[Federal Register Volume 67, Number 71 (Friday, April 12, 2002)]
[Proposed Rules]
[Pages 17948-17954]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-8615]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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 

  Federal Register / Vol. 67, No. 71 / Friday, April 12, 2002 / 
Proposed Rules  

[[Page 17948]]



DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 199

RIN 0720-AA63


Civilian Health and Medical Program of the Uniformed Services 
(CHAMPUS)/TRICARE; Implementation of the Pharmacy Benefits Program

AGENCY: Office of the Secretary, DoD.

ACTION: Proposed rule.

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SUMMARY: This proposed rule is designed to implement section 701 of the 
National Defense Authorization Act for Fiscal Year 2000. This proposed 
rule establishes procedures for the inclusion of pharmaceutical agents 
on a Uniform Formulary based upon relative clinical effectiveness and 
cost effectiveness; establishes cost-sharing requirements, including a 
tiered co-payment structure, for generic, formulary and non-formulary 
pharmaceutical agents; establishes procedures to assure the 
availability of pharmaceutical agents not included on the Uniform 
Formulary to eligible beneficiaries at the non-formulary cost-share 
tier; establishes procedures to receive pharmaceutical agents not 
included on the Uniform Formulary, but considered clinically necessary, 
under the same terms and conditions as an agent on the Uniform 
Formulary; establishes procedures to assure the availability of 
clinically appropriate non-formulary pharmaceutical agents to members 
of the uniformed services; establishes procedures for prior 
authorization when required; and establishes a Department of Defense 
Pharmacy and Therapeutics Committee (DoD P&T Committee) and a Uniform 
Formulary Beneficiary Advisory Panel. Other administrative amendments 
are also made to clarify specific policies that relate to the program. 
Public comments are invited and will be considered for possible 
revisions to the final rule.

DATES: Written comments will be accepted until June 11, 2002.

ADDRESSES: Medical Benefits and Reimbursement Systems, TRICARE 
Management Activity, 16401 East Centretech Parkway, Aurora, CO 80011-
9066.

FOR FURTHER INFORMATION CONTACT: Michael Kottyan, Medical Benefits and 
Reimbursement System, TRICARE Management Activity, Office of the 
Assistant Secretary of Defense (Health Affairs), telephone 303-676-
3520.

SUPPLEMENTARY INFORMATION:

A. Overview of the Rule

    Section 701 of the National Defense Authorization Act for Fiscal 
Year 2000 (Public Law 106-65), codified at Title 10, United States 
Code, Section 1074g, directs the Department to establish an effective, 
efficient, integrated Pharmacy Benefits Program. The current 
prescription drug benefit under TRICARE includes the U.S. Food and Drug 
Administration (FDA) approved drugs and medicines that by United States 
law require a physician's or other authorized individual professional 
provider prescription (acting within the scope of their license) that 
has been ordered or prescribed by them. The benefit does not include 
prescription drugs for medical conditions that are expressly excluded 
from the TRICARE benefit by statute or regulation.
    The Pharmacy Benefits Program will include a Uniform Formulary of 
pharmaceutical agents that will assure the availability of 
pharmaceutical agents in the complete range of therapeutic classes 
authorized under the current TRICARE prescription drug benefit. A 
therapeutic class is defined as a group of drugs that are similar in 
chemical structure, pharmacological effect, or clinical use. 
Pharmaceutical agents in each therapeutic class shall be selected for 
inclusion on the Uniform Formulary based upon the relative clinical 
effectiveness and cost effectiveness of the agents in such class. If a 
pharmaceutical agent in a therapeutic class is determined not to have a 
significant, clinically meaningful therapeutic advantage in terms of 
safety, effectiveness, or clinical outcome compared to other drugs 
included on the Uniform Formulary, it may be classified as a non-
formulary agent. If a pharmaceutical agent in a therapeutic class is 
not cost effective relative to other pharmaceutical agents in a 
therapeutic class, it may be classified as a non-formulary agent. 
Pharmaceutical agents used exclusively for medical conditions that are 
expressly excluded from the TRICARE benefit by statute or regulation 
will not be considered for inclusion on the Uniform Formulary.

B. Clinical Effectiveness and Cost Effectiveness

    It is presumed that pharmaceutical agents should be included on the 
Uniform Formulary unless the Pharmacy and Therapeutics Committee finds 
by a majority vote that a pharmaceutical agent does not have a 
significant, clinically meaningful therapeutic advantage in terms of 
safety, effectiveness, or clinical outcome over other pharmaceutical 
agents included on the uniform formulary. The DoD Pharmacy and 
Therapeutics Committee will exercise their collective professional 
judgement by considering pertinent information from a variety of 
sources.
    The DoD Pharmacy and Therapeutics Committee has sole discretion in 
determining what sources should be reviewed in evaluating the clinical 
effectiveness of a pharmaceutical agent in a therapeutic class. The DoD 
Pharmacy and Therapeutics Committee may designate Government agents to 
research pertinent sources of information and report the results to the 
full committee. The DoD Pharmacy and Therapeutics Committee or their 
designated agents will exercise their professional judgement in 
determining what sources of information to review. Sources of 
information may include, but are not limited to: medical and 
pharmaceutical textbooks and reference books; clinical literature; the 
U.S. Food and Drug Administration; pharmaceutical companies; clinical 
practice guidelines; and expert opinion.
    The DoD Pharmacy and Therapeutics Committee will evaluate the 
relative clinical effectiveness of pharmaceutical agents within a 
therapeutic class by considering information about their safety, 
effectiveness, and clinical outcome. Information considered by the 
committee may include but is not limited to: FDA approved and other 
studied indications; pharmacology; pharmacokinetics; contraindications; 
warnings/precautions; incidence and severity of adverse effects; drug 
to drug,

