[Federal Register Volume 70, Number 69 (Tuesday, April 12, 2005)]
[Proposed Rules]
[Pages 19045-19051]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-7270]


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GENERAL SERVICES ADMINISTRATION

48 CFR Parts 538 and 552

[GSAR 2005-G501]
RIN 3090-AI06


General Services Acquisition Regulation; Federal Agency Retail 
Pharmacy Program

AGENCY: Office of the Chief Acquisition Officer, General Services 
Administration (GSA).

ACTION: Proposed rule.

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SUMMARY: The General Services Administration (GSA) is proposing to 
amend the General Services Acquisition Regulation (GSAR) to add a new 
subpart and clause required by the Department of Veterans Affairs (VA), 
consistent with Congressional intent under Section 603 of the Veterans 
Health Care Act of 1992 (VHCA) that certain Federal agencies (i.e., VA, 
Department of Defense (DoD), Public Health Service (including the 
Indian Health Service), and the Coast Guard) have access to Federal 
pricing for pharmaceuticals purchased for their beneficiaries.
    GSA is responsible for the schedules program and rules related to 
its operation. Under GSA's delegation of authority, the VA procures 
medical supplies under the VA Federal Supply Schedule program. VA and 
DoD seek this amendment. This new subpart adds a clause unique to the 
virtual depot system established by a Federal Agency Retail Pharmacy 
Program utilizing contracted retail pharmacies as part of a centralized 
pharmaceutical commodity management program. At this time, only DoD has 
a program in place, and the rule would facilitate DoD's access to 
Federal pricing offered on Federal Supply Schedule (FSS) pharmaceutical

[[Page 19046]]

contracts for covered drugs purchased by DoD and dispensed to TRICARE 
beneficiaries through retail pharmacies in the TRICARE network.

DATES: Interested parties should submit comments in writing on or 
before June 13, 2005 to be considered in the formulation of a final 
rule.

ADDRESSES: Submit comments identified by GSAR case 2005-G501 by any of 
the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Agency Web Site: http://www.acqnet.gov/GSAM/gsamproposed.html. Click on the GSAR case number to submit comments.
     E-mail: [email protected]. Include GSAR case 
2005-G501 in the subject line of the message.
     Fax: 202-501-4067.
     Mail: General Services Administration, Regulatory 
Secretariat (VIR), 1800 F Street, NW, Room 4035, ATTN: Laurieann 
Duarte, Washington, DC 20405.
    Instructions: Please submit comments only and cite GSAR case 2005-
G501 in all correspondence related to this case. All comments received 
will be posted without change to http://www.acqnet.gov/far/ProposedRules/proposed.htm, including any personal information 
provided.

FOR FURTHER INFORMATION CONTACT The Regulatory Secretariat (VIR), Room 
4035, GS Building, Washington, DC 20405, (202) 208-7312, for 
information pertaining to status or publication schedules. For 
clarification of content, contact Ms. Kimberly Marshall at (202) 219-
0986, or by e-mail at [email protected]. Please cite GSAR case 
2005-G501.

SUPPLEMENTARY INFORMATION:

A. Introduction

    Under the General Services Administration (GSA) Schedules (also 
referred to as Multiple Award Schedules and Federal Supply Schedules) 
Program, 41 U.S.C. 259(b) and 40 U.S.C. 501, GSA establishes long-term 
Governmentwide contracts with commercial firms to provide access to 
over four million commercial services and products that can be ordered 
directly from GSA Schedule contractors or through the GSA Advantage! 
\TM\ online shopping and ordering system.
    GSA Schedules offer customers direct delivery of millions of state-
of-the-art, high-quality commercial services and products at volume 
discount pricing. All customers, even those in remote locations, can 
order the latest technology and quality services and products, 
conveniently, and at most-favored customer prices. GSA Schedules also 
offer the potential benefits of shorter lead-times, lower 
administrative costs, and reduced inventories. When using GSA 
Schedules, ordering activities have the opportunity to meet small 
business goals, while promoting compliance with various environmental 
and socioeconomic laws and regulations.
    The General Services Administration has delegated the 
responsibility for certain Federal Supply Schedules to the Department 
of Veterans Affairs (VA). This includes Federal Supply Classification 
(FSC) Group 65, which includes pharmaceuticals and drugs. Federal 
agencies and certain other organizations are eligible to purchase 
pharmaceuticals and drugs from VA supply schedules.

