The Texas Workers' Compensation Commission (the commission) adopts amended §134.502, Pharmaceutical Services with changes to the proposed text published in the September 13, 2002 issue of the Texas Register (27 TexReg 8731).

As required by the Government Code §2001.033 (a)(1), the commission's reasoned justification for this rule is set out in this order, which includes the preamble, which in turn includes the rule. This preamble contains a summary of the factual basis of the rule, a summary of comments received from interested parties, names of those groups and associations who commented and whether they were for or against adoption of the rule, and the reasons why the commission disagrees with some of the comments and proposals.

Changes made to the amended rule are in response to public comment received in writing and at a public hearing held on October 16, 2002, and are described in the summary of comments and responses section of this preamble.

House Bill 2600 (HB-2600), adopted during the 2001 Texas Legislative Session, amended §408.028 of the Texas Labor Code. In addition to previous requirements, the revised statute requires: that physicians and doctors order over the counter alternatives to prescription medications when clinically appropriate and applicable in accordance with state law; that the commission develop by rule an open formulary that requires the use of generic pharmaceutical medications and clinically appropriate over the counter alternatives to prescription medications; and that the commission adopt rules to allow an injured employee to obtain reimbursement for over the counter medications prescribed or ordered and purchased by the employee.

Sections 134.500, 134.502, 134.503, 134.504, and 134.506, relating to Pharmaceutical Benefits, were adopted at the December 13, 2001 public meeting. Section 134.502 addressed prescribing, billing and dispensing of medications. This rule also introduced the statement of medical necessity (SMN). The SMN was intended to assist pharmacists in the resolution of medical necessity disputes, as well as to assist injured employees when seeking reimbursement for out of pocket expenses for medications.

The commission expected this requirement to benefit system participants by improving the overall process for reimbursement for medications. However, eight months of experience under the new rule has shown that there were unintended consequences to the SMN requirement. The rule required a carrier to request an SMN before denying a pharmacy bill based upon its belief that the medication was not reasonable or medically necessary and gave doctors 14 working days from receipt of a request to provide the statement. Under Texas Labor Code §408.027, insurance carriers have a total of 45 days from the date that a properly completed bill is received to evaluate the bill for payment.

Some insurance carriers are unable to perform a complete medical review within the first few days after the date the bill is received. They may be able to do little more than start the administrative process necessary to review the bill. Depending on when the insurance carrier makes the request for a SMN, the insurance carrier might not receive the SMN early enough to be able to meet its 45-day deadline for taking final action on a medical bill.

The requirement to request the SMN before denying based upon reasonableness or medical necessity and the general timeframes of the statute and rule for taking final action on medical bills, resulted in at least one carrier requesting SMNs on the vast majority of their pharmacy bills ostensibly to preserve the 45-day time frame to deny the bill based on reasonableness and medical necessity. These requests were being made not because the carrier had determined that the medication was not medically necessary, but because it had not yet reviewed the bill and made the determination. System participants who were receiving the requests for SMN believed them to signal that the carrier was challenging the medical necessity of the medication. However, the carrier ultimately denied only a relatively small percentage of the bills for which the SMNs were requested. This practice cost system participants time and postage related to the requests and responsive SMNs. The practice may have also led to employees having additional difficulty obtaining refills on medications because the pharmacies were interpreting the carrier's request for SMNs as intent to deny the medical bill.

To address this issue, the commission has deleted the provisions of original subsection (e) of §134.502 that require the carrier to request an SMN prior to denying a pharmacy bill based upon reasonableness or medical necessity, and has re-lettered the remaining subsections accordingly. Instead, the carrier, like others, is permitted to request an SMN. If the carrier makes a request for a SMN, the carrier is required to send a copy of the request to the sender of the bill at the same time the request is made. The commission has added language to subsection (e) that prohibits carriers from requesting SMN unless, in the absence of a SMN, the carrier could reasonably support a denial based upon extent of, or relatedness to the compensable injury, or based upon reasonableness or medical necessity. Under this rule, it is intended that carriers only request SMNs on bills they actually anticipate denying based upon the above-mentioned reasons. Therefore, the requests themselves are much more meaningful than under the original rule. If the commission finds that a carrier has a pattern of practice of unnecessarily requesting SMNs, the commission may take enforcement action. While the commission acknowledges that deleting the provisions of original subsection (e) may not be an optimum solution to the problem, the commission is committed to developing means to improve delivery of pharmaceutical benefits through working with stakeholders to identify solutions beneficial to all participants involved.

The provision that was originally contained in subsection (e), which prohibited a doctor from billing for and a carrier from reimbursing a doctor for providing an SMN, has been moved to renumbered subsection (f). Though there was a comment on the issue reimbursing prescribing doctors for SMNs, the commission retained this provision and will continue to monitor the impact of this revised rule and may re-explore the issue of reimbursement in order to allow stakeholders an opportunity to provide input.

