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Department of Health and Human Services
Medicare Appeals Council
PacifiCare/Secure Horizons (Appellant)

Managed Care Benefits  



PacifiCare/Secure Horizons (Carrier/Intermediary/PRO/HMO)


The Administrative Law Judge issued a decision in the above-captioned case on September 7, 2000. The appellant has asked the Medicare Appeals Council to review that decision. The Council grants the request for review because the Administrative Law Judge's decision was not based on substantial evidence (20 CFR 404.967, by reference of 42 CFR 422.608). (1)

The Council has considered the record that was before the Administrative Law Judge. The Council also has considered the request for review, the documents submitted by the appellant on December 3, 2000, (2) and relevant documents concerning the appellant's prescription drug benefit that were in the claim file but not entered as exhibits by the Administrative Law Judge. This additional evidence has been proffered to the beneficiary and is hereby entered into the record as supplemental exhibits MAC-1, MAC-2, and MAC-3, respectively.

In November, 1998, the beneficiary requested pre-authorization from her Medicare managed care organization (MCO) for a compounded triple estrogen/progesterone product, used for treatment of the effects of menopause. The MCO, a Medicare+Choice plan, approved the request for compounded estrogen, but in December, 1998 denied the request to include Prometrium, a phytoprogesterone, in the compound. According to the MCO, the plan policy required the trial and failure of drugs on the plan formulary before authorization of a non-plan drug would be given (Ex. 1, p. 1). In this case, the beneficiary had tried Premarin, the estrogen product on the formulary, and had an allergic reaction; however, the beneficiary had not yet tried the progesterone products on the plan's formulary, "Provera/Cy[]rin." Provera is a brand name synthetic progesterone; Cycrin is a generic form (Ex. MAC-3, p. 111). The formulary covers Cycrin.

The beneficiary appealed the denial of Prometrium, and upon its review the Center for Health Dispute Resolution (CHDR) upheld the plan's determination. The beneficiary then requested a hearing before an Administrative Law Judge, and a hearing was held. (3) Present at the hearing and testifying were the beneficiary, the beneficiary's primary care physician, a representative of the MCO, and a medical expert called by the Administrative Law Judge.

The beneficiary claimed that: (1) the coverage policy concerning the compound she was taking had changed, contrary to written assurances, when her previous health plan (FHP) was taken over by the appellant; (2) a history of drug allergies, particularly to generic drugs, made the generic formulary progesterones inappropriate for her; and (3) she had many conditions that contraindicated use of Provera. The beneficiary's primary care physician testified that while he did not originally prescribe the compound for her, and had no direct knowledge of her past allergic reactions to medications, he "learned to trust her opinion and her experience." The physician found that she had good experience with the triple estrogen/progesterone compound and would advise her to continue it.

The medical expert called by the Administrative Law Judge asked the beneficiary some questions about her medical history. He then testified that: (1) Prometrium is a "pure" progesterone, while Provera is synthetic; (2) both Provera and Prometrium have a long list of possible reactions, "like almost any drug" and both have "the identical physiologic action"; and (3) the beneficiary's history of liver disease was not significant, because if it was significant the beneficiary shouldn't be taking either drug. The Administrative Law Judge asked the medical expert, "So there's no medical reason, based on objective data, to not use the drug on the formulary?" The medical expert responded, "Correct."

The Administrative Law Judge found that the formulary medication(s) offered by the MCO were not appropriate to treat the claimant's medical condition and that the requested medication, Prometrium, was medically necessary. He decided that the MCO must authorize the use of Prometrium in this beneficiary's hormone replacement compound. In his decision, the Administrative Law Judge wrote that he found the claimant's testimony and documentary statements credible. He relied in part on the testimony of the primary care physician, but also relied on the opinion of the medical expert who, he wrote, "understood the claimant's position and found it to be reasonable."

The appellant requested Medicare Appeals Council review of the Administrative Law Judge's decision. In the request for review, the appellant asserted that the beneficiary has been taking generic medication as part of her triple estrogen compound, according to documentation the appellant received from the beneficiary's pharmacy (Ex. MAC-1). Therefore, the appellant claimed, the beneficiary is able to use generic medication without reaction, contrary to her assertions at the hearing. The appellant asked the Council to reverse the Administrative Law Judge's decision and deny coverage of Prometrium until the beneficiary has "had an unsuccessful trial and failure of...Provera/Cy[]rin...or the brand Provera...." (4)

After careful review of the documents in the record and the hearing tape, the Council finds that the Administrative Law Judge's decision was not based on substantial evidence. The Council finds that record does not support the beneficiary's contentions that the progesterone products on the plan formulary are medically inappropriate for her and that she meets the plan's requirements for authorization of non-formulary medication.