[[Page 17949]]

drug to food, and drug to disease interactions; availability, dosing, 
and method of administration; epidemiology and relevant risk factors 
for diseases/conditions in which the drugs are used; and concomitant 
therapies; results of safety and efficacy studies; results of 
effectiveness/clinical outcomes studies; and results of meta-analyses.
    In considering the relative cost effectiveness of pharmaceutical 
agents in a therapeutic class authorized under the TRICARE pharmacy 
benefit, the DoD Pharmacy and Therapeutics Committee shall evaluate the 
costs of the agent in relation to the safety, effectiveness, and 
clinical outcomes of other agents in the class. The DoD Pharmacy and 
Therapeutics Committee may designate Government agents to conduct the 
evaluation and report the results for the Committee's consideration and 
decision. Information considered by the committee or its designated 
agents concerning the relative cost effectiveness of the pharmaceutical 
agent may include but is not limited to: cost of the drug to the 
Government; impact on overall medical resource utilization and costs, 
cost-efficacy studies; cost-effectiveness studies; cross-sectional or 
retrospective economic evaluations; pharmacoeconomic models; patent 
expiration dates; clinical practice guideline recommendations; and 
existence of existing blanket purchase agreements, incentive price 
agreements, or contracts.
    Based on its assessment of the relative clinical and cost 
effectiveness of agents within a therapeutic class, the DoD Pharmacy 
and Therapeutics Committee will recommend that an agent either be 
included on the Uniform Formulary or designated as non-formulary. The 
DoD Pharmacy and Therapeutics Committee's recommendation will be 
determined by a majority vote.

C. Evaluation of Pharmaceutical Agents for Determinations Regarding 
Inclusion on the Uniform Formulary

    The DoD Pharmacy and Therapeutics Committee will periodically 
evaluate or reevaluate individual drugs and/or drug classes for 
determinations regarding inclusion or continuation on the Uniform 
Formulary. Evaluation or reevaluation of individual drugs or drug 
classes may be prompted by a variety of circumstances that may include 
but are not limited to: approval of a new drug by the FDA; approval of 
a new indication for an existing drug; changes in the clinical use of 
existing drugs; new information concerning the safety, effectiveness or 
clinical outcomes of existing drugs; price changes; shifts in market 
share; scheduled review of a therapeutic class; and requests from 
Pharmacy and Therapeutics Committee members, military treatment 
facilities, or other Military Health System officials.

D. Uniform Formulary at Military Treatment Facilities (MTFs)

    Pharmaceutical agents included on the Uniform Formulary shall be 
available through military treatment facilities of the uniformed 
services, consistent with the scope of health care services offered in 
such facilities. The Basic Core Formulary (BCF) is a subset of the 
Uniform Formulary and is a mandatory component of all MTF pharmacy 
formularies. The BCF contains the minimum set of drugs that each MTF 
pharmacy must have on its formulary to support the primary care scope 
of practice for Primary Care Manager enrollment sites. Additions to 
individual MTF formularies are determined by local Pharmacy and 
Therapeutics Committees based upon the scope of health care services 
provided. However, pharmaceutical agents that are designated as non-
formulary on the Uniform Formulary shall not be included on an MTF 
pharmacy formulary. All drugs on the MTF formulary must be available to 
all beneficiaries. There are no co-pays or cost-shares for any 
beneficiaries utilizing MTF pharmacies.

E. Prior Authorizations

    Selected pharmaceutical agents may be subject to prior 
authorization or utilization review requirements to assure medical 
necessity, clinical appropriateness and/or cost effectiveness. The 
Pharmacy and Therapeutics Committee will assess the need to prior 
authorize a given agent by considering the relative clinical and cost 
effectiveness of agents within a therapeutic class. Agents that require 
prior authorization will be identified by a majority vote of the 
Pharmacy and Therapeutics Committee. The Pharmacy and Therapeutics 
Committee will establish the prior authorization criteria for a given 
agent.

