DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services  
 Center for Medicaid and State Operations 
7500 Security Boulevard 
Baltimore, MD 21244-1850 
 
 
November 30, 1998 
 
 
Dear State Medicaid Director: 
 
The purpose of this letter is to advise States about the appropriate coverage of Viagra 
through the Medicaid program and to encourage States to ensure that appropriate 
medications are provided to the Medicaid program. 
 
The issue of whether State Medicaid programs must cover Viagra is governed by the 
omnibus Budget Reconciliation Act of 1990, which established the drug rebate program 
at section 1927 of the Social Security Act (the Act). This law requires, with a few limited 
statutory exceptions, that a State that chooses to include outpatient drugs within its 
Medicaid program must cover, for their medically accepted indications, all FDA 
approved prescription drugs of manufacturers that have entered into drug rebate 
agreements. The specific exceptions are contained in section 1927(d) (2) of the Act, 
which provides that a State may choose to exclude or restrict drugs or classes of drugs, or 
their medical uses for certain purposes. These exceptions include drugs when used: for 
anorexia, weight loss or weight gain; to promote fertility; or to promote smoking 
cessation. States may also exclude prescription vitamins  and mineral products  (except 
prenatal vitamins and fluoride preparations); nonprescription drugs ;drugs with respect  to 
which the manufacturer seeks to condition the sale of the drug on a requirement  that 
associated tests or monitoring devices be purchased exclusively from the manufacturer or 
its designee; barbiturates; and benzodiazepines. 
 
The FDA has approved Viagra only to treat erectile dysfunction in men. Viagra does not 
fall within any of the allowable exclusions or restrictions listed in section 1927(d) (2), 
and section 1927 (d) (3) of the Act provides for the Secretary to add a drug to that list 
only when she determines, based on data she has received from the States, that a drug is 
subject to clinical abuse or inappropriate use. Therefore, the law requires that a States 
Medicaid program cover Viagra when medically necessity dictates such coverage for the 
drugs medically accepted indication. 
 
Secretary Shalala is greatly concerned about the potential for clinical or financial abuse 
of Viagra. Therefore, HCFA intends to monitor this vigorously, working with States in 
review of their claims and other data to monitor utilization of Viagra. We will work with 
States, clinicians, consumer advocates and others to assure consistent collection of the 
data that would be necessary to make the determination contemplated by section 1927(d) 
(3).   
In addition, States have several methods under the Medicaid program to ensure that they 
pay for Viagra and other drugs only when the proper diagnosis has been made and the 
drug is medically necessary. I understand some States are already taking some of these 
steps. I strongly urge you to consider some or all of the following measures to prevent 
abuse and misuse of Viagra and to ensure appropriate use and cost efficiencies. 
 
Page 2  State Medicaid Director 
 
  Implement procedures to ensure that physicians have undertaken the full medical 
assessments  necessary to reach the correct diagnosis; and to determine that 
Viagra is prescribed only when it is medically necessary; 
 
  Take all measures necessary to assure Viagra is prescribed only for those for 
whom the drug is indicated  and used only by those for whom it is prescribed; 
 
  Monitor and discipline, as appropriate, providers who prescribe Viagra for 
medically inappropriate indications or when not medically necessary; 
 
  Establish prior authorization programs to assure that health professional meet 
their responsibilities in prescribing Viagra; and 
 
  Place limits on the number of refills or the quantity per prescription to discourage 
waste, fraud and abuse. 
 
We will work with representatives of States to make communications on best practices 
available, so that successful techniques are shared among States. 
 
The challenge to both the States and the Federal government is to provide appropriate 
access to new drugs for the Medicaid population while performing the necessary 
oversight to assure that these drugs are being used in the appropriate medical 
circumstances for the appropriate segment of the Medicaid population. The fundamental 
agreement of the rebate legislation is responsible for ensuring Medicaid coverage of 
breakthrough pharmaceutical treatments such as protease inhibitors and atypical 
antipsychotic drugs. In partnership with the States, I feel assured that this challenge can 
be met. 
 
            Sincerely, 
 
 
            Sally K. Richardson 
            Director 
 
 
cc: All HCFA Regional Administrators 
  All HCFA Associate Regional Administrators 
for Medicaid & State Operations 
 
Lee Partridge 
American Public Human Services Association 
 
Joy Wilson 
National Conference of State Legislatures 
 
Nolan Jones 
National Governors Association