Medicare does not cover most self-administered drugs and biologicals, pursuant to section 1861(s) of the Social Security Act ("Act"). MCOs participating in Medicare as Medicare+Choice plans may offer coverage of certain drugs as a "supplemental benefit", defined in Medicare regulations (42 CFR 422.100 and 422.102). The scope of supplemental benefits offered is at the discretion of the MCO, although the Health Care Financing Administration (HCFA) previews and approves all plans and benefits. The MCO must provide enrollees with a detailed description of benefits at the time of enrollment and at least annually thereafter, and also 30 days before an approved and intended change in benefits (42 CFR 422.111). While the scope and type of supplemental benefits offered are not reviewable in the appeals process, once supplemental benefits become part of a Medicare+Choice plan offered to Medicare beneficiaries, a determination by the MCO that a particular item or service requested by a beneficiary is not covered under any part of its plan is reviewable (42 CFR 422.561 and 422.566).

Since self-administered hormone replacement drugs are not covered by Medicare, the issue before the Council is not one of medical necessity pursuant to section 1862(a)(1) of the Act, but rather whether the MCO followed its own coverage guidelines in offering a supplemental benefit pursuant to its contract with the beneficiary. The MCO offered a prescription drug benefit that included a formulary, which is a list of medication pre-selected by the plan as authorized. Drugs not on a plan's formulary are generally not approved unless a comparable formulary drug is deemed inappropriate for a particular individual. The record contains the plan's policy concerning coverage of prescription drugs and its policy concerning approval of non-formulary medications, effective January 1, 1998 (Ex. MAC-2, p. 71-81). According to the plan, non-formulary drugs not otherwise excluded from coverage are pre-authorized in the following instances:

(1) no formulary alternative is appropriate and the MCO determines the drug medically necessary for patient care;

(2) the formulary alternative has failed after a therapeutic trial;

(3) the formulary alternative is not appropriate after a review of physician chart notes;

(4) the patient has been under treatment and remains stable on a non-formulary prescription drug and conversion to a formulary drug would be medically inappropriate;

(5) the patient has experienced typical allergic reactions or established adverse effects relating to the pharmacological properties of the formulary drug;

(6) the physician provides evidence in the form of documents, records, or clinical trials that the non-formulary drug is medically necessary.

The beneficiary contends that her medical history meets conditions (1), (3), (4), (5), and (6) for approval of Prometrium, a non-formulary medication. The appellant asserts that none of these requirements have been met and that the only way it will authorize a prescription for Prometrium in this case is if the beneficiary meets condition (2) -- i.e., that she first have an unsuccessful trial of a formulary progesterone.

The Council has thoroughly reviewed the beneficiary's statements during the hearing and in documents she submitted. The beneficiary's central claim seems to be two-fold - she believes she is at risk of an allergic reaction to all generic medications, and she believes she is at risk of a reaction to synthetic medications, specifically synthetic hormones. During the hearing and in the written record, the beneficiary claimed that she had experienced allergic reactions to the following medications in the past: penicillin made from horse serum (tetanus antitoxin) or tetanus toxoid, the generic form of Flagyl (an antibiotic), cocaine, and Premarin. She also said that she has or had in the past hypoglycemia, Addison's disease, fluid retention, and episcleritis. The beneficiary claims that this medical history is sufficient to make a generic or synthetic drug medically inappropriate.

In testifying at the hearing before the Administrative Law Judge, the beneficiary's physician expressed his understanding of her fears and was averse to changing a prescription that did not cause the beneficiary any problems; however, he did not provide documentation supporting the beneficiary's contention that Prometrium is medically necessary, nor did he testify that in his opinion other forms of progesterone were medically inappropriate. Further, he testified that he had no direct knowledge of the beneficiary's past allergic reactions.

Moreover, the medical expert called by the Administrative Law Judge, after hearing the testimony concerning all these conditions and reactions, said that none of them precluded use of Provera or its generic. He concluded that there was no reason that the beneficiary could not try the progesterone products on the formulary. Therefore, according to the medical expert's opinion, the beneficiary did not meet the conditions of the plan policy.

The Administrative Law Judge concluded differently, but in his opinion he misinterpreted the conclusions of the medical expert and otherwise relied solely on the unsupported assertions of the beneficiary. The Administrative Law Judge claimed that the medical expert found the beneficiary's "position to be reasonable" and that he "explained that the formulary drugs would not be appropriate given her history of adverse reactions to medications." In fact, the medical expert opined that the beneficiary was "simply fearful" of taking generic medication. Apart from the medical expert's testimony, the Administrative Law Judge did not rely on any documentation, medical evidence, or beneficiary records to support his finding that the beneficiary's claim was "credible."

