[Federal Register Volume 71, Number 37 (Friday, February 24, 2006)]
[Notices]
[Pages 9565-9567]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-1647]


-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare and Medicaid Services


Notice of Hearing: Reconsideration of Disapproval of Iowa State 
Plan Amendments 05-003

AGENCY: Centers for Medicare and Medicaid Services (CMS), HHS.

ACTION: Notice of hearing.

-----------------------------------------------------------------------

SUMMARY: This notice announces an administrative hearing to be held on 
April 13, 2006, at the Richard Bolling Federal Building, 601 E. 12th 
Street, Room 235, Kansas City Conference Room, Kansas City, MO 64106-
2898, to

[[Page 9566]]

reconsider CMS' decision to disapprove Iowa State plan amendment 05-
003.
    Closing Date: Requests to participate in the hearing as a party 
must be received by the presiding officer by March 13, 2006.

FOR FURTHER INFORMATION CONTACT: Kathleen Scully-Hayes, Presiding 
Officer, CMS, Lord Baltimore Drive, Mail Stop LB-23-20, Baltimore, 
Maryland 21244, Telephone: (410) 786-2055.

SUPPLEMENTARY INFORMATION: 
    This notice announces an administrative hearing to reconsider CMS' 
decision to disapprove Iowa State plan amendment (SPA) 05-003 which was 
submitted on March 29, 2005. This SPA was disapproved on November 23, 
2005. Under SPA 05-003, Iowa sought to simplify its State plan 
provisions on drug pricing, reflecting the implementation of State 
supplemental rebates and preferred drug list.
    This amendment was disapproved because it did not comport with the 
requirements of the Federal regulations at 42 CFR 447.331(c) and 
sections 1902(a)(54) and 1927 of the Social Security Act (the Act) and 
implementing regulations.
    Specifically, Iowa failed to demonstrate that SPA 05-003 is 
consistent with the Federal upper limit (FUL) regulations at 42 CFR 
447.331(c). This regulation provides that the upper limit for payment 
for multiple source drugs for which a specific limit has been 
established does not apply if a physician certifies in his or her own 
handwriting that a specific brand is medically necessary. The State 
asserted that the physician certification provision (regarding the 
medical necessity of a brand name drug) need not be followed as part of 
the State's drug reimbursement methodology because the net cost, after 
rebates, of these brand name drugs will not exceed the FUL. The State, 
however, failed to demonstrate how this assertion is consistent with 
the plain language of the regulation which provides for an FUL based on 
State payment rates for prescription drugs (without regard to 
manufacturer rebates), and an FUL exemption based on physician 
certification.
    The State also failed to demonstrate compliance with sections 
1902(a)(54) and 1927 of the Act, which provide for the calculation of 
rebates for covered outpatient drugs, based on payment that was made 
under the State plan. Section 1927(b)(1)(B) of the Act provides for an 
offset against medical assistance to account for such rebates. Such an 
offset would not be necessary if the reference to ``payment'' was 
intended to be a net payment and include rebates that are eventually 
provided under section 1927. The State did not demonstrate that its 
methodology is consistent with sections 1902(a)(54) and 1927 of the Act 
which are not intended to change State payment rates for prescription 
drugs and which, as noted previously, provide for calculation of 
rebates based on State payment.
    For the reasons cited above, and after consultation with the 
Secretary, as required by the Federal regulations at 42 CFR section 
430.15(c)(2), Iowa SPA 05-003 was disapproved.
    Section 1116 of the Act and Federal regulations at 42 CFR Part 430, 
establish Department procedures that provide an administrative hearing 
for reconsideration of a disapproval of a State plan or plan amendment. 
CMS is required to publish a copy of the notice to a State Medicaid 
agency that informs the agency of the time and place of the hearing, 
and the issues to be considered. If we subsequently notify the agency 
of additional issues that will be considered at the hearing, we will 
also publish that notice.
    Any individual or group that wants to participate in the hearing as 
a party must petition the presiding officer within 15 days after 
publication of this notice, in accordance with the requirements 
contained at 42 CFR 430.76(b)(2). Any interested person or organization 
that wants to participate as amicus curiae must petition the presiding 
officer before the hearing begins in accordance with the requirements 
contained at 42 CFR 430.76(c). If the hearing is later rescheduled, the 
presiding officer will notify all participants.
    The notice to Iowa announcing an administrative hearing to 
reconsider the disapproval of its SPA reads as follows:

Mr. Daniel W. Hart, Assistant Attorney General, Counsel to the Iowa 
Department of Human Services, Regents and Human Services Division, 
1305 E. Walnut Street, Des Moines, IA 50319-0109.

