[Federal Register Volume 59, Number 184 (Friday, September 23, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-23280]


[[Page Unknown]]

[Federal Register: September 23, 1994]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES
42 CFR Part 456

[MB-050-F]
RIN 0938-AF67

 

Medicaid Program; Drug Use Review Program and Electronic Claims 
Management System for Outpatient Drug Claims

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Final rule.

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SUMMARY: This final rule revises some of the regulatory requirements 
for the drug use review (DUR) program for covered outpatient drugs 
furnished to recipients under the Medicaid program. The regulatory 
requirements became effective on January 2, 1993, as a result of an 
interim final rule with comment period that we published on November 2, 
1992. Specifically, these revisions--
     Clarify the definitions of overutilization, 
underutilization, consensus process, peer-reviewed literature, adverse 
medical result, adverse drug-drug interaction, appropriate and 
medically necessary, and individual medical history;
     Change the requirements for licensure of DUR board 
members, and telephone counseling arrangements for mail order 
pharmacies;
     Include non-prescription drugs in the consideration of 
alteration of therapeutic effect;
     Require hospitals to give assurances that they have met 
the requirements of the statute before claiming the hospital exemption 
from DUR;
     Specify the issues that State agencies must address when 
formulating counseling standards;
     Clarify the bases for DUR board recommendations;
     Clarify the distinction between DUR and surveillance and 
utilization review (SUR); and
     Make certain technical and editorial corrections.
    The November 1992 interim final rule with comment period 
incorporated and interpreted certain provisions of section 4401 of the 
Omnibus Budget Reconciliation Act of 1990.

DATES: These regulations are effective on October 24, 1994.

FOR FURTHER INFORMATION CONTACT: Thomas Fulda, (410) 966-3343.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 1927(g) of the Social Security Act (the Act), as added by 
section 4401 of the Omnibus Budget Reconciliation Act of 1990 (OBRA 
'90), provides that, for Federal financial participation (FFP) payment 
to be made for covered outpatient drugs under the Medicaid program, the 
State must have in operation a drug use review (DUR) program. The DUR 
program must consist of prospective drug review, retrospective drug use 
review, the application of explicit predetermined standards, and an 
educational program. The purpose of the DUR program is to improve the 
quality of pharmaceutical care by ensuring that prescriptions are 
appropriate and medically necessary, and that they are not likely to 
result in adverse medical effects. Section 1927(g) of the Act specifies 
detailed requirements for conducting drug use reviews under the DUR 
program, and requirements for the establishment, composition, and 
functions of State DUR boards.
    Section 1927(h) of the Act (also added by OBRA '90) requires the 
Secretary to encourage each State Medicaid agency to establish a point-
of-sale electronic claims management (ECM) system for processing claims 
for covered outpatient drugs. The ECM system must be capable of 
performing on-line, real-time eligibility verifications, claims data 
capture, and adjudication of claims and assisting pharmacists and other 
authorized persons in applying for and receiving payment. If the State 
acquired, through the applicable competitive procurement process, the 
most cost-effective telecommunications network and automatic data 
processing services and equipment, FFP at a matching rate of 90 percent 
was available for expenditures made in calendar quarters during fiscal 
years 1991 and 1992 for the development of the ECM system.
    Section 1927(j)(1) of the Act exempts covered outpatient drugs 
dispensed by health maintenance organizations (HMOs) from the 
requirements of section 1927 of the Act. Section 1927(j)(2) further 
requires that the Medicaid State plan provide that covered outpatient 
drugs dispensed by a hospital using drug formulary systems and billed 
to the State plan at no more than the hospital's purchasing costs are 
not subject to the requirements of section 1927 of the Act.
    In an interim final rule with comment period, published in the 
Federal Register on November 2, 1992 (57 FR 49397), we established 
regulations to incorporate and interpret the provisions of sections 
1927 (g), (h), and (j) of the Act under 42 CFR part 456, subpart K. In 
the interim final rule, we prescribed requirements for--
     An outpatient DUR program that includes prospective drug 
review, retrospective drug use review, and an educational program;
     The establishment, composition, and functions of a State 
DUR Board; and
     An optional point-of-sale ECM system for processing claims 
for covered outpatient drugs.
    In response to the November 2, 1992, interim final rule, we 
received comments from 72 pharmacists and organizations on a timely 
basis. We summarize these comments and present our responses to them 
under section II of this preamble. Prior to discussion of the public 
comments, we present a summary of the individual provisions of the 
interim final regulations related to each grouping of comments.

    Note: Sections 1927 (g) and (h) of the Act use the term ``drug 
use review'' to describe the total program (prospective review, 
retrospective review, and education) and in speaking of the 
retrospective review activity. These same sections use the term 
``drug review'' to mean the prospective review activity. We maintain 
that distinction in terminology in the following discussion.

II. Public Comments and Departmental Responses

A. Definitions

    In Sec. 456.702 of the interim final regulations we define several 
terms that are used in the DUR program to assess drug use, including 
``adverse medical result'', ``appropriate and medically necessary'', 
``overutilization'', and ``underutilization''.
    Comment: Five commenters suggested that the definition of 
``appropriate and medically necessary'' be expanded to permit the use 
of professional prerogatives to allow for individualized drug therapy. 
(We defined the term to mean drug prescribing and dispensing that is in 
conformity with predetermined standards established in accordance with 
provisions in the regulations under Sec. 456.703.) The commenters had a 
concern that a specific criterion might identify one approach as 
appropriate and, by omission, indicate that an equally acceptable 
approach is inappropriate.
    Response: Section 456.703 states that the goal of the State's DUR 
program must be to ensure appropriate drug therapy, while permitting 
sufficient professional prerogatives to allow for individualized drug 
therapy. We believe that predetermined standards are necessary to 
identify provider outliers whose prescribing, dispensing, and drug use 
practices may not conform to accepted medical practice. Without 
predetermined standards, each provider may claim ``professional 
prerogative'' for any action taken. Within this system for developing 
criteria and standards, there is adequate room for the exercise of 
professional prerogatives because States may adopt standards to modify 
criteria. Also, during retrospective DUR, States may use peer review to 
recognize professional prerogatives in the prescribing and dispensing 
of drugs. We do not believe that it is necessary to change this 
definition.
    Comment: Four commenters suggested that the definition of 
``overutilization'' should be changed to conform with the definition of 
``underutilization''. ``Overutilization'' is defined as the use of a 
drug in quantities or for durations that put the recipient at risk of 
an adverse medical effect while ``underutilization'' is defined as the 
use of a drug by a recipient in insufficient quantity to achieve a 
desired therapeutic goal. The commenters suggested that the definitions 
indicate the use of a drug in quantities or duration greater than 
necessary to achieve a desired therapeutic goal, and only when the use 
of the drug puts the recipient at risk of a clinically significant 
undesirable effect.
    Response: We concur with the commenters and have revised these 
definitions to incorporate their suggested language.
    Comment: Two commenters suggested that the definition of 
``underutilization'' also include a statement regarding insufficient 
duration for drug therapy.
    Response: We concur and have revised the regulation accordingly.

B. Exception for Nursing Facilities and HMOs

    Section 456.703(b) of the interim final regulations provides an 
exception to the DUR requirements for drugs dispensed to residents of 
nursing facilities that are in compliance with the drug regimen review 
requirements specified in regulations at Sec. 483.60, and an exception 
for drugs dispensed by HMOs.
    Comment: One commenter suggested clarification of Sec. 456.703(b) 
to state that pharmacies owned by nursing homes, where reimbursement of 
drugs is not included in the per diem rate, are subject to the DUR 
requirements.
    Response: We do not believe that this section needs any further 
clarification. The regulation already states that the nursing 
facilities exception applies only to drugs given to patients in a 
nursing facility that is in compliance with the drug regimen review 
requirements in Sec. 483.60. Ownership of the pharmacy by the nursing 
home is not a factor.
    Comment: Two commenters asked for clarification of the 
applicability of DUR requirements to various types of residential care 
facilities.
    Response: The term ``facility'', as it applies to the exception to 
the DUR requirements, is described at Sec. 483.5 and means a nursing 
facility (NF) as defined in section 1919(a) of the Act. Drugs dispensed 
by any facilities not meeting this definition would not be exempt from 
drug use review. Residential care facilities for the treatment of 
mental diseases do not meet the definition of section 1919(a) of the 
Act. These facilities are subject to the DUR requirements and do not 
qualify for the nursing facility exception.
    Comment: One commenter suggested clarification that the nursing 
facility exception also applies to rural health clinics and Federally 
qualified health centers.
    Response: Rural health clinics and Federally qualified health 
centers do not meet the requirements for nursing facilities as defined 
in section 1919(a) of the Act. Therefore, the DUR requirements under 
section 1927(g) apply to these facilities.
    Comment: One commenter suggested that States should not be able to 
apply additional nursing home requirements without appropriate Federal 
guidelines.
    Response: The statute precludes Federal action to require DUR for 
drugs dispensed by nursing facilities meeting the section 1927(g)(1)(D) 
guidelines but leaves the States free to issue additional requirements. 
The interim regulations that we issued explain the DUR requirements and 
include guidelines for the States to implement the DUR requirements.
    Comment: Four commenters suggested that HMOs not be excluded from 
the DUR requirements.
    Response: The exemption of drugs dispensed by HMOs from the DUR 
requirements is in the statute and can only be changed by the Congress. 
We are removing the HMO exception provision under Sec. 456.703(b), 
because this is a technically incorrect location, and adding a 
paragraph (c)(2) under Sec. 456.703 which specifies the exemption for 
HMOs.
    Comment: One commenter suggested that the nursing facility 
exception to the DUR requirement be mandatory, rather than making the 
exception optional.
    Response: The Act precludes the Federal Government from requiring 
States to perform additional drug use reviews with respect to drugs 
dispensed to residents of nursing facilities in compliance with the 
drug regimen review requirements specified at section 1919 of the Act, 
as set forth in Sec. 483.60. States may nonetheless impose DUR 
requirements on nursing facilities (see Sec. 456.703(b)).

C. Exemptions for Certain Covered Outpatient Drugs Dispensed by 
Hospitals

    Section 456.703(c) of the interim final regulations specifies that 
a State plan must provide that covered outpatient drugs dispensed by 
hospitals using a formulary system and billing Medicaid no more than 
the hospital's purchasing cost are not subject to the DUR requirements.
    Comment: One commenter suggested that a hospital pharmacy that is 
separate from the inpatient pharmacy should be subject to the DUR 
requirements as are other retail pharmacies.
    Response: Section 1927(j) of the Act applies the exemption to 
outpatient covered drugs dispensed by hospitals under certain specified 
conditions. Pharmacies located on the hospital premises that are 
separate in terms of ownership and fill only outpatient prescriptions 
are not entitled to the exemption.
    Comment: Two commenters suggested that outpatient prescription 
drugs dispensed by hospital pharmacies should not be exempt from the 
DUR requirements.
    Response: Pharmacies that operate as part of a hospital and also 
fill outpatient prescriptions are, by statute, entitled to the 
exemption. We have amended Sec. 456.703(c)(1) to indicate that 
hospitals which apply for the exemption must provide the State agency 
with an assurance that they qualify for the exemption by meeting the 
requirements at section 1927(j)(2).
    Comment: One commenter suggested the need for clarification of 
Sec. 456.703(c) by defining ``hospital's purchasing cost'' and 
``formulary system''.
    Response: The statute permits States, if they wish, to define the 
terms ``formulary system'' and ``hospital's purchasing cost''. We do 
not believe that it is necessary to do so in the regulations.