B. Background

    1. The Federal Agency Retail Pharmacy Program Supply Schedule 
clause. These changes will allow VA to revise its schedule contracts to 
accommodate the ordering needs of Federal agencies, i.e. DOD, VA, the 
Public Health Service (including the Indian Health Service), and the 
Coast Guard, pursuant to 38 U.S.C. 8126, through virtual depot systems. 
These depot systems will use contracted retail pharmacies as part of 
the centralized pharmaceutical commodity management program. DoD's 
TRICARE Retail Pharmacy Program is the first such virtual depot system 
and will be the prototype for future systems. This rule will allow 
Federal agencies to take advantage of FSS pricing and receive a refund, 
where appropriate, from drug manufacturers for sales to those agencies 
through the retail pharmacy network virtual depot system, for their 
beneficiaries.
    In general, Federal pricing of pharmaceuticals refers to discounts 
(Federal Ceiling Prices (FCPs)) available from manufacturers under 
Section 603 of the Veterans Health Care Act (VHCA) of 1992 (38 U.S.C. 
8126), and Federal Supply Schedule (FSS) prices under the VA Federal 
Supply Schedule program. The VHCA requires drug manufacturers to enter 
into a Master Agreement with VA under which a Pharmaceutical Pricing 
Agreement is executed establishing a discount for covered drugs 
obtained by VA, DoD, the Public Health Service (including the Indian 
Health Service), and the Coast Guard purchased by these Federal 
agencies under depot contracting systems or listed on the FSS. 
Specifically, this rule adds a new subpart to the GSAR on Federal 
Agency Retail Pharmacy Program (subpart 538.XX) and a new clause, 
Federal Agency Retail Pharmacy Program Supply Schedule (GSAR 552.238-
XX) for those Federal Agency Retail Pharmacy Programs determined by the 
VA Secretary to qualify as a ``depot'' contracting system as set forth 
in 38 U.S.C. 8126.
    This rulemaking assists the ongoing reengineering of the TRICARE 
Pharmacy Benefits Program (TPBP), consistent with the Congressional 
actions and DoD's prior rulemaking described below. This rulemaking is 
consistent with the authority provided by 38 U.S.C. 8126 to acquire 
drugs at the statutorily provided discount through use of a depot 
contracting system.
    Pursuant to the Federal Agency Retail Pharmacy Program clause, the 
drugs for beneficiaries will be deemed to be ordered by the Federal 
agencies through the FSS contract solely for the purposes of pricing, 
delivery, and scope of coverage, but does not confer rights for any 
other purpose. The Federal agencies will obtain refunds on covered 
drugs purchased through the retail pharmacy network by those agencies 
and dispensed to beneficiaries. The drug manufacturer will base the 
refund on the difference between a benchmark price, consisting of 
either the manufacturer's actual sales price to the wholesaler or 
retail pharmacy chain when known and auditable or non-FAMP (non-Federal 
average manufacturer price) and the Federal Supply Schedule price (the 
Federal Ceiling Price or FSS negotiated price, whichever is lower).
    The Federal Agency Retail Pharmacy Program Supply Schedule clause 
in this rule refers to a VA clause, ``Industrial Funding Fee and Sales 
Reporting (JUL 2003)(Variation''). This clause is available at the 
following website: http://www.va.gov/oamm/nac/fsss/.
    2. The TRICARE Pharmacy Benefits Program (TPBP) of the Department 
of Defense. This rule is required by DoD in order to reengineer its 
TRICARE Pharmacy Benefits Program. DoD is directed by statute (title 
10, United States Code, chapter 55) to provide an improved and uniform 
health care benefits program in order to create and maintain high 
morale in the uniformed services. TRICARE is DoD's comprehensive health 
care program for over 9.3 million beneficiaries--active duty Service 
members and their families, as well as retirees and their families and 
survivors--and includes a robust pharmacy benefit that gives 
beneficiaries the option of obtaining drugs from military treatment 
facilities, by mail order, or through retail

[[Page 19047]]