Subsection (g) was clarified by adding language referencing §133.304 of this title (relating to Medical Payments and Denials) that requires an insurance carrier to send a copy of the explanation of benefits (EOB) to the sender of the bill at the time the carrier makes or denies payment on a bill. As the sender of the bill, a pharmacy will always receive the EOB regardless of the reason for denial, in accordance with §133.304. Subsection (g) clarifies that the carrier is also required to send a copy of the explanation of benefits (EOB) to the employee and prescribing doctor whenever the carrier denies a pharmacy bill for any reason related to compensability of, liability for, extent of, or relatedness to the compensable injury, or for reasons related to reasonableness or medical necessity. It is important to send the EOB to the employee and prescribing doctor in addition to the pharmacist when the bill is denied for the above reasons, as all parties need to know about the potential that the carrier will no longer approve the medication. The requirement to send the EOB to the prescribing doctor and the employee when reducing the bill has been removed. A "reduction to $0" is considered a denial, which may require filing an EOB with all three parties depending on the reason for the reduction. Other changes were made to subsection (g) to ensure consistency of terminology.

The following groups submitted comments generally supporting amended §134.502: Insurance Council of Texas, and Texas Mutual Insurance Company.

The following groups submitted comments generally opposing the amendment of §134.502: EZRx Pharmacy Services.

The following groups submitted comments making recommendations, and/or supporting portions of amended §134.502: The Research and Oversight Council on Workers' Compensation.

The following groups submitted comments making recommendations, and/or opposing portions of amended §134.502: Walgreens and PMSI.

Summaries of the comments and commission responses are as follows:

COMMENT: Some commenters expressed general support of the amended rule.

RESPONSE: The commission agrees.

COMMENT: A commenter recommended that claim administrative information, such as insurance carrier, date of injury and claim number, be included on prescriptions in order to assist the pharmacist in getting the bill to the correct carrier. The commenter gave the example of employees with multiple injuries that may have a different carrier for a previous injury than the one they are getting the prescription filled for. Having the information from the doctor on the prescription would help the pharmacist know who the carrier is.

RESPONSE: The commission disagrees. The claim number is generally not available to the prescribing doctor when writing a prescription. Furthermore, it is the responsibility of the pharmacist to make sure that they are billing the correct carrier. There are many ways for the pharmacist to obtain this information from the commission, including online insurance verification. The commission recommends that all health care providers verify coverage and carrier prior to submitting claims as this information can change.

COMMENT: A commenter suggested that language be added to the prescription that would indicate that the prescription is medically necessary and related to a work related injury and that the prescription is related to a workers' compensation claim.

RESPONSE: The commission disagrees that additional language is necessary. Section 134.502 currently requires doctors to indicate on the prescription that the medication is related to a workers' compensation claim. It would not be appropriate or effective to require the suggested additional information on the face of the prescription, as the carrier will not see the prescription. Further, doctors are required to only prescribe medication that is medically necessary. To require them to indicate this on a prescription would both be redundant and suggest that it might sometimes be appropriate to prescribe medications that are not reasonable or medically necessary.

COMMENT: Commenters recommended retaining the requirement for the carrier to request the SMN prior to denying a bill but that the rule be amended to provide an extended time frame (such as 14 days) during which the carriers can have enough time to review the claim and decide whether or not more information is needed to make a determination of medical necessity and request a SMN, even though only one carrier seemed to need additional time to meet the requirements.

RESPONSE: The commission disagrees. Section 408.027 of the Texas Labor Code requires carriers to make payment by the 45th day after the date the carrier receives the bill. The commission does not have the authority to extend the length of time a carrier has to pay a bill, which seems to be the suggestion of the commenter.

COMMENT: Commenters objected to removing the requirement for a carrier to provide a copy of the request for a SMN to the provider of pharmaceutical services and the treating doctor. Another commenter suggested retaining the requirement for the carrier to request the SMN prior to denying a bill, but add language requiring the carrier to send a copy of their request only to the sender of the bill. The commenter felt that this would cut back on the number of notices being sent out while continuing to notify the party whose payment is in question.

RESPONSE: As noted, the commission is concerned that the rule as adopted had unintended consequences that were adding cost to the system and interfering with employee's ability to obtain refills because the request for a SMN was believed to be a signal that the carrier was challenging the medical necessity of the medication. While the commission acknowledges that this may not be an optimum solution to the problem, the commission is committed to developing means to improve delivery of pharmaceutical benefits and believes that through working with stakeholders it will be possible to identify solutions beneficial to all participants involved.

As to the suggestion that SMN requests only be provided to the sender of the bill, the commission agrees that the sender of the bill needs to be made aware when the carrier is requesting an SMN and has added language to subsection (e).