D. Predetermined Standards

    Section 456.703(d) of the interim final regulations specifies that 
the DUR program must assess drug use information against predetermined 
standards as provided for in section 1927(g)(1)(B) of the Act. Sections 
456.703 (e)(1) through (e)(4) specify the sources of predetermined 
standards. Section 456.703(f) lists eight specific requirements that 
predetermined standards must meet, including the requirement that the 
source material for development of the standards must be consistent 
with peer-reviewed medical literature. Section 456.703(g) requires that 
predetermined standards be available to the public, and that 
pharmacists and physicians must be informed of their existence and how 
they may obtain copies.
    Comment: One commenter requested clarification of the distinction 
between criteria and standards.
    Response: Section 1927(g)(1)(B) indicates that the DUR program is 
to assess drug use, based on predetermined standards that are 
consistent with three compendia and the peer-reviewed medical 
literature. The compendia and the peer-reviewed literature are source 
materials for criteria, but additional work is necessary to resolve 
differences of opinion in source material and to consider the input of 
professional experts. ``Criteria'', as defined in Sec. 466.1 and cross-
referenced in Sec. 456.702, are the predetermined elements of health 
care, developed by health professionals relying on professional 
expertise, prior experience, and the professional literature, with 
which aspects of the quality, medical necessity, and appropriateness of 
a health care service may be compared. ``Standards'', as defined in 
Sec. 466.1, are professionally developed expressions of the range of 
acceptable variation from a norm or criterion, which may be developed 
by the States. If, for example, a criterion for the use of H2 receptor 
antagonists indicates that acute therapy should not exceed 62 days, a 
standard might indicate that acute therapy of up to 67 days would not 
warrant consideration of intervention. Although section 1927(g)(1)(B) 
of the Act does not define predetermined standards, we believe that the 
definitions of criteria and standards at Sec. 466.1 provide an adequate 
base to interpret the meaning of predetermined standards.
    Comment: One commenter suggested that Sec. 456.703(e)(3) should 
delete specific examples of independent organizations from which 
predetermined standards may be obtained to broaden the sources of 
independent standards. This comment also indicated a typographical 
error in paragraph references at Sec. 456.703(e)(4).
    Response: We need to specify certain organizations in the 
regulations to indicate that criteria should be developed by 
organizations which have no vested interest in the sale of drugs 
covered by the criteria. Organizations with a vested interest would 
have an opportunity to provide input during the DUR board approval 
process. Therefore, we have retained the specific organization names.
    We have corrected Sec. 456.703(e)(4) to refer to paragraphs (e)(1) 
through (e)(4) rather than (f)(1) through (f)(4).
    Comment: One commenter suggested the inclusion of additional 
sources of predetermined standards, including relevant guidelines from 
professional groups, experience of practitioners with expertise in drug 
therapy, information from pharmaceutical manufacturers, and data as 
well as experience from the DUR program.
    Response: The statute provides that criteria developers are to 
place primary reliance on compendia and peer-reviewed literature. They 
may rely on other source materials to supplement what is in the 
compendia and the peer-reviewed literature. In the event of conflicts 
between primary materials and supplementary information, such as 
professional experience, if the professional consensus process (as 
specified in Sec. 456.703(f)(2)) is unable to resolve the conflict, the 
supplementary information must not be relied on by the criteria 
developer.
    Comment: One commenter suggested an amendment to require Food and 
Drug Administration (FDA) labeling as the primary source of DUR 
criteria.
    Response: The statute is specific regarding the primary sources for 
predetermined standards. FDA labeling is not included as a primary 
source.
    Comment: Five commenters requested clarification of 
Sec. 456.703(f)(2) regarding the consensus process and what to do if 
consensus cannot be reached. Several commenters suggested resolving 
disagreements with additional input from professional or medical 
organizations or other outside sources. Others indicated that if 
consensus is not reachable because of insufficient data or lack of 
sufficient knowledge of therapeutic outcomes, it would be satisfactory 
to have no criteria or to have more than one standard. One of these 
commenters recommended taking into account community practice standards 
in seeking consensus. One commenter suggested that the DUR board have 
final authority in the case of disagreements.
    Response: We have amended Sec. 456.703(f)(2) to specify that 
consensus process means that the criteria developers should rely on 
professional experts in drug therapy to consider differences in 
criteria source materials and come to agreement on how differences 
should be resolved. It is expected that the differences would be 
resolved before a criterion was submitted to the DUR board for 
approval. The DUR board must know the sources, decision guidelines used 
in developing criteria, and any other information necessary to evaluate 
criteria.
    Comment: One commenter suggested a revision of Sec. 456.703(f)(5) 
to consider patient as well as provider outliers in identifying 
problems and to consider both dispensing and consumption practices. In 
addition, the commenter suggested that standards may be considered in 
deciding if in-depth review is needed to determine whether to 
intervene, once potential therapeutic problems have been identified 
through the use of clinical criteria.
    Response: We agree and have revised Sec. 456.703(f)(5) to consider 
recipients' consumption practices.
    Comment: One commenter suggested that Sec. 456.703(f)(6) should be 
clarified to indicate that testing against claims data should be to 
test the accuracy and ability of criteria to detect significant 
problems without undue levels of false positives.
    Response: We have amended Sec. 456.703(f)(6) to specify that 
criteria be tested against claims data prior to adoption by the 
developer in order to validate the level of possibly significant 
therapeutic problems without undue levels of false positives.
    Comment: Two commenters suggested that criteria for predetermined 
standards should be modified to conform to State standards of practice. 
Four commenters were concerned with the process used to modify 
criteria. One commenter suggested that the State should be required to 
establish a process for review and modification of criteria which 
provides a mechanism to get input from providers. One commenter 
suggested an annual period for receipt of petitions for modification of 
criteria. Another commenter suggested that the DUR board issue public 
notice when it considers changing criteria. Another commenter suggested 
that there is a risk of bogging down the process by establishing 
procedures.
    Response: The State may require DUR Boards to specify the 
procedures suggested by the commenters. The DUR board would then 
establish the mechanisms to obtain input, where appropriate, from 
providers, the public, and other interested parties concerning 
modification of the criteria or the approval of the criteria. To avoid 
the possibility that these procedures might impede the efficient 
operation of the DUR program, the State may use informal mechanisms 
that it deems appropriate. There is no Federal requirement for the use 
of notice and comment procedures during the criteria development 
process.
    Comment: Two commenters suggested that standards be accessible 
during development, and public comment should be obtained during 
criteria development. Two commenters suggested that it is unnecessarily 
burdensome to have to furnish providers with criteria. One of these 
commenters suggested providing only a general description, not the 
complete criteria. One commenter suggested giving criteria to providers 
and allowing reasonable time for compliance.
    Response: We believe that making criteria and standards accessible 
for public comment during the development period would impede the 
development process. Section 456.703(g) does not require distribution 
of the criteria to the public or to providers; nor does it require that 
the State distribute the predetermined standards to the public. The 
regulations, however, do require that predetermined standards must be 
made available to the public after they are adopted by the State. They 
also require that physicians and pharmacists be informed of what 
predetermined standards have been adopted and how they can obtain 
copies.
    Comment: One commenter suggested that criteria should consider the 
needs of the geriatric population. Another commenter suggested that 
peer reviewers, not criteria and standards, determine what is necessary 
and appropriate. One commenter suggested that professional 
prerogatives, to allow for individualized therapy, be linked to the use 
of criteria and standards.
    Response: To the extent that the peer-reviewed medical literature 
and the three compendia specified in the statute reflect the results of 
the testing of drugs on elderly subjects, the needs of the geriatric 
population will be taken into consideration. Criteria and standards 
involve peer reviewers in the development and approval process. Also, 
standards provide a basis for State DUR boards to decide the degree of 
variation from a criterion which is acceptable to allow for such things 
as individualized therapy. In most instances where retrospective drug 
use review is conducted, peer reviewers evaluate the results of the 
screening process to decide which types of interventions should be 
applied to particular situations.
    Comment: One commenter suggested that the description of ``peer-
reviewed'' medical literature in Sec. 456.703(f)(1) be revised to 
indicate that original manuscripts are ``accepted'' for publication 
rather than ``rejected''.
    Response: We agree that if a manuscript was rejected, it would mean 
that the manuscript had not become peer-reviewed literature. We have 
deleted the words ``rejected or'' from the description of peer-reviewed 
medical literature.
    Comment: One commenter suggested that the Sec. 456.703(f)(1) 
provision on ``peer-reviewed'' medical literature should address 
conflicts between such literature and compendia.
    Response: We realize that there will be conflict between peer-
reviewed medical literature and compendia. However, the resolution of 
any such conflict will occur in the consensus process described in 
Sec. 456.703(f)(2).

E. Confidentiality

    Section 456.703(h) of the interim final regulations requires States 
to establish policies concerning the confidentiality of patient-related 
data consistent with Federal confidentiality requirements at part 431, 
subpart F of the Medicaid regulations, State Pharmacy Practice Acts, 
and guidelines adopted by the State Board of Pharmacy or other relevant 
licensing authority.
    Comment: Six commenters suggested that Sec. 456.703(h) should be 
more detailed and should require that States provide pharmacies with 
detailed information on how to comply with confidentiality 
requirements. The commenters suggested that the section include 
guidelines on protection of patient confidentiality in the electronic 
claims environment and physician-to-pharmacist confidentiality; and 
specify that confidentiality requirements which apply to medical 
records also apply to patient profiles maintained by pharmacists.
    Response: We believe that the Federal confidentiality requirements 
in the regulations at part 431, subpart F, the State requirements 
contained in Pharmacy Practice Acts, and the policies developed by 
State bodies which regulate the practices of medicine and pharmacy 
should be sufficient to protect the confidentiality of patient-related 
data and at the same time allow providers access to data to make 
informed judgments necessary to effectively conduct DUR. With regard to 
the problem of maintaining confidentiality in an electronic 
environment, the Workshop on Electronic Data Interchange (WEDI) is 
studying these issues but has not yet developed policy recommendations. 
In the interim, since use of the electronic drug claims processing 
systems may present unique confidentiality problems, particularly with 
prospective DUR, States may wish to establish policies to address these 
problems.
    Comment: One commenter indicated that, as important as 
confidentiality is, it should not be allowed to be used to restrict 
pharmacist access to relevant data needed to permit accurate assessment 
of patient needs so the pharmacist can make informed medication-related 
judgments.
    Response: Section 456.703(h) of the regulations requires States to 
establish policies concerning the confidentially of patient-related 
data which is consistent with Federal confidentiality requirements and 
State Pharmacy Practice Acts and State Pharmacy Board guidelines. We 
believe that this can be accomplished in a manner which both protects 
patient confidentiality and allows for access to data needed to 
efficiently administer the Medicaid DUR program.
    Comment: One commenter asked how HCFA will ensure that patient 
confidentiality rules are adequate and how HCFA will monitor compliance 
with them.
    Response: Since States are primarily responsible for regulating 
pharmacy and medical practice, they must determine the adequacy of 
confidentiality rules and ensure compliance with them. HCFA will 
monitor compliance with the confidentiality requirements through its 
review process conducted by regional offices and through review of the 
DUR annual reports required by Sec. 456.712.
    Comment: Two commenters requested an explanation of why Federal 
confidentiality requirements do not apply to patient profile 
requirements at Sec. 456.705(d).
    Response: The Federal Privacy Act requirements do not apply where 
the Federal Government does not control the records in question.

