TITLE 1. ADMINISTRATION

PART 15. TEXAS HEALTH AND HUMAN SERVICES COMMISSION

CHAPTER 353. MEDICAID MANAGED CARE

SUBCHAPTER J. OUTPATIENT PHARMACY SERVICES

The executive commissioner of the Texas Health and Human Services Commission (HHSC) adopts amendments to §353.903, concerning Definitions; and §353.907, concerning Prior Authorization Requirements.

Sections 353.903 and 353.907 are adopted with changes to the proposed text as published in the April 3, 2026, issue of the Texas Register (51 TexReg 2162). These rules will be republished.

BACKGROUND AND JUSTIFICATION

Previous HHSC rule amendments in the Vendor Drug Program (VDP) implemented portions of House Bill (HB) 3286, 88th Legislature Regular Session, 2023, and became effective in November 2024. These amendments elaborated on existing Preferred Drug List (PDL) exceptions regarding when a non-preferred drug can be used and added new PDL exceptions.

The adopted amendments implement the portion of HB 3286 that amended Texas Government Code §531.072 by adding subsection (h). However, effective September 1, 2025, Texas Government Code §531.072(h), was transferred to Texas Government Code, Chapter 549, and redesignated as §549.0209, as a result of HB 1620, 89th Legislature Regular Session, 2025.

Therefore, the adopted amendments implement Texas Government Code §549.0209, which requires HHSC to: (1) grant temporary non-preferred (TNP) status to new drugs that are available on the Medicaid formulary but have not been reviewed by the Drug Utilization Review (DUR) Board; and (2) establish criteria for authorizing drugs with this status. This change required HHSC to submit a Medicaid State Plan Amendment (SPA) to the Centers for Medicare & Medicaid Services (CMS), which was approved on August 29, 2024. The adopted amendments in §353.903 and §353.907 address these requirements for managed care, define TNP drugs and revise existing term definitions, and provide clarifications on application of PDL prior authorization to TNP drugs.

The adopted amendments establish a new TNP status for new drugs added to the VDP formulary that have not yet been reviewed by the DUR Board. This status will apply to new drugs upon addition to the Texas Medicaid formulary if the drugs fall into an existing PDL class. These drugs will remain TNP until reviewed at a DUR Board meeting and approved by HHSC.

TNP status does not apply to existing PDL drugs with new label indications. The adopted amendments require a health care managed care organization (health care MCO) to have a TNP drug list prior authorization for coverage.

COMMENTS

The 31-day comment period ended May 4, 2026.

During this period, HHSC received comments regarding the proposed rules from six commenters. HHSC received comments from Navitus, Parkland Community Health Plan, Molina HealthCare, the Texas Healthcare & Bioscience Institute, the Texas Association of Health Plans, and one individual. A summary of comments and HHSC responses follows.

Comment: A commenter supported HHSC's decision to list new-to-market drugs as TNP, stating that this approach helps ensure appropriate oversight and consistency while new drugs are evaluated.

Response: HHSC acknowledges the comment of support.

Comment: A commenter recommended that all TNP national drug codes follow preferred drug list criteria, stating that one non-preferred criteria process would streamline the process and provide clarity to providers and members.

Response: HHSC disagrees and declines to revise the rule in response to this comment. Section 353.907 establishes prior authorization requirements for covered outpatient drugs with TNP status in Medicaid managed care. HHSC will administer prior authorization requirements for TNP drugs consistent with applicable state and federal Medicaid requirements.

Comment: A commenter requested clarification on whether §353.907(b) applies to a member who started a drug while it was provisionally covered, and the drug later moves to TNP status.

Response: HHSC agrees that clarification is needed and provides clarification that a drug may be assigned both provisional coverage and TNP status at the same time during weekly reviews if the drug qualifies for both statuses. If a drug has TNP status, prior authorization requirements apply according to §353.907 and applicable Medicaid managed care requirements. No changes were made to the rule in response to this comment.

Comment: A commenter asked whether VDP will list TNP products on the posted preferred drug list.

Response: HHSC will list TNP products on the Provisional Drug web search only if the drug has both active coverages, either provisional or formulary, and TNP status. The Formulary Drug search will display if a drug has both active coverage and TNP status. The posted preferred drug list document will not include TNP products because that document lists drug products reviewed by the DUR Board and approved by HHSC. No changes were made to the rule in response to this comment.

Comment: A commenter stated that §353.907(c) should not limit submission of prior authorization requests to network providers. The commenter also stated that limiting prior authorization submissions only to network providers was not envisioned by HB 3286 and could restrict patient access.

