NC Medicaid Outpatient Pharmacy
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Defines coverage, prior authorization, dispensing limits, and pharmacy program rules for NC Medicaid outpatient pharmacy services and beneficiaries (including PHP enrollees). Applies to providers and pharmacists dispensing outpatient medications to NC Medicaid members.
Added interim procedure for new to market drugs for fee for service and managed care plans.
Clarified that drugs must be used for FDA indications unless approval is given by DHB; provided process and required documentation to request medically necessary off-label uses supported by compendia or peer-reviewed literature.
Changed lock-in program thresholds from 6+ claims to 10+ claims and from 3+ prescribers to 4+ prescribers and included utilization judged not medically necessary per Session Law 2023-134 HB 259.
Added 340B guidelines clarifying billing, use of UD modifier, and entities covered; required submission of actual purchased drug price in the usual and customary charge field.
Added section on Drug Donation and Long Acting Injectable Antipsychotics; updated record retention to electronic sources.
Coverage, Medical Necessity, and Limits
Coverage sections (TOC)
Document lists sections for when services are covered, not covered, and requirements/limitations (including EPSDT exception for under 21).
Table of contents outlines the coverage sections and related attachments.
General medical necessity criteria
Medicaid shall cover the procedure, product, or service when medically necessary and when ALL of the following are met:
Section 3.1
General and specific drug coverage criteria
Covered when ALL of the following are met
Applies to drug-specific coverage determinations (Section 3.2).
Compounded drug coverage
Compounded products are covered when ALL of the following are true
Refer to Attachment A Section J for billing and reimbursement details.
Specific criteria covered by Medicaid
Specific drug coverage conditions
Section 3.2.1
Non-FDA indications and approval process
Exceptions and process for non-FDA or non-standard uses
Applies per 1927(d)(1)(B)(i) and 42 U.S.C. 1396r-8(g)(1)(B).
Abandoned LAI donation criteria
LAI donation and abandonment rules (must ALL be met)
Sections 3.5.1 and 3.5.1 continued
Dispensing and substitution criteria
Covered when pharmacy follows supply limits and substitution rules:
Supply limits
- Exceptions to 34-day limit: Oral birth control: up to 12 months; Prepackaged HRT: up to 3 months; Non-controlled maintenance medications: up to 90 days at provider discretion (one copay and one dispensing fee for 90-day).12 months / 3 months / 90 days
Sections 5.4.1–5.4.2
Section 5.8.1
Section 5.8.2
Sections 5.9 and attachments
Beneficiary Management Lock-In inclusion criteria
A beneficiary shall be locked-in to one prescriber and one pharmacy for controlled substances (opiates or benzodiazepines) when ANY of the listed thresholds are met.
Section 5.14.1
Emergency supply for locked-in beneficiaries
Emergency provision for beneficiaries locked into a different prescriber or pharmacy:
Section 5.14.3
Off-label Authorization and 340B Billing
Covered when provider demonstrates medical necessity per documentation requirements and billing rules are followed for 340B drugs.
Section 3.2.3 and Revision Information; applies when indication/dosing falls outside FDA/NC Medicaid criteria.
Revision additions and Attachment guidance (chunks 209,217).
Compound Drug Reimbursement
Medicaid will reimburse compounds only under the specified conditions.
NCPDP D.0 POS instructions and Section 3.3; see Attachment A Section J for billing details.
Hospice Drugs
Coverage interaction for hospice-enrolled beneficiaries:
Section H: Billing for Drugs Covered under Hospice.
Third-Party Billing / Other Coverage
When POS indicates third-party coverage exists:
Attachment A POS/Other Coverage instructions; override codes 01–04 described.
Operational coverage criteria
Coverage and dispensing allowed under the following operational conditions:
Attachment C (Chunks 256–257).
Attachment C emergency supply rules (Chunks 256–257).
Attachment D and Pro-DUR procedures (Chunks 264–268).
The table of contents for this policy includes sections titled When the Procedure, Product, or Service Is Not Covered and General Criteria Not Covered, indicating that exclusions and non‑coverage rules are explicitly defined elsewhere in the policy and are part of the coverage criteria TOC.
