developed by the Centers for Medicare & Medicaid Services (CMS) to standardize the coding systems used to process Medicare and Medicaid (Medi-Cal) claims on a national basis.
Physician Administered Drug claims require a HCPCS code to identify the procedure and to determine the amount to reimburse the provider. Furthermore, all Physician Administered Drugs (PAD) claims must include the National Drug Code (NDC) so the drug manufacturer can be invoiced for rebates. DHCS also requires claims that are filled with 340B purchased drugs to include the “UD” modifier, which removes the claim from the drug manufacturer’s drug rebate invoice.
What is "FPACT HCPCS"?
FPACT HCPCS are Family Planning Access Care and Treatment (FPACT) Physician Administered Drug (PAD) claims. These are claims from non-pharmacy providers. Usually the claim is submitted by a clinic, but not always. The claim requires a HCPCS code, the NDC and a “UD” modifier if filled with a 340B purchased drug.
What is a "COHS"?
County Organized Health Systems (COHS) is a non-profit, independent public agency that contracts with the State to administer Medi-Cal benefits through local care providers and/or Health Maintenance Organizations. COHS have been part of the Medi-Cal program since CMS approved the first COHS plan in 1983. COHS have been part of the rebate program since 1991 and invoiced separately since fourth quarter 2001.
How many COHS are there?
There are six COHS plans that cover 22 counties.
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"CalOPTIMA" – Orange County
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"Central California Alliance for Health" – Santa Cruz, Monterey and Merced counties
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"Health Plan of San Mateo" – San Mateo County
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"Partnership Health Plan" – Napa, Solano, Yolo, Sonoma, Marin, Mendocino, Del Norte, Humboldt, Lake, Lassen, Modoc, Shasta, Siskiyou and Trinity counties.
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"CenCal" – Santa Barbara and San Luis Obispo counties
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"Gold Coast Health Plan" -- Ventura County
What is "CCS/GHPP"?
California Children’s Services (CCS) is a program that treats children with certain physical limitations and chronic health conditions or diseases. The Genetically Handicapped Persons Program (GHPP) is a health program for adults with certain genetic diseases. CMS approved a Medicaid program waiver, effective September 01, 2005, which allowed the State to invoice drug manufacturers for rebates.
The Medicaid program waiver to collect drug rebates for state-only CCS and GHPP utilization expired on December 31, 2020. Due to the non-extension of federal funding for the CCS and GHPP populations, DHCS no longer has the authority to invoice and collect federal Medicaid drug rebates for these programs. As of Q1 2021, CCS and GHPP invoices have been withdrawn from invoicing.
What are "Blood Factors"?
Blood Factors or Factor 8 is an essential blood-clotting protein, also known as anti-hemophilic factor (AHF). DHCS invoices drug manufacturers on separate invoices for drugs that are used to treat blood factor diseases. Providers of AHF drugs are reimbursed at their acquisition cost plus 20 percent.
What is BCCTP?
Breast Cancer and Cervical Treatment Program (BCCTP) provides cancer treatment for eligible low-income California residents who are screened by Cancer Detection Program: Every Woman Counts (CDP:EWC) or Family Planning Access Care and Treatment (FPACT) programs and found to be in need of treatment for breast and/or cervical cancer. Assembly bill (AB) 430, (Chapter 171, Statutes of 2001) provided the State with statutory authority to implement the optional federal Breast and Cervical Cancer and Treatment Act of 2000. California’s SPA was approved by the federal government with an effective date of January 1, 2000. Drug manufacturers have been required to pay rebates since the program was included in California's Medicaid State Plan. Visit the BCCTP webpage for more information.
What is California’s reimbursement rate for pharmacy claims?
Effective for pharmacy claims with dates of service on or after April 1, 2017, Medi-Cal reimburses based on the lower of Actual Acquisition Cost (AAC) plus a professional dispensing fee, or usual and customary charges. AAC is determined as the lowest of:
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National Average Drug Acquisition Cost (NADAC), or Wholesale Acquisition Cost (WAC) + 0% if the NADAC is not available,
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Federal Upper Limit (FUL), or
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Maximum Allowable Ingredient Cost (MAIC).
