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    OpenPayerPolicy UpdatesPharmacy & Specialty DrugsAlaska Medicaid PDL Coverage & Prior Auth | OpenPa…
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    CurrentAlaska MedicaidPolicy N/A

    Preferred Drug List (PDL) implementation and non-preferred drug coverage criteria

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    Describes Alaska Medicaid's implementation and operational requirements for a Preferred Drug List (PDL), notification (soft edit) and denial (hard edit) processes for non-preferred drugs, and what providers and pharmacists must do to document medical necessity to obtain payment. Affects Alaska Medicaid prescribers, pharmacists, and pharmacies.

    Policy Summary
    PayerAlaska Medicaid
    PolicyPreferred Drug List (PDL) implementation and non-preferred drug coverage criteria
    Policy CodePolicy N/A
    Change TypeNo material changes
    Effective DateJul 14, 2004
    Next Review DateN/A
    Key ActionPharmacists must enter '8' in Prior Authorization Type Code field 461-EU to override a non-preferred drug denial when prescriber-documented medical necessity exists.
    SourceLink
    POLICY UPDATE CHANGES

    No material clinical or coverage changes in this revision.

    June 16, 2004soft edits begin
    July 14, 2004first hard edits
    August 18, 2004

    OpenPayer is powered by Trek Health's payer performance platform. Trek continuously ingests, validates, and normalizes Transparency in Coverage data alongside payer policies and other commercial payer data to create a structured payer intelligence foundation. OpenPayer uses this foundation to deliver personalized search results, dynamically generated policy pages, and tailored policy monitoring based on each user's payers, specialties, billing codes, and areas of interest. The same intelligence powers broader payer performance workflows, including reimbursement benchmarking, contract evaluation, payer negotiations, and financial decision-making.

    second hard edits
    September 15, 2004third hard edits

    Coverage Criteria for Preferred Drug List (PDL)

    Coverage for non-preferred drugs with medical justification

    Covered when ALL of the following are met

    Medical necessity documented: Prescriber documents medical justification for a non-preferred drug on the prescription (handwritten or included for telephonic/electronic orders).

    Examples include patient allergy, contraindication/adverse reaction to preferred drug, or ineffectiveness of preferred drug.

    Pharmacist override and documentation: Pharmacist enters '8' in Prior Authorization Type Code field 461-EU to indicate payer-defined exemption and retains documentation of medical justification prior to dispensing or to obtain payment after electronic denial.

    Pharmacists should also record medical necessity in POS free-text fields for refills.

    Non-preferred drugs presented without prescriber-documented medical justification should not be dispensed to Medicaid recipients except for an emergency supply when the prescriber cannot be immediately contacted. In emergency situations the pharmacist should follow established procedures (contacting First Health Services Corporation's Technical Call Center) and the recipient must obtain either a new prescription for a preferred drug or medical justification from the prescriber for the non-preferred medication.

    Claims for non-preferred medications submitted without a "Medically Necessary" notation on the prescription will receive an automatic electronic denial of payment beginning for the first PDL set after July 14, 2004. To obtain payment after such a denial, the pharmacist must obtain and retain documentation of medical justification prior to dispensing or submit the required documentation following the denial per payer procedures.

    PDL-related POS / NCPDP Fields and Implementation Dates

    PDL-related NCPDP/POS fieldsNCPDP | mixed
    461-EUPrior Authorization Type Code — Payer Defined Exemption (enter '8' to override)
    504-F4NCPDP field for the soft edit message display (software vendors should make this message available to the viewer)
    Implementation dates — PDL soft and hard edits
    Soft edit start datesJune 16, 2004 (second set); July 21, 2004 (third set)
    Hard edit start datesJuly 14, 2004 (first set); August 18, 2004 (second set); September 15, 2004 (third set)
    Purpose of soft edit periodEducate providers about preferred vs non-preferred drugs and allow prescribers time to evaluate therapy
    Instruction for vendorsMake soft edit message available in NCPDP field 504-F4 for viewing in POS software
    Effect of hard editsBeginning on listed hard edit dates, computerized denial (hard edit) will occur when 'medically necessary' is not noted

    Provider and Pharmacist Requirements

    Prior Authorization

    Pharmacist override: use '8' Payer Defined Exemption (461-EU)

    To override a non-preferred medication when medical necessity exists, the pharmacist must place an "8" (Payer Defined Exemption) in Prior Authorization Type Code field 461-EU and obtain/retain documentation of the prescriber’s medical justification prior to dispensing or to obtain payment after an electronic denial.

    • Enter '8' in NCPDP Prior Authorization Type Code field 461-EU to indicate a payer-defined exemption.
    • Obtain and retain prescriber documentation of medical necessity before dispensing or to support payment after denial.
    Step Therapy

    Preferred vs non-preferred: when medical justification is required

    Preferred drugs listed on the PDL do not require medical justification; non-preferred drugs require the prescriber to document medical justification on the prescription before the drug may be dispensed (except for an emergency supply when the prescriber cannot be immediately contacted).