Under EPSDT (Early and Periodic Screening, Diagnostic, and Treatment) the state must cover medically necessary services for beneficiaries under age 21 to correct or ameliorate a condition. EPSDT does not, however, obligate the State to provide services that are unsafe, ineffective, experimental or investigational, or that are not medical in nature or not generally recognized as accepted medical practice.
Medicaid excludes coverage for most OTC products unless a specific exception applies (see Subsection 3.2.1). In addition, drugs manufactured by companies that have not signed the Medicaid Drug Rebate Agreement are not covered, with limited exceptions (for example, CroFab and selected vaccines/radiopharmaceuticals). The policy also includes detailed 340B guidance describing billing and pricing obligations for covered entities.
Automatic refills and automatic shipments are prohibited. Medicaid will not pay for any prescription (original or refill) dispensed without an explicit request from the beneficiary or the beneficiary's responsible party; prescriptions filled solely under an automatic refill policy are subject to recovery and audit.
The policy lists specific exclusions from the Beneficiary Management Lock‑In Program. Examples include beneficiaries with certain cancer diagnoses within the prior 12 months, residents of skilled nursing facilities, beneficiaries under age 18, those with a current hospice indicator, beneficiaries receiving buprenorphine specifically for OUD, and beneficiaries with sickle cell disease.
When 340B drugs are dispensed, providers must be listed on the HRSA 340B OPA website and must submit the actual purchased drug price in the usual and customary charge field. Providers who maintain separate inventories for 340B and non‑340B beneficiaries may not dispense a 340B‑purchased drug and bill Medicaid the calculated Medicaid price for non‑340B beneficiaries.
The policy clarifies that providers maintaining two separate inventories — one 340B inventory and one purchased inventory for non‑340B beneficiaries — are prohibited from using 340B‑purchased product to bill Medicaid at the calculated Medicaid price for non‑340B beneficiaries; separate inventory management does not permit cross‑billing.
Examples of non‑reimbursable compound scenarios are provided. Compounds are non‑reimbursable when they contain no legend‑covered drug, when all ingredients are from non‑rebate manufacturers, when only OTC or DESI ingredients are used, when the compound is equivalent to an OTC product, or when two physically separable products (e.g., tablets and capsules) are combined in the same container.
Early refill reason codes for vacation supply and lost prescription are not permitted for controlled substances. The policy specifies that vacation‑supply and lost‑prescription codes cannot be used to authorize early refills of controlled drugs.
The table of contents includes a section labeled Specific Criteria Not Covered (TOC), indicating that particular exclusions and noncoverage rules are defined elsewhere in the full policy document.
Services, products, or procedures are not covered when the beneficiary fails to meet eligibility requirements in Section 2.0, when they do not meet the criteria in Section 3.0, when the service duplicates another provider's service, or when the service is experimental, investigational, or part of a clinical trial.
A prescriber's telephone or e‑prescription notation, a stamped or pre‑printed 'Medically Necessary' statement, or the simple abbreviation 'DAW' on a prescription are not acceptable documentation to establish medical necessity for MAC overrides; the policy requires proper handwritten, signed notation or follow‑up prescription as described for MAC exceptions.
Medicaid will not pay for medications the beneficiary has not received. Pharmacies may not bill for undispensed quantities, issue IOUs, or bill Medicaid for an entire prescription if part of the quantity was not dispensed; doing so may be considered fraudulent and is subject to action.
Utilization that is determined to be not medically necessary can trigger programmatic actions — including inclusion in the Beneficiary Management Lock‑In Program — and may affect coverage and reimbursement decisions.
