[Federal Register Volume 71, Number 249 (Thursday, December 28, 2006)]
[Proposed Rules]
[Pages 78110-78115]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-22258]


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DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 199

[DOD-2006-HA-0149; RIN 0720-AB01]


Civilian Health and Medical Program of the Uniformed Services 
(CHAMPUS); TRICARE: Implementation of Changes to the Pharmacy Benefits 
Program; Double Coverage With Medicare Part D

AGENCY: Department of Defense.

ACTION: Proposed rule.

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SUMMARY: TRICARE eligible beneficiaries, who are entitled to Medicare 
Part A on the basis of age, disability, or end-stage renal disease, 
maintain their TRICARE eligibility when they are enrolled in the 
supplementary medical insurance program under Part B of Medicare. In 
general, in the case of medical or dental care provided to these 
individuals for which payment may be made under both Medicare and 
TRICARE, Medicare is the primary payer and TRICARE will normally pay 
the actual out-of-pocket costs incurred by the person. This proposed 
rule prescribes double coverage payment procedures and makes revisions 
to TRICARE rules to accommodate beneficiaries who are eligible under 
both Medicare and TRICARE, and who participate in Medicare's outpatient 
prescription drug program under Medicare Part D. These revisions are 
necessary because of the requirements contained in the Centers for 
Medicare and Medicaid Services (CMS) final rule for the Medicare 
Prescription Drug Benefit, Part D Plans with Other Prescription Drug 
Coverage.
    This proposed rule also establishes requirements and procedures for 
implementation of the improvements to the TRICARE Pharmacy Benefits 
Program directed by section 714 of the Ronald W. Reagan National 
Defense Authorization Act for Fiscal Year 2005 (NDAA FY 05) (Public Law 
108-365). The rule clarifies that the cost-sharing requirements for 
Medicare-eligible beneficiaries may not be in excess of the cost-
sharing requirements applicable to other retirees, their dependents, 
former spouses and survivors. Additionally, the rule authorizes the DoD 
Pharmacy and Therapeutics Committee to make a separate and additional 
determination of the relative clinical and cost effectiveness of 
pharmaceutical agents to assure pharmacies of the uniformed services 
have on their formularies pharmaceutical agents that provide greater 
value than other uniform formulary agents in that therapeutic

[[Page 78111]]

class. This rule also describes the transition process that will occur 
as the uniform formulary is developed and uniform service facilities 
move to a uniform formulary, consistent with their scope of practice.

DATES: Comments on this proposed rule will be accepted until February 
26, 2007.

ADDRESSES: You may submit comments, identified by docket number and/or 
RIN number and title, by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Federal Docket Management System Office, 1160 
Defense Pentagon, Washington, DC 20301-1160.
    Instructions: All submissions received must include the agency name 
and docket number or Regulatory Information Number (RIN) for this 
Federal Register document. The general policy for comments and other 
submissions from members of the public is to make these submissions 
available for public viewing on the Internet at http://regulations.gov 
as they are received without change, including any personal identifiers 
or contact information.

FOR FURTHER INFORMATION CONTACT: MAJ Travis Watson, TRICARE Management 
Activity, Pharmacy Directorate, telephone (703) 681-2890 x6707.

SUPPLEMENTARY INFORMATION:

I. Double Coverage With Medicare Part D

    Section 101 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA), (Pub. L. 108-173), amended Title XVIII 
of the Social Security Act by establishing a new Part D: the Voluntary 
Prescription Drug Benefit Program (henceforth, Medicare Part D). The 
Department of Health and Human Services, Centers for Medicare and 
Medicaid Services (CMS), published their Final Rule on January 28, 2005 
(70 FR 4193--4585). The addition of a prescription drug benefit to 
Medicare represents a landmark change to the Medicare program, and 
became available to beneficiaries beginning on January 1, 2006.
    The Floyd D. Spence National Defense Authorization Act for Fiscal 
Year 2001 (Pub. L. 106-398), established the TRICARE Senior Pharmacy 
Program under section 711 (which was effective April 1, 2001). The Act 
also under section 712 (which was effective October 1, 2001) continued 
TRICARE eligibility for beneficiaries entitled to Medicare Part A on 
the basis of age, provided they also are enrolled in Medicare Part B. 
This program has come to be known as TRICARE for Life. Under 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, the Department established its new pharmacy benefits program for 
all TRICARE beneficiaries (as implemented by 32 CFR 199.21). The full 
implementation of the pharmacy benefits program was not effective until 
May 3, 2004, however, changes in pharmacy cost shares were effective 
with the implementation of TRICARE Senior Pharmacy on April 1, 2001.
    In implementing TRICARE Senior Pharmacy, DoD stated that the double 
coverage rules in 32 CFR 199.8 are applicable to services provided to 
all beneficiaries under the retail pharmacy network, retail pharmacy 
non-network, or TRICARE Mail Order programs. In implementing TRICARE 
for Life, DoD explained the double coverage rules under 10 U.S.C. 
1086(d)(3). The statute states that if a TRICARE-Medicare dual-eligible 
beneficiary receives medical or dental care for which payment may be 
made under Medicare and TRICARE, the amount payable for that care by 
TRICARE shall be the amount of the actual out-of-pocket costs incurred 
by the person for that care over the sum of (i) the amount paid for 
that care under Medicare; and (ii) the total of all amounts paid or 
payable by third party payers other than Medicare. The amount payable 
by TRICARE may not exceed the total amount that would be paid under 
TRICARE if payment for the care were made solely under TRICARE. TRICARE 
for Life did not expand the scope of benefits available to this group 
of beneficiaries beyond the scope of TRICARE benefits available to 
other retirees and their families. The critical fact is whether the 
service or supply is payable by both Medicare and TRICARE. For health 
care services for which payment may be made under both Medicare and 
TRICARE, TRICARE will pay up to the beneficiary's legal liability the 
actual out-of-pocket costs incurred by the beneficiary, less any 
payments made by Medicare or other sources of insurance). Actual out-
of-pocket costs incurred by the beneficiary include the initial 
deductible, which are for services payable by Medicare and TRICARE, but 
for the fact that the beneficiary has not met the deductible amount, 
and any subsequent beneficiary cost shares. However, if a health care 
service or supply is a benefit payable only by Medicare, but not 
TRICARE, then Medicare has sole responsibility for payment of the 
health care service or supply, as defined by Medicare, and the 
beneficiary has the responsibility to pay any corresponding Medicare 
cost-share or deductible. Likewise, if a health care service or supply 
is a benefit payable only by TRICARE, but not Medicare, then TRICARE 
has sole responsibility for payment of the health care service and 
supply, and the beneficiary has the responsibility to pay any 
corresponding TRICARE cost-shares or deductible. Finally, if a health 
care service or supply is neither a benefit payable by Medicare or 
TRICARE, the beneficiary pays the total cost.
    TRICARE has applied the double coverage rules of 32 CFR 199.8 to 
the Pharmacy Benefits Program under section 199.21(m), and said to the 
extent they provide a prescription drug benefit, Medicare supplemental 
insurance plans or Medicare HMO plans are double coverage plans and 
will be primary payer. This rule was written prior to Medicare 
providing a prescription drug benefit under Medicare Part D, and CMS's 
final rule on the Medicare Prescription Drug Benefit. Under 42 CFR part 
423, Subpart J, Coordination of Part D Plans With Other Prescription 
Drug Coverage, section 423.464(f)(1)(iv), military coverage, including 
TRICARE coverage under chapter 55 of title 10, United States Code, 
qualifies as other prescription drug coverage with which a Part D plan 
must coordinate benefits.
    Medicare Part D plans are offered by private insurance companies 
that contract with CMS. Part D benefits may be offered by a stand-alone 
prescription drug plan sponsor, a Medicare Advantage Organization 
offering qualified prescription drug coverage, a Program for All-
Inclusive Care for the Elderly (PACE) organization offering qualified 
prescription drug coverage, or a cost plan offering qualified 
prescription drug coverage (collectively referred to as a ``Part D plan 
sponsor''). Each Part D plan sponsor submits a bid to CMS for plan 
benefit packages, which results in, among other things, the offering of 
Part D plans with varying monthly premiums and benefits designs. Part D 
plan sponsors may offer a defined standard benefit, which is the type 
of benefit used as an example in this preamble, or an actuarially 
equivalent standard benefit. Part D plan sponsors may also offer 
alternative prescription drug coverage, which may consist of basic 
alternative coverage or enhanced alternative coverage. Therefore 
depending on the Part D plan that a beneficiary chooses, monthly 
premiums, coinsurances, co-pays, deductibles and benefit design may 
vary from plan to plan. Under the MMA,