After reviewing the record, the Council finds that the beneficiary did not meet any of the conditions in the plan policy for coverage of a non-formulary medication. There are no physician chart notes or other medical documents to support the beneficiary's contentions that the formulary alternative is not appropriate, or that the beneficiary's alleged allergic reactions to other drugs would make a trial of the formulary progesterones inappropriate. (5) Moreover, the physician's testimony did not provide medical evidence of any contraindications for Provera/Cycrin, and the medical expert testified that there is no reason why the formulary progesterones would be inappropriate.

The Council recognizes that the beneficiary had a reaction to a generic form of an antibiotic, which was documented by the MCO. However, the medical expert testified that this event would not make the formulary progesterones medically inappropriate. Moreover, the appellant submitted information from the beneficiary's pharmacy with its request for review which demonstrates that the beneficiary had been taking at least one generic form of estrogen in the triple estrogen/progesterone compound prepared for her, included apparently without her knowledge (Ex. MAC-1). Even without this information, the Council finds no evidence in the record supporting the beneficiary's general fear of generic medication and rebutting the medical expert's testimony.

The beneficiary also claims that a natural progesterone such as Prometrium, as opposed to a synthetic progesterone such as Provera or Cycrin, is medically necessary. While the beneficiary did apparently have a documented reaction to Premarin, a synthetic estrogen, and is now allegedly receiving natural estrogens in the compound she is taking, neither her primary care physician nor the medical expert testified that a natural progesterone was medically necessary. In fact, the medical expert pointed out that Prometrium has an extensive list of possible reactions similar to Provera.

Therefore, the Council does not find sufficient evidence to support the beneficiary's claim that Provera or its generic equivalent is medically inappropriate, or that Prometrium is medically necessary, absent a trial of Provera/Cycrin.

Finally, the Council finds no support for the beneficiary's claim that coverage of the triple estrogen/progesterone compound changed when the appellant took over her health plan in early 1998. The beneficiary admitted in a letter to CHDR that previous to 1998 the prescription was paid for "once only" (Ex. 8, p. 1), and she has provided no documentation from the prior plan that the prescription had been covered.


The Medicare Appeals Council has considered the entire record, including the supplemental exhibits, and makes the following findings:

1. The beneficiary is a subscriber to the appellant's Medicare managed care plan, which includes a supplemental prescription drug benefit that uses a formulary.

2. The beneficiary has requested pre-authorization of a drug that is not on the plan's formulary.

3. Under the plan's policy, non-formulary medications are only approved in certain enumerated circumstances when a similar formulary medication would not be medically appropriate.

4. Pursuant to the relevant statute and regulations, the Medicare managed care organization has the discretion to limit supplemental benefits offered to Medicare beneficiaries; therefore, the Council may only review whether the plan followed its own policy in denying authorization for the requested item or service.

5. The record does not demonstrate that the beneficiary, in requesting pre-authorization for Prometrium, a progesterone, met any of the plan's requirements for approval of non-formulary medications. There is insufficient evidence to demonstrate that the beneficiary's claim that formulary progesterones are medically inappropriate for her, or that Prometrium is medically necessary, absent a failed trial of the formulary progesterones as required by plan policy.


It is the decision of the Medicare Appeals Council that the appellant is not required to supply the beneficiary with Prometrium or any other non-formulary progesterone.

Date: July 26, 2001


M. Susan Wiley
Administrative Appeals Judge

Clausen Krzywicki
Administrative Appeals Judge


1. The Council notes that the appellant's request for review was not filed with the Council within 65 days of the date of the Administrative Law Judge's decision; however, the appellant made a credible argument that it did not receive the decision until September 19, 2000. Pursuant to 20 CFR 404.968 and 404.911, the Council finds good cause to extend the appellant's time for filing.

2. The Council is not entering into the record those portions of the appellant's December 3, 2000 submission that duplicate documents already entered in the record and considered by the Administrative Law Judge.

3. Although the Council will refer to the proceedings before the Administrative Law Judge as one hearing, the Judge actually suspended the hearing on March 22, 2000 temporarily to give the MCO the opportunity to consider some of the appellant's claims, and then reconvened the parties on July 12, 2000. Therefore, there are two hearing tapes in the claim file.

4. The request for review also refers to Premarin, a synthetic estrogen, but the Council assumes that was a clerical error as the appellant has recognized that the beneficiary had a reaction to Premarin and covered the triple estrogen compound as an alternative (Ex. MAC-2, p. 9).

5. The Administrative Law Judge found that the beneficiary's claim "should not be hampered by the absence of old medical files which are not currently assessable." The Council notes that there is no evidence in the record that the beneficiary attempted to retrieve the relevant medical files from her former physicians or health plans. In fact, she claimed that her current physician, who testified at the hearing, was the one who had originally prescribed the triple estrogen/progesterone cream.