Claim Fields, Codes, and POS Rules
| No codes listed |
| SMAC | State Maximum Allowable Cost list (as referenced in B.4) |
| NDC | National Drug Code (as referenced in B.6) |
| NDC (first five digits) | Manufacturer code indicated by the first five digits of the 11-digit NDC determines rebate applicability |
| DAW 1 | NADAC generic rate and MAC override for prescriber's handwritten 'Medically Necessary' |
| DAW 7 | NADAC generic rate and MAC override for NTI brand required |
| DAW 8 | NADAC generic rate and MAC override when multi-source brand generic equivalent not available |
| DAW 9 | NADAC generic and MAC override for preferred multi-source brand with nonpreferred generic |
| DAW 1 | Indicate prescriber-documented 'Medically Necessary' to bill brand when overriding MAC price (use to bill brand when prescriber properly authorizes brand for a MAC drug). |
| 00075150616 | Nasacort AQ Nasal Spray — metric decimal quantity 16.5 |
| 00597001314 | Combivent Inhaler — metric decimal quantity 14.7 |
| 00186107008 | Rhinocort AQUA Nasal Spray — metric decimal quantity 8.6 |
| 00075062160 | Lovenox 60mg prefilled syringe — metric decimal quantity 0.60 |
| 00013830304 | Xalatan 0.005% Eye Drops — metric decimal quantity 2.5 |
| 00069313019 | Zithromax 200mg/5ml Suspension — metric decimal quantity 22.5 |
| 00065064835 | Tobradex Eye Ointment — metric decimal quantity 3.5 |
| 00054309036 | Butorphanol 10mg/ml Spray — metric decimal quantity 2.5 |
| 00085113201 | Proventil HFA 90 mcg Inhaler — metric decimal quantity 6.7 |
| 61570003775 | Viroptic 1% Eye Drops — metric decimal quantity 7.5 |
| 09 | Emergency Preparedness PA Type Code |
| E.R override | Valid value required in Reason for Service/Professional Service/Result of Service to override early refill during emergency |
| UD | Modifier to indicate 340B purchase on drug detail for outpatient pharmacy point-of-sale claims (and UB-04/837i for institutional outpatient medical drug claims) |
| CPT (vaccines) | Use appropriate CPT codes and pharmacy NPI/taxonomy when billing vaccines as professional claims |
| 308-C8 | Other Coverage Code (NCPDP D.0) - override codes for cost avoidance process |
| 431-DV | Other Coverage Amount Paid field |
| 353-NR | Medicare Coinsurance field (used for QMB claims) |
| 351-NP | Medicare Deductible field (used for QMB claims) |
| 352-NQ | Medicare Copayment field (used for QMB claims) |
| 308-C8 | Other Coverage Code (claim segment) |
| 431-DV | Other Coverage Amount (field for secondary payor amount) |
| 01 | No Other Coverage Identified |
| 02 | Other Coverage Exists - Payment Collected |
| 03 | Other Coverage Exists - This Claim Not Covered |
| 04 | Other Coverage Exists - Payment Not Collected |
| EOB 1 | Requirement not met (compound without a legend-covered drug / non-rebate drugs / OTC only etc.) |
| 905,1 | A compound without a legend-covered drug or a compound with only non-rebate drugs |
| 038,1 | OTC and DESI drugs as only ingredients |
| 009,1 | A compound equivalent to an OTC drug; OTC ingredients only; two physically separable drugs in same bottle |
| 418-DI | Level of Service field used to indicate emergency fill (value '3' for emergency supply) |
| 03 | Vacation Supply reason code for early refill |
| 04 | Lost Prescription reason code for early refill |
| 05 | Therapy Change reason code for early refill |
Prior Authorization, Documentation, and Operational Steps
Prior Authorization Required; LTC pharmacists may request PA
Prior authorization is required for selected outpatient prescription drugs; providers must follow the PA process described in Attachment C and the Pharmacy Prior Approval Criteria in Attachment K. Pharmacists serving long‑term care facilities may request prior authorization on behalf of beneficiaries per the special LTC PA process.
How to Submit Prior Authorization Requests
Submit PA requests using the NCTracks web portal, by phone, or fax as described in Attachment C; all PA requests will be answered within 24 hours of receipt.
PA Required for Selected and New‑to‑Market Drugs
Selected prescription drugs require prior authorization per NCTracks and Attachment K; PA may be imposed for new‑to‑market products, changed indications, or changes in dosing while criteria are developed.
72‑Hour Emergency Supply While Awaiting PA
If a beneficiary is waiting for PA acknowledgement, the pharmacy may provide a 72‑hour emergency supply; refer to Attachment C for processing details.
