[Federal Register Volume 72, Number 101 (Friday, May 25, 2007)]
[Proposed Rules]
[Pages 29403-29423]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-2577]
Federal Register / Vol. 72, No. 101 / Friday, May 25, 2007 / Proposed
Rules
[[Page 29403]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 423
[CMS-4130-P]
RIN 0938-A074
Medicare Program; Policy and Technical Changes to the Medicare
Prescription Drug Benefit
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would both codify prior clarifications of
our policies associated with the Medicare Prescription Drug Benefit
(also known as Medicare Part D) and propose certain clarifications of
these policies. These clarifications include the following: Codifying
our expectations of Part D sponsors regarding providing adequate access
to home infusion pharmacies for infused covered Part D drugs and
proposing standards with respect to timeliness of delivery of drugs;
codifying our guidance that certain supplies associated with the
inhalation of insulin are included in the definition of Part D drug;
refining our definition of what may be included in the drug costs Part
D sponsors use as the basis for calculating beneficiary cost sharing,
reporting drug costs to CMS for the purposes of reinsurance
reconciliation and risk sharing, as well submitting bids to CMS;
reiterating our previous guidance explaining how we interpret the
statutory exclusion from the definition of a Part D drug for any drug
when used for the treatment of sexual or erectile dysfunction, unless
that drug was used for an FDA-approved purpose other than sexual or
erectile dysfunction; and codifying our guidance on plan-to-plan
reconciliation and reconciliation to a payer other than the Part D of
record. In addition, we are correcting the regulations to ensure that
they reflect the appropriate subsidy for partial subsidy individuals
subject to a late enrollment penalty. We also propose changes to the
retiree drug subsidy regulations, including permitting non-calendar
year plans to choose between the current year's or the subsequent
year's Part D cost limits in certain circumstances and codifying our
previous guidance on aggregating plan options for purposes of meeting
the net test for actuarial equivalence.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on July 24, 2007.
ADDRESSES: In commenting, please refer to file code CMS-4130-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (no duplicates,
please):
1. Electronically. You may submit electronic comments on specific
issues in this regulation to http://www.cms.hhs.gov/eRulemaking. Click
on the link ``Submit electronic comments on CMS regulations with an
open comment period.'' (Attachments should be in Microsoft Word,
WordPerfect, or Excel; however, we prefer Microsoft Word.)
2. By regular mail. You may mail written comments (one original and
two copies) to the following address ONLY: Centers for Medicare &
Medicaid Services, Department of Health and Human Services, Attention:
CMS-4130-P, P.O. Box 8014, Baltimore, MD 21244-8014.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-4130-P, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to one of the following addresses. If you
intend to deliver your comments to the Baltimore address, please call
telephone number (410) 786-7195 in advance to schedule your arrival
with one of our staff members. Room 445-G, Hubert H. Humphrey Building,
200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security
Boulevard, Baltimore, MD 21244-1850.
(Because access to the interior of the HHS Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by stamping
in and retaining an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: For overall questions about this
proposed rule, please contact Alissa DeBoy, (410) 786-6041. For other
detailed questions on clarifications and/or proposed changes herein,
please contact the following individuals for the applicable subpart.
Subpart B--James Slade, (410) 786-1073.
Subpart C--Vanessa Duran, (410) 786-8697 or Gregory Dill, (312) 353-
1754.
Subparts F and G--Deondra Moseley, (410) 786-4577 or Meghan Elrington,
(410) 786 8675.
Subpart I--James Slade, (410) 786-1073.
Subpart J--Deborah Larwood, (410) 786-9500 or Vanessa Duran, (410) 786-
8697.
Subpart K--Mark Smith, (410) 786-8015.
Subpart P--Deondra Moseley, (410) 786-4577 or Christine Hinds, (410)
786-4578.
Subpart R--Adam Shaw, (410) 786-1091.
Subpart S--Christine Hinds, (410) 786-4578.
SUPPLEMENTARY INFORMATION:
Submitting Comments: We welcome comments from the public on all
issues set forth in this rule to assist us in fully considering issues
and developing policies. You can assist us by referencing the file code
CMS-4130-P and the specific ``issue identifier'' that precedes the
section on which you choose to comment.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://www.cms.hhs.gov/eRulemaking. Click on the link ``Electronic Comments on
CMS Regulations'' on that Web site to view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments,
phone 1-800-743-3951.
[[Page 29404]]
I. Background
The Medicare Prescription Drug Benefit (also known as Part D) is a
voluntary prescription drug benefit program enacted into law on
December 8, 2003 in section 101 of title I of the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-
173). In the January 28, 2005 Federal Register (70 FR 4194), we
published a final rule implementing the provisions of Part D, and these
provisions became effective March 22, 2005.
Since publication of the January 28, 2005 final rule, we have
issued several clarifications or interpretations of the final rule by
way of interpretive guidance documents. In addition, we have issued
guidance explaining how we will interpret a change to the Social
Security Act (``Act'') that excludes drugs used in the treatment of
erectile dysfunction from Part D, with a certain exception. In order to
ensure public awareness of our policies, as well as to avoid potential
confusion regarding them, in this preamble, we explain many of the
respective clarifications or interpretations. Relatedly, we are
proposing to codify some of these clarifications in regulation through
this proposed rule, as well as making certain technical corrections to
the January 28, 2005 final rule.
In addition, due to our experience to date in implementing Part D,
we are proposing several new clarifications of our policy for Part D
plans, to be implemented in contract year 2009, on which we
specifically invite public comment.
II. Provisions of the Proposed Rule
A. Subpart B--Eligibility and Enrollment
1. Approval of Marketing Materials and Enrollment Forms (Sec. 423.50)
In the preamble of the January 28, 2005 final rule, we discussed
the approval of marketing materials and enrollment forms, to correspond
with the regulations text at Sec. 423.50. (70 FR 4223) In our response
to public comments, we stated that it was ``appropriate to allow
providers and pharmacies to market to beneficiaries.'' (emphasis
added). (70 FR 4223) When we used the term ``market'' in the final
rule, we used the term ``market'' in a more general sense, to mean
assisting in enrollment or education directed at beneficiaries.
Subsequent to our publication of the final rule, we issued the
Medicare Marketing Guidelines (``The Guidelines''). (See Centers for
Medicare & Medicaid Services, Medicare Marketing Guidelines for:
Medicare Advantage Plans (MAs); Medicare Advantage Prescription Drug
Plans (MA-PDs); Prescription Drug Plans (PDPs); 1876 Cost Plans http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/FinalMarketingGuidelines.pdf (last updated July 25, 2006).) The
Guidelines contain a specific definition of the term, ``marketing.''
The Guidelines define ``marketing'' as ``[s]teering, or attempting to
steer, an undecided potential enrollee towards a plan, or limited
number of plans, and for which the individual or entity performing
marketing activities expects compensation directly or indirectly from
the plan for such marketing activities.'' (The Guidelines, page 8.)
This definition further clarifies that neither ``[a]ssisting in
enrollment'' nor ``education'' constitute ``marketing.'' (The
Guidelines, page 8.) The Guidelines require Part D plan sponsors to
ensure that their contracted providers agree to refrain from
``marketing'' to beneficiaries, as that term is defined by The
Guidelines (that is, steering or attempting to steer an undecided
beneficiary toward a plan based on the provider's financial interest).