F. Prospective DUR

    Section 456.705(a) of the interim final regulations requires review 
of drug therapy before each prescription is filled or delivered to a 
recipient. This review, as described in Sec. 456.705(b)(1) through (7), 
is done at the point of sale, based on predetermined standards, before 
a prescription is filled or delivered to the recipient or the 
recipient's caregiver. Reviews are to detect drug-disease 
contraindications, therapeutic duplication, adverse drug-drug 
interaction, incorrect drug dosage or duration of therapy, drug-allergy 
interactions, and clinical abuse and/or misuse. Counseling and 
maintenance of patient profiles by the pharmacist are required by 
Secs. 456.705(c) and (d).
    Comment: One commenter suggested that the word ``prescription'' be 
changed to ``drug'' in the description of drug-disease 
contraindications because contraindications can also occur with over-
the-counter drugs. The commenter also suggested that the term 
``clinically significant'' be used to describe adverse medical effect. 
This latter terminology would ensure that only significant events would 
be reviewed and these regulations would not identify all adverse 
effects as contraindications.
    Response: We have revised Sec. 456.705(b)(2)(i) to incorporate the 
commenter's suggestions.
    Comment: Two commenters suggested that the definition of ``adverse 
drug-drug interaction'' include the phrase ``clinically significant'' 
to describe ``adverse medical effect''. Again, this would ensure that 
only significant effects would meet this definition, since all adverse 
effects need to be reviewed.
    Response: We have revised Sec. 456.705(b)(3) to incorporate the 
commenters' suggestion. We have made a conforming change to 
Sec. 456.703(f)(5).
    Comment: One commenter suggested that the definition of ``adverse 
drug-drug interaction'' should prohibit substitution of the FDA orange 
book ``B'' rated drugs.
    Response: It is not HCFA's responsibility to require generic 
substitution of the FDA orange book ``B'' rated drugs. State laws 
regarding product selection will determine the requirements regarding 
generic substitution.
    Comment: One commenter suggested an error in the definition of 
``incorrect drug dosage'' at Sec. 456.705(b)(4) as a potential drug 
therapy problem type that must be included in the screening in point-
of-sale or point-of-distribution reviews. The commenter pointed out 
that the reference to ``daily dosage range'' should be ``daily dosage'' 
as the term ``range'' applies to the standard and is not a part of the 
definition. A second commenter suggested that the correct ``duration'' 
of drug treatment was hard to assess as a potential drug therapy 
problem type under Sec. 456.705(b)(5).
    Response: We have deleted the references to ``range'' in 
Sec. 456.705(b)(4), since we believe that the term is redundant. We 
agree with the commenter that duration, in some instances, may be 
difficult to assess. However, ranges provided in the predetermined 
standards would allow for some variance in individual cases.
    Comment: One commenter suggested that the definition of ``drug-
allergy interactions'' include a statement that such problems can only 
be identified based upon history obtained from the patient or the 
physician.
    Response: We agree that information regarding drug- allergy 
problems may be only available through contact with the physician or 
the patient. However, such a statement is not a proper part of the 
definition.
    Comment: One commenter suggested that the prospective DUR screening 
elements definitions should be consistent with definitions developed by 
the National Council for Prescription Drug Programs (NCPDP).
    Response: We did review the definitions of prospective DUR, 
retrospective DUR, and concurrent DUR developed and recommended by the 
NCPDP in developing the interim final regulations. Section 456.705 
describes prospective DUR in detail and Sec. 456.709 describes 
retrospective DUR in detail. We see no reason to define these terms in 
Sec. 456.703. Because the statute does not refer to concurrent DUR, we 
have no reason to include this term in the regulation.
    Comment: Four commenters were concerned about performing 
prospective DUR in an on-line electronic drug claims management 
environment. Two commenters suggested not implementing prospective DUR 
in an on-line ECM environment until demonstration projects required by 
the statute have been completed. Another commenter suggested a 
comparison of ECM-based DUR and pharmacy on-site DUR and the 
implementation of the most effective approach. One commenter warned 
against making prospective DUR too automated because the pharmacist is 
essential as a problem solver. One commenter suggested that detailed 
prospective DUR rules are unnecessary because prospective DUR can be 
performed based on the pharmacist's professional judgment manually, or 
electronically, or a combination of the two.
    Response: Establishing electronic drug claims management systems 
and including prospective DUR as part of such systems are options 
available to the States; they are not required. Therefore, prospective 
DUR can be done electronically or on site by each pharmacy. The purpose 
of the demonstration project required by Congress at section 
4401(c)(1)(d) of OBRA '90 is to determine the relative effectiveness of 
the ECM-based prospective DUR versus the on-site pharmacy prospective 
DUR, and thus assure implementation of ECD-based DUR. We recognize 
that, even with automation, prospective DUR cannot be done without the 
pharmacist because his or her professional judgment determines whether 
and how to respond to an automated alert of a potential problem.
    Comment: One commenter suggested that if electronic prospective DUR 
is implemented, a professional oversight committee should work to keep 
focus on serious problems and to avoid false positives.
    Response: We agree that if an electronic prospective DUR is 
implemented, a professional oversight committee is needed to ensure 
that prospective DUR is focused on serious problems and avoids false 
positives. We believe that the State DUR board would be the appropriate 
entity to provide such oversight.
    Comment: One commenter suggested that in the course of the 
prospective DUR, prescriptions should not be changed or denied without 
the physician's knowledge.
    Response: Except for the quantity dispensed, State law prohibits 
changing a prescription. It would be appropriate for the pharmacist to 
notify the physician if the prescription is not filled for therapeutic 
reasons. Establishing rules requiring such notification is in the 
province of State boards of pharmacy and could be included in the State 
Pharmacy Practice Acts. In the absence of such rules, the State 
Medicaid agency could, where appropriate, establish them.
    Comment: One commenter suggested that we define a prescription.
    Response: The definition of a prescription is included in the State 
Pharmacy Practice Acts.
    Comment: One commenter suggested that approval of State plans for 
DUR should be contingent on the State providing adequate financial 
incentives for pharmacist interventions.
    Response: There is no prohibition in the statute or the regulations 
against the State providing financial incentives for pharmacist 
interventions. The State is free to include, in its reimbursement for 
the cost of filling a prescription, consistent with the requirements of 
section 1902(a)(30)(A) of the Act with regard to efficiency, economy 
and quality of care, amounts to compensate for DUR services.
    Comment: One commenter suggested that instructions for compliance 
with prospective DUR should go to the pharmacist, not the pharmacy.
    Response: We believe that the instructions for compliance with 
prospective DUR should be directed to the pharmacies since they are the 
Medicaid providers. It would be more burdensome to furnish this 
information to pharmacists in part because changes in the pharmacy 
staff occur more frequently than do changes in the status of 
pharmacies. The owners or managers of pharmacies, as Medicaid 
providers, are responsible for furnishing their staff with information 
pertaining to DUR.
    Comment: One commenter suggested that pharmacists should not be 
required to take medical histories.
    Response: Nothing in the statute or the regulations requires 
pharmacists to take medical histories. Pharmacists must make a 
reasonable effort to maintain patient profiles and may, based on their 
professional judgment, seek patient specific information for those 
profiles.
    Comment: Seven commenters pointed out the importance of diagnosis 
information and the difficulty of conducting prospective DUR screening 
to identify drug-disease and drug- allergy screening without patient-
specific information. One commenter suggested that inaccurate diagnosis 
information would generate needless communication between physicians 
and pharmacists.
    Response: We agree that it is difficult to screen for drug-disease 
contraindications and drug-allergy interactions without access to 
patient-specific information. Clearly, access to such information 
improves the ability to conduct prospective DUR, and obtaining accurate 
information is a difficult technical problem. There is also the 
question of the relationship of the diagnosis to the use of the 
prescription, for example, the diagnosis may be cancer and the 
prescription may be for pain. Given these difficulties, problems 
associated with access to patient-specific information can best be 
resolved by pharmacists cultivating relationships with physicians so 
that it becomes possible for the pharmacist to seek patient-specific 
information about diagnosis, allergies, and other matters when, in his 
professional judgment, it is appropriate for counseling.
    Comment: One commenter suggested that HCFA require physicians to 
submit diagnosis information, while another suggested that physicians 
not be required to provide diagnosis information. Other commenters 
pointed to the difficulty of getting diagnosis information from 
providers.
    Response: Since States regulate the practice of medicine, placing 
diagnosis information on prescriptions is a matter for States to 
decide.