[[Page 78112]]

certain low-income beneficiaries may be eligible for reduced premiums 
and cost-sharing for their drug coverage. In some cases, beneficiaries 
pay no premium and nominal cost-sharing. Other beneficiaries have a 
reduced premium and lower cost-sharing.
    The standard Part D benefit includes several phases of beneficiary 
spending, as described below.
    Premiums. Statute requires a beneficiary to pay a monthly premium 
to participate in the plan. A beneficiary who wants to participate in a 
standard Medicare Part D plan is solely responsible for payment of any 
premium that is not otherwise subsidized under the program. Beneficiary 
premiums do not count toward any required beneficiary cost-sharing to 
reach the deductible, coverage gap, or catastrophic limit (described 
below).
    Deductible. Under the Medicare Part D defined standard benefit, the 
beneficiary is responsible for paying an out-of-pocket deductible ($265 
in 2007) that adjusts annually according to the annual percentage 
increase in spending on covered Part D drugs. For purposes of meeting 
the deductible, both spending by the beneficiary and spending by 
TRICARE on behalf of the beneficiary (i.e., the TRICARE wraparound 
coverage) qualify.
    Cost-sharing between deductible and coverage gap. After the 
deductible is met, the standard Part D plan sponsors are responsible 
for 75% of the actual cost of the covered Part D drug, and the 
beneficiary is responsible for 25% of the actual cost of the covered 
Part D drug, until the beneficiary reaches the coverage gap. TRICARE 
wraparound coverage qualifies as beneficiary cost-sharing between the 
deductible and coverage gap.
    Coverage gap. To reach the coverage gap, the beneficiary must reach 
a statutorily-specified amount of total drug spending. Total 
beneficiary spending needed to meet the coverage gap is defined as 
beneficiary out-of-pocket spending, or TRICARE spending on behalf of 
the beneficiary, and spending by the Part D plan sponsor. In 2007, a 
beneficiary reaches the coverage gap when he has incurred $2,400 in 
total drug spending and remains in the gap until he has incurred $3,850 
in beneficiary out-of-pocket spending. Individuals who qualify for the 
low-income subsidies pay lower cost-sharing amounts before they reach 
the coverage gap. In the coverage gap, the beneficiary is responsible 
for 100% of the cost of the drug, although the beneficiary by law is 
entitled to receive the plan's negotiated price. Individuals who 
qualify for low-income subsidies do not have a coverage gap.
    Catastrophic threshold. To reach the catastrophic threshold defined 
in the standard benefit, the beneficiary must have incurred total 
spending defined in statute as true out-of-pocket spending (TrOOP) 
($3,850 in 2007). In the catastrophic phase, the beneficiary is 
responsible for the greater of 5% of the cost of the drug, or, in 2007, 
$2.15 for a generic/preferred multi-source drug or $5.35 for other 
drugs. In the catastrophic phase of the defined standard benefit, the 
Part D plan sponsor and Medicare are responsible for what is not paid 
by the beneficiary up to the Part D plan sponsor's negotiated price.
    Under 42 CFR 423.100, incurred costs means costs incurred by the 
Part D enrollee for covered Part D drugs--(1) That are not paid for 
under the Part D plan as a result of application of any annual 
deductible or other cost-sharing rules for covered Part D drugs prior 
to the Part D enrollee satisfying annual out-of-pocket threshold amount 
under section 423.104(d)(5)(iii); and (2) That are paid for by the Part 
D enrollee or on behalf of the enrollee by another person, and the 
enrollee or other person is not reimbursed through insurance or 