F. Cost-Sharing Requirements

    Active duty members do not pay a cost-share. Cost-sharing 
requirements for all other beneficiaries will be based upon the 
pharmaceutical agent's classification on the uniform formulary, that 
is, generic, formulary, or non-formulary and the point of service, that 
is, MTF, retail network pharmacy, retail non-network pharmacy, or the 
National Mail Order Pharmacy (NMOP), from which the agent is acquired. 
TRICARE Prime point of service charges will still apply.
    There is no co-pay for pharmaceutical agents obtained from a 
military treatment facility.
    For pharmaceutical agents obtained from a retail network pharmacy 
there is a $9.00 co-pay per prescription for up to a 30-day supply of a 
formulary agent, a $3.00 co-pay per prescription for up to a 30-day 
supply of a generic agent, and a $22.00 co-pay per prescription for up 
to a 30-day supply of a non-formulary agent.
    For formulary and generic pharmaceutical agents obtained from a 
retail non-network pharmacy there is a 20 percent or $9.00 co-pay 
(whichever is greater) per prescription for up to a 30-day supply of 
the pharmaceutical agent.
    For non-formulary pharmaceutical agents obtained from a retail non-
network pharmacy there is a 20 percent or $22.00 co-pay (whichever is 
greater) per prescription for up to a 30-day supply of the 
pharmaceutical agent.
    For pharmaceutical agents obtained under the NMOP program there is 
a $9.00 co-pay per prescription for up to a 90-day supply of a 
formulary agent, a $3.00 co-pay per prescription for up to a 90-day 
supply of a generic agent, and a $22.00 co-pay per prescription for up 
to a 90-day supply of a non-formulary agent.
    Section 1074g(a)(6) provides that for non-formulary agents, cost 
sharing shall be consistent with common industry practice and not in 
excess of amounts generally comparable to 20% for dependents of active 
duty service members or 25% for retirees and their dependents. The 
proposed non-formulary cost share of $22 (or in the case of non-
formulary agents provided by non-network providers, the greater of $22 
or 20%) complies with this statutory requirement. An analysis of 
categories of agents for which the selection of formulary and non-
formulary agents is anticipated indicated that the average prescription 
cost and dispensing fee of potential non-formulary agents will, in the 
aggregate, be in excess of $110. Thus, the non-formulary co-payment 
will not be in excess of amounts generally comparable to the statutory 
maximums. In addition, these co-payment provisions are based upon 
common industry practice. Common industry practice typically has a $12 
to $15 differential in the cost share between formulary and non-
formulary pharmaceutical agents. The $22.00 per prescription co-pay for 
non-formulary agents is subject to annual adjustment by the Assistant 
Secretary of Defense (Health Affairs), upon advice of

[[Page 17950]]

the Pharmacy and Therapeutics Committee, based on experience with the 
Uniform Formulary, changes in economic circumstances, and other 
relevant factors. Any adjustments will remain consistent with the 
statutory co-pay maximum.
    A point of service cost-share of 50 percent applies in lieu of the 
20 percent co-pay for TRICARE Prime beneficiaries who obtain 
prescriptions from retail non-network pharmacies.
    Except as provided below, for prescription drugs acquired by 
TRICARE Standard beneficiaries from retail non-network pharmacies, 
beneficiaries are subject to the $150.00 per individual or $300.00 
maximum per family annual fiscal year deductible.
    Under TRICARE Standard, dependents of members of the uniformed 
services whose pay grade is E-4 or below are subject to the $50.00 per 
individual or $100.00 maximum per family annual fiscal year deductible.
    The TRICARE catastrophic loss limits apply to pharmacy benefits. 
For dependents of active duty members, the maximum family liability is 
$1,000 for cost-shares and deductibles based on allowable charges for 
TRICARE Basic Program services and supplies received in a fiscal year. 
For all other categories of beneficiary families, the maximum family 
liability is $3,000 in a fiscal year.

G. Determination of Generic Drug Classification Under the Pharmacy 
Benefits Program

    The designation of a drug as a generic, for the purpose of applying 
cost-shares at the generic rate, will be determined through the use of 
standard pharmaceutical references as part of commercial best business 
practices. In considering the relative cost effectiveness of 
pharmaceutical agents in a therapeutic class, the Pharmacy and 
Therapeutics Committee may consider the existence of blanket purchase 
agreements, incentive price agreements, or contracts. The existence of 
these agreements or contracts may result in situations where a brand 
drug is the most cost effective pharmaceutical agent for the Government 
to purchase, even more cost effective than generic agents. When this 
circumstance occurs, the Pharmacy and Therapeutics Committee may 
designate that the branded drug cost share be the same as the lower 
generic drug cost share when the branded drug is selected as the 
preferred agent over generic drugs because it is more cost effective 
for the Government. This will assure that the beneficiary is not 
penalized when brand products are competed and selected as the 
formulary pharmaceutical agent over generic products following a 
contracting initiative.

H. Availability of Clinically Appropriate Non-Formulary 
Pharmaceutical Agents to Members of the Uniformed Services

    The Pharmacy Benefits Program is required to assure the 
availability of clinically appropriate pharmaceutical agents to members 
of the uniformed services, including where appropriate, agents not 
included on the Uniform Formulary. MTFs shall establish procedures to 
evaluate the clinical appropriateness of prescriptions written for 
members of the uniformed services for pharmaceutical agents not 
included on the uniform formulary. If it is determined that the 
prescription is clinically appropriate, the MTF will provide the 
pharmaceutical agent to the member. TRICARE will conduct an evaluation 
for clinical appropriateness when a member presents a prescription for 
a non-formulary pharmaceutical agent to a network or non-network 
pharmacy or the NMOP.

I. Availability of Non-Formulary Pharmaceutical Agents to Eligible 
Covered Beneficiaries

    Non-formulary pharmaceutical agents will be available to eligible 
beneficiaries through the retail network pharmacies and the NMOP at the 
non-formulary co-pay tier of $22.00 per prescription.
    Non-formulary pharmaceutical agents will be available to eligible 
beneficiaries through the retail non-network pharmacies at the non-
formulary co-pay tier of 20 percent or $22.00, whichever is greater, 
per prescription.
    Non-formulary pharmaceutical agents will be available to eligible 
covered beneficiaries through the MTF pharmacies only for prescriptions 
written by MTF providers and approved through the non-formulary special 
order process that validates the clinical necessity for use of the non-
formulary pharmaceutical agent.