What is California’s maximum number of days supply when dispensing drugs?
California has a 100-day maximum supply for most drugs. This differs from many other states that have a maximum 30-day supply. It is important to take 100-day maximum supply into consideration when disputing utilization.
Why does Medi-Cal reimburse some providers at such a low rate?
Reimbursed dollars is not always the best indicator of how many units (tablets, milligrams, vials, etc.) of the drug was dispensed since some providers do not include all information.
Other Health Coverage or Third Party Liability (TPL) information is sometimes not included on the Medi-Cal claim. It is normal to see providers reimbursed only for the co-pay (i.e. $5, $15, $30, etc.) without any TPL data. For that reason, most claims with a low reimbursement amounts are correct and the units invoiced for rebates are also correct.
It is typical for managed care organizations (MCOs) to provide either a low reimbursement or no reimbursement amount on the claim. CMS’s Medicaid Drug Rebate Program Notice for Manufacturer’s Release No. 84 addresses the issue of low or no reimbursement for MCO claims. According to CMS, rebates are owed even if the MCO invoice does not show any paid amount since the drug cost is part of the capitated payment made by the State to the MCO. Consequently, reimbursement amount should not be used to dispute utilization since it has no relationship to units.
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.)
Why do I need to submit Average Manufacturers Price (AMP) data for certain NDCs?
Only labelers who have an AMP based State Supplemental Drug Rebate Agreement with California need to provide AMP data. The contract requires AMP data to be submitted quarterly so a unit rebate amount (URA) can be calculated for invoice purposes. AMP data must be provided for each NDC for each quarter as required by the terms of the contract.
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, Gainwell Technologies, LLC (Gainwell), within 30 days after the end of each quarter. This deadline is the same as CMS’s deadline for the federal drug rebate program.
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.
How do I submit AMP data?
AMP data for Supplemental contracts is submitted to Gainwell. AMP data is due within 30 days after the end of the quarter. Please contact the Drug Rebate Branch at drugrebatebranch@dhcs.ca.gov, for instructions on how to submit AMP data.
What if my AMP changes?
If a labeler’s AMP changes for a period under contract, the labeler must submit that updated AMP to Gainwell. The AMP data is submitted in the same manner as the initial AMP was submitted. Please contact the Drug Rebate Branch at drugrebatebranch@dhcs.ca.gov, for instructions on how to submit AMP data.
How do I know if my AMP data was incorrectly submitted (i.e. format, missing data, etc.)?
Gainwell or the drug rebate analyst will contact the labeler if there are problems with the AMP data submitted.
What if I can't find a copy of my state supplemental contract?
Contact your DHCS drug rebate analyst or have your government representative contact the Pharmacy Drug Contracting Branch.
What qualifies a Provider as a Public Health Services (PHS) entity in California and eligible for 340B pricing?
The drug rebate program was amended by the Veterans Health Care Act of 1992 (VHCA). Under the VHCA, Congress created the 340B program which is administered by the federal Health Resources and Services Administration (HRSA), Office of Pharmacy Affairs (OPA). The 340B program requires manufacturers of drugs that are paid for by state Medicaid programs to enter into an agreement with HRSA to provide statutory discounts on drugs to “covered entities”. Covered entities are required to identify claims for which the Medicaid beneficiary received a 340B purchased drug. The State is not entitled to rebates for those claims since the covered entity has already received a discount from the drug manufacturer. California’s rebate invoicing system automatically removes pharmacy and Physician Administered Drug (PAD) claims which include the appropriate PHS/340B identifier from the drug manufacturer’s invoice.
Information about the 340B program and which entities qualify can be found on the
HRSA 340 B Drug Pricing Program webpage.
Does a provider need to identify claims where Medi-Cal beneficiaries receive 340B purchased drugs?
Yes.
