PHARMACY SERVICES, PRESCRIBING, AND PRACTITIONER‑ADMINISTERED DRUG ITEMS
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State rule governing Medicaid (MAD) pharmacy services, prescribing, provider responsibilities, coverage limits, prior authorization, utilization review, and reimbursement for New Mexico MAP eligible recipients.
No material clinical or coverage changes in this revision.
Coverage Criteria and Exclusions
Covered when medically necessary with restrictions
Covered when ALL of the following are met:
References to provider enrollment, eligibility verification, and medical necessity reviews are required
MAD may expand the list after economic determination; incorporated into generic-first provisions
Exempt categories and step rules published by MAD
See policy exclusions for full list
Standard coverage and reimbursement criteria
Covered reimbursement and dispensing when ALL of the following pricing, billing, and dispensing rules are met:
EAC, MAC, FUL interactions and brand exceptions described in policy
Provider must place actual costs in ingredient cost field when lower
MAC methodology uses arrayed A‑rated generic prices
FUL interactions with brand‑necessary determinations
Provider must populate ingredient cost field and flag 340B on the claim
Pharmacist responsible for resolving POS denials and documenting contacts
Excessive dispensing is subject to denial and recoupment; prescription splitting to reduce quantities is considered fraudulent
See refill and quantity provisions for details
MAD does not cover certain pharmacy items and supplies. Excluded items include medication supplied by state mental hospitals to MAP eligible recipients on convalescent leave and methadone for use in drug treatment programs except when provided as part of a MAD‑approved medication assisted treatment (MAT) program. Personal care items (for example, non‑prescription shampoos and soaps), cosmetic items, fertility drugs, and antitubercular drugs available from the New Mexico Department of Health are also excluded. Additionally, MAD excludes DESI drugs (drugs not approved as effective by the FDA), weight loss/weight control drugs, certain barbiturate hypnotics (except for nursing home residents), drugs for sexual dysfunction, and compounded products that lack an FDA‑approved ingredient or an assigned NDC. Cough and cold preparations for MAP eligible recipients under age four are likewise not covered.
MAD establishes maximum allowable cost (MAC) pricing for certain multiple‑source and OTC drugs when an A‑rated generic is readily available, but MAC is not applied when a prescriber certifies that a specific brand is medically necessary; in that case reimbursement is the lower of the product's EAC plus dispensing fee or the provider's usual and customary billed charge. When drugs are purchased under Section 340B, the provider must place the actual acquisition cost in the ingredient cost field and indicate the item as 340B on the billing transaction. Pharmacies must not submit claims to MAD for products that are given free to the general public.
MAD excludes items that are not eligible for federal financial participation (FFP). This specifically includes DESI drugs—drugs not approved by the FDA as effective—and other drug items that lack FDA approval for the intended indication. Excluded non‑drug items and solutions are addressed separately under medical supply reimbursement rules.
MAD considers prescription splitting (splitting an order into smaller quantities to circumvent limits) to be fraudulent; pharmacies must not reduce prescriptions for maintenance drugs written for quantities larger than a 34‑day supply and may dispense up to a 90‑day supply when appropriate. Coverage may be limited by the MAP eligible recipient's eligibility end date at the time of dispensing, and pharmacists must not bill MAD for products provided free to the general public.
Provider Responsibilities, Prior Authorization, and POS Actions
Prior authorization required for utilization‑review items
MAD requires prior authorization for items subject to utilization review, including injectable drugs, IV admixtures, IV nutritional products, other expensive medications, and items for which a less expensive or therapeutically preferred alternative should be used first. Prior authorization requests are reviewed by MAD or its designee and services for which prior authorization was obtained remain subject to utilization review at any point in the payment process.
- Providers must consult MAD or its designated contractor before supplying items not specifically listed in the policy or billing instructions.
- Prior authorization does not guarantee recipient eligibility; providers must verify eligibility at time services are furnished.
Prior authorization may be required after POS denial
When a POS claim is denied because the point‑of‑sale utilization information indicates an adequate supply, excessive quantity, or potential abuse, prior authorization may be required before the drug can be dispensed.
- Pharmacist must obtain authorization to dispense if the POS denial reflects excessive supply or potential abuse.
- Prior authorization may also be required for prescriptions subject to special dispensing limits (e.g., controlled substances).
Generic‑first (step) coverage enforced
MAD applies generic‑first (step) coverage when drugs are provided through a preferred drug list: the recipient must first use one or more generic items on the preferred list before MAD will cover a brand‑name drug for that condition.
- MAD publishes therapeutic categories exempt from generic‑first provisions; injectable drug items are exempt from generic‑first.
- Brand coverage may be approved by MAD or its designee based on prescriber medical justification.
Suspected abuse triggers prior authorization review
If the pharmacist suspects over‑utilization, overlapping dangerous therapies, or abuse (for example based on POS or drug monitoring data), the prescription may be subjected to the prior authorization process and pharmacist must document contacts made.
- Pharmacist is responsible for documenting contact with the prescriber and MAD when abuse or overutilization is suspected.
- Prescriptions showing potential overlap or excessive utilization may require prior authorization before dispensing.
Retain prescriptions and brand‑necessary documentation for six years
Pharmacies must retain original prescriptions, electronic prescriptions, and records of phone or fax orders for six years; handwritten prescriber certification of 'brand medically necessary' or 'brand necessary' must be maintained in pharmacy records and supported in the prescriber's medical records.