- Use Level of Service field value '3' (418‑DI) for emergency fills.
- Emergency fills permit only a 72‑hour supply and co‑payments apply.
PA May Be Required for Handwritten 'Medically Necessary' Brand Orders
NC Medicaid may require PA for brand drugs when the prescriber handwrites 'medically necessary' on the prescription; DAW/MAC override rules and PA requirements apply as described in the MAC and Generic Substitution sections.
- Handwritten, signed 'Medically Necessary' by the prescriber is required for MAC/NADAC override (DAW 1,7,8,9 as applicable).
- NC Medicaid may impose PA for brand‑name drugs when 'medically necessary' is indicated.
Hemophilia Specialty Pharmacy Authorization
Hemophilia drugs are managed under the mandated Hemophilia Specialty Pharmacy Program; follow Clinical Coverage Policy 9B for program‑specific authorization rules.
Emergency PA Override Submission Requirements
When the Emergency Preparedness Protocol is enacted, submit pharmacy claims with '09' in the PA Type Code field and include a valid emergency override value in the Reason for Service/Professional Service/Result of Service fields to override early‑refill denials.
- Use PA Type Code '09' (Emergency Preparedness) on POS claims.
- Provide a valid ER override value in DUR/Result of Service fields to override early refill denials.
PA for Off‑Label or Non‑criteria Indications — Documentation Required
Prior authorization is required for selected drugs and requests for off‑label/non‑criteria indications must include the required supporting documentation described in policy (medical records, alternatives tried, prescriber rationale, and compendia/peer‑reviewed literature).
- Send supporting materials to: Pharmacy Manager for Clinical Policy and Programs, Division of Health Benefits, NC Medicaid, 2501 Mail Service Center, Raleigh, NC 27699‑2501.
DME Prior Authorization for Diabetic Supplies
Prior authorization for additional quantities or non‑preferred diabetic supplies must be requested through the DME Program rather than outpatient pharmacy POS.
Other Coverage / Override Codes and Secondary Billing
When billing Medicaid as secondary payer, report other coverage using the Other Coverage Code in claim segment 308‑C8 and report the other payer payment amount in field 431‑DV per Attachment A instructions.
- Use '01' in 308‑C8 when no other coverage identified; when other payer paid, include amount in 431‑DV.
Prior Authorization Submission Channels and Response Time
Submit PA requests via NCTracks web portal, phone, or fax; all requests will be answered within 24 hours. If PA is not obtained, the POS will return PA‑required messages and the pharmacy may contact CSC or the prescriber to resolve status.
- If POS returns 'PA REQ. PRESCRIBER CALL CSC' or 'CLAIM DENIED. PA LIMITS EXCEEDED', verify PA status through NCTracks or CSC (1‑866‑246‑8505).
Step Therapy Not Described in Excerpt
This excerpt contains only table‑of‑contents headings for step therapy; no step therapy requirements or specific step protocols are described in the provided text.
DUR Resolution and Documentation Requirements
The policy references DUR and prospective/retrospective review processes; pharmacists must resolve DUR alerts by contacting prescriber or beneficiary and, when dispensing after resolution, resubmit the claim with DUR reason/professional service/result of service codes.
- If dispensing after DUR resolution, include DUR reason for service, DUR professional service code, and DUR result of service code on resubmitted claim.
- For early‑refill alerts use approved reason codes in the clarification field.
Record Retention and Audit‑Readiness
Providers must retain Medicaid records on‑site and produce sight‑readable original and refill prescription records and purchase invoices for audits; payments that cannot be audited because records are not retrievable are subject to recoupment.
- Electronic records are acceptable if readily retrievable and sight‑readable per enrollment agreement.
- Maintain purchase invoices for all covered drugs and supplies on‑site.
Documentation Required for Off‑Label / Medically Necessary Requests
When requesting coverage for non‑FDA or non‑criteria dosing/indications, submit medical record evidence of necessity, explanation of alternatives tried or why they cannot be tried, prescriber rationale why FDA/NC criteria are insufficient, and supporting compendia or peer‑reviewed literature.