pharmacies. The TRICARE pharmacy website is at http://www.tricare.osd.mil/pharmacy/. The TRICARE Pharmacy Benefits Program 
uses the VA supply schedules, among other vehicles.
    Section 703 of the National Defense Authorization Act for FY 1999 
(Public Law 105-261) required the Secretary of Defense to plan a 
``system-wide redesign of the military and contractor retail and mail-
order pharmacy system of the Department of Defense by incorporating 
'best business practices' of the private sector.'' In addition, section 
701 of the FY 2000 National Defense Authorization Act (Public Law 106-
65) enacted 10 U.S.C. 1074g, which directed the Secretary to 
``establish an effective, efficient, integrated pharmacy benefits 
program.''
    DoD has reengineered the TPBP to meet these Congressional 
requirements. The redesign of the TPBP was the subject of public 
rulemaking (see 69 FR 17035, April 1, 2004) and is codified at 32 CFR 
Section 199.21.
    One key goal of the reengineering effort is to extend Federal 
pricing of pharmaceuticals to prescriptions filled for TRICARE 
beneficiaries by retail pharmacies in the TRICARE network. DOD has 
taken advantage of the statutory pricing authority with respect to 
drugs purchased and dispensed through the TRICARE mail order pharmacy 
program and military hospitals. DoD is now in a position to extend 
Federal pricing to the TRICARE retail pharmacy network. As a result of 
reengineering, DoD is able to link DoD's drug purchases from network 
pharmacies to the manufacturer of the purchased drug, including those 
manufacturers with FSS contracts.
    In particular, the redesigned TPBP leverages new technology to 
create a centralized commodity management system as required under the 
VHCA for a depot contracting system. As previously stated, the VHCA 
requires drug manufacturers to enter into a Master Agreement with VA 
under which a Pharmaceutical Pricing Agreement is executed establishing 
a discount for covered drugs purchased by VA, DoD, the Public Health 
Service (including the Indian Health Service), and the Coast Guard 
under depot contracting systems or listed on the FSS. All drug 
manufacturers that signed a Master Agreement and Pharmaceutical Pricing 
Agreement with VA were advised by letter signed by the Acting Executive 
Director, VA National Acquisition Center, dated October 14, 2004 (which 
letter is hereby incorporated by reference), that the VA Secretary had 
determined that DoD's TRICARE Retail Pharmacy Program was a centralized 
pharmaceutical commodity management system that met the definition of 
``depot'' contracting system as set forth in 38 U.S.C. 8126. While that 
letter authorized DoD to obtain Federal Ceiling Prices for drugs 
purchased through the TRICARE retail pharmacy network after September 
30, 2004, this rule will extend FSS pricing to such drugs.
    Pursuant to the terms of a contract awarded by DoD, a commercial 
pharmacy benefits manager (PBM) will provide a retail pharmacy network 
for the DoD TRICARE Management Activity. The PBM will issue payment 
with Government funds for prescriptions dispensed by retail network 
pharmacies to TRICARE beneficiaries. DoD will provide manufacturers 
with itemized data on covered drugs purchased through TRICARE retail 
network pharmacies in order to obtain appropriate refunds on covered 
drugs delivered to TRICARE beneficiaries.
    DoD will use the reporting and audit capabilities of the Pharmacy 
Data Transaction Service (PDTS) to verify beneficiary eligibility, 
authorize prescription payments, and validate the refund owed to the 
Government.
    The PBM contractor has no role in DoD's process for obtaining 
refunds based on FSS prices (whether Federal Ceiling Prices or 
negotiated lower FSS prices) already established by VA. Nor is DoD's 
payment to the PBM contractor related, either directly or indirectly, 
to Federal pricing of pharmaceuticals dispensed to TRICARE 
beneficiaries by network pharmacies.
    Congress has anticipated the extension of Federal pricing to the 
redesigned TPBP. In the Defense Appropriations Act for FY 2005 (Public 
Law 108-287), Congress decreased the funding in the Defense Health 
Program account to reflect savings generated from the application of 
Federal pricing to the TRICARE pharmacy program. In addition, Senate 
Report No. 108-260, accompanying the proposed National Defense 
Authorization Act for Fiscal Year 2005, S. 2400, reiterates an 
expectation for savings and recommends further decreases to TRICARE 
program funding. The report (page 313) states:
    The budget request reflected $172.0 million in savings related 
to the use of federal pricing for retail pharmaceuticals in fiscal 
year 2005. The committee understands that the funding in the defense 
health program request did not reflect anticipated savings for 
retail pharmaceuticals beginning in June 2004, when federal pricing 
authorized by the Secretary of Veterans Affairs under title 38, 
United States Code, is applied in a new retail pharmacy program. 
Accordingly, the committee recommends a decrease of $44 million in 
the defense health program account.
    It should be noted that the effective date in the aforementioned 
committee report has been extended to October 1, 2004.
    3. The Department of Veterans Affairs. The General Services 
Administration is promulgating this rule also to assist efforts by the 
Department of Veterans Affairs to provide medical care and associated 
services to veterans of Operation Iraqi Freedom (OIF) and Operation 
Enduring Freedom (OEF), as well as to provide more efficient access to 
newly written prescriptions for veterans currently receiving medical 
care at locations where VA pharmacy services are not immediately 
available. Such venues primarily include Community Based Outpatient 
Clinics (CBOCs). As is the current practice, refills would be handled 
at VA's consolidated mail outpatient pharmacies (CMOPs).
    As some portion of OIF and OEF veterans will be returning from 
combat areas to their homes in locations where VA pharmacy services are 
not immediately available, VA is currently contemplating how to meet 
the needs of these returning soldiers for timely, high-quality and 
cost-effective prescription services. Based upon the July 29, 2004, VHA 
report, ``Analysis of VA Health Care Utilization Among Veterans of 
Operation Iraqi Freedom and Operation Enduring Freedom'', approximately 
27,571 (16 percent) of the 168,528 separated OIF veterans and 5,113 (11 
percent) of the 45,880 separated OEF veterans identified by VA based on 
data provided by DoD, have sought VA health care since they were 
deployed. VA believes that contractual arrangements whereby VA pays for 
new prescriptions at Federal prices in community settings will allow VA 
to meet its obligations to its existing patients, as well as newly 
enrolled OIF and OEF beneficiaries, in a cost-effective and timely 
manner.
    In the future, it is likely that VA will make use of this rule to 
provide prescription services to beneficiaries authorized to receive 
services under one or more of the following programs: VA's CHAMPVA, VA 
Fee Program, Spina Bifada Health Care Program, Children of Women 
Vietnam Veterans Program, or other contracted medical care programs. 
While VA does not currently have contractual arrangements in place to 
immediately take advantage of this rule, it is actively engaged in the 
preparatory work to solicit for such contracts.