Thus, our intent in the preamble was to acknowledge that providers and
pharmacies are free to engage in either ``assisting in enrollment'' or
``education'' (as those terms are defined on page 6 of The Guidelines),
including provider promotional activities as permitted under The
Guidelines. We believe that the context of our discussion in the
preamble demonstrates that we were discussing providers and pharmacies
assisting in beneficiary enrollment, based on the beneficiary's needs,
and education. This is consistent with The Guidelines, which encourage
providers to assist beneficiaries in objective assessments of the
beneficiaries' needs and potential plan options that may meet those
needs. Given that the Guidelines' definition of ``market'' was not
issued until after publication of the final rule, we wish to emphasize
our consistent policy: providers and pharmacies that are contracted
with plan sponsors may not ``market'' to beneficiaries, as the term is
defined in The Guidelines. However, providers and pharmacies may assist
in enrollment, including participating in provider promotion activities
within the parameters established in The Guidelines, and educate
beneficiaries. We clarify this policy here in this proposed rule so as
to avoid any confusion arising from our inaccurate use of the term
``market'' in our discussion of the approval of marketing materials and
enrollment forms in the January 28, 2005 final rule.
Section 423.50(f)(1)(v) states that in conducting marketing
activities, a Part D plan may not ``[u]se providers, provider groups,
or pharmacies to distribute printed information comparing the benefits
of different Part D plans unless the providers, provider groups or
pharmacies accept and display materials from all Part D plan
sponsors.'' (70 FR 4532) One might infer from this language that when a
Part D plan uses providers, provider groups, or pharmacies to
distribute printed information comparing the benefits of different Part
D plans, that the providers, provider groups, or pharmacies must not
only accept and display printed information comparing the benefits of
the Part D plans with whom they contract, but that they also must
accept and display printed information comparing the benefits of
different Part D plans with whom they do not contract. This
interpretation would likely lead to beneficiary confusion because if a
provider were required, per its contract with Part D plan sponsors, to
display materials for plans with which the provider does not contract,
beneficiaries, who may want to continue using the applicable provider
because the provider has a history with the beneficiary, may mistakenly
believe that he or she may continue to use the applicable non-
contracted provider and receive the maximum amount of benefit. Even
though we are requiring that plan sponsors only require their
contracted providers to accept and display comparative materials from
plans with which the provider contracts, the Guidelines require that
providers in a health care setting inform prospective enrollees where
they can obtain information on the full range of plan options,
including referring beneficiaries to 1-800-MEDICARE, http://www.medicare.gov, State Health Insurance Assistance Programs. (The
Guidelines, page 124.) We clarify here that a Part D plan can use
providers, provider groups, or pharmacies to distribute printed
information comparing the benefits of different Part D plans, so long
as the providers, provider groups, or pharmacies accept and display
printed information comparing the benefits of different Part D plans
with whom they contract; the providers, provider groups, or pharmacies
are not obliged to accept and display any comparative information
regarding those Part D plans with whom they do not contract. This
[[Page 29405]]
clarification applies to comparative marketing materials and is in
accord with The Guidelines. (The Guidelines, page 125.) We are
codifying the policy in regulation by revising Sec. 423.50(f)(1) to
indicate a Part D plan may use providers, provider groups and
pharmacies to distribute printed information comparing the benefits of
different plans, so long as the providers, provider groups or
pharmacies accept and display materials from all Part D plan sponsors
with which the providers, provider groups or pharmacies contract.
2. Procedures To Determine and Document Creditable Status of
Prescription Drug Coverage (Sec. 423.56)
In the regulation text of the January 28, 2005 final rule, we have
identified a typographical error in Sec. 423.56(b)(6). As published,
Sec. 423.56(b)(6) directs the reader to reference Sec. 423.205 for a
definition of the term ``Medicare supplemental policy''. (70 FR 4532)
However, the proper reference for the definition of the term ``Medicare
supplemental policy'' is Sec. 403.205. Therefore, we are revising the
regulation text accordingly to state the correct reference; that is,
Sec. 403.205.
B. Subpart C--Benefits and Beneficiary Protections
1. Definitions
a. Part D Drug
(1) Erectile Dysfunction
In the preamble of the January 28, 2005 final rule (70 FR 4228 et
seq.), we addressed the regulatory definition of the term ``Part D
drug'' in Sec. 423.100. (70 FR 4534) We stated that in accordance with
section 1860D-2(e)(2) of the Act, the definition of a Part D drug would
specifically exclude drugs or classes of drugs, or their medical uses,
which may be excluded from coverage or otherwise restricted under
Medicaid under section 1927(d)(2) of the Act, with the exception of
smoking cessation agents. On October 26, 2005, section 1860D-2(e)(2)(A)
of the Act was amended to exclude from the statutory definition of a
Part D drug ``a drug when used for the treatment of sexual or erectile
dysfunction, unless such drug were used to treat a condition, other
than sexual or erectile dysfunction, for which the drug has been
approved by the Food and Drug Administration.'' Consequently, beginning
January 1, 2007, erectile dysfunction (ED) drugs will not be classified
as Part D drugs under Sec. 423.100 when they are used for the
treatment of sexual or erectile dysfunction, unless they are used to
treat a condition, other than sexual or erectile dysfunction, for which
the drug has been approved by the FDA. We note here that ED drugs will
also not meet the definition of a Part D drug for off-label uses that
by definition are not approved by the FDA. This includes non-FDA-
approved uses contained in one of the compendia listed in section
1927(g)(1)(B)(i) of the Act: American Hospital Formulary Service Drug
Information, United States Pharmacopeia-Drug Information (or its
successor publications), and the DRUGDEX Information System.
This ED exclusion is cited in 1927(d)(2)(K), and because our
definition of a Part D drug in Sec. 423.100(2)(ii) excludes drugs
which may be excluded under section 1927(d)(2) of the Act, no
regulation text change is required. Similar to other excluded drugs
contained in section 1927(d)(2) of the Act, those plans that wish to
continue coverage of ED drugs may do so as a supplemental benefit
through enhanced alternative coverage, consistent with existing policy.
To ensure adequate notice of this new ED exclusion, we issued a
question and answer (Q&A) notice to plans throughout our Healthcare
Plan Management System (HPMS) on July 10, 2006 (Q&A 7682 http://questions.cms.hhs.gov/cgi-bin/cmshhs.cfg/php/enduser/std_alp.php?p_sid=F*VR*Ygi). We believe that this Q&A, coupled with a considerable
amount of media attention on the topic, has provided the industry a
significant amount of notice regarding the implementation of this ED
exclusion. Our provider and beneficiary outreach programs are also
including the new ED exclusion in their broader education program to
ensure all groups are prepared for the implementation of the ED
exclusion on January 1, 2007.
(2) Morbid Obesity
Section 423.100 defines the term ``Part D drug'' and excludes from
that definition ``[d]rugs or classes of drugs, or their medical uses,
which may be excluded from coverage or otherwise restricted under
Medicaid under sections 1927(d)(2) or (d)(3) of the Act, except for
smoking cessation agents.'' (70 FR 4534) In the corresponding preamble
of the January 28, 2005 final rule, we explained that this list of
excluded drugs included agents when used for anorexia, weight loss, or
weight gain and agents when used for cosmetic purposes or hair growth.
(70 FR 4228) However, in the preamble we erroneously asserted that to
the extent that a drug was dispensed for a ``medically accepted
indication'' (70 FR 4230) as described in section 1860D-2(e)(1) of the
Act, weight loss agents could be covered for the treatment of morbid
obesity. Therefore, we clarify here that agents, when used for
anorexia, weight loss, or weight gain, are specifically excluded from
the definition of Part D drugs. Thus, a weight loss agent, even when
not used for cosmetic purposes, is still ``an agent used for anorexia,
weight loss, or weight gain,'' for purposes of the exclusion from the
definition of Part D drug. Similar to other excluded drugs contained in
section 1927(d)(2) of the Act, those plans that wish to continue
coverage of weight loss agents may do so as a supplemental benefit
through enhanced alternative coverage, consistent with existing policy.