G. Counseling

    Section 456.705(c) of the interim final regulations provides that 
applicable State law, or other method satisfactory to the State, must 
establish standards for counseling of the recipient or the recipient's 
caregiver. The State must provide pharmacies with detailed information 
as to what they must do to comply with prospective DUR requirements, 
including guidelines on counseling, profiling, and documentation of 
prospective DUR activities by the pharmacists. The State law, or other 
method satisfactory to the State, must specify how counseling 
requirements apply to mail order pharmacies.
    The standards must specify whether the pharmacist or an ancillary 
person may make the offer to counsel; must specify what documentation 
must be maintained on refusals of counsel; and must include in the 
counseling those matters considered significant by the pharmacist. The 
standards need not require a pharmacist to provide consultation when a 
recipient or recipient's caregiver refuses such consultation.
    Comment: Five commenters addressed the physician-pharmacist 
relationship concerning the provision of counseling services. One 
commenter stated that counseling that involves the pharmacist 
contacting the physician would create a hassle factor for the 
physician. Four commenters suggested the expansion of Sec. 456.705(c) 
to include specific statements regarding the physician-pharmacist 
relationship: the physician should be able to direct the pharmacist to 
include or exclude specific topics for specific patients; the 
pharmacist should notify the physician if the patient refuses the 
prescription after counseling. In addition, if the pharmacist 
identifies a significant risk of an adverse medical result, he or she 
should consult the physician prior to counseling. The commenters 
indicated concern that inappropriate counseling would result without 
the addition of these requirements.
    Response: The individual State has the responsibility of 
establishing standards of counseling for the pharmacist. Some States 
may want to incorporate requirements regarding physician-pharmacist 
interaction in their standard; others may not. We believe these 
interactions will occur in the normal day-to-day relationships between 
physicians and pharmacists. In any event, States should be given the 
flexibility of either including, or not including, the suggested 
requirements.
    Comment: Seven commenters suggested that mail order pharmacies 
should be treated the same as all other pharmacies. Counseling 
requirements should apply equally to all pharmacy providers of 
outpatient drugs.
    Response: We concur and have removed the statement concerning mail 
order pharmacies from Sec. 456.705(c). Since delivery of a prescription 
to a person at home by a pharmacy and mail order prescriptions raise 
the same issues about how to offer and provide counseling, we have 
amended Sec. 456.705(c) to require State counseling standards to 
address this issue.
    Comment: Three commenters suggested that the regulations specify 
whether the offer to provide counseling is required for new 
prescriptions only, both new and refill prescriptions, or whether the 
decision to make the offer should be left to the professional judgment 
of the pharmacist. One commenter suggested limiting the offer to new 
prescriptions; one commenter suggested that it apply to both new and 
refill prescriptions; and the third commenter suggested leaving the 
decision to the professional judgment of the pharmacist. Six commenters 
suggested that the regulations specify the role of ancillary personnel 
in making the offer to counsel to the patient or the patient's 
representative. The commenters indicated that pharmacists may have 
ancillary personnel make the offer of counseling on their behalf, but 
the pharmacists must personally conduct counseling if the offer is 
accepted.
    Response: Since the statute requires each State to establish 
standards for counseling, these State standards rather than Federal 
regulations must, at a minimum, address the following issues:
     Whether the offer to counsel is required for new 
prescriptions only, or both new and refill prescriptions;
     Whether only pharmacists must make the offer to counsel or 
whether auxiliary personnel are authorized to make the offer;
     Whether only a patient's refusal of the offer to counsel 
must be documented or whether documentation of all offers is required;
     Whether documentation of counseling is required; and
     How counseling is to be addressed in situations where the 
patient's representative is not readily available to receive a 
counseling offer or the counseling itself.
    We have amended Sec. 456.705(c) to specify that State counseling 
standards must address these issues.
    Comment: Seven commenters discussed the method of documenting a 
patient's refusal of the offer to provide counsel. Six commenters 
suggested that pharmacists be given the maximum flexibility in the 
method of documenting a patient's refusal of the offer to provide 
counsel. One of the six commenters suggested that documentation should 
not be mandatory. The seventh commenter suggested that a recipient 
should be able to sign a blanket refusal for all prescriptions.
    Response: Again, we leave to the States decisions regarding 
documentation of offers to counsel.
    Comment: Five commenters addressed documentation of counseling in 
general, although such documentation was not discussed in the interim 
final regulation. Two commenters suggested that guidelines on 
documentation be included and three commenters suggested that 
documentation standards should be general and not specific.
    Response: The statute requires the States to establish standards 
for counseling. We have amended Sec. 456.705(c)(1) (formerly the 
undesignated introductory paragraph of Sec. 456.705(c)) to specify the 
subject matter that must be addressed by these standards.
    Comment: Five commenters suggested that Sec. 456.705(c)(1) specify 
that the content of counseling should be left to the professional 
prerogative of the pharmacist, who should be given proper flexibility 
in selecting how patient counseling should be administered in each 
circumstance. One commenter requested that the control of the content 
not be given to the prescriber.
    Response: Section 456.705(c)(3), formerly Sec. 456.705(c)(2), 
clearly specifies that the content of counseling is subject to the 
professional judgment of the pharmacist. Determining how counseling 
should be administered, that is, whether counseling must be oral or to 
what extent written communication may be used, depends on the State 
standards for counseling.
    Comment: Six commenters discussed making an oral offer to counsel. 
Two of the six suggested that, in all instances, the offer must be 
oral. Three suggested that a written offer should be used where an oral 
offer was not possible. The sixth commenter advised that written 
material alone should not be substituted for the oral offer.
    Response: We believe that the issue of whether the offer to counsel 
must be oral, and the extent to which written material may be 
substituted for an oral offer of counseling, are matters to be 
addressed by State standards for counseling.
    Comment: Six commenters suggested additional requirements for 
offers of counseling when the patient was not available, when 
deliveries were made via mail service or offsite deliveries outside the 
area covered by the local telephone exchange. They suggested use of 
written instructions (offer to counsel) with the prescription plus a 
toll-free telephone number for the patient to call if there were any 
questions.
    Response: We concur and have amended Sec. 456.705(c)(2) to require 
mail order pharmacies to provide toll-free telephone service for all 
long distance calls. As stated in the regulation, other pharmacies 
whose primary patient population is accessible through a local measured 
or toll-free exchange may not be required to offer toll-free service. A 
State agency's counseling standards must address special situations 
where the patient, or the patient's representative, is not readily 
available to receive the offer to counsel or the actual counseling, for 
example, prescriptions delivered off site or through the mail.
    Comment: Five commenters addressed the provision of a toll-free 
telephone number for the patient to use to ask questions or obtain 
additional information concerning his or her prescription. One 
commenter stated that requiring such a number was not practical. One 
commenter requested more information regarding toll-free numbers. One 
commenter stated ``access to'' should mean that every patient has the 
opportunity to telephone the pharmacist without cost to the patient. 
The fourth commenter stated that managed care pharmacies should provide 
a toll-free telephone counseling service. A fifth commenter also stated 
that pharmacies should provide a toll-free number on the prescription 
label which would, in part, meet the ``offer to counsel'' standard.
    Response: As stated in the regulation, pharmacists whose primary 
patient population is accessible through a local measured or toll-free 
exchange may not be required to offer toll-free service. States are 
free to further define, under the counseling standards, the term 
``primary patient population'', or otherwise specify under what 
circumstances pharmacies would or would not be required to provide 
toll- free telephone service. Otherwise, pharmacists whose primary 
population is not accessible as indicated above, would be required to 
provide toll-free telephone service.
    Comment: Four commenters suggested that counseling requirements 
will alarm, confuse, or raise fears among recipients. Two commenters 
indicated that recipients would not understand that refusal to provide 
medical history or to accept counseling would not affect their 
eligibility for medical services under the Medicaid program.
    Response: We do not agree that counseling would alarm, confuse, or 
raise fears among recipients. Overall, the program will increase the 
knowledge, and the understanding by patients, of the impact of drugs on 
their lives. With such increased knowledge, patients can better 
participate in the administration of the medical care that they are 
receiving. Rather than alarm patients, the offer to counsel and the 
actual counseling can be used to alleviate their fears by providing an 
explanation which could cover not only the items suggested in the law 
and regulations but also the impact of the counseling program on the 
individual's eligibility for medical services under the Medicaid 
program.
    Comment: One commenter suggested that the regulations be amended to 
acknowledge what many States had done to implement model patient 
counseling legislation that established how the ``offer to counsel'' is 
made to the patient.
    Response: We do not believe that an acknowledgement of what States 
have done thus far would serve any purpose. It would not be feasible to 
include a current list of such States in the regulations since the list 
would be growing constantly. If such recognition is provided for model 
patient counseling legislation, then recognition should also be 
provided to States that have model retrospective review programs, 
prospective programs, and point-of-sale ECM systems. HCFA intends to 
share with the States information and technology that various States 
have found effective for administering DUR.
    Comment: One commenter suggested that the regulation distinguish 
between the ``offer to counsel'' and the act of counseling itself.
    Response: We believe that Secs. 456.705 (c)(1) and (c)(3) already 
distinguish between the offer and the content of counseling.
    Comment: Two commenters suggested that the counseling requirements 
are an unwarranted Federal intrusion and may have adverse consequences 
for the mentally ill. They stated that absolute confidentiality must be 
maintained and counseling must be done in a discreet, supportive, 
informative, and non-threatening manner.
    Response: We agree that the protection of confidentiality and the 
sensitivity with which counseling is conducted are critically 
important. Since the States and pharmacists, not the Federal 
Government, are responsible for counseling, we do not believe that an 
unwarranted Federal intrusion has occurred.
    Comment: One commenter asked whether the $1 to $2 cost estimate per 
prescription for counseling services was based upon the pharmacist or 
the ancillary personnel making the offer to counsel.
    Response: This estimate was based upon the pharmacist making the 
offer of counseling.
    Comment: One commenter noted that the timing of the issuance of the 
rule placed States and pharmacies at a serious disadvantage as it 
permitted only 60 days for the adoption of counseling standards through 
legislation or regulation.
    Response: We agree that the timeframe for issuing the regulations 
was unusually short and placed a burden on the States. However, most 
States have successfully established counseling standards to comply 
with the regulations.

H. Profiling

    Section 456.705(d) of the interim final regulations requires 
States, in the case of Medicaid recipients, to require pharmacists to 
make a reasonable effort to obtain, record, and maintain patient 
profiles. The profiles, at a minimum, must contain the following 
information: (1) name, address, telephone number, date of birth (or 
age), and gender of the patient; (2) individual history, if 
significant, including disease state or states, known drug reactions, 
and a comprehensive list of medications and relevant devices; and (3) 
the pharmacist's comments relevant to the individual's drug therapy.
    Comment: Two commenters suggested that ``individual history'' 
rather than ``individual medical history'' should be one of the minimum 
information items.
    Response: We agree and we have changed Sec. 456.705(d)(2) to delete 
the word ``medical''. The term ``medical history'' is not appropriate, 
as ``medical history'' includes obtaining specific information 
regarding laboratory results, diagnosis, and other medical findings.
    Comment: Three commenters suggested that the regulations should 
include a statement that profile information can be obtained by 
ancillary personnel, but the pharmacist must review and interpret the 
information obtained.
    Response: We believe this is an individual State decision. A State 
that decides to authorize auxiliary personnel to obtain profile 
information may include such authorization and the appropriate 
requirements for the use of auxiliary personnel in their standards for 
counseling.
    Comment: Three commenters addressed the use of the term 
``reasonable effort'' for obtaining profile information in 
Sec. 456.705(d). One commenter suggested the term should be further 
defined or deleted. One commenter suggested expansion of the term to 
state that ``the pharmacist is responsible for ensuring that a 
reasonable effort is made to obtain profile information.'' The third 
commenter suggested expanding the statement to indicate that 
``reasonable effort'' should not include additional burden or cost to 
the pharmacist.
    Response: We have decided not to define reasonable effort in the 
regulations to allow States flexibility in implementing the DUR 
requirements. States and their pharmacy boards may, or may not, choose 
to further define ``reasonable effort''.
    Comment: One commenter stated that Sec. 456.705(d)(2) should be 
amended to make it explicit that the profiling requirements are limited 
to recording information concerning drugs and devices dispensed at the 
pharmacy where the pharmacist is employed.
    Response: We have retained the phrase ``a comprehensive list of 
medications and relevant devices'' as the statute specifies in section 
1927(g)(2)(A)(ii) of the Act. Neither the statute nor the regulation 
defines a ``comprehensive list''; therefore the State, if it chooses, 
may further define the term according to section 1927(g)(2)(A)(ii) of 
the Act. Methods for securing this information could include checking 
the pharmacy's own record, receiving an alert message from the 
electronic claims management system, or asking the patient, physician, 
or other pharmacies for additional information if, in the professional 
judgment of the pharmacist, it was appropriate to do so.
    Comment: One commenter suggested that HCFA study the advantages and 
disadvantages of requiring the collection of information for profiles.
    Response: We will consider these matters as a subject for HCFA 
studies of the DUR program and its impact on the industry and the 
public.