J. Reduction of Co-Pay for Cases of Clinical Necessity

    Non-formulary pharmaceutical agents will be available to eligible 
covered beneficiaries through the retail network and non-network 
pharmacies at the same co-pay as a formulary pharmaceutical agent in 
situations of documented clinical necessity. A clinical necessity to 
use a non-formulary drug may exist when either: the use of formulary 
agents is contraindicated; the patient experiences significant adverse 
effects from formulary agents; formulary agents result in therapeutic 
failure; the patient previously responded to a non-formulary agent and 
changing to a formulary agent would incur unacceptable clinical risk; 
or there is no alternative agent on the formulary.
    For prescriptions submitted to the NMOP, information to justify the 
clinical necessity for use of a non-formulary agent should be submitted 
with the prescription. The beneficiary may also submit information to 
justify the clinical necessity for use of a non-formulary agent to the 
NMOP after the prescription has been filled. If clinical necessity for 
use of a non-formulary agent is validated, then the patient will 
receive a refund for the co-pay differential. For prescriptions 
submitted to a retail network pharmacy, the beneficiary will submit 
information to justify the clinical necessity for use of a non-
formulary agent to the servicing TRICARE contractor and request a 
refund for the difference in the cost between the formulary and non-
formulary pharmaceutical agent. Determinations of the clinical 
necessity for use of a non-formulary agent will undergo a peer review.
    If the request for the difference is denied, either the beneficiary 
or provider may appeal the decision under section 199.10 of this Part.

K. Department of Defense Pharmacy and Therapeutics Committee

    The Department of Defense Pharmacy and Therapeutics Committee will 
develop the uniform formulary of pharmaceutical agents. The committee 
will review the formulary on a periodic basis, and make additional 
recommendations regarding the formulary as the committee determines 
necessary and appropriate to the Director, TRICARE Management Activity. 
The committee shall include representatives of pharmacies of the 
uniformed service treatment facilities, contractors responsible for the 
TRICARE retail pharmacy program, contractors responsible for the 
national mail order pharmacy program, providers in facilities of the 
uniformed services, and TRICARE network providers. Committee members 
will have expertise in treating the medical needs of the populations 
served through such entities and in the range of pharmaceutical and 
biological medicines available for treating such populations.
    The committee will identify therapeutic classes of pharmaceutical 
agents. The committee will consider the clinical and cost effectiveness 
of pharmaceutical agents relative to other agents in the class, 
following the guidelines contained in this regulation. Therapeutic drug 
class reviews will be

[[Page 17951]]

conducted on a scheduled, periodic basis, as determined by the 
committee.

L. Uniform Formulary Beneficiary Advisory Panel

    A Uniform Formulary Beneficiary Advisory Panel will be established 
to review and comment on the development of the uniform formulary. The 
panel will meet after each Pharmacy and Therapeutics Committee 
quarterly meeting. The panel's comments will be submitted to the 
Director, TRICARE Management Activity. The Director will consider the 
comments before implementing the uniform formulary or any 
recommendations for change made by the Pharmacy and Therapeutics 
Committee.

M. Mandatory Generic Substitution

    Mandatory substitution of generic drugs listed with an ``A'' rating 
in the current Approved Drug Products with Therapeutic Equivalence 
Evaluations (Orange Book) (or any successor) published by the Food and 
Drug Administration and generic equivalents of grandfather or Drug 
Efficacy Study Implementation (DESI) category drugs is required for 
brand name drugs.
    Brand name drugs will be available at the non-formulary co-pay when 
dispensed in lieu of a generic equivalent if selection of the branded 
product is based solely on the personal preference of the provider or 
beneficiary. Section J of this preamble describes the process for 
obtaining non-formulary drugs at the formulary co-pay in situations of 
clinical necessity.

N. Regulatory Procedures

    Executive Order 12866 requires that a comprehensive regulatory 
impact analysis be performed on any economically significant regulatory 
action, defined as one that would result in an annual effect of $100 
million or more on the national economy or which would have other 
substantial impacts. The Regulatory Flexibility Act (RFA) requires that 
each Federal agency prepare, and make available for public comment, a 
regulatory flexibility analysis when the agency issues a regulation 
which would have a significant impact on a substantial number of small 
entities. This rule is not an economically significant regulatory 
action. Cost-shares for generic and formulary pharmaceutical agents 
were addressed in the implementation of the TRICARE Senior Pharmacy 
benefit earlier this year. Approximately 1.5 million persons are 
potential beneficiaries of this program, and expected benefits per 
person are approximately $2,000 per year. This rule includes the 
addition of a third tier to the formulary cost-share structure by 
adding non-formulary pharmaceutical agents, which will have an impact 
of less than $100 million. The rule, although not economically 
significant under Executive Order 12866, is significant under Executive 
Order 12866, and has been reviewed by the Office of Management and 
Budget.
    This rule is not a major rule under the Congressional Review Act. 
This rule does not require a regulatory flexibility analysis as it 
would have no significant economic impact on a substantial number of 
small entities.
    This rule will not impose additional information collection 
requirements on the public under the Paperwork Reduction Act of 1995 
(44 U.S.C. 3501-3511).

List of Subjects in 32 CFR Part 199

    Claims, Health care, Health insurance, Military personnel, Pharmacy 
benefits.

    Accordingly, 32 CFR Part 199 is proposed to be amended as follows:

PART 199--[AMENDED]

    1. The authority citation for part 199 continues to read as 
follows:

    Authority: 5 U.S.C. 301; 10 U.S.C. chapter 55.