Since publication of the January 28, 2005 final rule, we have
received requests for clarification about our preamble language
regarding drugs used to treat morbid obesity. We clarified our policy
in Q&A guidance to Part D plans released in Spring 2005. (Q&A 5279
http://questions.cms.hhs.gov/cgi-bin/cmshhs.cfg/php/enduser/std_alp.php?p_sid=7KFqaChi.) There, we stated that weight loss agents
prescribed for the treatment of morbid obesity are not Part D drugs
covered under 1860D-2(e)(2) of the Act, because even though they are
not used for other excluded purposes such as cosmetic or hair growth,
they nevertheless remain agents for anorexia, weight loss, or weight
gain that are excluded from the definition of Part D drugs under
section 1860D-2(e)(2) of the Act. We note that we are not expanding or
changing current policy regarding the exclusion of agents used for
weight loss from the definition of Part D drug. Rather, we are
clarifying existing policy regarding the definition of a Part D drug
that excludes agents used for weight loss, including in connection with
morbid obesity.
(3) Insulin Inhalation Drugs and Supplies
[If you choose to comment on issues in this section, please include
the caption ``INSULIN INHALATION DRUGS AND SUPPLIES'' at the beginning
of your comments.]
With the passage of the MMA, Congress included within the
definition of ``Part D drug'' found in section 1860D-2(e) of the Act
``medical supplies associated with the injection of insulin (as defined
in regulations of the Secretary)'' as Part D drugs. We believe that
Congress' intent was to ensure that a beneficiary with diabetes had
access to both the insulin and the supplies required to deliver insulin
into the body. For example, in the conference report for the MMA, the
conferees
[[Page 29406]]
specifically stated that: ``It is the intent of conferees that the
definition of insulin, and medical supplies associated with the
administration of insulin, as a covered prescription drug shall include
medical supplies that the Secretary determines to be reasonable and
necessary, such as insulin, insulin syringes, and insulin delivery
devices that are not otherwise covered under the durable medical
equipment benefit.'' (H.R. Conf. Rep. 108-391, 108th Cong., 1st Sess.
at 442 (2003))
Administration of insulin by injection, especially since it
involves multiple injections daily, has fueled constant research into
the delivery of insulin by another route. While there have been
promising developments of an alternative delivery method over the past
8 years, no other insulin delivery method had obtained FDA approval as
of the time we were undertaking rulemaking to implement the Part D
program. Thus, in the final rule, we interpreted the term ``medical
supplies associated with the injection of insulin'' as comprising
syringes, needles, alcohol swabs, gauze, and insulin delivery devices
not otherwise covered by Part B, such as insulin pens, pen supplies,
and needle-free syringes. In doing this, we provided greater detail to
Part D sponsors on what exactly met the definition of a Part D drug,
but, like Congress, we derived our definition based upon the only
approved administration method available to diabetics at the time.
On January 26, 2006, the FDA approved the first-ever inhaled
insulin. This inhaled medication is a dry powder inhaler (``DPI'') that
requires a patient to place a small amount of powdered insulin into a
hand-held chamber that permits inhalation of the insulin into the
lungs.
Subsequent to the FDA approval, we began to receive questions
regarding the reimbursement of this new product. For example, inquirers
wanted to know whether the inhalation supplies associated with this new
product would be included in the definition of a Part D drug, because
while administration by inhalation offers the beneficiary an
alternative method of receiving insulin for those appropriately
qualified, the chamber and any associated accessories involved in
inhalation are not specifically described in the definition of a Part D
drug.
Upon review of these issues, we concluded it was not Congress'
intention to prevent access to this novel insulin delivery method, as
doing so would deny millions of Medicare beneficiaries an alternative
way to manage diabetes. Thus, we have determined that, consistent with
Congressional intent, supplies associated with the inhalation of
insulin meet the definition of a Part D drug. We propose to codify our
existing guidance (Q&A 7940 http://questions.cms.hhs.gov/cgi-bin/cmshhs.cfg/php/enduser/std_alp.php?p_sid=sXyWmkki) and revise the
definition of Part D drug to include ``[s]upplies that are directly
associated with delivering insulin into the body through inhalation,
such as the inhalation chamber used to deliver the insulin.''
While this new definition would make these insulin inhalation
supplies eligible for reimbursement as a Part D drug, unless our
formulary guidelines required otherwise, it would be the Part D
sponsor's decision (through its Pharmacy and Therapeutics Committee)
whether to place these products on the formulary. Additionally, we
would expect sponsors to apply drug utilization management tools to
ensure the appropriate use of these supplies.
We note that our extension of insulin-related supplies extends only
to those supplies that are directly associated with delivering the
insulin into the body through inhalation, such as the inhalation
chamber used to deliver the insulin. Where the relationship is more
indirect, for example auxiliary supplies that might be used to hold the
chamber, ease actuation or store the chamber, we would not consider
such items to be an insulin delivery-related supply. We reiterate our
statement in the final rule that our intention is to narrowly construe
what constitutes these medical supplies in order to avoid an
inappropriate expansion of the Part D benefit.
(4) Vaccine Administration Fee
We also propose to amend the definition of Part D drug to include a
reference to vaccine administration on or after January 1, 2008, to
conform to Section 1860D-2(e)(1)(B) of the Act, which was recently
amended by Section 202(b) of the Tax Relief and Health Care Act of
2006. We intend to reflect the statutory change in the final rule.
b. Long-Term Care Facilities
In the January 28, 2005 final rule, Sec. 423.100 defines the term
``long term care facility'' as a ``skilled nursing facility as defined
in section 1819(a) of the Act, or a medical institution or a nursing
facility for which payment is made for an institutionalized individual
under section 1902(q)(1)(B) of the Act.'' (70 FR 4534) However, in our
corollary discussion of that term in the preamble, we inadvertently
omitted institutions for mental disease (IMDs) from the list of
facilities that meet the definition of a long term care (LTC) facility.
(70 FR 4236)
Since publication of the January 28, 2005 final rule, we have
received numerous requests for clarification regarding the status of
IMDs in terms of our definition of the term ``long term care
facility''. Consequently, we have clarified, in Q&A guidance to Part D
plans released on October 21, 2005 (http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/IMDICFPharmacyGuidance.pdf.), the
status of IMDs. The definition of an LTC facility would include an IMD
that is a nursing facility or other medical institution (which is a
term defined at 42 CFR 4435.1009) and receives Medicaid payment for its
services to an institutionalized individual under section 1902(q)(1)(B)
of the Act. In other words, to the extent that a nursing facility or
medical institution that is an IMD has as an inpatient any
institutionalized individual (which means any full benefit dual
eligible individual for whom payment is made for IMD services under
Medicaid throughout a month, as provided in section 1902(q)(1)(B) of
the Act), that IMD will fall within the definition of an LTC facility
in Sec. 423.100. We are aware that there exists a statutory Federal
financial participation exclusion under Medicaid affecting residents of
IMDs between the ages of 22 and 64. However, the IMD exception to the
definition of ``medical assistance'' under section 1902(q)(1)(B) of the
Act does not apply to individuals who are age 65 and older. Thus, a
State may elect to provide Medicaid coverage for services of an IMD to
individuals over age 65. In these cases, all elderly full-benefit dual
eligibles who are inpatients in an IMD for a full month are considered
institutionalized individuals for that month. We note that we are not
expanding or changing current policy regarding the definition of an LTC
facility, but rather clarifying that IMDs are among the medical
institutions that meet the definition of an LTC facility in Sec.
423.100.