I. Retrospective DUR

    Section 456.709 of the interim final regulations requires that the 
State Medicaid plan provide for a retrospective DUR program for ongoing 
periodic examination of claims data and other records in order to 
identify patterns of fraud, abuse, gross overuse, or inappropriate or 
medically unnecessary care among physicians, pharmacists, and Medicaid 
recipients, or associated with specific drugs or groups of drugs. This 
examination must involve pattern analysis, using predetermined 
standards of physician prescribing practices, dispensing practices of 
pharmacies, and drug use by individual patients. This program must be 
provided through the State's mechanized drug claims processing and 
information retrieval system or an electronic drug claims processing 
system that is integrated with the Medicaid Management Information 
System (MMIS).
    Comment: Two commenters suggested peer review prior to any 
intervention suggested by DUR reports or outliers identified by 
computerized DUR programs. A third commenter suggested that the 
regulations state that the system should not produce punitive decisions 
against physicians.
    Response: It is up to each State to determine whether, and under 
what circumstances, peer reviews of therapeutic problems identified 
through screening applications based upon predetermined standards, will 
be required. States may require peer review prior to all interventions 
or identify circumstances where peer reviews are, or are not, required.
    We do not believe that it is appropriate to address the question of 
punitive decisions against physicians. The objective of the DUR is to 
improve pharmaceutical care through education.

J. Education Program

    Section 456.711 of the interim final regulations requires that the 
State plan must provide for ongoing outreach programs that educate 
practitioners on common drug therapy problems with the aim of improving 
prescribing and dispensing practices. Section 456.716(d)(5) requires 
the DUR Board to: (1) identify and develop educational programs if 
needed; (2) make recommendations regarding interventions; and (3) 
periodically reevaluate and, if necessary, modify interventions. 
Section 456.716(d)(6) specifies that the Medicaid agency, or its 
contractor, should apply predetermined standards to drug claims data 
and generate reports for use by the board and carry out educational 
programs specified by the board.
    Comment: Five commenters suggested expanding Sec. 456.716(d)(5) to 
make it more specific. One commenter suggested the creation of a fifth 
provision to require more in-depth review prior to intervention. Other 
commenters stressed ``appropriate and balanced'' education programs 
based upon program experience, matching the education program to the 
drug therapy problem identified, and placing more emphasis on 
preliminary education.
    Response: We have expanded Sec. 456.716(d)(5)(ii) to address the 
commenters' suggestions. The DUR Board recommendations for educational 
interventions must be based on an in-depth review of claims data 
reports. The board may decide which educational intervention approaches 
are suitable for the drug therapy problems identified. We have changed 
Sec. 456.703(f)(5) to specify that standards (that is, exceptions to 
criteria) may be used in deciding whether or not to intervene after the 
potential therapeutic problems have been identified.

K. Annual Report

    Section 456.712 of the interim final regulations provides that a 
State must require the DUR Board to prepare and submit annual DUR 
reports to the Medicaid agency. The Medicaid agency is required to 
prepare and submit an annual report to the Secretary of the Department 
of Health and Human Services that incorporates the DUR board's report 
and includes detailed information on the DUR program operations and an 
estimate of the cost savings attributable to the DUR program.
    Comment: Ten commenters addressed the DUR cost savings estimate 
required in the annual report. Three commenters suggested that 
Sec. 456.712 should specify that savings resulting from reduced 
physician visits and hospitalizations should be taken into account. Two 
commenters suggested that we require comprehensive evaluations, 
including both clinical and economic evaluations that would estimate 
total savings of DUR.
    Response: The requirement that State Medicaid agencies submit a 
cost savings estimate refers to those savings that can be attributed to 
the operation of prospective and retrospective DUR. The report on cost 
savings must identify what is spent annually to operate the DUR program 
and also identify the savings to the Medicaid drug program as a result 
of DUR. It may include savings that result from reduced physician 
visits and reduced hospitalizations if the State can document such 
savings. We agree that evaluating both the economic and clinical impact 
of DUR is important and the States should, to the extent that they are 
able, take both types of outcomes into account when evaluating their 
DUR programs. Demonstration projects are also addressing outcomes, 
including physician visits, emergency room visits, and 
hospitalizations. The Agency for Health Care Policy and Research of the 
Public Health Service is conducting an evaluation of pharmaceutical 
outcomes, and may cover this topic in its study.
    Comment: Three commenters stated that it would be difficult to 
estimate cost savings as a result of the DUR program and asked for 
suggestions as how to perform this task. One commenter recommended that 
HCFA define the word ``costs'' in Sec. 456.712(b)(10) when referring to 
the cost savings estimates to be included in the annual report. Another 
commenter suggested that the cost of DUR be expressed in terms of cost 
per recipient.
    Response: Currently HCFA is developing a cost savings methodology 
for use by State Medicaid agencies, at their option, when estimating 
the cost savings that result from DUR. These guidelines will specify 
data collection needs. They will also suggest what costs are to be 
considered and whether or not to express costs in terms of cost per 
recipient. The guidelines for reporting cost savings will be 
distributed to the States on an advisory basis.
    Comment: One commenter suggested that Sec. 456.712(b)(3) be revised 
to require States to include information in the annual report that 
describes the process and sources used for establishing and revising 
criteria.
    Response: HCFA will provide guidance to the States about the 
contents of the annual reports which will include information relating 
to sources for criteria. We do not believe it is necessary to include 
this as a regulatory requirement. The State DUR Boards will have such 
information available if there are any questions about the selection of 
criteria and standards.
    Comment: One commenter suggested that providing complete criteria 
in annual reports would be cumbersome and costly. Another questioned 
whether the provision of criteria in the annual report would eliminate 
the need for the State's cost savings estimate.
    Response: Section 1927(g)(3)(D) of the Act identifies specific 
information that must be included in the annual report to allow us to 
evaluate the effectiveness of each State's DUR program. HCFA's Medicaid 
Bureau has provided additional informal guidance with regard to the 
contents of the annual reports. This guidance indicates that detailed 
information about DUR-approved criteria must be provided but not 
necessarily the criteria themselves. This approach addresses concerns 
about the burdensome nature of submitting complete criteria in the 
annual reports. The statute requires inclusion of a cost savings 
estimate in the annual report; therefore provision of detailed 
information on the criteria does not eliminate the requirement that the 
State must submit a cost savings estimate.
    Comment: One commenter suggested that a requirement be established 
for adequate data to be collected by State Medicaid agencies, to prove 
that the DUR program is beneficial.
    Response: State agencies are required to submit an annual DUR 
report to HCFA. As previously indicated, HCFA will provide guidance as 
to what data are needed to determine cost effectiveness.

L. Drug Use Review and Surveillance and Utilization Review (SUR)

    Section 456.714 of the interim final regulations states that the 
retrospective DUR requirements parallel some portion of the 
Surveillance and Utilization Review (SUR) requirements in subpart A of 
part 456 and in part 455 of the Medicaid regulations.
    Comment: Two commenters suggested that SUR and DUR activities 
should be completely separate and distinct.
    Response: We agree with the commenters and we have revised 
Sec. 456.714 to indicate that the SUR program and the DUR program have 
overlapping responsibilities to identify and reduce the frequency of 
patterns of fraud, abuse, and gross overuse of drugs. Given the 
historical emphasis of SUR units in this area, we believe that the DUR 
staffs should focus their limited resources on what constitutes 
appropriate and medically necessary pharmaceutical care. It is the 
State's option, however, to establish what it considers to be the 
appropriate balance between fraud and abuse and medical appropriateness 
concerns.
    Comment: One commenter requested clarification of Sec. 456.714 and 
an explanation of how cost savings from SUR are to be taken into 
account in calculating DUR cost savings required by 
Sec. 456.712(b)(10).
    Response: HCFA is developing specific guidance to assist the States 
in determining DUR costs savings as required by Sec. 456.712(b)(10). 
This guidance will address the issue of whether or not to include SUR 
cost savings.