[[Page 19048]]

CHAMPVA

    CHAMPVA is a health care benefits program for--
     Dependents of veterans who have been rated by the VA as 
having a total and permanent disability;
     Survivors of veterans who died from VA-rated service-
connected conditions, or, who at the time of death, were rated 
permanently and totally disabled from a VA-rated service-connected 
condition; and
     Survivors of persons who died in the line of duty and not 
due to misconduct and not otherwise entitled to benefits under DoD's 
TRICARE program.
    Under CHAPVA, VA shares the cost of covered health care services 
and supplies with eligible beneficiaries. As is the current practice, 
patients would continue to have a choice to refill their medications 
through the VA CMOP under the Made-by-Mail program. For fiscal year 
2004 (FY 04), there were 234,000 beneficiaries enrolled and 149,400 
unique users for the CHAMPVA program.

VA Fee Program

    The VA Fee program provides authorization for certain veterans to 
receive community-based medical care, hospital care, home care, nursing 
home care, and services when VA facilities are not available. Fee care 
is governed by 38 U.S.C. 1703, 38 U.S.C. 1725, and 38 U.S.C. 1728. 
Approved services are generally paid on a fee-for-service or contract 
schedule. Authorization may be for brief or long-term episodes of care.

Spina Bifida Health Care Program

    Spina Bifida Health Care Program provides benefits to Vietnam 
veterans' birth children diagnosed with spina bifida and who are in 
receipt of a VA regional office award for spina bifida benefits. Under 
this program, VA assumes financial responsibility for medical service 
and supplies related to the treatment of spina bifida, including 
complications and associated conditions, excluding spina bifida 
occulta. Spina bifida beneficiaries are not responsible for a cost 
share. In FY 04, there were 1,164 beneficiaries enrolled and 689 unique 
users for the Spina Bifida Health Care program.

Children of Women Vietnam Veterans Program

    Children of Women Vietnam Veterans (CWVV) program provides benefits 
for women Vietnam veterans' birth children diagnosed with one or more 
covered birth defects as determined by the Denver VA regional office. 
Under this program, VA assumes financial responsibility for medical 
services and supplies related to the treatment of the covered birth 
defects, including complications and associated conditions. CWVV 
beneficiaries are not responsible for a cost share. In FY 04, there 
were eight beneficiaries enrolled and no unique users for the CWVV 
program.
    4. The U.S. Public Health Service (including the Indian Health 
Service). Although the U.S. Public Health Service/Indian Health Service 
do not have current plans to establish a Federal Agency Retail Pharmacy 
program, if and when the VA Secretary determines that such a program 
initiated by these agencies qualifies as a ``depot'' contracting system 
as set forth in 38 U.S.C. 8126, this rule would apply to that program.

C. Executive Order 12866

    We have examined the impacts of the proposed rule under Executive 
Order 12866. Executive Order 12866 directs agencies to assess all costs 
and benefits of available regulatory alternatives and, when regulation 
is necessary, to select regulatory approaches that maximize net 
benefits (including potential economic, environmental, public health 
and safety, and other advantages; distributive impacts; and equity). We 
believe that this proposed rule is consistent with the regulatory 
philosophy and principles identified in the Executive order. This 
proposed rule is considered a significant regulatory action under the 
Executive order.

D. Unfunded Mandates Reform Act

    Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires 
that agencies prepare a written statement, which includes an assessment 
of anticipated costs and benefits, before issuing ``any rule that 
includes any Federal mandate that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100,000,000 or more (adjusted annually for 
inflation) in any one year.'' The current threshold after adjustment 
for inflation is $115 million, using the implicit GDP deflator for 
2003, the most recent year for which final data exist. This proposed 
rule does not contain such a mandate.

E. Congressional Review Act

    The Congressional Review Act (5 U.S.C. 804) requires that 
regulations that have been identified as being major must be submitted 
to Congress before taking effect. If implemented as proposed, this rule 
is not a major rule under the Congressional Review Act.

F. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-612), requires 
agencies to analyze regulatory options that would minimize any 
significant impact of a rule on small entities. This rulemaking assists 
VA's efforts to revise its schedule to accommodate the ordering needs 
of Federal agencies, i.e., DoD, VA, the Public Health Service 
(including the Indian Health Service), and the Coast Guard, pursuant to 
38 U.S.C. 8126, through virtual depot systems. At this time, only DoD 
has a program in place, TRICARE Retail Pharmacy Program, that is 
designed to work through a virtual depot system. The Coast Guard 
utilizes the TRICARE Retail Pharmacy Program and, thus, is included in 
the DoD TRICARE Retail Pharmacy Initial Regulatory Flexibility Analysis 
discussion below.
    The changes may have a significant economic impact on a substantial 
number of small entities within the meaning of the Regulatory 
Flexibility Act. However, this appears to be very unlikely. The Initial 
Regulatory Flexibility Analysis is as follows:

Initial Regulatory Flexibility Analysis, GSAR Case 2005-G501, Federal 
Agency Retail Pharmacy Program