Handwritten 'Medically Necessary' and DAW/MAC Override Rules
Pharmacies that accept a prescriber's handwritten, signed 'Medically Necessary' statement may use DAW overrides (DAW 1, 7, 8, 9) to override NADAC/MAC pricing as described; telephone, e‑prescription, stamps, or 'DAW' abbreviation on the prescription are unacceptable forms of documentation.
- DAW 1 on POS indicates prescriber handwritten 'Medically Necessary' and is a NADAC/MAC override where appropriate.
- Unacceptable practices (phone eprescription, stamps, boxed 'Dispense as Written' checks) will not support MAC override.
NTI Refill and Manufacturer Consent Requirements
NTI refill rules: subsequent refills must use the same manufacturer's product unless prescriber and beneficiary provide documented consent to switch manufacturers; use DAW 7 to indicate brand required for NTI.
Verify Eligibility Each Time; POS Coverage Flags
Providers must verify beneficiary eligibility each time a service is rendered; POS will check eligibility and return messages if other third‑party coverage exists or beneficiary is enrolled in hospice.
- If POS indicates other payer exists, bill the third party as primary before billing Medicaid.
- POS notifies pharmacist when beneficiary is enrolled in hospice; hospice claims are denied unless hospice override is used.
NDC Accuracy and 11‑Digit Formatting Requirement
Incorrect or improperly formatted NDCs (fail to include all 11 digits with leading zeros placed correctly) will result in claim denial; pharmacies must use the NDC actually dispensed and record all 11 digits in the proper positions.
- Example formatting guidance provided (leading zeros required).
- Inaccurate NDC use may lead to denials, sanctions, or termination.
POS Claim Triggers — High‑Value and Compound Claims
POS claim handling rules apply to high‑value and compound claims: point‑of‑sale claims over $9,999 and compound prescription claims have special processing and failure to follow these rules may trigger manual review, denials, or audits.
- Claims over $9,999 may require manual review.
- Compound reimbursement limited to legend drugs from manufacturers with Medicaid Drug Rebate Agreements; POS pays payable ingredients only.
Automatic Refills Prohibited — Risk of Recovery/Audit
Automatic refills and automatic shipments are prohibited; pharmacies must obtain an explicit beneficiary (or responsible party) request for each refill — unauthorized fills are subject to recovery, audit, or provider agreement suspension/termination.
Hospice Billing Override Instructions and Denial Risk
If a beneficiary is enrolled in hospice, POS will deny drug claims with 'beneficiary claim covered by hospice' unless the pharmacist enters '1' in the PA field and the ICD‑10‑CM code for the terminal illness in the diagnosis field to override for drugs related to the terminal illness; certain drug classes cannot be overridden and will continue to deny.
- Pharmacists must not use the ICD‑10‑CM code for the drug indication; contact hospice agency or NC Medicaid for questions.
PA Missing Triggers POS Denial Messages
If a prescriber has not obtained required prior authorization, the POS will return messages such as 'PA REQ. PRESCRIBER CALL CSC' or 'CLAIM DENIED. PA LIMITS EXCEEDED' and the claim may be denied at point‑of‑sale; pharmacies should verify PA status via NCTracks or CSC.
- Contact CSC at 1‑866‑246‑8505 or use the NCTracks web portal to verify or obtain PA status.
Emergency Supply Limits and POS Edit Restrictions
Emergency fills bypassing PA allow only a 72‑hour supply; use Level of Service field value '3' (418‑DI) for emergency transactions and include required edits — Edit 383 prevents overriding days supply for PA emergency fills.
- Emergency fill transactions must be submitted with Level of Service = '3' (418‑DI).
- Edit 383 message: 'CANT USE OVERRIDE WITH A PA EMER FILL'.
Eligibility, Duplication, and Not‑Medically‑Necessary Denial Risks
Claims may be denied for eligibility, duplication, or services not meeting Sections 2.0/3.0 criteria; utilization judged not medically necessary can also trigger lock‑in program inclusion and affect coverage decisions.
- Utilization considered not medically necessary may result in administrative actions including recoupment and lock‑in enrollment.