otherwise, a group health plan or other third party arrangement. 
Because TRICARE falls under the definition of ``or otherwise,'' which 
refers to ``government-funded health programs,'' wraparound payments 
made by TRICARE for covered Part D drugs on behalf of an enrollee 
eligible for both Part D and TRICARE do not count towards beneficiary 
incurred costs. Therefore, for purposes of reaching the catastrophic 
limit, only true beneficiary out-of-pocket spending (TrOOP) counts as 
beneficiary spending. Although TRICARE supplementary coverage counts 
toward meeting the deductible and the initial coverage limit, it does 
not count toward meeting the catastrophic threshold.
    Generally, a Part D plan is primary payer under 42 CFR 423.464, 
coordination of benefits with other providers of prescription drug 
coverage, which includes military coverage (including TRICARE) under 
chapter 55 of title 10, United States Code. A Part D plan under section 
423.464(f)(2) must exclude expenditures for covered Part D drugs made 
by TRICARE for purposes of determining whether a Part D enrollee has 
satisfied the out-of-pocket threshold, which for 2007 is $3,850.
    As a result of these provisions implementing Medicare Part D, 
TRICARE double coverage rules must be modified. If a TRICARE-Medicare 
beneficiary enrolls in a Part D plan that adds prescription coverage to 
their Medicare plan, the Medicare Part D plan is generally primary 
payer and TRICARE is secondary payer. TRICARE will pay the 
beneficiary's out-of-pocket costs for Medicare and TRICARE covered 
medications, including the initial deductible and Medicare Part D cost-
share. TRICARE will not pay the beneficiary's out-of-pocket cost 
associated with any monthly premium required to enroll in and 
participate in the Medicare Part D plan.
    In the coverage gap, the Part D plan is generally still the primary 
payer. Thus, assuming the beneficiary is accessing a pharmacy under 
contract with his or her Part D plan, the pharmacy would bill the Part 
D plan, which would respond by indicating that it is responsible for 
$0, at which point the pharmacy would bill TRICARE. When the 
beneficiary becomes responsible for 100% of the drug costs in the 
coverage gap, the beneficiary may use the TRICARE pharmacy benefit as 
the secondary payer. TRICARE will cost share during the coverage gap to 
the same extent as it does under section 199.21 for beneficiaries not 
enrolled in a Medicare Part D plan. The beneficiary is responsible for 
the applicable TRICARE pharmacy cost-sharing amounts (and deductible if 
using a retail non-network pharmacy). During the coverage gap, TRICARE 
is incurring the cost of the drugs during the Medicare Part D coverage 
gap and not the beneficiary. Thus none of the costs of the drugs borne 
by TRICARE will be applied to meeting the beneficiary's annual Medicare 
Part D true out-of-pocket (TrOOP) threshold. Generally, however, the 
beneficiary's own TRICARE pharmacy benefit cost-share will accrue to 
meeting his/her annual Medicare Part D TrOOP spending because this 
cost-sharing is an actual out-of-pocket expense incurred by the 
beneficiary. Any actual out-of-pocket expense incurred by the 
beneficiary also will apply toward the TRICARE fiscal year catastrophic 
cap.
    Similarly, if the TRICARE-Medicare dual-eligible beneficiary 
enrolls in a Medicare Advantage drug plan, the beneficiary has to pay 
the plan's monthly premiums and obtain all medical care and 
prescription drugs through the Medicare Advantage plan. The Medicare 
Advantage plan will generally be the primary payer, and TRICARE will be 
the secondary payer. If the Medicare Advantage plan has a Part D drug 
benefit, TRICARE will pay secondary as described above.