    This Initial Regulatory Flexibility Analysis has been prepared 
in accordance with Section 603, Title 5, of the United States Code.
    1. Description of the reasons why action by the agency is being 
considered. This rule amends the General Services Acquisition 
Regulation (GSAR) to add a new subpart and clause to complement 
ongoing efforts by the Department of Defense (DoD) to reengineer its 
TRICARE Retail Pharmacy Benefits Program, and the Department of 
Veterans Affairs' (VA) plans to create a similar program. This is 
consistent with Congressional intent under Section 603 of the 
Veterans Health Care Act of 1992 (VHCA) that certain Federal 
agencies (i.e., VA, DoD, Public Health Service (including the Indian 
Health Service), and the Coast Guard) have access to Federal pricing 
for pharmaceuticals purchased for their beneficiaries.
    2. Succinct statement of the objectives of, and legal basis for, 
the rule. Section 603 of the VHCA requires that certain Federal 
agencies (i.e., VA, DoD, Public Health Service (including the Indian 
Health Service), and the Coast Guard) have access to Federal pricing 
for pharmaceuticals purchased for their beneficiaries. This rule 
would facilitate DoD's access to Federal pricing offered on Federal 
Supply Schedule (FSS) pharmaceutical contracts for covered drugs 
purchased by DoD and dispensed to TRICARE beneficiaries through 
retail pharmacies in the TRICARE network. It would also facilitate 
access to the same Federal pricing for retail network pharmacy 
programs instituted by the other agencies named in section 603. GSA 
has overall responsibility for the schedules program and

[[Page 19049]]

rules related to its operation and have empowered VA, under a GSA 
delegation of authority, to procure medical supplies under the VA 
Federal Supply Schedule program. VA and DoD both seek this amendment 
to the GSAR.
    3. Description of and, where feasible, estimate of the number of 
small entities to which the rule will apply. The changes may have a 
significant economic impact on a substantial number of small 
entities within the meaning of the Regulatory Flexibility Act, 5 
U.S.C. 601 et seq., but this appears to be very unlikely because of 
the research conducted (queries of the Central Contractor 
Registration system database, as well as information provided 
directly by DoD and VA officials).
    It is estimated that the rule will apply to approximately two 
dozen small businesses as a result of these changes. It should be 
noted that more than half of these businesses have annual gross 
sales exceeding $20 million, thus comparing very favorably with 
their large business counterparts. Further, the high gross sales 
figures of the small businesses in the pharmaceutical industry 
indicates the reporting of sales and the payment of refunds to the 
Federal agencies named in section 603 will have little significant 
impact on them.
    Since subcontractors are not required to be registered in CCR, 
the total number of small businesses positively impacted may be 
greater than this; but not significantly so, since subcontracting is 
not common in the production of pharmaceuticals.
    4. Description of projected reporting, recordkeeping, and other 
compliance requirements of the rule, including an estimate of the 
classes of small entities which will be subject to the requirement 
and the type of professional skills necessary for preparation of the 
report or record. The rule will impose a new three-step reporting/ 
recordkeeping requirement on all entities that hold VA Federal 
Supply Schedule contracts (for FSC Group 65, which includes covered 
pharmaceuticals and drugs), including small entities. The first step 
is the reporting of VA schedule sales of covered drugs (under 
section 603) under the TRICARE and other Federal agency retail 
pharmacy programs. The second step is the calculation and the 
payment of the refunds owed to DoD and other named Federal agencies 
with similar programs. The third step is the calculation and payment 
of the industrial funding fee owed to VA. This paperwork 
justification covers the calculation of the refunds owed to DoD. The 
types of professional skills necessary for the reporting/
recordkeeping and processing of payment is very minimal--
predominately spreadsheet and database operational skills which are 
both essentially clerical. The recordkeeping and processing of 
payment transactions can both be accomplished electronically, so the 
effort to be expended on this is minimal.
    5. Identification, to the extent practicable, of all relevant 
Federal rules which may duplicate, overlap, or conflict with the 
rule. This rule is to assist DoD in the final phase of implementing 
the following: Section 703 of the National Defense Authorization Act 
for FY 1999 (Public Law 105-261) which required the Secretary of 
Defense to plan a system-wide redesign of the military and 
contractor retail and mail-order pharmacy system of the Department; 
and Section 701 of the FY 2000 National Defense Authorization Act 
(Public Law 106-65) enacted 10 U.S.C. 1074g, which directed the 
Secretary to establish an effective, efficient, integrated pharmacy 
benefits program. This rule also facilitates access to the same 
Federal pricing for retail network pharmacy programs instituted by 
other agencies under section 603. There are no other known Federal 
rules which may duplicate, overlap, or conflict with this rule.
    6. Description of any significant alternatives to the rule which 
accomplish the stated objectives of applicable statutes and which 
minimize any significant economic impact of the rule on small 
entities. There are no known alternatives to accomplish the stated 
objectives to assist DoD's reengineered TRICARE Retail Pharmacy 
Benefits Program and VA's planned retail pharmacy program, which 
would further lessen any significant economic impact of the rule on 
small entities. As stated previously, the economic impact is deemed 
to be minimal.
    The Regulatory Secretariat has submitted a copy of the IRFA to the 
Chief Counsel for Advocacy of the Small Business Administration. 
Interested parties may obtain a copy from the Regulatory Secretariat. 
The Councils will consider comments from small entities concerning the 
affected GSAR Parts 538 and 552 in accordance with 5 U.S.C. 610. 
Interested parties must submit such comments separately and should cite 
5 U.S.C 601, et seq. (GSAR case 2005-G501), in correspondence.