M. DUR Board

    Sections 456.716(a) and (b) of the interim final regulations 
require that each State establish a DUR Board and establish 
requirements for the composition of the DUR Board and expertise of its 
members. Section 456.716(c) specifies the relationship between the DUR 
Board and the State Medicaid agency; Sec. 456.716(d) discusses 
activities of the DUR Board; and Sec. 456.716(e) specifies funding 
available for DUR Boards.
    Comment: Five commenters expressed concern about the relationship 
between the DUR Board and the State Medicaid agency as provided for in 
Sec. 456.716(c). Four commenters suggested that the DUR Board be 
separate from the Medicaid agency or have final authority with regard 
to clinical issues such as approval of criteria. One commenter 
suggested the DUR Board should have rulemaking authority. One commenter 
suggested that DUR Boards should not be independent.
    Response: Section 1902(a)(5) of the Act, which specifies that a 
single State agency must administer or supervise the administration of 
the Medicaid program, precludes making DUR Boards independent of the 
State agency. While it is expected that a State will rely heavily on 
the clinical expertise of the DUR Board, this does not preclude the 
State agency from independently assessing the DUR Board's 
recommendations to assist it in reaching its decisions.
    Comment: Four commenters addressed the issue of procedures for DUR 
Board action if a State agency overrules the DUR Board. Two commenters 
suggested that DUR Boards have procedures to make their activities 
public, including possible public comment procedure for responses to 
outside input. Two commenters indicated that when the State agency 
overrules the DUR Board, it must make public the reasons for its 
actions and consider public comment.
    Response: States may require DUR Boards to establish informal 
procedures through which outside parties may contribute input with 
regard to the application of predetermined standards. Section 
456.716(c) gives the State agency the authority to overrule the DUR 
Board. The State agency may or may not make its reasons public, 
depending on the rules which it establishes for the creation of the DUR 
Board.
    Comment: Five commenters addressed the composition of the DUR 
Boards. Some commenters suggested the need for more specifics about 
membership such as the possibility of having public members, 
representatives of chain pharmacies, and psychiatrists. One commenter 
suggested that pharmacist members have DUR experience.
    Response: The State agency is free to determine the size of the DUR 
board and may include any types of members that it considers 
appropriate so long as it complies with Secs. 456.716 (a) and (b).
    Comment: One commenter suggested that the issue of possible 
conflict of interest of Board members be dealt with.
    Response: Section 1927(g)(3)(b) of the Act and Sec. 456.716 of this 
regulation specify that members of the DUR boards must be health 
professionals who have recognized knowledge and expertise in one or 
more of the following: the clinically appropriate prescribing of 
covered outpatient drugs; the clinically appropriate dispensing and 
monitoring of covered outpatient drugs; drug use review, evaluation, 
and intervention; or medical quality assurance. We are monitoring 
compliance with these requirements and expect that States will take 
whatever actions they deem appropriate, consistent with their laws and 
regulations concerning conflict of interest, to protect against 
conflict of interest in the operation of the DUR boards.
    Comment: One commenter suggested that DUR Boards have the 
flexibility to determine appropriate interventions and when to use 
them. The commenter also suggested that there is no need to have all 
interventions reviewed by peers before they are carried out.
    Response: DUR Boards do have the flexibility to determine 
appropriate interventions and when to perform them. It is up to the DUR 
Board to decide under what circumstances peer review must occur prior 
to interventions and when interventions may occur without such review.
    Comment: Eighteen commenters responded to the request for comment 
on the interim final regulations about the appropriateness of having 
DUR Boards certify prospective DUR software. Ten of these commenters 
indicated that the DUR Board should not take on the task of certifying 
individual pharmacy prospective DUR software because of the enormity of 
the task, the DUR Board's lack of expertise in this area, and because 
the Board should not be put in a position of providing something 
equivalent to a seal of approval for software products. Five of the 
commenters suggested that DUR Boards should approve prospective DUR 
software. One commenter suggested that it would be more economical for 
HCFA to undertake evaluation of software packages. Two commenters 
suggested that DUR Boards should not deal with evaluation of individual 
pharmacy prospective DUR software but should provide guidance as to 
which products available to pharmacies would meet statutory 
requirements.
    Response: We agree with those commenters who indicated that the DUR 
Boards should not take on the task of certifying individual pharmacy 
prospective DUR software. DUR Boards should know and understand the 
criteria upon which the software is based, but they often do not have 
the expertise to evaluate the quality and efficiency of the software 
itself. Undertaking such certification would be excessively burdensome 
and create the impression that some packages have State government 
approval while others do not.
    Comment: One commenter suggested that the requirement in 
Sec. 456.716(b) that pharmacists must be licensed and actively 
practicing in the State on whose DUR Board they serve would be 
burdensome to small States seeking to recruit experts from nearby 
States.
    Response: We concur and have revised Sec. 456.716(b) by eliminating 
the requirement for licensure by the State on whose DUR Board the 
pharmacist is serving.

N. Electronic Drug Claims Processing

    Section 456.722 of the interim final regulations establishes 
functional requirements for those State Medicaid agencies that choose 
to develop an on-line, real-time point-of-sale electronic claims 
management (ECM) system to perform eligibility verification, claims 
data capture, claims adjudication, and to assist pharmacists in 
applying for and receiving reimbursement for services.
    Comment: Four commenters addressed the costs of in-store 
telecommunications and the installation and use of on-line dedicated 
telecommunications lines. They recommended that pharmacy providers 
should be compensated for the additional costs incurred. One commenter 
suggested that the States should pay costs, charges, and fees related 
to on-line communication. Four commenters addressed the issue of costs 
associated with establishing an on-line, real-time ECM system and asked 
who would be responsible for the costs. They questioned whether access 
to the system would be toll free. They suggested that providers be 
compensated for costs associated with telecommunications, software 
enhancements, etc., that HCFA or fiscal agents, rather than pharmacies, 
take responsibility for telecommunication costs, and that HCFA require 
States to pay associated costs.
    Response: State Medicaid agencies, who may receive FFP for the ECM 
systematic MMIS at enhanced rates if functional requirements are met, 
may also decide the amount of funding they will offer providers for 
hardware, software, and telecommunications charges, if any. A State may 
base this decision on such variables as what the average cost will be 
for pharmacies to participate, the amount of FFP received by the State 
for the ECM subsystem, and whether the State's budgets will enable it 
to compensate pharmacies who have incurred additional costs due to ECM. 
The State agency is free to pay transmission charges and other costs 
associated with participation in an ECM system or to require pharmacies 
to cover these costs.
    Comment: One commenter stated that ``ECMS'' should require only the 
minimum data elements necessary for processing and paying claims. No 
variable data elements should be permitted.
    Response: HCFA requires at least the minimum data set for 
processing and paying claims as defined in Part 2 of the State Medicaid 
Manual. Given the wide variation in State programs, however, we believe 
that it would be unwise at this time to restrict data that States may 
need for proper program administration. Thus, States have the option to 
add other data elements, as necessary.
    Comment: Eight commenters suggested that HCFA require State 
Medicaid agencies to comply with one industry telecommunications 
standard. Six of the eight commenters recommend NCPDP's Version 3.2 to 
be incorporated into Sec. 456.722. One commenter suggested that HCFA 
require the use of RFDS 3C in all State POS/ECM systems.
    Response: Currently, the State may decide the format for its ECM as 
long as it meets the requirements of the minimum data set provided in 
Part 2, section 11375 of the State Medicaid Manual. However, with the 
growing use of the Electronic Data Interchange (EDI) and the 
possibility of a Federal requirement that mandates its use by the 
Medicaid program, a standard format requirement for ECM subsystems may 
be forthcoming. Moreover, HCFA announced in an advance notice of 
proposed rulemaking in the Federal Register on October 19, 1992 (57 FR 
47587) that it endorses electronic standards established by the 
American National Standards Institute (ANSI). We anticipate final 
adoption of the ANSI electronic standards as the required 
telecommunications standard.
    Comment: One commenter recommended that the ECM system develop 
electronic payment capabilities by incorporating the electronic funds 
transfer (EFT) program, or it will be of little value.
    Response: The States may decide whether their ECMs will have an EFT 
capability. HCFA requires only that ECMs take steps toward the payment 
of the claim, in order to receive FFP, but not that funds be sent 
electronically.
    Comment: Four commenters addressed the establishment of ECM 
systems. Two commenters suggested that providers be required by HCFA to 
use ECM systems. One commenter suggested that participation in an ECM 
system be an option for the pharmacy. One commenter requested that 
batch processing of claims for prescriptions be included in any ECM 
program.
    Response: State Medicaid agencies may determine whether providers 
will be required to use ECM systems and whether providers using the ECM 
system will be required to rely on the State's prospective DUR, if the 
State has one. At this time, HCFA does not require State Medicaid 
agencies to establish ECM systems or to use them to accomplish 
prospective DUR.
    Comment: Two commenters suggested that HCFA should require mail 
order pharmacies' ECM systems to be on-line, real-time. One commenter 
suggested that the exemption allowing batch claims submission mentioned 
in Sec. 456.722(b) also be available to retail pharmacies.
    Response: States are responsible for determining whether mail order 
dispensers and other providers are required to operate a real-time ECM 
system, or a batch processing system at the end of each day or at a 
time specified by the State Medicaid agency.
    Comment: One commenter recommended that HCFA not require States to 
obtain cost/benefit analyses prior to procuring point-of-sale ECM.
    Response: An analysis that shows the cost effectiveness of the ECM 
is required in order for the States to receive enhanced FFP for the 
system.

O. Dispensing Physicians

    The interim final regulations are silent on the subject of 
dispensing physicians.
    Comment: One commenter pointed out that the regulations do not deal 
with the situation of dispensing physicians.
    Response: Section 1927(k)(3) of the Act states that the term 
``covered outpatient drug'' does not apply to drugs provided as 
physicians services unless there is a separate reimbursement for the 
drug. If there is a separate reimbursement claim for a drug dispensed 
by a physician, all the requirements of section 1927(g) apply to that 
physician, except for the requirements to offer patient counseling and 
to collect, record, and maintain patient profiles. This is because the 
Act specifically speaks to a pharmacist's responsibilities in these two 
areas. The State is free to develop State requirements with regard to 
patient counseling and patient profiles for dispensing physicians.
    Comment: One commenter suggested that dispensing physicians not be 
allowed to submit claims through ECM systems.
    Response: While the Secretary has been explicitly directed by the 
statute to encourage the use of ECM systems, States are free to 
establish policy with regard to the submission of claims through ECM 
systems.

P. Renal Dialysis

    Section 1927(k)(3) of the Act does not include as a ``covered 
outpatient drug'' under Medicaid, drugs provided for renal dialysis 
unless direct reimbursement for the drug is involved.
    Comment: One commenter pointed out that drugs administered to 
Medicaid recipients in renal dialysis centers are or are not subject to 
DUR, depending on whether or not there is separate reimbursement for 
the drug.
    Response: We agree with the commenter. Section 1927 (k)(3) of the 
Act provides that drugs provided to Medicaid recipients in renal 
dialysis centers are not subject to DUR unless there is a separate 
reimbursement for the drug product.

Q. Liability

    The Act and the interim final regulations are silent with regard to 
additional liability incurred by pharmacists as a result of DUR 
requirements.
    Comment: Three commenters suggested that the preamble language that 
pharmacies would not incur additional liability is not correct and 
pharmacists should expect to have additional liability problems.
    Response: Suits may result from pharmacy practice of DUR, but we 
have no evidence to support or refute the contention that the level of 
liability suits will increase. Since the DUR requirements specified in 
OBRA '90 constitute standards of pharmacy practice for Medicaid 
recipients, compliance with these standards provides the best 
protection against possible liability actions.
    Comment: Five commenters suggested that pharmacists be held 
harmless from liability associated with conducting DUR or that HCFA 
assume such liability.
    Response: We know of no statutory basis for holding pharmacists 
harmless from such liability or for having HCFA assume such liability 
that may result from compliance with the DUR requirements.
    Comment: One commenter asked about product liability.
    Response: We do not believe that product liability would be 
impacted by the OBRA '90 DUR requirements.