    2. Section 199.2(b) is amended by adding a sentence at the end of 
the current definition of Prescription drugs and medicines to read as 
follows:


Sec. 199.2  Definitions.

* * * * *
    (b) Prescription drugs and medicines. * * * Prescription drugs and 
medicines may also be referred to as ``pharmaceutical agents''.
* * * * *
    3. Revises Sec. 199.21 to read as follows:


Sec. 199.21  Pharmacy Benefits Program.

    (a) General.--(1) Statutory authority. Title 10, U.S. Code, Section 
1074g requires that the Department of Defense establish an effective, 
efficient, integrated Pharmacy Benefits Program for the Military Health 
System. This law is independent of a number of sections of Title 10 and 
other laws that affect the benefits, rules, and procedures of TRICARE, 
resulting in changes to the rules otherwise applicable to TRICARE 
Prime, Standard, and Extra.
    (2) Uniform Formulary. The Pharmacy Benefits Program features a 
Uniform Formulary of pharmaceutical agents.
    (i) The Uniform Formulary will assure the availability of 
pharmaceutical agents in the complete range of therapeutic classes 
authorized as basic program benefits. Pharmaceutical agents are 
prescription drugs and medicines as defined in Sec. 199.2. A 
therapeutic class is defined as a group of drugs that are similar in 
chemical structure, pharmacological effect, or clinical use.
    (ii) As required by 10 U.S.C 1074g(a)(2) and implemented under the 
procedures established by paragraphs (d) and (e) of this section, 
pharmaceutical agents in each therapeutic class are selected for 
inclusion on the Uniform Formulary based upon the relative clinical 
effectiveness and cost effectiveness of the agents in such class. If a 
pharmaceutical agent in a therapeutic class is determined by the 
Pharmacy and Therapeutics Committee not to have a significant, 
clinically meaningful therapeutic advantage in terms of safety, 
effectiveness, or clinical outcome over other pharmaceutical agents 
included on the Uniform Formulary, it may be classified as a non-
formulary agent. In addition, if the evaluation of the Pharmacy and 
Therapeutics Committee concludes that a pharmaceutical agent in a 
therapeutic class is not cost effective relative to other 
pharmaceutical agents in a therapeutic class, considering costs, 
safety, effectiveness, and clinical outcomes, it may be classified as a 
non-formulary agent.
    (iii) Pharmaceutical agents that are used exclusively for medical 
conditions that are expressly excluded from the TRICARE benefit by 
statute or regulation will not be considered for inclusion on the 
Uniform Formulary.
    (b) Department of Defense Pharmacy and Therapeutics Committee.--(1) 
Purpose. The Department of Defense Pharmacy and Therapeutics Committee 
is established by 10 U.S.C. 1074g to assure that the selection of 
pharmaceutical agents for the Uniform Formulary is based on broadly 
representative professional expertise concerning relative clinical and 
cost effectiveness of pharmaceutical agents and accomplishes an 
effective, efficient, integrated Pharmacy Benefits Program. The 
Committee will function consistent with the Federal Advisory Committee 
Act (5 U.S.C. App. 2).
    (2) Composition. As required by 10 U.S.C. 1074g(b), the committee 
includes representatives of pharmacies of the uniformed service 
treatment facilities, contractor(s) responsible for the TRICARE retail 
pharmacy program, contractor(s) responsible for the National Mail Order 
Pharmacy (NMOP) program, providers in facilities of the uniformed 
services, and TRICARE network providers. Committee members will have 
expertise in treating the

[[Page 17952]]