We also clarify that as medical institutions, hospitals, (including
long-term care hospitals) that receive payments under section
1902(q)(1)(B) of the Act can meet the definition of an LTC facility. To
the extent that inpatients in these hospitals exhaust their Part A
inpatient days benefit, and payment is no longer available under Part A
or Part B for drugs that would otherwise meet the definition of a Part
D drug, such drugs are Part D drugs. Consequently, Part D sponsors must
[[Page 29407]]
ensure that they provide convenient access to network LTC pharmacies
(which, in the case of a hospital, is typically the hospital's in-house
pharmacy) for all of their enrollees who are inpatients in a hospital
where the hospital is a ``medical institution'' under 1902(q)(1)(B) and
therefore would meet the Part D definition of an LTC facility and whose
Part A benefits have been exhausted.
c. Contracted Pharmacy Network
Section 423.100 defines the ``contracted pharmacy network'' as
``pharmacies, including retail, mail-order, and institutional
pharmacies, under contract with a Part D sponsor to provide covered
Part D drugs at negotiated prices to Part D enrollees.'' (70 FR 4533)
There, we made a technical error by inadvertently omitting clarifying
language indicating that a pharmacy in a contracted pharmacy network
must be licensed. We view this change as necessary in order to bring it
in line with our term ``retail pharmacy'' which requires that a retail
pharmacy be ``licensed.'' (70 FR 4535) Further, we believe this is an
important clarification to be made, given our commitment to safeguard
beneficiaries' interests and health with respect to access to covered
Part D drugs through network pharmacies, be they retail, home infusion,
long-term care, I/T/U, or other types of pharmacies. Accordingly, we
will revise the definition of ``contracted pharmacy network'' to state
that a pharmacy participating in a contracted pharmacy network must be
licensed.
d. Negotiated Prices
[If you choose to comment on issues in this section, please include
the caption ``NEGOTIATED PRICES'' at the beginning of your comments.]
Under Sec. 423.104(d)(2)(i), beneficiary cost sharing under the
initial coverage limit is equal to 25 percent of ``actual cost.'' (70
FR 4535) In addition, in accordance with Sec. 423.104(g)(1), a Part D
sponsor is required to provide beneficiaries with ``access to
negotiated prices for covered Part D drugs * * * even if no benefits
are payable to the beneficiary * * * because of the application of any
deductible or 100 percent coinsurance requirement.'' (70 FR 4536) In
other words, even if a beneficiary is paying 100 percent of his or her
costs, the beneficiary must be charged the same negotiated prices at a
network pharmacy that would otherwise be used for calculating cost
sharing.
Actual cost is defined in Sec. 423.100 as ``the negotiated price
for a covered Part D drug when the drug is purchased at a network
pharmacy, and the usual and customary price when a beneficiary
purchases the drug at an out-of-network pharmacy consistent with Sec.
423.124(a).'' (70 FR 4533.) In Sec. 423.100 ``negotiated prices''
means prices for covered Part D drugs that--
Are available to beneficiaries at the point of sale at
network pharmacies;
Are reduced by those discounts, direct or indirect
subsidies, rebates, other price concessions, and direct or indirect
remunerations that the Part D sponsor has elected to pass through to
Part D enrollees at the point of sale; and
Includes any dispensing fees. (70 FR 4534.)
On July 20, 2006, we issued guidance to Part D sponsors stating
that, in order to minimize disruption to plan operations, for 2006 and
2007, sponsors could, at their option, base beneficiary cost-sharing
not on the price ultimately charged by the pharmacy for the drug, but
on the price the sponsor paid a pharmacy benefit manager (PBM) or other
intermediary for the drug. We also stated our intent to issue a
proposed rule that would require a single approach for calculating
beneficiary cost sharing, based upon the price ultimately received by
the pharmacy.
In order to resolve the confusion caused by the Prescription Drug
Benefit final rule, we are now proposing to amend the definition of
``negotiated prices'' to be effective for Part D contract year 2009 to
require that beneficiary cost sharing must be based upon the price
ultimately received by the pharmacy or other dispensing provider.
Therefore, we are proposing to revise Sec. 423.100 so that the
first part of the definition of ``negotiated prices'' would state that
negotiated prices are prices that the Part D sponsor (or other
intermediary contracting organization) and the network dispensing
pharmacy or other network dispensing provider have negotiated as the
amount the network dispensing pharmacy or other network dispensing
provider will receive, in total, for a particular drug. The term
``intermediary contracting organization'' refers to organizations such
as pharmacy benefit managers that contract with plan sponsors to
negotiate pharmacy contracts on their behalf.
We would also revise the definition of ``negotiated prices'' to
include prices for covered Part D drugs negotiated between the Part D
sponsor and other network dispensing providers. Part D sponsors can
contract with providers other than a pharmacy to dispense covered Part
D drugs, including them in their network. Therefore, we are amending
the definition of negotiated prices to reflect the prices for covered
Part D drugs that Part D sponsors negotiate with all of their network
dispensing providers.
In addition, although the definition of negotiated prices continues
to state that these prices are reduced by discounts, rebates, and other
direct and indirect remuneration that the Part D sponsor has elected to
pass through to Part D enrollees at the point of sale, it is our
understanding that in practice, Part D sponsors are unable to actually
apply discounts, rebates, and other price concessions at the point of
sale in order to reduce the price negotiated with the dispensing
pharmacy or other dispensing provider. We recognize that negotiated
prices would include only those price concessions actually passed
through in order to result in a lower price to the beneficiary at the
pharmacy (or other dispensing provider). To the extent no price
concessions are passed through, of course, the negotiated prices would
not be reduced.
2. Requirements Related to Qualified Prescription Drug Coverage (Sec.
423.104)--Waiver of Reduction of Part D Cost-Sharing by Pharmacies
In the January 28, 2005 final rule, we stated that we would allow
waivers or reductions of cost-sharing by pharmacies to count as
incurred costs. (70 FR 4240) Our statement, however, was limited only
to pharmacies that are not also acting as other wrap-around coverage
that generally would not count toward TrOOP. We did not intend to allow
pharmacy waivers to count as incurred costs in cases where a pharmacy
also met the definition of a group health plan, insurance or otherwise,
or a third party payment arrangement, as those terms are defined in
Sec. 423.100. As provided in the definition of incurred costs in Sec.
423.100 (70 FR 4534), wraparound assistance with covered Part D drug
costs by group health plans, insurance or otherwise, or a third party
payment arrangement does not count as costs incurred toward a Part D
enrollee's annual out-of-pocket threshold.
In response to numerous requests for clarification of our policy
with regard to waiver or reduction of Part D cost-sharing by network
pharmacies, particularly by safety-net pharmacies, we have clarified,
in question-and-answer guidance to Part D plans released on June 27,
2005 (Q & A number 5115 http://questions.cms.hhs.gov/cgi-bin/cmshhs.cfg/php/enduser/std_alp.php?p_sid=gIVVcxhi), that although we
will generally allow waivers or reductions of Part D cost-sharing by
pharmacies to count toward
[[Page 29408]]
as incurred costs, this will not be the case for pharmacies affiliated
with entities whose wraparound coverage does not count as an incurred
cost. This includes pharmacies operated by entities that are group
health plans, insurance, government-funded health programs, or third
party payment arrangements with an obligation to pay for covered Part D
drugs. As a result, many safety-net providers (who, because they are
fully or partially funded through government grants are considered
government-funded health programs as defined in Sec. 423.100) will be
unable to have any waiver or reduction of cost-sharing their pharmacies
apply to Part D enrollees' Part D cost-sharing count as an incurred
cost. This clarification does not represent a change or expansion to
current policy given that, consistent with the section 1860D-2(b)(4)(C)
of the Act, our regulations have made abundantly clear that cost-
sharing paid for or reimbursed by group health plans, insurance or
otherwise, or other third party payment arrangements cannot be counted
toward a Part D enrollee's incurred cost total.
3. Access to Covered Part D Drugs (Sec. 423.120)
a. Applicability of Some Nonretail Pharmacies to Standards for
Convenient Access (Sec. 423.120(a)(2))
In Sec. 423.120(a)(2), we made a technical error by inadvertently
referring to ``rural health clinics'' as ``rural health centers.'' (70
FR 4537) In fact, there is no such entity as a ``rural health center''
for purposes of the Medicare statute or regulations. Our intent was to
reference facilities described in section 1861(aa)(2) of the Act, as
demonstrated by our reference in Sec. 423.464(f)(1)(vii) to ``Rural
health centers as defined under section 1861(aa)(2) of the Act.'' The
correct terminology for those facilities is ``rural health clinics.''