Response: HHSC agrees with the comment as to network providers. In response to the comment, HHSC removed the definition of "network provider" in §353.903(5) and revised the definition of "covered outpatient drug" in §353.903(2) to align with the federal definition. HHSC also revised §353.907(c) to clarify that prior authorization requests for covered outpatient drugs may be submitted by a provider rather than limiting submission to a network provider. These revisions clarify that the prior authorization submission requirements are not limited to network providers and ensure consistent use of the terminology throughout the rule.

Comment: A commenter stated that limiting TNP status to drugs within existing PDL classes is not supported by Texas Government Code §549.0209 or §549.0006 and recommends removing the limitation.

Response: HHSC disagrees and declines to revise the rule in response to this comment. TNP status applies to drugs within a preferred drug list class because the preferred drug list is a subset of the formulary and the TNP designation is a precursor to preferred or non-preferred status. Drugs are not eligible for TNP status if the drugs do not fall within a current preferred drug list class, but those drugs remain subject to applicable Vendor Drug Program formulary and coverage processes.

Comment: A commenter stated that striking "electronic communications" could have unintended consequences as health care moves away from fax and toward electronic processing.

Response: HHSC agrees and revised §353.907(c) and (d) to retain "electronic communications" and remove "through the internet." These changes clarify that a provider may submit a prior authorization request by telephone, fax, or electronic communications.

Comment: A commenter stated that proposed definitions of preferred drug and non-preferred drug in §353.903 require DUR Board recommendation and may undermine the executive commissioner's authority because the DUR Board serves in an advisory capacity.

Response: HHSC agrees and revised the rule to remove language regarding a DUR Board recommendation for preferred drug and non-preferred drug status. This change clarifies that HHSC retains authority to approve preferred drug list status after DUR Board review.

Comment: A commenter expressed concern that the proposed rules may allow managed care organizations or HHSC to deny access to a TNP drug despite the drug being available on the Medicaid formulary. The commenter stated that TNP status should not operate as a barrier to access for medically necessary drugs.

Response: HHSC disagrees and declines to revise the rule in response to this comment. Section 353.907 establishes managed care prior authorization requirements, including for drugs with TNP status. Drugs with TNP status remain subject to prior authorization requirements, and HHSC will apply the rule consistent with applicable state and federal Medicaid requirements.

Comment: A commenter recommended that the rules clarify that TNP drugs remain available through a prior authorization process based on individualized medical necessity.

Response: HHSC disagrees and declines to revise the rule in response to this comment. The rule requires prior authorization for drugs with TNP status. Medical necessity and coverage determinations will continue to be made consistent with applicable Medicaid requirements.

Comment: A commenter recommended that TNP prior authorization requests be submitted to VDP as formulary exception requests and that denial of a TNP drug not occur before VDP completes a case-by-case clinical review.

Response: HHSC disagrees and declines to revise the rule in response to this comment. The rule does not require separate VDP review before every managed care organization prior authorization decision. Managed care organizations must comply with applicable state and federal Medicaid requirements when reviewing prior authorization requests and issuing adverse benefit determinations.

Comment: A commenter requested transparency and reporting requirements regarding TNP prior authorization requests, VDP review outcomes, and managed care organization compliance.

Response: HHSC disagrees and declines to revise the rules in response to this comment. The statute does not require VDP to report on TNP drug status. TNP status requires prior authorization before approval of the drug. Managed care organizations must follow the same TNP prior authorization criteria and process as VDP.

Comment: A commenter requested that TNP status be applied to all drugs that are added to the formulary post-implementation, regardless of whether they are new to the market. HHSC appears to be applying TNP status only to drugs that are "new to market," when this limitation has no basis in the text of Texas Government Code §549.0209.

Response: HHSC disagrees and declines to revise the rule in response to this comment. The rule does not use the term "new-to-market drug" and does not establish a requirement that a drug be new to the market to qualify for TNP status. Consistent with Texas Government Code §549.0209, the rule applies TNP status to a new drug that is available on the Medicaid formulary and falls within an existing preferred drug list class.

Comment: A commenter stated that if HHSC determines that a first-in-class drug presents distinct administrative considerations, that explicit regulatory guidance is provided on how such drugs would be evaluated for and granted TNP status.

Response: HHSC disagrees and declines to revise the rule in response to this comment. HHSC will determine whether a new drug, including a first-in-class drug, qualifies for TNP based on whether the drug is available on the Medicaid formulary and falls within an existing preferred drug class that has not yet been reviewed by the DUR Board.

Comment: A commenter requested clarification that the "existing PDL class" language was not intended to exclude first-in-class drugs from TNP status under Texas Government Code §549.0209.

Response: HHSC declines to revise the rule in response to this comment. HHSC clarifies that TNP status applies to new drugs that are available on the Medicaid formulary and fall under an existing preferred drug list class that has not yet been reviewed by the DUR Board. A first-in-class drug may be eligible for TNP status if it falls within an existing preferred drug list class. If the drug does not fall within an existing preferred drug list class, it is not eligible for TNP status but remains subject to applicable Vendor Drug Program formulary and coverage processes.