    Key Definitions

    Medical necessity / medical justification
    Acceptable examplesPatient allergy to preferred drug; contraindication or unacceptable/toxic side effect to preferred drug; preferred drug proven ineffective for the patient
    Soft edit (informational alert)
    DefinitionSoft edit: an informational alert (computerized flag) on pharmacy claims indicating a drug is non-preferred when 'Medically Necessary' is not noted on the prescription; intended to educate providers prior to hard edits.
    Displayed viaNCPDP field 504-F4 (software vendors should make the message available to the viewer)
    TimingSoft edits began June 16, 2004 for second set and July 21, 2004 for third set of PDL drug classes

    Policy Background

    The Preferred Drug List (PDL) identifies preferred products that do not require medical justification from the prescriber. Drugs assigned a non-preferred status on the PDL must have prescriber-documented medical justification on the prescription before they may be dispensed. Acceptable documentation includes handwritten notation on the prescription or equivalent notation on telephonic or electronic orders (for example, "Medically Necessary" or "Allergic to (Preferred Drug)"). Examples of acceptable medical justification include patient allergy to the preferred drug, contraindication or unacceptable adverse reaction to the preferred drug, or proven ineffectiveness of the preferred drug for the patient. Pharmacists are advised to record the medical necessity notation in POS free-text fields to support future refills.

    Step Therapy and Related Requirements

    RequirementDetails
    Prescriber medical justification required for non-preferred drugsPrescriber must document medical justification on the prescription (handwritten) or include it with telephonic/electronic orders. Examples include 'Medically Necessary', 'Allergic to (Preferred Drug)', contraindication/adverse reaction to preferred drug, or ineffectiveness of the preferred drug.
    Pharmacist override when justification presentPharmacist may override non-preferred status when the prescriber includes medical necessity on the prescription; pharmacists should record medical necessity in POS free-text fields for future refills.
    Denial without medical justificationNon-preferred medications submitted without a 'Medically Necessary' notation will be denied payment (electronic denial) and should not be dispensed except for an emergency supply when the prescriber cannot be immediately contacted.
    Policy Summary
    PayerAlaska Medicaid
    PolicyPreferred Drug List (PDL) implementation and non-preferred drug coverage criteria
    Policy CodePolicy N/A
    Change TypeNo material changes
    Effective DateJul 14, 2004
    Next Review DateN/A
    Key ActionPharmacists must enter '8' in Prior Authorization Type Code field 461-EU to override a non-preferred drug denial when prescriber-documented medical necessity exists.
    SourceLink
    On This Page
    Coverage Criteria for Preferred Drug List (PDL)PDL-related POS / NCPDP Fields and Implementation DatesProvider and Pharmacist RequirementsKey DefinitionsPolicy BackgroundStep Therapy and Related Requirements
  1. Preferred products: no prescriber medical justification required.
  2. Non-preferred products: prescriber must document justification (e.g., allergy, contraindication, or ineffectiveness) on the prescription prior to dispensing.
  3. Emergency exception: an emergency supply is allowed if prescriber cannot be reached, following existing procedures.
    4. Documentation Required

    Medical necessity must be handwritten (or included) on the prescription

    Prescribers must document medical justification in their own handwriting on the prescription (for example, 'Medically Necessary' or 'Allergic to (Preferred Drug)'); this notation must also accompany telephonic and electronic prescriptions. Pharmacists should record the medical necessity in POS free-text fields for refills.

    • Acceptable notations include 'Medically Necessary' or a statement such as 'Allergic to (Preferred Drug)'.
    • Telephonic and electronic prescriptions must include the same medical-necessity notation.
    • Pharmacies should save medical-necessity information in point-of-sale free-text fields for future refills.
    Denial Risk

    Electronic denial if 'Medically Necessary' notation is missing

    Claims submitted for non-preferred medications without a 'Medically Necessary' notation on the prescription will receive an automatic electronic denial of payment for the affected PDL drug sets beginning with the stated hard-edit dates.

    • Beginning July 14, 2004 (and other listed hard edit dates), submitted claims lacking the notation will be denied electronically.
    • To receive payment after denial, the pharmacist must obtain documentation of medical justification prior to dispensing or to support the claim.
    Hard edit (electronic denial)
    DefinitionHard edit: an automated electronic denial on pharmacy claims for non-preferred drugs when 'Medically Necessary' is not noted on the prescription, which prevents reimbursement until overridden with proper documentation.
    First hard edit dateJuly 14, 2004 (first set of non-preferred drugs)
    Override procedurePharmacist must place an '8' (Payer Defined Exemption) in Prior Authorization Type Code field 461-EU and obtain documentation of medical justification
    ConsequenceReimbursement for unjustified non-preferred prescriptions will be denied pending further information; pharmacist must obtain documentation prior to dispensing to receive payment