Accordingly, we are revising the regulatory text to correctly reference
these entities in Sec. 423.120(a)(2) by removing the phrase ``rural
health centers'' and adding in its place ``rural health clinics.''
b. Adequate Access to Home Infusion Pharmacies (Sec. 423.120(a)(4))
[If you choose to comment on issues in this section, please include
the caption ``ADEQUATE ACCESS TO HOME INFUSION PHARMACIES'' at the
beginning of your comments.]
We are proposing to codify in regulation, at Sec. 423.120(a)(4)
(70 FR 4537), guidance that we have already issued with regard to
access to home infusion pharmacies by Part D sponsors. This
codification would ensure that the regulations provide specificity to
our requirement that Part D enrollees receive adequate access to Part
D-covered home infusion therapy. In addition, we propose one change to
the regulations, on which we invite comments. This modification would
require that Part D sponsors provide covered home infusion drugs within
24 hours of discharge from an acute setting.
In the January 28, 2005 final rule, we used our authority under
section 1860D-4(b)(1)(C) of the Act to require Part D plans to provide
adequate access to home infusion pharmacies. Given coverage of home
infusion drugs under Part D, we did not believe it was an option for
Part D plans not to include at least some home infusion pharmacies in
their networks in order to provide enrollees with meaningful access to
those drugs. As we stated in the preamble to the final rule (70 FR
4250), we were particularly concerned in regard to prescription drug
plans which, unlike other Part D plans options, do not benefit from
reduced medical costs associated with home infusion and may therefore
have little incentive to contract with home infusion pharmacies.
Therefore, we added a provision to our final regulations at Sec.
423.120(a)(4) which requires Part D plans to demonstrate to us that
they provide adequate access to home infusion pharmacies consistent
with CMS operational guidance to Part D plans. In the preamble to our
final rule, we also set forth our expectation that Part D plans would
demonstrate adequate access based in part on the number of enrollees in
their service areas and the geographic distribution and capacity of
home infusion pharmacies in those service areas.
As we have gained experience with the Part D program, the need to
clarify our expectations with regard to the provision of Part D-covered
home infusion drugs became necessary. To this end, we issued a
clarification of our expectations regarding adequate access to home
infusion pharmacies to Part D plans on March 10, 2006. (http://www.cms.hhs.gov/PrescriptionDrugCovContra/downloads/HomeInfusionReminder_03.10.06.pdf.) That policy memorandum clarified
that, while we do not expect Part D plans to provide or pay for
supplies, equipment, or the professional services needed for home
infusion therapy, we do expect Part D sponsors' contracted pharmacy
networks to deliver home infused drugs in a form that can be
administered in a clinically appropriate fashion.
In addition, we clarified that home infusion networks must have
contracted pharmacies capable of providing infusible Part D drugs for
both short term acute care (for example, IV antibiotics) and long term
chronic care (for example, alpha1 protease inhibitor)
therapies. While the same network pharmacy does not necessarily need to
be capable of providing the full range of home infusion Part D drugs,
the home infusion network, in the aggregate, must have a sufficient
number of pharmacies capable of providing the full range of home
infusion Part D drugs to ensure enrollees have adequate access to
medically necessary home infusion therapies when needed.
In addition, we clarified that Part D plans must require their
contracted network pharmacies that deliver home infusion drugs to
ensure that the necessary professional services and ancillary supplies
required for home infusion therapy are in place before dispensing home
infusion drugs. In addition, we believe that plans must require the
delivery of home infusion drugs within a reasonable time period based
on these assurances. We note that, generally, facility discharge
planners, in collaboration with a patient's physician, are responsible
for ensuring that the components needed to safely administer a drug at
home are present upon a patient's discharge. However, we expect the
Part D plan's in-network contracted pharmacy vendors--particularly
those that do not supply the necessary ancillary services (which are
not a Medicare Part D benefit)--to receive assurances that another
entity, such as a home health entity, can arrange for the provision of
these services. We further clarified that we consider the action of
obtaining assurances a minimum quality assurance requirement on Part D
plans under Sec. 423.153(c).
With respect to the timely delivery of home infusion drugs under
Part D, we invite comments on the specification of a reasonable
timeframe for delivery. In our ongoing discussions with home infusion
providers we have learned that best practices involve the availability
of infusion services upon discharge from a hospital either by the next
required dose or within twenty-four hours of the discharge.
Consequently, we are proposing a requirement that Part D plan sponsors
provide covered home infusion drugs within 24 hours of discharge from
an acute setting. We note that home infusion therapy may serve as a
vehicle to promote early hospital discharge. Given that the need for
home infusion therapy is often of an urgent nature, we believe that
delivery of home infusion drugs should occur within 24
[[Page 29409]]
hours, provided that all necessary assurances have been received by the
Part D plan sponsor that all ancillary services and professional
services have been arranged.
Accordingly, in order to codify our previous guidance, we are
proposing to revise Sec. 423.120(a)(4) to expressly require that a
Part D plan's contracted pharmacy network provide adequate access to
home infusion pharmacies through a contracted pharmacy network that, at
a minimum: (1) Is capable of delivering home infused drugs in a form
that can be administered in a clinically appropriate fashion; (2) is
capable of providing infusible Part D drugs for both short-term acute
care and long-term chronic care therapies; and (3) ensures that the
professional services and ancillary supplies necessary for home
infusion therapy are in place before dispensing home infusion drugs. In
addition, we propose to add a new requirement that a Part D plan's
contracted pharmacy network also provide delivery of home infusion
drugs within 24 hours. These proposed changes would codify our existing
operational policies and impose a new requirement that Part D plans
provide adequate access to home infusion therapy through their
contracted pharmacy networks within 24 hours.
C. Subpart F--Submission of Bids and Monthly Beneficiary Premiums: Plan
Approval--Timing of Payments (Sec. 423.293(a))
We are making a technical correction to Sec. 423.293(a) (70 FR
4546) to reflect the statutory requirement that all the provisions of
section 1854(d) of the Act apply in the same manner as they apply under
Part C of Title XVIII of the Act. Section 1860D-13(c)(1) of the Act
states that, with two exceptions not particularly relevant to this
discussion, the provisions of ``section 1854(d) shall apply to PDP
sponsors and premiums (and any late enrollment penalty) under this part
in the same manner as they apply to MA organizations and beneficiary
premiums under part C, except that any reference to a Trust Fund is
deemed for this purpose a reference to the Medicare Prescription Drug
Account.'' Section 1854(d)(1) of the Act requires an organization to
permit the payment of both basic and supplemental premiums on a monthly
basis. This concept is reflected in the Part C regulations at Sec.
422.262(e). In accordance with the statutory mandate, we have already
required plans to permit beneficiaries to pay their premiums on a
monthly basis. We are now making a technical correction to Sec.
423.293(a) to cite both Sec. 422.262(f) and Sec. 422.262(e). This
change reflects both our current policy as well as the statutory
requirement.
D. Subpart G--Payments to Part D Plan Sponsors for Qualified
Prescription Drug Coverage
1. Definitions and Terminology (Sec. 423.308)
a. Administrative Costs (Sec. 423.308)
[If you choose to comment on issues in this section, please include
the caption ``ADMINISTRATIVE COSTS'' at the beginning of your
comments.]
The statute requires CMS to exclude administrative costs from the
calculation of gross covered prescription drug costs and allowable risk
corridor costs. However, administrative costs are not defined in either
the statute or the January 28, 2005 final rule. Therefore, to explain
this term and clarify which costs are included in administrative costs,
we are adding a definition for the term ``administrative costs''. In
the definition, we define ``administrative costs'' as the Part D
sponsor's costs other than those incurred to purchase or reimburse the
purchase of Part D drugs under the Part D plan. Included in the
definition of administrative costs are costs incurred by Part D plans
that exceed the price charged by a dispensing entity for covered Part D
drugs. For example, the profit retained by a PBM that negotiates prices
with pharmacies on behalf of a Part D sponsor is considered an
administrative cost and not a drug cost.