- Checked boxes, rubber stamps, and telephone requests do not meet documentation requirements under 42 CFR 447.512.
- Electronic alternatives approved by the HHS secretary are acceptable.
Bill 340B drugs at actual acquisition cost and flag as 340B
When billing 340B‑purchased drugs, the actual ingredient cost must be placed in the ingredient cost field and the billing transaction must indicate the item as a 340B drug; 340B items dispensed under contract must be filled as 340B when requested by the recipient.
- Drugs purchased under Section 340B must be billed at the provider's actual acquisition cost and indicated on the billing transaction as a 340B drug item.
- If a recipient requests a 340B entity's prescription be filled by a contract 340B pharmacy, the pharmacist must dispense the 340B purchased items.
Resolve POS denials and document authorization
If the POS denies a claim for adequate supply or excessive quantity, the pharmacist must resolve the POS issue and obtain authorization to dispense when appropriate; the pharmacist is responsible for documenting contact with the prescriber and MAD when resolving such issues.
- All in‑state and border‑area pharmacy providers must submit claims through the POS system, subject to listed exceptions.
- The pharmacist must consider POS drug utilization information before dispensing and document resolution steps.
Medical necessity reviews may lead to denials without prior authorization
Claims and services are subject to medical necessity review before or after reimbursement; failure to obtain required prior authorization or to meet utilization review criteria can result in claim denial or recoupment.
- Reviews can be prospective, concurrent, or retrospective and may occur before or after payment is made.
- Providers may request reconsideration of prior authorization denials per MAD procedures.
Point‑of‑sale denials for adequate supply or excessive quantity
When POS utilization data indicates the recipient has an adequate supply or the quantity is excessive, the claim will initially be denied; the pharmacist must address the denial and obtain authorization before dispensing.
- POS denials occur automatically when utilization information shows adequate supply or excessive quantity.
- Pharmacist responsibility includes resolving the issue and obtaining any required authorization to dispense.
Denials/recoupment for excessive refill, quantity, or dispensing frequency
Claims may be denied or subject to recoupment if refill, quantity, or dispensing frequency limits are exceeded or inconsistent with MAD rules (for example, exceeding the maximum number of dispensings for maintenance drugs or early refill patterns).
- Maintenance drugs: maximum of three dispensings in 90 days (with a 14‑calendar day grace period); up to a 90‑day supply for continuously eligible recipients.
- Non‑maintenance drugs and Schedule II controlled substances are limited to 34‑day supplies; inconsistent refills can lead to recoupment.
Step Therapy and Generic-First Requirements
| Requirement | Details | Exceptions / Notes |
|---|---|---|
| Generic-first (step) requirement | MAP eligible recipients must first use one or more generic items available on the preferred drug list to treat a condition before MAD covers a brand-name drug for that condition. | Generic-first provisions do not apply to injectable drug items; MAD publishes therapeutic categories exempt from generic-first; brand may be covered with prescriber medical justification and MAD or designee approval. |
| Preferred drug list (PDL) application | MAD relies on a published preferred drug list; generic items on the PDL are the required first step in therapy when applicable. | Therapeutic categories exempted from the PDL/step requirement are published by MAD; step requirements also based on clinical practice guidelines and economic considerations. |
| Prior authorization for step or non-preferred items | MAD or its designee reviews all prior authorization requests. Review or prior authorization may be required when a less expensive or therapeutically preferred alternative should be used first. | Prior authorization approval does not guarantee recipient eligibility; providers must verify eligibility at time of service. Services with prior authorization remain subject to utilization review. |
| Brand-name coverage after step failure or justification | Brand name drug items may be covered upon approval by MAD or its designee based on medical justification documented by the prescriber. | Providers can request reconsideration of prior authorization denials per MAD procedures. |
| Utilization review scope | All MAD services, including pharmacy items, are subject to utilization review for medical necessity and program compliance; reviews may occur before or after services are furnished and before or after payment. | Reconsideration processes are available for denied prior authorization or review decisions. |
Quantity Limits and Refill Policies
Site of Care and Practitioner-Administered Drugs
Ensure licensed practitioner furnishes non‑self‑administered drugs
Practitioner‑administered drug items that cannot be self‑administered may be reimbursed when furnished by properly licensed practitioners or facilities; providers must be enrolled and follow billing instructions to receive reimbursement.
Reimbursement per MAD fee schedule; mail service and billing notes
Practitioner‑administered drug items are reimbursed according to the MAD fee schedule; mail service pharmacy is available as an option and retail pharmacies may mail prescriptions consistent with law—providers must enroll and follow contractor billing instructions when services are paid by a coordinated services contractor.
- Reimbursement follows MAD fee schedule and applicable pricing methodologies (EAC/MAC/FUL/usual & customary).
- Mail service pharmacy may be used consistent with MAD rules and provider enrollment.
Definitions and Key Terms
Background and Scope
MAD covers medically necessary prescription drugs and selected over‑the‑counter items for MAP eligible recipients, subject to program rules and limits. Drug utilization review (DUR) is performed prospectively, concurrently, and retrospectively to identify therapy problems—including appropriateness, interactions, dosing, duration, and other issues—and to ensure safe, effective use of medications.
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