[[Page 78113]]

II. Legislative Changes for TRICARE-Medicare Dual-Eligible 
Beneficiaries

    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 Department 
published the final rule on the Pharmacy Benefits Program on April 1, 
2004 (69 FR 17035-17052) implementing the pharmacy benefits program, 
effective May 3, 2004. Congress in section 714 of the Ronald W. Reagan 
NDAA for FY 05 has directed certain improvements to the TRICARE 
pharmacy benefits program.
    Section 714(a) directs that for a TRICARE-Medicare dual-eligible 
beneficiary, the cost-sharing requirements under the pharmacy benefits 
program may not be greater than the cost-sharing requirements 
applicable to all other beneficiaries covered by 10 U.S.C. 1086, which 
are beneficiaries who are retirees, their authorized dependents, 
survivors, and certain former spouses. Under 10 U.S.C. 1074g(a)(6), the 
Department may establish cost-sharing requirements for the pharmacy 
benefits program, which may be established as a percentage or fixed 
dollar amount, for generic, formulary, and non-formulary pharmaceutical 
agents. For non-formulary agents, cost-sharing shall be consistent with 
common industry practice and not in excess of amounts generally 
comparable to 20 percent for beneficiaries who are dependents of active 
duty members of the uniformed services, and 25 percent for 
beneficiaries who are retirees, their authorized dependents, survivors, 
and certain former spouses.
    In the TRICARE Pharmacy Benefits Program final rule, the Department 
published the cost share amounts for pharmaceutical agents based upon 
two factors: (1) The agent's status as generic, formulary, or non-
formulary; and (2) the venue in which the agent was obtained, that is, 
military treatment facility (MTF), TRICARE Mail Order Program (TMOP), 
retail network pharmacy, or retail non-network pharmacy. The Department 
is authorized under 10 U.S.C. 1074g(a)(6) to have two non-formulary 
cost-shares based upon the status of the beneficiary, no more than 20 
percent for active duty family members and no more than 25 percent for 
all others (other than active duty members who have no cost share). The 
Department chose to have one non-formulary cost-share equal to no more 
than 20 percent of the anticipated aggregated cost of non-formulary 
agents that is $22 for non-formulary agents obtained in the TMOP or 
retail network pharmacies, and $22 or 20 percent (whichever is greater) 
for non-formulary agents obtained in retail non-network pharmacies. 
(For more information on TRICARE Pharmacy Benefit Program cost shares, 
see Section 199.21(i)). Section 714(a) emphasizes that if the 
Department were to move to a two-tier non-formulary cost-share based 
upon the status of the beneficiary, the Department may not have a 
higher cost-share for TRICARE-Medicare dual-eligible beneficiaries than 
for other retirees, their authorized dependents, survivors, and certain 
former spouses. The Department has no intention at this time of 
establishing two separate non-formulary cost-shares based upon the 
status of the beneficiary as an active duty family member or other 
category of beneficiary.
    This proposed rule adds to Sec.  199.21 a provision incorporating 
into the regulation the new statutory requirement.

III. Legislative Changes To Improve the Uniform Formulary Process

    Under 10 U.S.C. 1074g(a)(2)(E)(i), pharmaceutical agents included 
on the uniform formulary on the basis of relative clinical 
effectiveness and cost effectiveness are required to be available to 
beneficiaries through facilities of the uniformed services, consistent 
with the scope of health care services offered in such facilities. 
Section 714(b) of the Ronald W. Reagan NDAA for FY 05 directs the 
Department to allow the DoD Pharmacy and Therapeutics Committee (P&T 
Committee) to make additional relative clinical and cost effectiveness 
determinations for military treatment facilities (MTFs). This change in 
the law means that MTFs are not required to include on their 
formularies every pharmaceutical agent in a therapeutic class that is 
on the uniform formulary that is consistent with the scope of health 
care services offered in the MTF. This proposed rule incorporates into 
section 199.21 a provision reflecting the change in statute.