The policy refines our interpretation of the statutory and
regulatory definitions of ``allowable reinsurance costs'' and
``allowable risk corridor costs,'' which in both cases exclude any
administrative costs of the sponsor. By statute, ``allowable
reinsurance costs'' are a subset of ``gross covered prescription drug
costs,'' and Congress specifically defined these gross costs as ``not
including administrative costs.'' (See sections 1860D-15(b)(2) and
1860D-15(b)(3) of the Act.) Similarly, Congress defined ``allowable
risk corridor costs'' as ``not including administrative costs.'' (See
section 1860D-15(e)(1)(B) of the Act.) In the January 28, 2005 final
rule, we adopted these definitions. (70 FR 4547.) We interpret
administrative costs to include any profit or loss incurred by an
intermediary contracting organization (for example, a pharmacy benefit
manager (PBM)) as a result of lock-in pricing. Therefore, this profit
or loss must not be included in the reinsurance and risk corridor
payments made by the government, as these payments exclude
administrative fees. Thus, the Ingredient Cost, Dispensing Fee, Sales
Tax, Gross Drug Cost below the Out of Pocket Threshold, and Gross Drug
Cost above the Out of Pocket Threshold fields would need to reflect the
final amount ultimately received by the pharmacy at the point of sale.
b. Gross Covered Prescription Drug Costs (Sec. 423.308)
[If you choose to comment on issues in this section, please include
the caption ``GROSS COVERED PRESCRIPTION DRUG COSTS'' at the beginning
of your comments.]
Part D sponsors are required to report drug costs to CMS for the
purposes of reconciliation and risk sharing. We are required by statute
to calculate reinsurance payments using ``allowable reinsurance
costs,'' a subset of ``gross covered prescription drug costs,'' which
Congress specifically defined as ``not including administrative
costs.'' (See sections 1860D-15(b)(2) and 1860D-15(b)(3) of the Act).
Risk sharing payments are calculated using ``allowable risk corridor
costs,'' which are also defined as ``not including administrative
costs.'' (See section 1860D-15(e)(1)(B)of the Act.)
There have been several questions regarding the appropriate drug
costs to report, particularly when a Part D sponsor has contracted with
a PBM. The January 28, 2005 final rule defines ``gross covered
prescription drug costs'' as ``those actually paid costs incurred under
a Part D plan, excluding administrative costs * * * [equal to:] (1) All
reimbursement paid by a Part D sponsor to a pharmacy (or other
intermediary) * * * plus (2) All amounts paid under the Part D plan by
or on behalf of an enrollee (such as the deductible, coinsurance, cost
sharing, or amounts between the initial coverage limit and the out-of-
pocket threshold) in order to obtain drugs covered under the Part D
plan.'' (70 FR 4547)
The January 28, 2005 final rule definition of ``gross covered
prescription drug costs'' specifically recognizes that reimbursement
may be paid by a Part D sponsor ``to a pharmacy (or other
intermediary).'' (70 FR 4547) Many interpreted the term
``intermediary'' to mean PBM (rather than agent). Using this
definition, many plan sponsors reported the prices they negotiated with
their PBMs, rather than the prices that were agreed upon as the amount
to be received by the pharmacies.
We propose rectifying these conflicting definitions to require the
plan sponsor to include the profit or loss retained or incurred by a
PBM as part of lock-in pricing to be part of the administrative costs
of the plan sponsor.
[[Page 29410]]
This would require the amount ultimately received by the pharmacy
(minus any point-of-sale price concessions) to be used in calculating
cost-sharing for plan years 2009 and beyond. Specifically, we propose
amending the definition of ``gross covered prescription drug costs'' to
eliminate the parenthetical ``or other intermediary'' to require that
all plan sponsors report the amount ultimately received by the
pharmacy, other dispensing provider, or agent (as opposed to the amount
paid to an intermediary contracting organization that does not serve as
an agent, such as a PBM). We propose that the amount ultimately
received by the pharmacy or other dispensing provider (whether directly
or indirectly) for the particular drug will be the basis for-- (1)
calculating beneficiary cost sharing; (2) accumulating gross covered
drug costs; (3) reporting drug costs on the Prescription Drug Event
(PDE) records, and (4) developing bids submitted to CMS.
Similarly, we propose clarifying our definition of ``allowable risk
corridor costs'' so that it is clear that these costs are only based
upon the amounts received directly by the pharmacy or other dispensing
provider. This is because we would consider any profit (or loss) earned
by a PBM or other entity negotiating contracts with pharmacies to
constitute an administrative cost, and therefore would be exempt from
the definition of allowable risk corridor costs, as well as gross
covered prescription drug costs. Thus, for example, if a Part D sponsor
pays a PBM a certain amount for a particular drug, and then the PBM
negotiates a different price with the pharmacy, any differential
retained or lost by the PBM would be considered administrative, and
could not be reported as part of drug costs.
We propose revising the definitions of ``gross covered prescription
drug costs'' and ``allowable risk corridor costs'' to establish that
the amount received by the dispensing pharmacy or other dispensing
provider (whether directly or through an intermediary contracting
organization) rather than just the amount paid by the Part D sponsor is
the basis for drug cost that must be reported to CMS and used as the
basis to calculate beneficiary cost sharing. Accordingly, we are
revising Sec. 423.308 to incorporate these changes.
We also propose amending the definition of ``gross covered
prescription drug costs'' and ``allowable risk corridor costs'' to
ensure that when entities other than pharmacies dispense Part D drugs
and receive payment for Part D drugs, these expenditures are also
reflected in gross drug costs and allowable reinsurance costs, as well
as allowable risk corridor costs. For instance, reimbursement for a
vaccine that must be administered in a physician's office, payments
made to other Part D plans due to reconciliation, and reimbursement
made to a third party payer for COB error are all legitimate drug costs
that have been incurred through the payments indicated. In some cases,
a Part D plan, other than the plan in which the beneficiary is
correctly enrolled, may pay for a prescription drug on the
beneficiary's behalf (because of an erroneous belief that the
beneficiary was actually enrolled in its plan). In these cases, when
the enrollment error is corrected, the beneficiary's true plan
generally will reconcile payments with the original payer. The drug
costs paid by Part D plans (as well as by the beneficiary) under these
reconciliation processes reflect drug costs incurred by the plan's
enrollees that a payer other than the correct Part D plan of record
paid as primary. As drug costs paid for Part D covered drugs under Part
D plans, these costs are included in the calculations of reinsurance
costs and risk corridor costs. Therefore, we have amended the
definition of ``gross covered prescription drug costs'' and ``allowable
risk corridor costs'' in Sec. 423.308 to include all these drug costs.
We also propose amending the definition of ``gross covered
prescription drug costs'' to ensure that when a beneficiary is paying
100 percent cost sharing (for example, in any applicable deductible or
coverage gap) and the beneficiary obtains a covered Part D drug at a
network pharmacy for a lower price than the plan's negotiated price,
the beneficiary's out-of-pocket costs are counted toward both incurred
costs (TrOOP) and total drug spending. This is consistent with guidance
released via Q&A 7944 (issued May 9, 2006 http://questions.cms.hhs.gov/cgi-bin/cmshhs.cfg/php/enduser/std_alp.php?p_sid=gIVVcxhi.) For
example, if an enrollee in any applicable coverage gap or deductible
phase of the Part D benefit is able to obtain a better cash price for a
covered Part D drug at a network pharmacy than the plan offers via its
negotiated price, and the enrollee takes advantage of the special cash
price or discount being offered to all pharmacy customers or,
alternatively, by using a discount card, the enrollee may purchase that
covered Part D drug without using the Part D benefit or a supplemental
card. If that purchase price is lower than the Part D plan's negotiated
price, it will count toward TrOOP and total drug spend balances,
provided the Part D plan finds out about the purchase. This means that
the enrollee must take responsibility for submitting the appropriate
documentation to the enrollee's Part D plan, consistent with plan-
established processes and instructions for submitting that information,
in order to have that amount aggregated to the beneficiary's TrOOP and
total drug spend balances.