State MAC Inquiry — Documentation and Process
Providers requesting a State MAC rate review must complete a State MAC Pricing Inquiry Worksheet and submit copies of drug purchase records representing current price paid; the vendor may contact other pharmacies/manufacturers during review.
Compound Claim Billing and Reimbursement Requirements
Providers billing compounds at POS must ensure compound ingredients are reimbursable (legend drugs from manufacturers with Drug Rebate Agreements); if one ingredient lacks rebate status reimbursement is withheld for that ingredient only and the remainder may be paid.
- POS assumes submission clarification indicating payable ingredients only when appropriate.
- Dispensing fee must be included in header total and ingredient details must match POS compound component count.
Claims Documentation and POS Billing Instructions
Providers must follow Attachment A claim‑related instructions including point‑of‑sale billing, time limits (POS claims within 1 year of dispensing), compound claims rules, and required remittance/Explanation of Benefit handling.
- Time limit for POS claim submission: within 1 year of dispensing date.
- POS reversals are allowed up to 12 consecutive months.
Record Retention, On‑Site Documentation, and Recoupment Risk
If a provider cannot produce on‑site, sight‑readable Medicaid records (original prescriptions, refill history, purchase invoices), payments may be recouped; pharmacies are subject to periodic audits and must cooperate with investigations.
Documentation and Consent Required for Abandoned LAI Donation
For LAI donation of abandoned doses, obtain and retain a signed consent from the beneficiary donor that explains when an LAI is considered abandoned and document outreach attempts; do not bill Medicaid for administration of donated LAIs.
- LAI considered abandoned after 30 days post‑missed administration and at least two calls plus a letter, or after three outreach attempts or documented refusal.
- Donated LAIs must be in original unopened container and donated to a registered Drug Repository Program.
340B Billing Documentation and UD Modifier Requirement
When billing 340B‑purchased outpatient drugs at POS, ensure the provider is listed on the HRSA 340B OPA website, submit the actual purchased drug price in the usual & customary charge field, and append the UD modifier to indicate a 340B purchase; do not bill the 340B Medicaid price for non‑340B beneficiaries when maintaining separate inventories.
- For hemophilia 340B drugs, providers may submit the state upper limit when applicable.
PDL Override When PA Criteria Met
PDL overrides are allowed when 'Meets PA Criteria' is documented per Attachment B; ensure the PA documentation supports the PDL override.
MAC Override Requirements and Acceptable Documentation
MAC price overrides require proper prescriber documentation and use of DAW codes (DAW 1, 7, 8, 9) as specified; telephone or e‑prescription notations alone are unacceptable to support MAC overrides.
- DAW 1 indicates prescriber's handwritten 'Medically Necessary' and may override MAC/NADAC where allowed.
- DAW 7 used for NTI brand required; DAW 8/9 as described for market availability and PDL preferences.
Policy Scope and Attachments
This policy's background and attachments focus on administrative and claims processing details. Attachment A–E are included and provide directions for drug reimbursement, the SMAC list, billing guidance for vaccines and compounds, point‑of‑sale rules, and other claims‑related instructions relevant to outpatient pharmacy coverage and payment.
Key Terms and Abbreviations
Utilization Management and Step Therapy
| Step | Requirement / Policy | Notes |
|---|---|---|
| 1 | NCPAG may recommend prior authorization criteria and other restrictions for drugs designated as episodic; quantity limitations may be applied. | Recommendations may include evaluation of quantity limits for beneficiaries using specialized distribution systems, development of prior authorization criteria, and actions to minimize number of dispensing fees. |
| Step | Interim Procedure | Provider Requirements |
|---|---|---|
| 1 | An interim procedure was added for new-to-market drugs applying to fee-for-service and managed care plans. | Providers requesting coverage for new-to-market or non-standard indications must submit medical records showing medical necessity, explanation of alternatives tried or why they cannot be tried, prescriber's rationale why FDA/NC Medicaid criteria are insufficient, and supporting compendia or peer‑reviewed literature. |
Dispensing Limits and Quantity Rules
Authorized Settings and Site-Specific Rules
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