IV. Transition to the Uniform Formulary

    The DoD P&T Committee is required under section 199.21 to make 
recommendations concerning which pharmaceutical agents should be on the 
uniform formulary and the Basic Core Formulary (BCF), and may now make 
recommendations concerning which agents should be on the Extended Core 
Formulary (ECF). The BCF contains the minimum set of pharmaceutical 
agents that each MTF pharmacy must have on its formulary to support the 
primary care scope of practice for Primary Care Manager enrollment 
sites. The ECF contains the minimum set of pharmaceutical agents that 
each MTF pharmacy must have on its formulary to support an extended 
care scope of practice if the MTF Pharmacy and Therapeutics Committee 
has authorized agents in that class based upon the scope of practice at 
that facility.
    The DoD Pharmacy and Therapeutics Committee will review the classes 
in a methodical but expeditious manner, taking into consideration 
circumstances that may include but are not limited to: DoD national 
contracting, or DoD and Veterans Affairs national joint contracting or 
other agreements with pharmaceutical manufacturers; approval of a new 
drug by 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 DoD P&T Committee members, military treatment 
facilities, or other Military Health System officials. During the 
transition period from the previous methodology of formulary management 
involving only the MTFs and the TRICARE Mail Order Program, previous 
decisions by the DoD P&T Committee or committed use requirements 
contracts executed by DoD, or jointly by DoD and VA, shall continue in 
effect. This is necessary to comply with the statutory requirements of 
38 U.S.C. 8111 and 10 U.S.C. 1104 relating to resource sharing between 
DoD and VA, and allow time to incorporate the impact of uniform 
formulary management into those agreements. As therapeutic classes are 
reviewed under the new formulary management process and pharmaceutical 
agents are designated for formulary or non-formulary status, this 
transition methodology shall apply.
    The P&T Committee will meet at least quarterly to review new and 
existing drugs and drug classes, and recommend pharmaceutical agents 
for inclusion on or exclusion from the uniform formulary after 
evaluating their relative clinical and cost effectiveness. Pending 
review of a pharmaceutical agent or class, previous decisions by the 
predecessor to the P&T Committee regarding national contracts, 
agreements, formulary status, BCF status, pre-authorization 
requirements and quantity limits shall remain in effect. The P&T 
Committee will eventually evaluate all applicable drug classes at which 
time the transition period will be complete.

[[Page 78114]]

    During this transition period, pharmaceutical agents in drug 
classes not yet evaluated by the P&T Committee will continue to be 
available from the TRICARE Mail Order Pharmacy (TMOP) and the TRICARE 
Retail Pharmacy network at either the generic or formulary (brand) cost 
share. MTFs may evaluate for inclusion on the MTF formulary 
pharmaceutical agents in drug classes that do not already have BCF 
status, or have not yet been evaluated by the P&T Committee. BCF listed 
agents must be on the formulary at all full-service MTF pharmacies at 
all times.

V. Regulatory Procedures

    Executive Order 12866 directs agencies to assess all costs and 
benefits 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). The Order 
classifies a rule as a significant regulatory action requiring review 
by the Office of Management and Budget if it meets any one of a number 
of specified conditions, including: having an annual effect on the 
national economy of $100 million or more, creating a serious 
inconsistency or interfering with an action of another agency, 
materially altering the budgetary impact of entitlements or the rights 
of entitlement recipients, or raising novel legal or policy issues. DoD 
has examined the economic, legal, and policy implications of this 
proposed rule and has concluded that it is a significant regulatory 
action as it addresses novel policy issues relating to implementation 
of coordination of medical benefits programs for covered beneficiaries 
of the uniformed services under TRICARE and the Medicare Prescription 
Drug Benefit. Thus, this rule has been reviewed by the Office of 
Management and Budget under E.O. 12866. 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 regulations which would have a significant impact on a 
substantial number of small entities.
    This proposed rule is not a major rule under the Congressional 
Review Act, because its economic impact will be less than $100 million. 
There are approximately 1.9 million TRICARE-Medicare dual-eligible 
beneficiaries, and approximately 7% have enrolled in Medicare Part D 
plans. For those who have Medicare Part D coverage, the cost of their 
pharmacy benefit to DoD is less, as Medicare Part D Plans are the first 
payer as opposed to DoD, resulting in a cost avoidance for DoD. The 
amount of the cost avoidance is directly related to the number and cost 
of prescriptions filled by beneficiaries for which Medicare is first 
payer. Under the standard benefit package, there is a potential of 
about $1,601.25 in DoD cost avoidance (in 2007) for Medicare/TRICARE 
Part D enrollees whose drug spending is high enough to enter the 
Medicare coverage gap. For beneficiaries with lower drug spending, 
DoD's cost avoidance would also be lower. In addition, this rule will 
have minor impact and will not significantly affect a substantial 
number of small entities. In light of the above, no regulatory impact 
analysis is required.
    This proposed rule will not impose additional information 
collection requirements on the public under the Paperwork Reduction Act 
of 1995 (44 U.S.C. 55). In order to determine which dual-eligible 
beneficiaries are participating in Medicare Part D, TRICARE will rely 
on the Defense Eligibility Enrollment Reporting System (DEERS) to 
identify which beneficiaries are enrolled in Medicare Part D through 
existing data sharing agreements with CMS and will not need to collect 
additional information from them.
    We have examined the impact(s) of the proposed rule under Executive 
Order 13132 and it does not have policies that have federalism 
implications that would have substantial direct effects on the States, 
on the relationship between the national government and the States, or 
on the distribution of power and responsibilities among the various 
levels of government, therefore, consultation with State and local 
officials is not required.