G. Paperwork Reduction Act

    This rulemaking assists VA's efforts to revise its schedule to 
accommodate the ordering needs of Federal agencies, i.e., DoD, VA, the 
Public Health Service (including the Indian Health Service), and the 
Coast Guard, pursuant to 38 U.S.C. 8126, through virtual depot systems. 
At this time only DoD has a program in place, TRICARE Retail Pharmacy 
Program that is designed to work through a virtual depot system. The 
Coast Guard utilizes the TRICARE Retail Pharmacy Program; and, thus, is 
included in the DoD TRICARE Retail Pharmacy Paperwork Burden discussion 
below.
    The discussion of information collection activities below applies 
to the DoD TRICARE program. It is expected that other eligible agencies 
will request additional collections of information specific to their 
respective programs. At such time eligible agencies will request OMB 
numbers for prospective collections and seek public comment.
    Summary of Collection of Information: DoD is revising the 
information collection requirements under current OMB control number 
0720-0032. Specifically, under the revised collection of information, 
respondents (drug manufacturers) will base refund calculation reporting 
requirements on both the Federal Ceiling Price and the Federal Supply 
Schedule Price, whichever is lower. Prior to this rulemaking, drug 
manufacturers' reporting requirements addressed only the Federal 
Ceiling Price.
    Proposed Use of Information: DoD will use the reporting and audit 
capabilities of the Pharmacy Data Transaction Service (PDTS) to 
validate refunds owed to the Government.
    Annual Reporting Burden: Public reporting burden for this 
collection of information is estimated to average 8 hours per response, 
including the time for reviewing instructions, searching existing data 
sources, gathering and maintaining the data needed, and completing and 
reviewing the collection of information.
    The annual reporting burden is estimated as follows:
    Respondents: There are approximately 300 drug manufacturers 
responding to this collection.
    Responses per respondent: 4
    Total annual responses: 1,200
    Preparation hours per response: 8
    Total response burden hours: 9,600

H. Request for Comments Regarding Paperwork Burden

    Submit comments, including suggestions for reducing this burden, 
not later than June 13, 2005 to: DoD Health Desk Officer, OMB, Room 
10102, NEOB, Washington, DC 20503, and a copy to the General Services 
Administration, Regulatory Secretariat (VIR), 1800 F Street, NW, Room 
4035, Washington, DC 20405, and a copy to Colonel James Young, or Major 
Travis Watson, TRICARE Management Activity, 5111 Leesburg Pike, Suite 
810, Falls Church, VA 22041-3206 (703 681-0039).
    Public comments are particularly invited on: whether this 
collection of information is necessary for the proper performance of 
functions of the DoD, and will have practical utility; whether our 
estimate of the public burden of this collection of information is 
accurate, and based on valid assumptions and methodology; ways to 
enhance the quality, utility, and clarity of the information to be 
collected; and ways in which we can minimize the burden of the 
collection of information on those who are to respond, through the use 
of appropriate technological collection techniques or other forms of 
information technology.

[[Page 19050]]

    Requester may obtain a copy of the justification from the Colonel 
James Young or Major Travis Watson, TRICARE Management Activity, 5111 
Leesburg Pike, Suite 810, Falls Church, VA 22041-3206 (703 681-0039). 
Please cite OMB Control Number 0720-0032, GSAR case 2005-G501, Federal 
Agency Retail Pharmacy Program, in all correspondence.

List of Subjects in 48 CFR Parts 538 and 552

    Government procurement.

    Dated: April 6, 2005.
David A. Drabkin,
Senior Procurement Executive, Office of the Chief Acquisition Officer, 
General Services Administration.
    Therefore, GSA proposes amending 48 CFR parts 538 and 552 as set 
forth below:
    1. The authority citation for 48 CFR parts 538 and 552 continues to 
read as follows:

    Authority: 40 U.S.C. 121(c).

PART 538--FEDERAL SUPPLY SCHEDULE CONTRACTING

    2. Add Subpart 538.XX, consisting of sections 538.XX01 and 
538.XX02, to read as follows:
Sec.
538.XX01 Scope.
538.XX02 Contract clause.

Subpart 538-XX--Federal Agency Retail Pharmacy Program


538.XX01  Scope.

    This subpart prescribes a clause that applies to a retail pharmacy 
program of any of the Federal agencies covered by Section 603 of the 
Veterans Health Care Act (VHCA) of 1992, Public Law 102-585 (38 U.S.C. 
8126). As described in 38 U.S.C. 8126(b), the Federal agencies include 
the Department of Veterans Affairs (VA), Department of Defense (DoD), 
Public Health Service (including the Indian Health Service), and the 
Coast Guard.


538.XX02  Contract clause.