The commission has added language to subsection (e) that prohibits carriers from requesting SMN unless, in the absence of a SMN, the carrier could reasonably support a denial based upon extent of, or relatedness to the compensable injury, or based upon reasonableness or medical necessity. Under this rule, it is intended that carriers only request SMNs on bills they actually anticipate denying based upon the above-mentioned reasons. Therefore, the requests themselves are much more meaningful than under the original rule. If the commission finds that a carrier has a pattern of practice of unnecessarily requesting SMNs, the commission may take enforcement action.

COMMENT: Commenters pointed out that the rule states that a SMN shall only be requested if the carrier intends to dispute the medical necessity of the services. The commenters additionally pointed out that in the proposal preamble the commission states that one carrier was requesting the SMN prior to its determination that the medication was not medically necessary. The commenters believe that such action is a flagrant violation of the rule and preamble since the carrier was making the request prior to a decision to deny based on a lack of medical necessity and that the appropriate response by the commission should be to punish the carrier's actions, not to remove the requirement that they perform a proper review.

One commenter expressed the concern that the decision to deny payments will no longer be based upon medical information and the professional judgment of the prescribing doctor, but on the opinion of the carrier or third party billing company

RESPONSE: Although it is not a violation of the rule as originally adopted to request SMNs on every prescription in order to ensure that the carrier has the information necessary to make the final determination regarding reasonableness and medical necessity, this was not the anticipated result. The commission was surprised that at least one carrier was unable to develop a better system of complying with the rule. The commission had expected that carriers would employ some type of initial screening criteria (perhaps based upon length of treatment, diagnosis, type of medication, or other similar means) to decide which pharmaceutical services they had concerns with. In this manner, they would only request SMNs in those cases where a denial was truly likely rather than requesting one in every case. The fact that most other carriers did not feel the need to request SMNs on every bill suggests that the commission's expectations were not unfounded. Nevertheless, as noted, the commission is committed to continuing to explore ways to improve delivery of and reimbursement for reasonable and necessary pharmaceutical services and system participants should not assume that the adoption of this rule represents the commission's final answer to these issues.

It should also be noted that removal of the requirement to request the SMN before denying a bill during retrospective review does not excuse the carrier from conducting a proper review of the bill as required by commission rules and Texas Department of Insurance guidelines. Furthermore, the carrier still has the option under subsection (e) of requesting the SMN at any time during its review if the carrier feels that more medical evidence or the professional opinion of the prescribing doctor is needed.

COMMENT: A commenter questioned the logic behind the prohibition on reimbursement for the SMN and suggested that doctors be reimbursed in order to encourage them to provide the SMN while creating a cost to carriers who request SMNs without good cause. Commenter pointed out that other mandated medical reports are reimbursed.

RESPONSE: With the adopted changes to the rule, the number of requests for SMNs should be greatly reduced. Since issuing Advisory 2002-14, which indicated the commission would not enforce the requirement found in §134.502 (e) pending final rule-making action, the number of requests for SMNs has decreased. In addition, the SMN may consist of an existing document or medical record the prescribing doctor forwards to the carrier. However, the commission will continue to monitor the impact of this revised rule and may re-explore the issue of reimbursement in order to allow stakeholders an opportunity to provide input.

COMMENT: Commenters objected to the proposed changes in §134.502 stating that the changes would return pharmacy benefits services to a system filled with problems that the SMN was intended to correct. The commenters objected to the change of wording in the amended rule from "carrier shall" to "carrier may" and objected to deleting the requirement for the carrier to request a SMN before denying reimbursement for prescriptions.

RESPONSE: The commission disagrees. The changes to §134.502 do not return pharmacy benefits to the process used before the SMN was introduced. Prior to the adoption of §134.502, the SMN was not defined or discussed anywhere in commission rules. The amendments to §134.502 (e) retain the SMN, but remove the requirement that it be requested before denial. The carrier can request the SMN when the information is needed to complete the review of the bill. Additionally, the rule still allows the pharmacy or employee to request a SMN from the prescribing doctor when needed

With the proposal of the amendment to remove subsection (e) of §134.502 containing the requirement for the carrier to request a SMN prior to denying pharmaceutical services as not reasonable or medically necessary, an advisory was issued explaining that enforcement action would not be taken on the provisions of §134.502 (e) pending the outcome of the rule-making process. In the two months since Advisory 2002-14 was issued, the commission has not received reports that indicate that pharmacies are having additional difficulty obtaining information necessary for accessing and participating in medical dispute resolution. Therefore, the commission does not believe that adoption of this amendment will have a significant adverse effect on the system. Furthermore, the commission is committed to continue to explore ways to improve delivery of and reimbursement for pharmaceutical services.