DATE:  05/09/2011








AUTHORITY: 38 CFR 17.270(a); 38 CFR 17.272(a)(b) and 17.274(a)






A. Drugs and medications, including "unlabeled, and off label use", whether administered by a physician or obtained by prescription, or orphan drugs when used in the diagnosis, treatment or prevention of a rare disease or condition, are covered benefits when dispensed in accordance with CHAMPVA policy Chapter 2, Section 22.1, Pharmacy.

B. CHAMPVA is a cost sharing program and the cost of covered pharmacy supplies is shared with the beneficiary.  Upon satisfaction of the annual deductible requirement of $50 per beneficiary or $100 per family, CHAMPVA’s covered pharmaceuticals are 75% of the allowable amount.  Beneficiaries are responsible for the remaining 25% of the allowable amount and for charges associated with non-covered services

C. CITI (CHAMPVA Inhouse Treatment Initiative) program.  Pharmacy services and supplies obtained through a VA (Veterans Affairs) medical center under the CITI program are not subject to cost sharing or deductibles (see Chapter 1, Section 4.1, CITI (CHAMPVA Inhouse Treatment Initiative) and Chapter 3, Section 6.4, CITI (CHAMPVA Inhouse Treatment Initiative) Reimbursement).

1. Under the CHAMPVA MbM (Meds by Mail) Program.  Pharmacy services obtained through the MbM Program are not subject to cost sharing or deductibles (see Chapter 1, Section 4.2, MbM (Meds By Mail).

D. For pharmacy submitted claims, the allowable amount for FDA (Food and Drug Administration) approved outpatient prescription drugs and medical requisites, such as diabetic strips, syringes, and insulin, is limited to the AWP (Average Wholesale Price) plus a $3.00 dispensing fee or the negotiated price.  

1. CITI Program.  Reimbursement is the VA cost for the drug, plus a $5.00 dispensing fee for each line item listed on the claim.

2. MbM Program.  Reimbursement is made to the Leavenworth CMOP (Consolidated Mail Outpatient Pharmacy) for the actual VA cost of the drugs plus varying administrative costs.

3. CHAMPVA’s PBM (Pharmacy Benefits Manager) Program.  The PBM provides a network of pharmacies to meet the prescription needs of CHAMPVA beneficiaries.  The allowable amount will be the lesser of the billed amount plus dispensing fee or the AWP plus $3 dispensing fee.  In instances where the PBM negotiates an amount lower then both the AWP plus $3 or the billed amount plus dispensing fee (sometimes referred to as “usual and customary”); this will be the allowed amount.

E. Allergy preparations are custom made in a laboratory and are not considered prescription drugs.  Reimbursement for allergy preparations will be based on the allowable charge methodology utilizing the prevailing rate that will include both the costs of the drug and the administrative fee.

F. Compounded prescriptions consist of two or more medications that are “compounded” or mixed together by a pharmacist to form one medication.  The cost of the compounded drug will include the ingredients and the services of the pharmacist.

G. Drugs administered other than oral method, including chemotherapy drugs, are to be priced from the “J” code pricing file except for home infusion drugs furnished through a covered item of durable medical equipment.  Home infusion drugs will be paid the lesser of the billed amount or the AWP (Average Wholesale Price) of the NDC (National Drug Code) plus a $3.00 dispensing fee or the negotiated price.  Claims for home infusion drugs will be billed using the appropriate J-code along with a specific NDC for pricing.  The HCPCS (Healthcare Common Procedure Coding System) J-code will facilitate agency reporting requirements for future data analysis.

H. Double Coverage OHI (Other Health Insurance).  When double coverage exists, the CHAMPVA payment will not exceed that which would have been paid in the absence of OHI.  After deductibles have been met, the CHAMPVA payment usually covers all of the beneficiaries’ OHI co-payment requirements.  Benefits will not be paid until the claim has been filed with the OHI and an EOB (Explanation of Benefits) issued (see Chapter 3, Section 4.1, OHI (Other Health Insurance).

I. CHAMPVA and HMO (Health Maintenance Organizations).  Benefits will not be paid until the claim has been filed with the HMO.  In the case of an HMO, CHAMPVA does not require documentation of the actual prescription cost to process the claim.  The full HMO co-payment will be reimbursed to the beneficiary as long as it does not exceed what the CHAMPVA payment would have been in the absence of OHI.

J. CHAMPVA and Medicare.  CHAMPVA is the secondary payer to Medicare for those beneficiaries who are Medicare eligible and are enrolled in the Medicare Part-D (Prescription Drug Coverage Plan).  If the beneficiary elected not to enroll in Medicare Part-D, CHAMPVA becomes primary payer for pharmacy coverage.  

Note:  Medicare Part A and B may pay for some drugs or biologic products under limited conditions.  Examples of these drugs are immunosuppressive agents for beneficiaries who have received organ transplants, erythroprotein for patients with renal disease who are undergoing dialysis and who have anemia, oral anticancer agents, and clotting factors for the treatment of hemophilia.  In these instances, an EOB must be received from Medicare before payment can be made by CHAMPVA.

K. CHAMPVA and the PBM.  The PBM is a pharmacy third-party biller with whom CHAMPVA has an agreement that allows them to forward pharmacy claims electronically to CHAMPVA for processing and payment.  

1. Beneficiaries who use PBM pharmacies pay only their 25% cost share (after the outpatient deductible has been met).  

2. Beneficiaries have no claims to file and cannot bill CHAMPVA for their cost-share.

3. Beneficiaries are not eligible to access the PBM for their prescription medications if they have OHI with pharmacy coverage.

L. Ordering drugs and medications from Foreign Countries.  Beneficiaries who reside in the United States and order their prescriptions from foreign countries are responsible for their deductible and cost share as indicated in Policy B. above.  The requirements of Chapter 2, Section 22.1, Pharmacy, will apply in all instances.

M. Payment will be made to the provider unless the billing is accompanied by a completed and signed CHAMPVA Claim Form (VA Form 10-7959a).  ONLY when a CHAMPVA Claim Form is received with billing, will payment be made to the beneficiary.