    The contracting officer shall insert the clause at 552.238-XX, 
Federal Agency Retail Pharmacy Program Supply Schedule, in solicitation 
and schedule contracts for Schedule 65, Part I, Section B, to apply 
only to orders for a Retail Pharmacy Program of the Department of 
Veterans Affairs, Department of Defense, Public Health Service 
(including the Indian Health Service), and the Coast Guard.

PART 552--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    3. Add section 552.238-XX to read as follows:


552.238-XX  Federal Agency Retail Pharmacy Program Supply Schedule.

    As prescribed in 538.XX02, insert the following clause:

FEDERAL AGENCY RETAIL PHARMACY PROGRAM SUPPLY SCHEDULE (DATE)

    (a) This clause applies only to a Federal Agency Retail Pharmacy 
Program administered by one of the Federal agencies described in 
Section 603 of the Veterans Health Care Act (VHCA) of 1992 (38 
U.S.C. 8126). When this clause applies, the FAR clauses 52.216-18, 
52.216-19, GSAR clause 552.232-74, and FSS clauses I-FSS-103, and F-
FSS-202-G do not apply.
    (b) The Federal Agency Retail Pharmacy Program procedures, 
including pricing procedures, and those in this clause, are 
consistent with 38 U.S.C. 8126. The Federal agency enters into 
contracts with a commercial pharmacy benefits manager to provide a 
retail pharmacy network. The pharmacy benefits manager will issue 
payment with Government funds to the retail pharmacy for 
prescriptions dispensed to the Federal agency beneficiaries. The 
Federal agency will provide to FSS contractors itemized data on 
covered drugs procured through the agency's retail network 
pharmacies, in order to obtain appropriate refunds on covered drugs 
delivered to the Federal agency's beneficiaries and subject to 
Federal pricing. The drugs will be deemed to have been ordered by 
the Federal agency through the FSS contract, for the purposes of 
establishing price, delivery, and scope of coverage, but does not 
confer rights for any other purpose. The Federal agency will obtain 
refunds on covered drugs from FSS contractors based on the 
difference between a benchmark price, consisting of either the 
manufacturer's actual sales price to the wholesaler or retail 
pharmacy chain when known and auditable or non-FAMP (non-Federal 
average manufacturer price), and the Federal Supply Schedule price 
(the Federal Ceiling Price or FSS negotiated price, whichever is 
lower).
    (c) Ordering. (1) All Federal agency network retail pharmacy 
prescription orders for covered drugs are subject to the terms and 
conditions of this contract. In the event of conflict between a 
prescription order and this contract, the contract shall control.
    (2) A Federal agency's instruction to its contracted or 
subcontracted retail pharmacy to fill a prescription for a health 
care beneficiary of the agency, under its virtual depot system for 
centralized pharmaceutical management, shall be deemed to be an 
order placed against this contract.
    (d) Invoice payments. The time and method of payments to the 
Contractor for FSS items deemed (for the purposes of establishing 
price, delivery, and scope of coverage) to have been ordered by a 
Federal agency through its contracted or subcontracted retail 
pharmacies will be determined according to commercial agreements 
between the FSS Contractor and such pharmacies or their authorized 
Pharmaceutical Prime Vendors.
    (e) Scope of contract worldwide. (1) This solicitation is issued 
to establish contracts which may be used as sources of supplies or 
services described herein for domestic and/or overseas delivery.
    (2) Definition. Domestic delivery is delivery within the 48 
contiguous states, Alaska, Hawaii, Puerto Rico, Washington, DC, and 
U.S. territories. Domestic delivery also includes a port or 
consolidation point, within the aforementioned areas, for orders 
received from overseas activities.
    (3) Contractor will provide domestic delivery only for Federal 
agency retail pharmacy orders.
    (4) The Contractor is obligated to accept orders received from 
activities within the Executive branch of the Federal Government. 
Federal beneficiary prescriptions for FSS-listed covered drugs that 
are filled through a Federal agency's directly contracted or 
indirectly subcontracted retail pharmacy, under the agency's virtual 
depot system for centralized pharmaceutical commodity management, 
will be deemed to constitute Executive branch orders, solely for the 
purposes of establishing pricing, delivery, and scope of coverage, 
but does not confer rights for any other purpose.
    (f) Delivery prices. Prices offered must cover delivery of FSS 
covered drugs to all Federal agency contracted or subcontracted 
retail pharmacies (or to their authorized PPVs) for use in filling 
prescriptions for such agencies' beneficiaries, as part of the 
agencies' virtual depot system for centralized pharmaceutical 
commodity management.
    (g)Electronic Commerce. A Federal Agency Retail Pharmacy Program 
will require a Contractor to receive and process refund requests 
submitted according to the following procedures:
    (1) On the 15th of the month following the end of each calendar 
year quarter, the Federal Agency Pharmacy Benefits Office (PBO) will 
generate and submit to each pharmaceutical manufacturer a 
Utilization Flat File Layout Report for their products procured 
during the prior quarter, based on National Council for Prescription 
Drug Programs (NCPDP) Standards Version 03 Release 02 (or most 
current version).
    (i) The 15th was selected to enable reversals to clear within 
the 10-day hold period.
    (ii) NCPDP represents industry standards.
    (iii) The Federal agency, VA, and industry (as a whole) will 
establish an interface control document for the transmission and 
file layout, to include the population of optional and conditional 
data elements for standardization for all of industry.
    (iv) Separate reports will be generated for purchases paid from 
the Department of Defense's (DoD's) Accrual Fund and DHP account.
    (2) Within the Utilization Flat File Detail Record (UD), the 
product code identifier will be used by the Contractor to sum (grand 
metric quantity) the total metric decimal quantity of individual 
records of each product purchased by the Government

