The Texas Vendor Drug Program (VDP) provides statewide access to covered outpatient drugs for eligible individuals enrolled in the following programs:

  • Medicaid
  • the Children’s Health Insurance Program (CHIP)
  • the Children with Special Health Care Needs (CSHCN) Services program
  • the Texas Healthy Texas Women (HTW) Program
  • the Kidney Health Care (KHC) Program

Important VDP Terms and Definitions

(Source: State of Texas Vendor Drug Program: Formulary Control State vs. MCO)

  1. Federal Rebates:
    Federal rebates are based on statutory formula and are only available to state agencies. In general, federal rebates are much higher for brand than generic drugs. Federal rebates account for over 90% of the total rebates collected by HHSC. Federal rebates differ in both concept and magnitude from prescription drug rebates in the commercial sector which are more similar to supplemental rebates. The federal rebate rate per drug will be the same under both the mandate and no mandate scenarios. However, total federal rebates will decrease under the no mandate scenario as a result of increased generic utilization. Federal rebates are not available under the CHIP program.
  2. Formulary
    A formulary is a list of drugs. Texas Medicaid/CHIP utilizes a closed formulary where drugs included on the formulary are covered by the program and those drugs not on the formulary are not covered.
  3. Preferred Drug List (PDL)
    The PDL is a list of formulary (covered) drugs separated into preferred and non-preferred categories. Preferred drugs are generally more cost effective than non-preferred drugs. Preferred drugs are available to eligible participants without prior authorization while non-preferred drugs require prior authorization.
  4. Prior Authorization (PA):
    PA is required for non-preferred drugs and drugs subject to clinical PA edits. The goal of the PA program is to ensure that the client receives treatment that is both appropriate and cost-effective. If a client presents the pharmacy with a prescription for a nonpreferred drug, the pharmacy will require additional information in order for the drug to be covered. There are various levels of PA requirements depending on the drug.
  5. Supplemental Rebates
    Supplemental rebates are obtained through direct contracts with drug manufacturers and are in addition to federal rebates. HHSC contracts with the drug manufacturer under the current mandate scenario while the MCOs will contract with the drug manufacturer under the no mandate scenario for supplemental rebates.



See also: “The 85th Texas Legislature Takes Up The Medicaid Vendor Drug Program.” Link provided here.

[Source: “About” Vendor Drug Program ]

[Source: Khiem D. Ngo, “State of Texas Vendor Drug Program: Formulary Control State vs. MCO,” ]