R. Comments on the Regulatory Impact Analysis

    Comment: Two commenters questioned the Congressional Budget Office 
estimate of $10 million to $40 million savings annually. One commenter 
suggested that the DUR provisions will cost more than they save. The 
other commenter stated that significant hardware and software costs 
will reduce cost savings.
    Response: Since these commenters provided no specific data, we will 
not make changes to the Congressional Budget Office estimates.
    Comment: Ten commenters questioned the hardware-software costs 
associated with the DUR program. They included estimates for software 
costs of: $1,500, $1,900, $2,000 to $5,000, and $3,500. One commenter 
suggested the cost of a new computer would be $3,600 to $6,000; a 
second commenter indicated that 10 percent of their group would need 
new computers. One commenter indicated annual upgrade and modification 
costs would be $995 per pharmacy.
    Response: We concur with the majority opinion that our original 
estimates may be low and probably should reflect costs in the $1,500 to 
$3,500 range. However, due to the lack of any empirical data, we are 
unable at this time to make this determination with any degree of 
certainty.
    Comment: Four commenters questioned the cost of counseling, all 
indicating cost estimates should be higher; however, only two provided 
their own estimates. One commenter suggested that 5 minutes would be 
necessary for counseling and profiling at a cost of $2.50 per 
prescription. Another commenter indicated that the time and cost per 
prescription for the DUR requirements would be 4 minutes and $2.98 
($2.98 includes 50 cents for hardware- software costs). One commenter 
suggested that the usual and customary charge should be reimbursed to 
ensure adequate compensation for DUR services. Four commenters 
suggested that the dispensing fee will need to be changed to reflect 
the increased requirements for DUR. None of the commenters suggested 
specific cost figures.
    Response: We believe that 5 minutes at a cost of $2.50 per 
prescription is a reasonable estimate that would raise our top estimate 
from $140 million to $175 million. However, as we stated earlier, we 
lack any empirical data to substantiate this claim.
    Comment: Six commenters suggested that the estimates in the interim 
final regulations did not include, or consider, the cost of 
interventions or consultations with physicians. One commenter, using 
data from a study that the commenter conducted, reported that 1.9 
percent of all prescriptions require interventions. Where interventions 
are made, 87 percent of these interventions involve contact with the 
physician. This commenter estimated that with 2 to 4 minutes per 
consultation, at a pharmacist hourly rate of $30, the total cost would 
be $10 to $20 million for approximately 140 million new prescriptions 
per year.
    Response: We generally agree that some of our estimates may be low. 
However, we do not believe, absent any additional definitive research 
studies that we can make any provisional changes as a result of this 
study at this time.
    Comment: Three commenters suggested reimbursement for ``cognitive 
services.'' One commenter suggested that the cognitive fee be separate 
from the dispensing fee. The second commenter indicated that a 
cognitive fee payment would ensure that pharmacists would maximize 
program efficiencies. The third simply advocated payment for such 
services.
    Response: Currently, there is no authorization in Federal statute 
or regulation for a separate payment for cognitive services. However, 
section 4401(c)(2) of OBRA '90 authorizes a demonstration project on 
the cost-effectiveness of reimbursement for pharmacists' cognitive 
services. When this demonstration project is completed, consideration 
may be given to the inclusion of reimbursement for cognitive services 
in the payments made to pharmacists.
    Comment: The commenters addressed various subjects, all indicating 
their impact on increasing costs. One commenter suggested that 
recordkeeping and liability costs will increase. Three commenters 
indicated that costs associated with establishing and maintaining 
profiles were not included in the estimates. Six commenters were 
concerned about increased costs (one comment indicated DUR costs would 
be shifted to other payers).
    Response: Some of these costs will be considered by the State in 
establishing the dispensing fee. As indicated in existing Secs. 447.331 
and 447.332 of the Medicaid regulations, the State is authorized to 
include a reasonable dispensing fee in its payments to pharmacies. This 
area is discussed in response to the comment regarding liability costs 
in section II. Q. of this preamble.
    Comment: One commenter stated that the regulatory impact analysis 
was not adequate and seriously underestimated the impact of the rule on 
small pharmacies. The commenter suggested a more comprehensive 
regulatory flexibility analysis and recommended a longer compliance 
schedule for small businesses and looking at other alternatives to ease 
the burden.
    Response: We disagree with the commenter. The analysis in the 
interim final rule did address the impact on pharmacies, States, 
dispensing fees, cost of counseling, and the costs of educational 
outreach. Since the commenter offered no data to support the comment 
and did not suggest a methodology for conducting the analysis, we are 
not making a change in the regulation at this time.

III. Changes to the Interim Final Rule

    In developing the November 1992 interim final regulations, we 
essentially relied on the language of sections 1927 (g) and (h) of the 
Act. We also sought and received advice from various national provider 
associations, pharmaceutical companies, States, drug utilization review 
firms, and others. The interim final regulations became effective on 
January 2, 1993.
    We have reviewed all of the public comments received on the interim 
final regulations and, in summary, have made the following changes.
     We have amended Sec. 456.702 to clarify the definitions of 
``overutilization'' and ``underutilization''.
     We have removed the technically incorrect HMO exception 
from Sec. 456.703(b) and added a new paragraph at Sec. 456.703(c)(2) to 
indicate the HMO exemption from DUR.
     We have included under Sec. 456.703(c)(1) a provision that 
those hospitals that claim the exemption from DUR must give assurances 
to the State that they meet the requirements of section 1927(j)(2) of 
the Act.
     We have removed the words ``rejected or'' from 
Sec. 456.703(f)(1) to clarify that only published peer-reviewed 
literature is an acceptable criterion.
     We have added a definition of ``the consensus process'' to 
Sec. 456.703(f)(2).
     We have amended Secs. 456.703(f)(5) and 456.705(b)(3) to 
clarify that only ``clinically significant'' adverse medical results 
warrant consideration in the prospective drug review. We also added 
wording under Sec. 456.703(f)(5) to include the consideration of 
patient consumption practices and standards.
     We have added wording to Sec. 456.703(f)(6) to clarify the 
reason for testing criteria against claims data.
     We have changed the word ``prescription'' to ``drug'' in 
Sec. 456.705(b)(2)(i) in order to include consideration of non- 
prescription drugs with regard to alteration of therapeutic effect.
     In Sec. 456.705(b)(4), we have specified ``daily dosage'' 
rather than ``daily dosage range'' in the description of what 
constitutes incorrect drug dosage.
     We have removed the reference to how drug counseling 
requirements apply specifically to mail order pharmacies from 
Sec. 456.705(c) (now designated as Sec. 456.705(c)(1)) so that we do 
not give the impression that they are treated differently than other 
pharmacies. Also, we have added language in Sec. 456.705(c)(1) (i) 
through (v) to specify the issues that State agencies must address when 
formulating their counseling standards.
     We have added wording to Sec. 456.705(c)(2)(i), previously 
Sec. 456.705(c)(1), to require mail-order pharmacies to provide toll-
free telephone service for long distance calls for counseling.
     In Sec. 456.705(d)(2), we have replaced the phrase 
``individual medical history'' with ``individual history'' since 
medical history would indicate the need for much more complete records, 
including such items as laboratory reports, X-rays, consultation 
reports, and unrelated surgeries and illnesses.
     We have added a paragraph to Sec. 456.714 clarifying the 
distinction between the responsibilities of DUR and SUR.
     We have amended Sec. 456.716(b) to change the requirement 
for licensure of a DUR board member in the State on whose board he or 
she serves, to licensure in any State.
     In Sec. 456.716(d)(5)(ii) we have added wording to clarify 
the bases for DUR board recommendations, and we have added wording to 
Sec. 456.703(f)(5) to allow the consideration of standards if an in-
depth review is needed to determine whether to intervene once the 
potential therapeutic problems have been identified through the use of 
clinical criteria.
     Also, we have made certain technical corrections and 
corrections of typographical errors that appeared in the interim final 
rule.

VI. Regulatory Impact Statement

A. Regulatory Flexibility Act

    We generally prepare a regulatory flexibility analysis that is 
consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 
through 612) unless the Secretary certifies that a rule will not have a 
significant economic impact on a substantial number of small entities. 
For purposes of the RFA, all pharmacies and prescribing physicians are 
considered to be small entities.

B. Comments on Regulatory Impact Analysis and Regulatory Flexibility 
Analysis

    In the interim final rule with comment period, we included a 
regulatory impact and regulatory flexibility analysis because of the 
financial impact on the operation of pharmacies, the States, and on 
recipients. The analysis described the effects that the interim final 
rule with comment period would have on these individuals and entities.
    We received 35 comments concerning the costs of the drug use review 
program, the cost of the DUR requirements on pharmacies, and the cost 
estimates included in the interim final rule. All commenters indicated 
that the actual costs of implementing the provisions will be higher 
than the amounts presented. Eight of the commenters furnished specific 
cost figures either for their particular operation or they supplied 
estimates of specific costs per prescription, type of service rendered, 
equipment costs, or total program costs.
    The comments covered the following specific areas:
     Initial hardware and software computer costs
     Upgrade costs for computer programs
     Counseling
     Cognitive services
     Dispensing fees
     Consultation with physicians
     Interventions by pharmacies
     Recordkeeping
     Additional liability for the pharmacist
     Profiles
    The other commenters suggested the cost saving estimate was too 
high, advocated increased Federal funds to offset DUR costs, urged 
voluntary compliance of prospective DUR requirements for small fragile 
pharmacies, warned that DUR cost estimates were too low, and requested 
a comprehensive regulatory analysis for small businesses. For a 
complete summarization of these comments and our responses, see section 
II of this preamble.
    We were unable to provide a more quantitative analysis due to the 
lack of empirical data. However, we did receive several studies from 
commenters. Although these data were somewhat limited, we agree that 
some of our estimates were low. We believe, however, that additional 
research in the future concerning these issues is needed to provide us 
with more specific results.
    This final rule revises the November 2, 1992, interim final rule 
with comment period based on comments submitted by the public. Costs 
associated with implementing these regulations are a consequence of 
section 4401 of OBRA '90, not the regulations. We do not believe, 
absent any additional definitive research studies, that the changes 
incorporated into this final rule as a result of public comments will 
have any significant effect on DUR costs.

C. Impact on Small Rural Hospitals

    Section 1102(b) of the Act requires the Secretary to prepare a 
regulatory impact analysis if a final rule may have a significant 
impact on the operations of a substantial number of small rural 
hospitals. This analysis must conform to the provisions of section 604 
of the RFA. For purposes of section 1102(b) of the Act, we define a 
small rural hospital as a hospital that is located outside of a 
Metropolitan Statistical Area and has fewer than 50 beds.
    We are not preparing a rural impact analysis since we have 
determined, and the Secretary certifies, that this final rule will not 
have a significant impact on the operations of a substantial number of 
small rural hospitals. In accordance with the provisions of Executive 
Order 12866, this regulation was reviewed by the Office of Management 
and Budget.