[[Page 19051]]

through individual Federal agency retail network pharmacies. The 
grand metric quantity for each product will then be rounded down to 
the nearest package size based on the product code identifier to 
yield the total number of units procured by the Federal agency.
    (i) The National Drug Code (NDC) number will be used to populate 
the product code identifier. The NDC should correlate to the actual 
product dispensed by the pharmacy, based on commercial best practice 
and data integrity requirements demanded by health plans and other 
insurers.
    (ii) The Federal agency's Office of Program Integrity will be 
notified of any pharmacies identified (by Government, industry, or 
other means) as submitting fraudulent NDCs.
    (iii) NDCs assigned by product repackagers will only be included 
in the reports when the repackager NDC can be correlated to the NDC 
of the originating product.
    (3) Contractor Refund and Reporting Schedule. (i) The Contractor 
shall complete refund calculations not later than 60 days following 
the date of the quarterly UD Report.
    (ii) The Contractor shall make refund payments so that such 
payments are received by DoD not later than 70 days following the 
date of the quarterly UD Report. At the time of refund payment, the 
Contractor shall also send to the Federal Agency's Pharmacy Benefits 
Office (PBO) a Reconciliation Report corresponding to the quarterly 
UD Report and resulting refund payment.
    (h) Resolution of Refund Data Disagreements. (1) If the 
Contractor disagrees with the Federal agency data in the quarterly 
refund request under paragraph (g) of this clause, the Contractor 
shall provide prompt written notice to the PBO. Such notice shall be 
received by the PBO no later than 10 business days after the 
Contractor's discovery of the alleged error, but in no event no 
later than one year after the date of the quarterly report 
containing the alleged erroneous data. The notice shall include 
specific identification of the alleged error(s) and the specific 
reason(s) the Contractor believes the data to be in error, along 
with all available documentation that supports the Contractor's 
allegation(s).
    (2) The Federal agency's PBO will initiate a prompt review of 
the data following receipt of the notice and documentation provided 
by the Contractor. The parties agree to use their best good faith 
efforts to resolve any disagreement within 60 days of the PBO's 
receipt of the Contractor's written notice. During this period, the 
Contractor shall proceed diligently with performance of this 
contract and will exhaust administrative remedies under this clause 
prior to filing a dispute under the Disputes clause incorporated 
into this contract. Performance includes remittance of any refund 
due the Federal agency based upon the data provided by the PBO with 
which the Contractor disagrees. If the written notice of 
disagreement is resolved in favor of the Contractor, the Federal 
agency shall reimburse the Contractor the amount of remitted refund 
attributed to the error and simple interest on the reimbursed amount 
at the rate determined in accordance with the Contract Disputes Act 
of 1978, as amended (41 U.S.C. 601-603), from the date of receipt of 
the Contractor's remittance of the refund in disagreement.
    (3) If the Federal agency and the Contractor cannot resolve the 
disagreement within 60 days following receipt of the Contractor's 
written notice (and any time extensions mutually agreed to by the 
parties), the Contractor shall have exhausted administrative 
remedies under this clause and may proceed with disputes remedies 
available under the Disputes clause and the Contract Disputes Act of 
1978, as amended.
    (i) Industrial Funding Fee and Sales Reporting. The Contractor 
shall report all contract sales covered by this clause and pay the 
Industrial Funding Fee (IFF) included therein, as required by VA's 
variation of clause 552.238-74 of the contract, ``Industrial Funding 
Fee and Sales Reporting (JUL 2003) (Variation''). All sales of 
covered drugs made through retail pharmacies under this clause are 
deemed to be reportable when the Contractor receives the quarterly 
Utilization Flat File Layout Report(s) (or its functional 
substitute), applies the appropriate FSS contract price (including 
IFF) to the rounded total number of units of each covered product 
purchased by the submitting agency (as shown on the Flat File 
Report), and computes the total dollar sales of each product. These 
sales are counted as FSS sales on the date the computations are 
finished (for example, the results of computations finished on March 
10 are reported 60 days after the end of the first calendar quarter, 
on May 30). The grand total of all retail pharmacy sales (at the 
appropriate FSS contract prices) under this clause computed during a 
calendar quarter shall be included in the Contractor's quarterly 
sales report to VA. That information and the resultant IFF shall be 
provided to VA according to the timelines and procedures established 
in 552.238-74.
    (End of clause)
[FR Doc. 05-7270 Filed 4-11-04; 8:45 am]
BILLING CODE 6820-61-S