medical needs of the populations served through such entities and in 
the range of pharmaceutical and biological medicines available for 
treating such populations.
    (3) Executive Council. The Pharmacy and Therapeutics Committee has 
an Executive Council, composed of those voting and non-voting members 
of the Committee who are military members or civilian employees of the 
Department of Defense. The function of the Executive Council is to 
review and analyze issues relating to the operation of the Uniform 
Formulary, including issues of an inherently governmental nature, 
procurement sensitive information, and matters affecting military 
readiness. The Executive Council presents information to the Pharmacy 
and Therapeutics Committee, but is not authorized to act for the 
Committee.
    (c) Uniform Formulary Beneficiary Advisory Panel. As required by 10 
U.S.C 1074g(c), a Uniform Formulary Beneficiary Advisory Panel reviews 
and comments on the development of the Uniform Formulary. The Panel 
includes members that represent non-governmental organizations and 
associations that represent the views and interests of a large number 
of eligible covered beneficiaries. The panel will meet after each 
Pharmacy and Therapeutics Committee quarterly meeting. The Panel's 
comments will be submitted to the Director, TRICARE Management 
Activity. The Director will consider the comments before implementing 
the Uniform Formulary or any recommendations for change made by the 
Pharmacy and Therapeutics Committee. The Panel will function in 
accordance with the Federal Advisory Committee Act (5 U.S.C. App. 2).
    (d) Determinations regarding relative clinical and cost 
effectiveness for the selection of pharmaceutical agents for the 
Uniform Formulary.--(1) Clinical effectiveness. (i) It is presumed that 
pharmaceutical agents in a therapeutic class are clinically effective 
and should be included on the Uniform Formulary unless the Pharmacy and 
Therapeutics Committee finds that a pharmaceutical agent does not have 
a significant, clinically meaningful therapeutic advantage in terms of 
safety, effectiveness, or clinical outcome over the other 
pharmaceutical agents included on the Uniform Formulary in that 
therapeutic class. This determination is based on the collective 
professional judgment of the DoD Pharmacy and Therapeutics Committee 
and consideration of pertinent information from a variety of sources 
determined by the Committee to be relevant and reliable. The DoD 
Pharmacy and Therapeutics Committee has discretion based on its 
collective professional judgment in determining what sources should be 
reviewed or relied upon in evaluating the clinical effectiveness of a 
pharmaceutical agent in a therapeutic class.
    (ii) Sources of information may include but are not limited to:
    (A) Medical and pharmaceutical textbooks and reference books.
    (B) Clinical literature.
    (C) U.S. Food and Drug Administration determinations and 
information.
    (D) Information from pharmaceutical companies.
    (E) Clinical practice guidelines.
    (F) Expert opinion.
    (iii) The DoD Pharmacy and Therapeutics Committee will evaluate the 
relative clinical effectiveness of drugs within a therapeutic class by 
considering information about their safety, effectiveness, and clinical 
outcome.
    (iv) Information considered by the Committee may include but is not 
limited to:
    (A) U.S. Food and Drug Administration approved and other studied 
indications.
    (B) Pharmacology.
    (C) Pharmacokinetics.
    (D) Contraindications.
    (E) Warnings/precautions.
    (F) Incidence and severity of adverse effects.
    (G) Drug to drug, drug to food, and drug to disease interactions.
    (H) Availability, dosing, and method of administration.
    (I) Epidemiology and relevant risk factors for diseases/conditions 
in which the drugs are used.
    (J) Concomitant therapies.
    (K) Results of safety and efficacy studies.
    (L) Results of effectiveness/clinical outcomes studies.
    (M) Results of meta-analyses.
    (2) Cost effectiveness. (i) In considering the relative cost 
effectiveness of pharmaceutical agents in a therapeutic class, the DoD 
Pharmacy and Therapeutics Committee shall evaluate the costs of the 
agents in relation to the safety, effectiveness, and clinical outcomes 
of the other agents in the class.
    (ii) Information considered by the Committee concerning the 
relative cost effectiveness of pharmaceutical agents may include but is 
not limited to:
    (A) Cost of the drug to the Government.
    (B) Impact on overall medical resource utilization and costs.
    (C) Cost-efficacy studies.
    (D) Cost-effectiveness studies.
    (E) Cross-sectional or retrospective economic evaluations.
    (F) Pharmacoeconomic models.
    (G) Patent expiration dates.
    (H) Clinical practice guideline recommendations.
    (I) Existence of existing blanket purchase agreements, incentive 
price agreements, or contracts.
    (e) Evaluation of pharmaceutical agents for determinations 
regarding inclusion on the Uniform Formulary. The DoD Pharmacy and 
Therapeutics Committee will periodically evaluate or reevaluate 
individual drugs and drug classes for determinations regarding 
inclusion or continuation on the Uniform Formulary. Evaluation or 
reevaluation of individual drugs or drug classes may be prompted by a 
variety of circumstances including, but not limited to:
    (1) Approval of a new drug by the U.S. Food and Drug 
Administration;
    (2) Approval of a new indication for an existing drug;
    (3) Changes in the clinical use of existing drugs;
    (4) New information concerning the safety, effectiveness or 
clinical outcomes of existing drugs;
    (5) Price changes;
    (6) Shifts in market share;
    (7) Scheduled review of a therapeutic class; and
    (8) Requests from Pharmacy and Therapeutics Committee members, 
military treatment facilities, or other Military Health System 
officials.
    (f) Administrative procedures for establishing and maintaining the 
Uniform Formulary. (1) Determinations of the Pharmacy and Therapeutics 
Committee are recorded in minutes of Committee meetings. The minutes 
set forth the determinations of the Committee regarding the 
pharmaceutical agents selected for inclusion in the Uniform Formulary 
and summarize the reasons for those determinations. The minutes will 
include a record of the number of members voting for and against the 
Committee's action.
    (2) Comments and recommendations of the Beneficiary Advisory Panel 
are recorded in minutes of Panel meetings. The minutes set forth the 
comments and recommendations of the Panel and summarize the reasons for 
those comments and recommendations. The minutes will include a record 
of the number of members voting for or against the Panel's comments and 
recommendations.
    (3) The Director of the TRICARE Management Activity makes the final 
DoD decisions regarding the Uniform

[[Page 17953]]