V. Collection of Information Requirements

    Sections 456.703, 456.705, 456.709, 456.711, 456.712, 456.716, and 
456.722 contain information collection or recordkeeping requirements or 
both that are subject to review by the Office of Management and Budget 
(OMB) under the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et 
seq.). The information collection requirements concern the collection 
of information for patient profiles of Medicaid recipients, preparation 
by the State DUR boards of annual reports to the State agency, and 
preparation of annual reports by the State agency to the Secretary. 
These are statutory requirements. The respondents who will provide the 
information include Medicaid recipients who will provide information 
for profiles to pharmacists, State DUR boards that will provide annual 
report information to the State agencies and State agencies that will 
provide annual report information to the Secretary. Public reporting 
burden for the collection of profile information is estimated to be 5 
minutes for each initial encounter and 2 minutes for each subsequent 
encounter. Public reporting burden for the collection of the annual 
report information, which includes activities by the DUR board and by 
the State agency, is estimated to be up to 60 hours a year per State.
    A notice will be published in the Federal Register after approval 
is obtained.

List of Subjects in 42 CFR Part 456

    Administrative practice and procedure, Grant programs--health, 
Health facilities, Medicaid, Reporting and recordkeeping requirements.

    42 CFR part 456 is amended as set forth below:

PART 456--UTILIZATION CONTROL

    1. The authority citation continues to read as follows:

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 
1302), unless otherwise noted.

    2. In Sec. 456.702 the definitions of ``overutilization'' and 
``underutilization'' are revised to read as follows:


Sec. 456.702  Definitions.

* * * * *
    Overutilization means use of a drug in a quantity, strength, or 
duration that is greater than necessary to achieve a desired 
therapeutic goal or that puts the recipient at risk of a clinically 
significant undesirable effect, or both.
* * * * *
    Underutilization means use of a drug by a recipient in insufficient 
quantity, strength, or duration to achieve a desired therapeutic goal 
or that puts the recipient at risk of a clinically significant 
undesired effect, or both.
    3. In Sec. 456.703, paragraphs (b), (c), and (e)(4) are revised, 
the introductory text of paragraphs (e) and (f) are republished and 
paragraphs (f)(1), (f)(2), (f)(5), (f)(6) and (h) are revised to read 
as follows:


Sec. 456.703  Drug use review program.

* * * * *
    (b) Exception for drugs dispensed to certain nursing facility 
residents. Prospective drug review and retrospective drug use review 
(including interventions and education) under the DUR program are not 
required for drugs dispensed to residents of nursing facilities that 
are in compliance with the drug regimen review procedures set forth in 
part 483 of this chapter. This does not preclude the State agency from 
making such drugs subject to prospective DUR or retrospective DUR or 
both, provided the State agency makes the drugs subject to all the 
requirements of this subpart applicable to the respective review.
    (c) Exemption for certain covered outpatient drugs dispensed by 
hospitals and health maintenance organizations. 
    (1) The State plan must provide that covered outpatient drugs 
dispensed by a hospital using drug formulary systems and billed to the 
plan at no more than the hospital's purchasing costs are not subject to 
the requirements of this subpart. Individual hospitals requesting this 
exemption must provide assurances to the State agency that they meet 
the requirements specified in section 1927(j)(2) of the Act.
    (2) The State plan must provide that covered outpatient drugs 
dispensed by health maintenance organizations are not subject to the 
requirements of this subpart.
* * * * *
    (e) Source of predetermined standards. The predetermined standards 
must be--
* * * * *
    (4) Any combination of paragraphs (e)(1) through (e)(3) of this 
section.
    (f) Requirements for predetermined standards. The predetermined 
standards used in the DUR program must meet the following requirements:
    (1) The source materials for their development are consistent with 
peer-reviewed medical literature (that is, scientific, medical, and 
pharmaceutical publications in which original manuscripts are published 
only after having been critically reviewed by unbiased independent 
experts) and the following compendia:
    (i) American Hospital Formulary Service Drug Information;
    (ii) United States Pharmacopeia-Drug Information;
    (iii) American Medical Association Drug Evaluations.
    (2) Differences between source materials were resolved by 
physicians and pharmacists developing consensus solutions. The 
consensus process means the reliance, by the criteria developers, on 
the expertise of physicians and pharmacists to evaluate differences in 
criteria source materials and to come to agreement on how differences 
should be resolved.
* * * * *
    (5) The review based on clinical criteria uses predetermined 
standards to determine the population at risk of a clinically 
significant adverse medical result and applies standards, appropriate 
to this population, across providers and patients to determine the 
provider outliers whose prescribing, dispensing, or consumption 
practices may not conform to accepted standards of care. Various 
statistical measures (including mean, range, or other measures at the 
discretion of the State) may be applied to these data. Standards may be 
considered in deciding if an in-depth review is needed to determine 
whether to intervene once the potential therapeutic problems have been 
identified through the use of clinical criteria.
    (6) They have been tested against claims data prior to adoption in 
order to validate the level of possibly significant therapeutic 
problems without undue levels of false positives.
* * * * *
    (h) Confidentiality of patient related data. In implementing the 
DUR program, the agency must establish, in regulations or through other 
means, policies concerning confidentiality of patient related data that 
are consistent with applicable Federal confidentiality requirements at 
part 431, subpart F of this chapter; the State Pharmacy Practice Act; 
and the guidelines adopted by the State Board of Pharmacy or other 
relevant licensing bodies.
    4. In Sec. 456.705, paragraph (b) introductory text is republished 
and paragraphs (b)(2)(i), (b)(3), (b)(4), (c), and (d) are revised to 
read as follows:


Sec. 456.705   Prospective drug review.

* * * * *
    (b) Point-of-sale or point-of-distribution review.
* * * * *
    (2) Drug-disease contraindication, that is, the potential for, or 
the occurrence of--
    (i) An undesirable alteration of the therapeutic effect of a given 
drug because of the presence, in the patient for whom it is prescribed, 
of a disease condition; or
* * * * *
    (3) Adverse drug-drug interaction, that is, the potential for, or 
occurrence of, a clinically significant adverse medical effect as a 
result of the recipient using two or more drugs together.
    (4) Incorrect drug dosage, that is, the dosage lies outside the 
daily dosage specified in predetermined standards as necessary to 
achieve therapeutic benefit. Dosage is the strength multiplied by the 
quantity dispensed divided by day's supply.
* * * * *
    (c) Drug counseling. (1) As part of the prospective drug review 
program, standards for counseling by pharmacists of recipients or the 
recipients' caregivers must be established by State law or other method 
that is satisfactory to the State agency. A State agency's counseling 
standards must address special situations where the patient or the 
patient's representative, is not readily available to receive the offer 
to counsel or the actual counseling, for example, prescriptions 
delivered offsite or through the mail. The State agency, at a minimum, 
must also address the following issues in their counseling standards:
    (i) Whether the offer to counsel is required for new prescriptions 
only, or for both new and refill prescriptions;
    (ii) Whether pharmacists must make the offer to counsel or 
auxiliary personnel are authorized to make the offer;
    (iii) Whether only a patient's refusal of the offer to counsel must 
be documented, or whether documentation of all offers is required;
    (iv) Whether documentation of counseling is required; and
    (v) Whether counseling is required in situations where the 
patient's representative is not readily available to receive a 
counseling offer or the counseling itself.
    (2) The standards must meet the following requirements:
    (i) They must require pharmacists to offer to counsel (in person, 
whenever practicable, or through access to a telephone service that is 
toll-free for long-distance calls) each recipient or recipient's 
caregiver who presents a prescription. A pharmacist whose primary 
patient population is accessible through a local measured or toll-free 
exchange need not be required to offer toll-free service. Mail order 
pharmacies are required to provide toll-free telephone service for long 
distance calls.
    (ii) They need not require a pharmacist to provide consultation 
when a Medicaid recipient or the recipient's caregiver refuses that 
consultation.
    (iii) They must specify what documentation by the pharmacy of 
refusal of the offer of counseling is required.
    (3) The standards must specify that the counseling include those 
matters listed in paragraphs (c)(3)(i) through (c)(3)(viii) of this 
section that, in the exercise of his or her professional judgement 
(consistent with State law regarding the provision of such 
information), the pharmacist considers significant as well as other 
matters the pharmacist considers significant.
    (i) The name and description of the medication;
    (ii) The dosage form, dosage, route of administration, and duration 
of drug therapy;
    (iii) Special directions and precautions for preparation, 
administration, and use by the patient;
    (iv) Common severe side or adverse effects or interactions and 
therapeutic contraindications that may be encountered, including their 
avoidance, and the action required if they occur;
    (v) Techniques for self-monitoring drug therapy;
    (vi) Proper storage;
    (vii) Prescription refill information; and
    (viii) Action to be taken in the event of a missed dose.
    (d) Profiling. The State agency must require that, in the case of 
Medicaid recipients, the pharmacist make a reasonable effort to obtain, 
record, and maintain patient profiles containing, at a minimum, the 
information listed in paragraphs (d)(1) through (d)(3) of this section.
    (1) Name, address, telephone number, date of birth (or age), and 
gender of the patient;
    (2) Individual history, if significant, including disease state or 
states, known allergies and drug reactions, and a comprehensive list of 
medications and relevant devices; and
    (3) Pharmacist's comments relevant to the individual's drug 
therapy.
    5. Section 456.714 is revised to read as follows:


Sec. 456.714  DUR/Surveillance and utilization review relationship.

    (a) The retrospective DUR requirements in this subpart parallel a 
portion of the surveillance and utilization review (SUR) requirements 
in subpart A of this part and in part 455 of this chapter.
    (b) A State agency may direct DUR staffs to limit review activities 
to those that focus on what constitutes appropriate and medically 
necessary care to avoid duplication of activities relating to fraud and 
abuse under the SUR program.
    6. In Sec. 456.716, paragraph (d) introductory text is republished 
and paragraphs (b), (d)(5) introductory text and (d)(5)(ii) are revised 
to read as follows:


Sec. 456.716  DUR Board.

* * * * *
    (b) Board composition. At least one-third but not more than 51 
percent of the DUR Board members must be physicians, and at least one-
third of the Board members must be pharmacists. These physicians and 
pharmacists must be actively practicing and licensed.
* * * * *
    (d) DUR Board activities.
* * * * *
    (5) Education program (including interventions): Board's 
activities. The DUR Board must perform the following activities:
* * * * *
    (ii) Make recommendations as to which mix of the interventions set 
forth in Secs. 456.711 (a) through (d) would most effectively lead to 
improvement in the quality of drug therapy. The DUR board 
recommendations must be based upon an in-depth review of the results of 
the application of predetermined standards against claims data reports, 
must be appropriate based upon program experience, and must match the 
educational program with the drug therapy problems identified.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program)

    Dated: April 1, 1994.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.

    Dated: June 28, 1994.
Donna E. Shalala,
Secretary.
[FR Doc. 94-23280 Filed 9-22-94; 8:45 am]
BILLING CODE 4120-01-P