HHSC made minor editorial changes in §353.903(5)(B) and §353.907(a) to correct use of acronyms.

STATUTORY AUTHORITY

The amendments are adopted under Texas Government Code §524.0151, which provides that the executive commissioner of HHSC shall adopt rules for the operation and provision of services by the health and human services system, and Texas Human Resources Code §32.021 which authorizes HHSC to administer the federal medical assistance (Medicaid) program; Texas Government Code §540.0051, which authorizes HHSC to implement the Medicaid managed care program; and §549.0202, which requires the commission to adopt preferred drug lists for the Medicaid vendor drug program and prescription drugs purchased through the child health plan program.

§353.903. Definitions.

The following words and terms, when used in this subchapter, have the following meaning, unless the context clearly indicates otherwise.

(1) Clinical prior authorization (clinical PA)--A health care managed care organization (MCO) must review and approve certain drugs before a pharmacy can dispense the drug to a Medicaid member.

(2) Covered outpatient drug--A covered outpatient drug, as defined by 42 CFR §447.502, that is included on the Texas Medicaid Formulary.

(3) Formulary--The list of covered outpatient drugs for the Texas Medicaid program.

(4) Maximum allowable cost--The highest unit price set by a health care MCO, or its subcontractor, for reimbursement of therapeutically equivalent multi-source drugs.

(5) Non-preferred drug--A covered outpatient drug on the preferred drug list (PDL) that has been:

(A) reviewed by the Drug Utilization Review Board (DUR Board);

(B) approved by the Texas Health and Human Services Commission (HHSC); and

(C) designated by HHSC as non-preferred on the preferred drug list.

(6) Pharmacy benefits manager (PBM)--An entity that administers the Medicaid outpatient drug benefit on behalf of a health care MCO.

(7) Preferred drug--A covered outpatient drug on the preferred drug list that has been:

(A) reviewed and evaluated for safety, clinical effectiveness, and cost-effectiveness compared to other drugs in the same therapeutic drug class on the market;

(B) approved by HHSC; and

(C) designated by HHSC as preferred on the preferred drug list.

(8) Preferred drug list (PDL)--The list of covered outpatient drugs defined in this section as a:

(A) non-preferred drug;

(B) preferred drug; or

(C) temporary non-preferred drug.

(9) Preferred drug list prior authorization (PDL PA)--A review a health care MCO does before a pharmacy can dispense a non-preferred drug or a temporary non-preferred drug to a Medicaid member in an outpatient setting.

(10) Temporary non-preferred drug--A covered outpatient drug on the PDL:

(A) that the DUR Board has not yet reviewed;

(B) HHSC has not approved; and

(C) that has not been designated by HHSC as preferred or non-preferred.

§353.907. Prior Authorization Requirements.

(a) Except for a temporary non-preferred drug, a health care managed care organization (health care MCO) may not require a preferred drug list prior authorization (PDL PA) for a covered outpatient drug until the Texas Health and Human Services Commission (HHSC) designates the drug as non-preferred.

(b) A health care MCO may not require a PDL PA for a covered outpatient drug that was prescribed for a member before HHSC decides the drug is non-preferred or temporary non-preferred, unless the member has used up the whole prescription, including any authorized refills.

(c) A health care MCO must allow a provider to submit a request for prior authorization for a covered outpatient drug by telephone, fax, or electronic communications.

(d) A health care MCO must respond to a request for prior authorization by telephone, fax, or electronic communications no later than 24 hours after the MCO receives the request. If the health care MCO cannot respond to the prior authorization request within this time, then the health care MCO must allow a pharmacy to dispense a 72-hour supply of the prescribed drug.

(e) A health care MCO must not require a PDL PA for a preferred drug.

(f) A health care MCO must require a PDL PA for a non-preferred drug or a temporary non-preferred drug.

(g) If a member's medical condition does not match the health care MCO's clinical criteria for dispensing a covered outpatient drug, the health care MCO may require a clinical PA for a preferred, non-preferred, or temporary non-preferred drug.

(h) A health care MCO must implement all clinical PAs that HHSC designates as "mandatory" for Medicaid managed care programs.

(i) A health care MCO must accept a standard prior authorization form for a covered outpatient drug in accordance with Texas Insurance Code Chapter 1369, Subchapter F.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on September 17, 2026.

TRD-202604017

Stephanie Tourk

Deputy Chief Counsel

Texas Health and Human Services Commission

Effective date: October 7, 2026

Proposal publication date: April 3, 2026

For further information, please call: (512) 289-2482

CHAPTER 354. MEDICAID HEALTH SERVICES

SUBCHAPTER F. PHARMACY SERVICES