Formulary. Those decisions are based on the Director's review of the 
final determinations of the Pharmacy and Therapeutics Committee and the 
comments and recommendations of the Beneficiary Advisory Panel. No 
pharmaceutical agent may be designated as non-formulary on the Uniform 
Formulary unless it is preceded by such recommendation by the Pharmacy 
and Therapeutics Committee. The decisions of the Director of the 
TRICARE Management Activity are in writing and establish the effective 
date(s) of the Uniform Formulary actions.
    (g) Obtaining pharmacy services under the Pharmacy Benefits 
Program.--(1) Points of service. There are four outpatient pharmacy 
points of service: Military Treatment Facilities (MTFs), retail network 
pharmacies, retail non-network pharmacies, and the National Mail Order 
Pharmacy (NMOP). Retail network pharmacies are those non-MTF pharmacies 
that are a part of the network established for TRICARE Prime under 
Sec. 199.17. Retail non-network pharmacies are those non-MTF pharmacies 
that are not part of such a network.
    (2) Availability of formulary drugs.--(i) General. Subject to 
paragraph (g)(2)(ii) of this section, formulary drugs are available 
under the Pharmacy Benefits Program from all of the points of service 
identified in paragraph (g)(1) of this section.
    (ii) Availability of formulary drugs at military treatment 
facilities. Pharmaceutical agents included on the Uniform Formulary are 
available through MTFs, consistent with the scope of health care 
services offered in such facilities. The Basic Core Formulary (BCF) is 
a subset of the Uniform Formulary and is a mandatory component of all 
MTF pharmacy formularies. The BCF contains the minimum set of drugs 
that each MTF pharmacy must have on its formulary to support the 
primary care scope of practice for Primary Care Manager enrollment 
sites. Additions to individual MTF formularies are determined by local 
Pharmacy and Therapeutics Committees based on the scope of health care 
services provided at the respective MTFs. All drugs on the local MTF 
formulary must be available to all categories of beneficiaries.
    (3) Availability of non-formulary drugs--(i) General. Non-formulary 
pharmaceutical agents are generally available under the Pharmacy 
Benefits Program from retail network pharmacies, retail non-network 
pharmacies, and the National Mail Order Pharmacy (NMOP).
    (ii) Availability of non-formulary drugs at military treatment 
facilities. Non-formulary pharmaceutical agents will be available to 
eligible covered beneficiaries through the MTF pharmacies only for 
prescriptions written by MTF providers and approved through the non-
formulary special order process that validates the medical necessity 
for use of the non-formulary pharmaceutical agent.
    (iii) Availability of clinically appropriate non-formulary 
pharmaceutical agents to members of the Uniformed Services. The 
Pharmacy Benefits Program is required to assure the availability of 
clinically appropriate pharmaceutical agents to members of the 
uniformed services, including, where appropriate, agents not included 
on the Uniform Formulary. MTFs shall establish procedures to evaluate 
the clinical appropriateness of prescriptions written for members of 
the uniformed services for pharmaceutical agents not included on the 
uniform formulary. If it is determined that the prescription is 
clinically appropriate, the MTF will provide the pharmaceutical agent 
to the member. TRICARE will conduct an evaluation for clinical 
appropriateness when a member presents a prescription for a non-
formulary pharmaceutical agent to a retail pharmacy or the NMOP.
    (h) Cost-sharing under the Pharmacy Benefits Program--(1) General. 
Under 10 U.S.C. 1074g(a)(6), cost-sharing requirements (independent of 
those established under other provisions of this Part) are established 
in this section for the Pharmacy Benefits Program. Cost-sharing 
requirements are based on the classification of a pharmaceutical agent 
as generic, formulary, or non-formulary, in conjunction with the point 
of service from which the agent is acquired.
    (2) Cost-sharing amounts. Active duty members of the uniformed 
services do not pay cost-shares. For other categories of beneficiaries, 
cost-sharing amounts are as follows:
    (i) For pharmaceutical agents obtained from a military treatment 
facility, there is no co-pay.
    (ii) For pharmaceutical agents obtained from a retail network 
pharmacy there is a:
    (A) $9.00 co-pay per prescription required for up to a 30-day 
supply of a formulary pharmaceutical agent.
    (B) $3.00 co-pay per prescription for up to a 30-day supply of a 
generic pharmaceutical agent.
    (C) $22.00 co-pay per prescription for up to a 30-day supply of a 
non-formulary pharmaceutical agent.
    (iii) For formulary and generic pharmaceutical agents obtained from 
a retail non-network pharmacy there is a 20 percent or $9.00 co-pay 
(whichever is greater) per prescription for up to a 30-day supply of 
the pharmaceutical agent.
    (iv) For non-formulary pharmaceutical agents obtained at a retail 
non-network pharmacy there is a 20 percent or $22.00 co-pay (whichever 
is greater) per prescription for up to a 30-day supply of the 
pharmaceutical agent.
    (v) For pharmaceutical agents obtained under the NMOP program there 
is a:
    (A) $9.00 co-pay per prescription for up to a 90-day supply of a 
formulary pharmaceutical agent.
    (B) $3.00 co-pay for up to a 90-day supply of a generic 
pharmaceutical agent.
    (C) $22.00 co-pay for up to a 90-day supply of a non-formulary 
pharmaceutical agent.
    (vi) A point of service cost-share of 50 percent applies in lieu of 
the 20 percent co-pay for TRICARE Prime beneficiaries who obtain 
prescriptions from retail non-network pharmacies.
    (vii) Except as provided in paragraph (h)(2)(viii) of this section, 
for pharmaceutical agents acquired by TRICARE Standard beneficiaries 
from retail non-network pharmacies, beneficiaries are subject to the 
$150.00 per individual or $300.00 maximum per family annual fiscal year 
deductible.
    (viii) Under TRICARE Standard, dependents of members of the 
uniformed services whose pay grade is E-4 or below are subject to the 
$50.00 per individual or $100.00 maximum per family annual fiscal year 
deductible.
    (ix) The TRICARE catastrophic cap limits apply to Pharmacy Benefits 
Program cost-sharing.
    (x) The $22 per prescription co-pay established in this paragraph 
(h)(2) of this section may be adjusted periodically (but no more 
frequently than annually unless necessary to comply with a statutory 
requirement) based on experience with the Uniform Formulary, changes in 
economic circumstances, and other appropriate factors. Any such 
adjustment must be made upon the recommendation of the Pharmacy and 
Therapeutics Committee and approved by the Assistant Secretary of 
Defense (Health Affairs). Any such adjusted amount will maintain 
compliance with the requirements of 10 U.S.C. 1074g(a)(6).
    (3) Special cost-sharing rule when there is a clinical necessity 
for use of a non-formulary drug. (i) When there is a clinical necessity 
for the use of a non-formulary pharmaceutical agent that is not 
otherwise excluded as a covered