In order to comply with federal law claims must be filled out correctly to prevent “duplicate discounts.” This occurs when the drug manufacturer gives the provider the discounted 340B price and pays a Medicaid rebate. In order to prevent the “duplicate discount”, providers must include the appropriate code on the claim. Physician Administered Drug claims require a “UD” modifier. Pharmacy claims need to have a “08” in the Basis of Cost Determination field. Both the “UD” modifier and the “08” inform DHCS that a 340B purchased drug was used for the claim. Our rebate system removes the claims from the drug manufacturers rebate invoice ensuring that the drug manufacturer is not subject to the “duplicate discount”.
What is "EFT"?
The Electronic Fund Transfer (EFT) payment option permits registered users to pay their drug rebate invoices electronically without having to submit traditional paper checks. This voluntary option requires participants to adhere to a specific format when submitting electronic data. Please contact the Drug Rebate Branch at drugrebatebranch@dhcs.ca.gov, for more information on how to sign up for EFT.
What is "EIS"?
The Electronic Interface System (EIS) allows subscribing drug manufacturers to retrieve current quarter invoices and download 10 years of claim information based on rebate invoices. Please contact the Drug Rebate Branch Portal team at drugrebateportal@dhcs.ca.gov, for more information on how to obtain access to the system.
Opening Claims from the EIS System
After saving the paid claim data link, use 7-Zip to extract the data into a text format that can be converted to an Excel file.
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.
CMS defines the termination date for rebates as:
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Date product was removed from pharmacy shelves; or
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Date of shelf life (last date it can be dispensed) of last lot sold
Drug manufacturers are required to report pricing information for terminated drugs for
FOUR QUARTERS beyond the termination date.
Are Claims submitted by managed care organizations subject to rebates?
Yes.
Section 2501 of the Affordable Care Act (ACA) amended section 1927(b)(1)(A) of the Social Security Act
requires that the manufacturers “provide a rebate …including (for) such drugs dispensed to individuals enrolled with a Medicaid MCO if the organization is responsible for coverage of such drugs.” While section 1927(b)(1)(A) of the Act references payments made under the state plan, the amended statutory language does not limit the provision of additional manufacturer rebates to only drugs for which the MCO incurred a cost. When a drug is dispensed to a Medicaid beneficiary under a managed care arrangement, the state has made a capitated payment to the MCO for the drug. Regardless of the payment terms negotiated as part of the contract between the MCO and its participating providers to provide Medicaid coverage, the manufacturer is responsible for payment of rebates for covered outpatient drugs dispensed to Medicaid beneficiaries enrolled in MCOs. DHCS began collecting rebates for claims with a date of service of March 23, 2010, the implementation date of ACA.
Is it required that ROSI and/or PQAS be submitted with a labeler’s rebate payment?
Yes. The Centers for Medicare & Medicaid Services (CMS) requires that the Reconciliation of State Invoices (ROSI) and the Prior Quarter Adjustment Statement (PQAS) be included with every rebate payment. Without the ROSI and/or PQAS, the state will not be able to post your rebate payment. The data required on the forms is approved through the federal Office of Management and is mandated by CMS. It is also mandatory that drug manufacturers include ROSI and/or PQAS for any supplemental rebates paid.
Submit checks, ROSI, PQAS and other supporting documents to the DHC Accounting address noted on your Invoice Cover Letters.
Department of Health Care Services
Accounting Section
Medi-Cal
Drug Rebate Accounts Receivable
MS 1101
PO Box 997415
Sacramento, CA 95899-7415
In order to ensure that payments are processed correctly, it is necessary to consult your Invoice Cover Letter for account information. Separate payments are required for many of the programs.
How many beneficiaries are enrolled in Medi-Cal managed care in California?
For managed care information, including enrollment data, visit the
Medi-Cal Managed Care webpage.
Does California require drug manufacturers to pay rebates on compound claims?
Yes. California’s claims processing system has been capturing the information necessary to rebate drug manufacturers for compound rebates since October 2003. To ensure compliance with federal requirements, drug manufacturers will be invoiced for compounds in 2014. Invoicing will be retroactive to 2003 when the claims processing system began capturing the data.
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