Dear Mr. Hart:

    I am responding to your request for reconsideration of the 
decision to disapprove the Iowa State plan amendment (SPA) 05-003, 
which was submitted on March 29, 2005, and disapproved on November 
23, 2005.
    Under SPA 05-003, Iowa was seeking to simplify its State plan 
provisions on drug pricing, reflecting the implementation of State 
supplemental rebates and the preferred drug list.
    This amendment was disapproved because it did not comport with 
the requirements of the Federal regulations at 42 CFR 447.331(c) and 
sections 1902(a)(54) and 1927 of the Social Security Act (the Act) 
and implementing regulations.
    Specifically, Iowa failed to demonstrate that SPA 05-003 is 
consistent with the Federal upper limit (FUL) regulations at 42 CFR 
447.331(c). This regulation provides that the upper limit for 
payment for multiple source drugs for which a specific limit has 
been established does not apply if a physician certifies in his or 
her own handwriting that a specific brand is medically necessary. 
The State asserted that the physician certification provision 
(regarding the medical necessity of a brand name drug) need not be 
followed as part of the State's drug reimbursement methodology 
because the net cost, after rebates, of these brand name drugs will 
not exceed the FUL. The State, however, failed to demonstrate how 
this assertion is consistent with the plain language of the 
regulation which provides for an FUL based on State payment rates 
for prescription drugs (without regard to manufacturer rebates), and 
an FUL exemption based on physician certification.
    The State also failed to demonstrate compliance with sections 
1902(a)(54) and 1927 of the Act, which provide for the calculation 
of rebates for covered outpatient drugs, based on payment that was 
made under the State plan. Section 1927(b)(1)(B) of the Act provides 
for an offset against medical assistance to account for such 
rebates. Such an offset would not be necessary if the reference to 
``payment'' was intended to be a net payment and include rebates 
that are eventually provided under section 1927. The State did not 
demonstrate that its methodology is consistent with sections 
1902(a)(54) and 1927 of the Act which are not intended to change 
State payment rates for prescription drugs and which, as noted 
previously, provide for calculation of rebates based on State 
payment.
    For the reasons cited above, and after consultation with the 
Secretary, as required by 42 CFR 430.15(c)(2), Iowa 05-003 was 
disapproved.
    I am scheduling a hearing on your request for reconsideration to 
be held on April 13, 2006, at the Richard Bolling Federal Building, 
601 E. 12th Street, Room 235, Kansas City Conference Room, Kansas 
City, MO 64106-2898, to reconsider the decision to disapprove SPA 
05-003. If this date is not acceptable, we would be glad to set 
another date that is mutually agreeable to the parties. The hearing 
will be governed by the procedures prescribed at 42 CFR Part 430.
    I am designating Ms. Kathleen Scully-Hayes as the presiding 
officer. If these arrangements present any problems, please contact 
the presiding officer at (410) 786-2055. In order to facilitate any 
communication which may be necessary between the parties to the 
hearing, please notify the presiding officer to indicate 
acceptability of the hearing date that has been scheduled and 
provide names of the individuals who will represent the State at the 
hearing.

 Sincerely,

Mark B. McClellan, M.D., Ph.D.

    Section 1116 of the Social Security Act (42 U.S.C. section 1316); 
42 CFR section 430.18)


[[Page 9567]]


(Catalog of Federal Domestic Assistance Program No. 13.714, Medicaid 
Assistance Program)

    Dated: February 13, 2006.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
[FR Doc. 06-1647 Filed 2-23-06; 8:45 am]
BILLING CODE 4120-01-P