[[Page 17954]]

benefit, the drug or medicine will be provided at the same co-pay as a 
formulary pharmaceutical agent can be obtained.
    (ii) A clinical necessity for use of a non-formulary drug is 
established when the beneficiary or their provider submits sufficient 
information to show that one or more of the following conditions exist:
    (A) The use of formulary agents is contraindicated;
    (B) The patient experiences significant adverse effects from 
formulary agents;
    (C) Formulary agents result in therapeutic failure;
    (D) The patient previously responded to a non-formulary agent and 
changing to a formulary agent would incur unacceptable clinical risk; 
or
    (E) There is no alternative agent on the formulary.
    (iii) Information to establish clinical necessity for use of a non-
formulary pharmaceutical agent should be provided to TRICARE for 
prescriptions submitted to a retail network pharmacy.
    (iv) Information to establish clinical necessity for use of a non-
formulary pharmaceutical agent should be provided as part of the claims 
processes for non-formulary pharmaceuticals obtained through non-
network points of service, claims as a result of other health 
insurance, or any other situations requiring the submission of a manual 
claim.
    (v) Information to establish clinical necessity for use of a non-
formulary pharmaceutical agent may be provided with the prescription 
submitted to the NMOP.
    (vi) Information to establish clinical necessity for use of a non-
formulary pharmaceutical agent may also be provided at a later date as 
an appeal to reduce the non-formulary co-pay to the same co-pay as a 
formulary drug.
    (vii) The process of establishing clinical necessity will not 
unnecessarily delay the dispensing of a prescription. In situations 
where clinical necessity can not be determined in a timely manner, the 
non-formulary pharmaceutical will be dispensed at the non-formulary co-
pay and a refund provided to the beneficiary should clinical necessity 
be established.
    (i) Use of generic drugs under the Pharmacy Benefits Program. (1) 
The designation of a drug as a generic, for the purpose of applying 
cost-shares at the generic rate, will be determined through the use of 
standard pharmaceutical references as part of commercial best business 
practices. Drugs will be designated as generics when listed with an 
``A'' rating in the current Approved Drug Products with Therapeutic 
Equivalence Evaluations (Orange Book) published by the Food and Drug 
Administration, or any successor to such reference. Generics are 
multisource products that must contain the same active ingredients, are 
of the same dosage form, route of administration and are identical in 
strength or concentration.
    (2) The Pharmacy Benefits Program generally requires mandatory 
substitution of generic drugs when available. Brand name drugs will be 
available at the non-formulary co-pay when dispensed in lieu of a 
generic equivalent if selection of the branded product is based solely 
on the personal preference of the provider or beneficiary. In cases in 
which there is a clinical justification for a brand name drug in lieu 
of a generic equivalent, under the standards and procedures of 
paragraph (h)(3) of this section, the generic substitution policy is 
waived.
    (3) When a blanket purchase agreement, incentive price agreement, 
or other Government contract action results in a brand pharmaceutical 
agent being the most cost effective agent for purchase by the 
Government, the Pharmacy and Therapeutics Committee may also designate 
that the drug be cost-shared at the generic rate.
    (j) Preauthorization of certain pharmaceutical agents. Selected 
pharmaceutical agents may be subject to prior authorization or 
utilization review requirements to assure medical necessity, clinical 
appropriateness and/or cost effectiveness. The Pharmacy and 
Therapeutics Committee will assess the need to prior authorize a given 
agent by considering the relative clinical and cost effectiveness of 
agents within a therapeutic class. Agents that require prior 
authorization will be identified by a majority vote of the Pharmacy and 
Therapeutics Committee. The Pharmacy and Therapeutics Committee will 
establish the prior authorization criteria for the agent.
    (k) TRICARE Senior Pharmacy Program. Section 711 of the Floyd D. 
Spence National Defense Authorization Act for Fiscal Year 2001 (Public 
Law 106-398, 114 Stat. 1654A-175) established the TRICARE Senior 
Pharmacy Program for Medicare eligible beneficiaries effective April 1, 
2001. These beneficiaries are required to meet the eligibility criteria 
as prescribed in Sec. 199.3. The benefit under the TRICARE Senior 
Pharmacy Program applies to prescription drugs and medicines provided 
on or after April 1, 2001.
    (l) Effect of other health insurance. The double coverage rules of 
Sec. 199.8 are applicable to services provided under the Pharmacy 
Benefits Program. For this purpose, to the extent they provide a 
prescription drug benefit, Medicare supplemental insurance plans or 
Medicare HMO plans are double coverage plans and will be the primary 
payor.
    (m) Procedures. The Director, TRICARE Management Activity shall 
establish procedures for the effective operation of the Pharmacy 
Benefits Program. Such procedures may include restrictions of the 
quantity of pharmaceuticals to be included under the benefit, 
encouragement of the use of generic drugs, implementation of quality 
assurance and utilization management activities, and other appropriate 
matters.

    Dated: April 4, 2002.
L.M. Bynum,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 02-8615 Filed 4-11-02; 8:45 am]
BILLING CODE 5001-08-P