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 199.8 is amended by adding paragraph (d)(1)(iii)(C) and 
revising paragraph (d)(1)(vi) to read as follows:


Sec.  199.8  Double coverage.

* * * * *
    (d) * * *
    (1) * * *
    (iii) * * *
    (C) For Medicare beneficiaries who enroll in Medicare Part D, the 
Part D plan is primary and TRICARE is secondary payer. TRICARE will pay 
the beneficiary's out-of-pocket costs for Medicare and TRICARE covered 
medications, including the initial deductible and Medicare Part D cost 
sharing amounts up to the initial coverage limit of the Medicare Part D 
plan. The Medicare Part D plan, although the primary plan pays nothing 
during any coverage gap period. When the beneficiary becomes 
responsible for 100 percent of the drug costs under a Part D coverage 
gap period, the beneficiary may use the TRICARE pharmacy benefit as the 
secondary payer. TRICARE will cost share during the coverage gap to the 
same extent as it does under Sec.  199.21 for beneficiaries not 
enrolled in a Medicare Part D plan. The beneficiary is responsible for 
the applicable TRICARE pharmacy cost-sharing amounts (and deductible if 
using a retail non-network pharmacy). Part D plan sponsors may offer a 
defined standard benefit, or an actuarially equivalent standard 
benefit. Part D plan sponsors may also offer alternative prescription 
drug coverage, which may consist of basic alternative coverage or 
enhanced alternative coverage. Therefore depending on the Part D plan 
that a beneficiary chooses, monthly premiums, coinsurances, co-pays, 
deductibles and benefit design may vary from plan to plan. TRICARE 
payment of the beneficiary's initial deductible, if any, along with 
payment of any beneficiary cost share count towards total spending on 
drugs, and may have the effect of moving the beneficiary more quickly 
through the initial phase of coverage to the coverage gap. Irrespective 
of the phase of the benefit in which a beneficiary may be, if a 
beneficiary is accessing a pharmacy under contract with his or her Part 
D plan, the provider will bill the Part D plan first, then TRICARE. If 
the beneficiary chooses to use his or her TRICARE pharmacy benefit 
during a coverage gap under Part D, the beneficiary may do so, but the 
beneficiary is responsible for the TRICARE cost-shares.
* * * * *
    (vi) Effect of enrollment in Medicare Advantage Prescription Drug 
(MA-PD) plan. In the case of a beneficiary enrolled in a MA-PD plan who 
receives items or services for which payment may be made under both the 
MA-PD plan and CHAMPUS/TRICARE, a claim for the beneficiary's normal 
out-of-