The applicability of beneficiary out-of-pocket expenditures made
outside the Part D benefit to TrOOP and total drug spend also extends
to any nominal copayments assessed by patient assistance programs
(PAPs) that provide assistance with covered Part D drug costs to Part D
enrollees outside the Part D benefit. Consistent with guidance provided
via Q&A 7942 (http://questions.cms.hhs.gov/cgi-bin/cmshhs.cfg/php/enduser/std_alp.php?p_sid=gIVVcxhi), operating outside the Part D
benefit does not preclude a PAP sponsor from requiring its enrollees
(including those enrolled in a Part D plan) from paying a nominal
copayment when they fill a prescription for a covered Part D drug for
which they provide assistance. We note that any copayments assessed by
PAPs operating outside the Part D benefit should be nominal, since only
nominal beneficiary cost-sharing is consistent with the concept of
operating outside Part D. Moreover, given that copayments are typically
assessed for purposes of minimizing drug overutilization, the
assessment of anything but nominal cost-sharing by PAPs is seemingly
inconsistent with the mission of a charitable organization structured
to provide assistance with prescription drug costs to low-income
patients.
Although PAP payments made for covered Part D drugs outside the
Part D benefit do not count toward enrollees' TrOOP or total drug spend
balances, nominal PAP copayment amounts paid by affected Part D
enrollees can be aggregated to their TrOOP and total drug spend
balances, provided the enrollees submit the appropriate documentation
to their plan consistent with plan-established processes and
instructions for submitting the information. The definition of ``gross
covered prescription drug costs'' has been revised to include these
drug costs and to reflect this sub-regulatory guidance.
2. Payment Appeals (Sec. 423.350(b))
In the January 28, 2005 final rule, we made a technical error in
Sec. 423.350(b). (70 FR 4550) In this paragraph, we inadvertently used
the phrase ``notice of
[[Page 29411]]
the adverse determination'' when we said that the request for
reconsideration for a payment determination must be filed within 15
days from the date of the notice of the adverse determination. The term
``notice of the adverse determination'' is a term that was
inadvertently copied here from a fee-for-service policy, and is not
relevant here. We are revising the regulation text to instead cite to
the notice of final payment for risk adjustment, reinsurance, low-
income cost sharing subsidies, or risk-sharing payments under
Sec. Sec. 423.343(b), 423.343(c), 423.343(d) or 423.336, respectively.
E. Subpart I--Organization Compliance With State Law and Preemption by
Federal Law--Waiver of Certain Requirements To Expand Choice (Sec.
423.410)
In accordance with section 1860D-12(c)(2)(B) of the Act, which
describes the special waivers available for the 2006 and 2007 plan
years, we are revising section 423.410(d) of the January 28, 2005 final
rule (70 FR 4551). We believe that the statute requires only a
substantially complete (rather than a fully complete) application to
have been submitted to the applicable state in order for an applicant
to be granted the special waiver for 2006 and 2007. Therefore, we are
correcting the regulatory language to require that an applicant submit
a substantially completed application to the state, in order for the
applicant to be eligible for the Sec. 423.410(d) waiver.
F. Subpart J--Coordination of Part D Plans With Other Prescription Drug
Coverage
1. Application of Part D Rules to Certain Part D Plans On and After
January 1, 2006 (Sec. 423.458).
Application of Part D Rules to Certain Part D Plans On and After
January 1, 2006 (Sec. 423.458).
We are revising the regulation text of Sec. 423.458(d)(2)(ii),
because we inadvertently omitted a reference to section 1894 of the Act
in describing the statutory authorization for the benefits offered by a
Program for All Inclusive Care For the Elderly (PACE) organization (70
FR 4552). Under Sec. 423.458(d)(2)(ii), a PACE organization may
request a waiver of a Part D requirement if the waiver would improve
the coordination of benefits between Part D and the benefits offered by
the PACE organization. As provided in section 1860D-21(f)(1) of the
Act, Part D provisions will apply to PACE organizations electing to
offer qualified prescription drug coverage in a manner that is similar
to the manner in which those provisions apply to an MA-PD local plan.
In addition, section 1860D-21(f) provides that a PACE organization may
be deemed to be an MA-PD local plan. Section 1860D-21(f) of the Act
specifically refers to ``a PACE program under section 1894.'' As
published in Sec. 423.458(d)(2)(ii), we reference only section 1934 of
the Act when describing benefits provided by PACE organizations. In
fact, PACE operates under both the Medicare and Medicaid statutes, and
all descriptions of PACE benefits should refer to both sections 1894
and 1934 of the Act. We are therefore revising Sec. 423.458(d)(2)(ii)
so that it refers to benefits offered by a PACE organization under both
sections 1894 and 1934 of the Act.
2. Coordination of Benefits With Rural Health Clinics (Sec. 423.464)
a. Coordination of Benefits With Rural Health Clinics
In Sec. 423.464(f)(1)(vii), we made a technical error by
inadvertently referring to rural health clinics as rural health centers
(70 FR 4553). In fact, our intent was to reference facilities described
in section 1861(aa)(2) of the Act, and the correct terminology for
those facilities is rural health clinics. Accordingly, we are
correcting the reference to these entities in Sec. 423.464(f)(1)(vii)
by removing the phrase rural health centers and adding in its place
rural health clinics.
b. Coordination of Benefits With Part D Plans and Other Payers
[If you choose to comment on issues in this section, please include
the caption ``COORDINATION OF BENEFITS WITH PART D PLANS AND OTHER
PAYERS'' at the beginning of your comments.]
We are codifying in Sec. 423.464(f) guidance we have already
issued to Part D sponsors addressing coordination of benefits
requirements in cases that involve another Part D plan that is not the
correct Part D plan of record or another payer that has incorrectly
paid as primary for a covered Part D drug for an enrolled beneficiary.
These revisions to Sec. 423.464(f) reflect our historic policy that
Part D plans must effectively coordinate benefits with other entities
providing prescription drug coverage.
In accordance with sections 1860D-24(a)(1) and (b) of the Act,
Sec. 423.464(a) of the regulations extends the coordination of
benefits requirements in section 1860D-23 of the Act applicable to Part
D plans vis-[agrave]-vis State Pharmaceutical Assistance Programs
(SPAPs) to other entities providing prescription drug coverage. As
provided in Sec. 423.464(f)(1), these entities include Medicaid
(including a plan operating under a waiver under section 1115 of the
Act), group health plans, the Federal Employees Health Benefits Program
(FEHBP), military coverage (including TRICARE), the Indian Health
Service, Federally qualified health centers, rural health clinics, and
other health benefit plans or programs that provide coverage or
financial assistance for the purchase or provision of Part D drugs on
behalf of Part D eligible individuals as CMS specifies. Consistent with
section 1860D-23(a)(2) of the Act, Sec. 423.464(a) specifies that the
elements to be coordinated with entities providing prescription drug
coverage include enrollment file sharing, the processing of claims
(including electronic processing), claims payment, claims
reconciliation reports, application of incurred costs, and other
administrative processes and requirements we specify.
A number of issues associated with the implementation of Part D
(including the presence of multiple payers, payer order, and
retroactive eligibility) have created challenges for Part D plans in
coordinating benefits with other entities providing prescription drug
coverage. Since the publication of the January 28, 2005 Medicare
Prescription Drug benefit final rule, we have developed, in cooperation
with industry stakeholders, additional processes and requirements to
address these challenges to Part D plan coordination of benefits.
