A physician-administered drug is an outpatient drug other than a vaccine that is typically administered by a health care provider in a physician’s office or other outpatient clinical setting. For example, drugs that are infused or injected are typically physician-administered drugs. The provider bills the state Medicaid program for the drug using the appropriate national drug code (NDC) and Healthcare Common Procedure Coding System code. States may maintain a list of (1) which drugs are considered physician-administered drugs and must be provided in a clinical setting, and (2) which drugs are considered outpatient drugs and must be dispensed by a pharmacy.
Physician-administered drugs may also be eligible for a rebate as long as the drug meets the definition of a covered outpatient drug. The statute contains language that limits the definition of covered outpatient drugs to exclude drugs that are billed as part of a bundled service within certain settings (e.g., drugs provided as part of a clinic visit or hospital stay and are paid for as part of those services (§ 1927(k)(3)). This means that if a drug is provided as part of services received in one of the settings listed in the statute and is paid as part of those services (i.e., there is not direct payment for the drug), it is not subject to a rebate. However, if a state authorizes and makes a direct payment for the drug separately from the service in one of those settings, it can claim a rebate for that drug. This means that a physician-administered drug’s status as a covered outpatient drug subject to a rebate can vary from state to state, depending on how a state pays for the drug (CMS 2016).
Physician-administered drugs are not required to meet the actual acquisition cost and professional dispensing fee requirements placed on states for outpatient drugs dispensed at a pharmacy (42 CFR 447.512). The state’s payment methodology for physician-administered drugs must be approved by the Centers for Medicare & Medicaid Services (CMS) under the state plan. While professional dispensing fees do not apply for physician-administered drugs, the state can choose to pay an administrative fee for these drugs.
In order for states to receive federal matching funds for physician-administered drugs, they are required to collect NDCs that are necessary to claim rebates (§ 1927(a)(7)). NDCs identify the drug and manufacturer, which are needed to ensure that the correct manufacturer is billed for a rebate in the event that multiple manufacturers produce the same drug, as is the case for generic drugs. The statute requires states to collect NDCs for all brand drugs and for the 20 generic drugs that have the highest annual dollar value. In practice, however, states typically collect drug code information for all brand and generic physician-administered drugs.