[[Page 78115]]

pocket costs under the MA-PD plan may be submitted for CHAMPUS/TRICARE 
payment. However, consistent with paragraph (c)(4) of this section, 
out-of-pocket costs do not include costs associated with unauthorized 
out-of-system care or care otherwise obtained under circumstances that 
result in a denial or limitation of coverage for care that would have 
been covered or fully covered had the beneficiary met applicable 
requirements and procedures. In such cases, the CHAMPUS/TRICARE amount 
payable is limited to the amount that would have been paid if the 
beneficiary had received care covered by the Medicare Advantage plan. 
If the TRICARE-Medicare beneficiary enrolls in a MA-PD drug plan, it 
will be governed by Medicare Part C, although plans that offer a 
prescription drug benefit also must comply with Medicare Part D rules. 
The beneficiary has to pay the plan's monthly premiums and obtain all 
medical care and prescription drugs through the Medicare Advantage plan 
before seeking CHAMPUS/TRICARE payment. CHAMPUS/TRICARE payment for 
such beneficiaries may not exceed that which would be payable for a 
beneficiary under paragraph (d)(1)(iii)(C) of this section.
    3. Section 199.21 is amended by adding new paragraphs (g)(4) and 
(i)(2)(xi), and by revising paragraphs (h)(2)(ii) and (m), to read as 
follows:


Sec.  199.21  Pharmacy benefits program.

* * * * *
    (g) * * *
    (4) Transition to the uniform formulary. Beginning in Fiscal Year 
2005, under an updated charter for the DoD P&T Committee, the committee 
shall meet at least quarterly to review therapeutic classes of 
pharmaceutical agents and make recommendations concerning which 
pharmaceutical agents should be on the Uniform Formulary, Basic Core 
Formulary, and Extended Core Formulary. The P&T Committee will review 
the classes in a methodical, but expeditious manner. During the 
transition period from the previous methodology of formulary management 
involving only the MTFs and the TRICARE Mail Order Pharmacy Program, 
previous decisions by the predecessor DoD P&T Committee concerning MTF 
and Mail Order Pharmacy Program formularies shall continue in effect. 
As therapeutic classes are reviewed under the new formulary management 
process, the processes established by this section shall apply.
* * * * *
    (h) * * *
    (2) * * *
    (ii) Availability of formulary pharmaceutical agents at military 
treatment facilities. Pharmaceutical agents included on the uniform 
formulary are available through facilities of uniformed services, 
consistent with the scope of health care services offered in such 
facilities and additional determinations by the Pharmacy and 
Therapeutics Committee of the relative clinical effectiveness and cost 
effectiveness, based on costs to the Program associated with providing 
the agents to beneficiaries. The Basic Core Formulary (BCF) is a subset 
of the uniform formulary and is a mandatory component of formularies at 
all full-service MTF pharmacies. The BCF contains the minimum set of 
pharmaceutical agents that each full-service MTF pharmacy must have on 
its formulary to support the primary care scope of practice for Primary 
Care Manager enrollment sites. Limited-service MTF pharmacies (e.g., 
specialty pharmacies within an MTF or pharmacies servicing only active 
duty military members) are not required to include the entire BCF on 
their formularies, but may limit their formularies to those BCF agents 
appropriate to the needs of the patients they serve. An Extended Core 
Formulary (ECF) may list preferred agents in drug classes other than 
those covered by the BCF. Among BCF and ECF agents, 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 pharmaceutical agents on the local formulary of 
full-service MTF pharmacies must be available to all categories of 
beneficiaries.
* * * * *
    (i) * * *
    (2) * * *
    (xi) For a Medicare-eligible beneficiary, the cost sharing 
requirements may not be in excess of the cost-sharing requirements 
applicable to all other beneficiaries covered by 10 U.S.C. 1086.
* * * * *
    (m) Effect of other health insurance. The double coverage rules of 
section 199.8 of this part are applicable to services provided under 
the pharmacy benefits program. For this purpose, the Medicare 
prescription drug benefit under Medicare Part D, prescription drug 
benefits provided under Medicare Part D plans are double coverage plans 
and such plans will be the primary payer, to the extent described in 
section 199.8 of this part. Beneficiaries who elect to use these 
pharmacy benefits shall provide DoD with other health insurance 
information.

    Dated: December 21, 2006.
L.M. Bynum,
Alternate OSD Federal Register Liaison Officer, DoD.
 [FR Doc. E6-22258 Filed 12-27-06; 8:45 am]
BILLING CODE 5001-06-P