Because of program start-up issues in 2006, lags in the information
available to pharmacies at the point-of-sale regarding which Part D
plan to bill may have resulted in the pharmacies' having access to
outdated or incomplete information. Because pharmacies generally relied
in good faith on this information, in some cases the wrong payer paid
for a prescription. Given the volume of drug claims that pharmacies
would need to re-adjudicate as a result of incorrect Part D enrollment
information available at the point-of-sale, re-adjudication would have
imposed a significant administrative and financial burden on
pharmacies. Therefore, payer-to-payer reconciliation procedures were
developed by CMS and a workgroup of industry representatives, including
industry trade groups, Part D plans, and pharmacies to mitigate the
administrative and financial burden involved with re-adjudication of
claims.
This payer-to-payer process was designed initially to be a
temporary measure during Part D's start-up phase. However, because many
beneficiaries have the opportunity (through special election periods)
to change their Part D
[[Page 29412]]
plan enrollment during the coverage year, there continues to be lag
time associated with enrollment and information systems updates.
Therefore, the Part D plan from which a beneficiary has transferred may
make payment for covered prescription drug costs incurred after the
effective date of the beneficiary's enrollment in the new Part D plan
of record. As a result, while CMS continues to explore the plan-to-plan
reconciliation and reimbursement procedures, we are requiring that
plans continue to use the special prescription drug event submission
and reimbursement processes established in 2006 as part of the plan-to-
plan reconciliation process. In this proposed rule, we are merely
codifying the already-existing procedures. (It is important to note
that an essential element of the plan-to-plan reconciliation process as
designed precludes plan use of claim denials or edits in the transition
period. That is, the process's design reflects the consensus of Part D
plans that it is necessary to prevent disclosure of proprietary pricing
information by masking the NDC coding.)
In addition, unforeseeable future events may create further need
for processes to reconcile payments when a payer other than the correct
Part D plan of record pays as primary for a covered Part D drug for an
enrolled beneficiary. These other reconciliation processes may be
developed by CMS to accomplish payment reconciliation without involving
pharmacy reversal and re-adjudication of claims or the public release
of a payer's proprietary information, such as negotiated rates.
Therefore we are proposing to clarify Sec. 423.464(f)(1) to state
that included among the entities providing other prescription drug
coverage with which Part D plans must coordinate are other Part D
plans. Although Part D plans are already obligated to coordinate with
group health plans, as provided in Sec. 423.464(f)(1)(ii), we believe
this revision formalizes our implicit recognition of other Part D plans
as other entities providing prescription drug coverage with which a
beneficiary's correct Part D plan of record must coordinate.
We also are clarifying Sec. 423.464(f) to clearly specify
additional elements of Part D plans' coordination of benefits
requirements in order to address the reconciliation issues detailed in
the preceding discussion. Section 1860D-23(a)(2)(F) of the Act gives
the Secretary the discretion to identify other administrative processes
that may be included in the required elements for coordination of
benefits by Part D plans. Consistent with this authority, we propose
revising Sec. 423.464(f) to add a fifth paragraph that clarifies that
Part D plans coordinate benefits with other Part D plans through the
reconciliation process we have developed for 2006, which involves
making payments to other Part D plans on the basis of the covered plan-
paid and low-income cost-sharing subsidy amounts reported to them by
CMS with respect to transferred enrollees. Payments made by the Part D
plans as part of this reconciliation process would be made without
regard to the plan's formulary or drug utilization review edits.
In addition, we propose modifying Sec. 423.464(f) by adding a
sixth paragraph that would require Part D sponsors to coordinate
benefits on a timely basis with other third parties and use CMS-
developed reconciliation processes, when established, in situations in
which a payer other than the correct Part D plan of record pays for
covered Part D drug costs as a primary payer. This was the case in 2006
with respect to the State-to-Plan Reconciliation Project in which some
States made drug payments for dual eligible beneficiaries and low-
income subsidy entitled beneficiaries enrolled in Part D and were
subsequently reimbursed by CMS through a special demonstration
authority. Processes similar to those employed in 2006 may need to be
developed by CMS in lieu of requesting pharmacy claims reversals and
re-adjudications or the public release of a payer's proprietary
information (such as negotiated prices).
The proposed changes described in this portion of this proposed
rule would not change current coordination benefits policy. Rather,
they would codify existing operational processes and reflect our
historic policy that Part D plans must effectively coordinate benefits
with entities providing other prescription drug coverage. We seek
comment on our proposals regarding the plan-to-plan coordination
process and CMS-developed reconciliation process.
G. Subpart K--Application Procedures and Contracts With Part D Plan
Sponsors
1. General Provisions (Sec. 423.504)
a. Submission of Bids
In Sec. 423.504, we inadvertently made reference to Sec.
423.265(a)(1) rather than Sec. 423.265 (70 FR 4555). Section
423.265(a) gives only the most narrow and rudimentary of information
concerning the bidding process; that is, that an applicant may submit a
bid to become a Part D plan sponsor. In fact, our intent was to cite in
its entirety the much broader list found under Sec. 423.265
(Submission of bids and related information) that provides
comprehensive and essential information for a Part D Plan sponsor to
successfully contract with CMS (70 FR 4544). Accordingly, we are
correcting the reference found under Sec. 423.504(a) to cite all of
Sec. 423.265.
2. Contract Provisions (Sec. 423.505)
In Sec. 423.505(h)(1), we are correcting the citation for the
False Claims Act, from 32 U.S.C. 3729 et seq., to 31 U.S.C. 3729 et seq
(70 FR 4556).
3. Failure To Comply With the Dissemination of Information Requirements
Grounds for Contract Termination (Sec. 423.509(a)(9))
In Sec. 423.509(a)(9), we indicate that CMS may terminate a plan's
contract if the plan substantially fails to comply with the Part D
marketing requirements (70 FR 4559). This provision cites the marketing
requirements at Sec. 423.128, which is an incorrect citation. Section
423.128 deals with the dissemination of Part D plan information, not
with plans' marketing requirements, per se. Therefore, we are revising
the regulation text, consistent with our original intent, to reflect
that a plan contract may be terminated if a plan sponsor substantially
fails to comply with the marketing requirements in Sec. 423.50 or the
dissemination of Part D plan information requirements in Sec. 423.128.
H. Subpart M--Grievances, Coverage Determinations, and Appeals
1. Definitions (Sec. 423.560)
a. Appointed Representative
We are revising the regulation text of Sec. 423.560 by making a
technical change to the definition of ``appointed representative.'' (70
FR 4562) In the Medicare Prescription Drug Benefit final rule, we
inadvertently omitted language indicating that an enrollee's appointed
representative may request a grievance on the enrollee's behalf.
Current policy as reflected in Chapter 18 of the Prescription Drug Plan
Manual permits an enrollee's appointed representative to request a
grievance, obtain a coverage determination, or deal with any of the
levels of the appeals process on the enrollee's behalf. We are
codifying this already existing policy by amending the regulation text.
The definition for appointed representative will state: ``Appointed
representative means an individual either appointed by an enrollee or
authorized under State or other applicable law to act on behalf of the
enrollee in filing a grievance, obtaining a coverage determination, or
[[Page 29413]]
in dealing with any of the levels of the appeals process. Unless
otherwise stated in this subpart, the appointed representative has all
of the rights and responsibilities of an enrollee in filing a
grievance, obtaining a coverage determination, or in dealing with any
of the levels of the appeals process, subject to the rules described in
part 422, subpart M of this chapter.''
b. Projected Value
In addition, we are making a technical change to the definition of
``projected value'' in Sec. 423.560 because it is not consistent with
the definition of projected value provided on page 4360 of the preamble
and in the regulation text at Sec. 423.610(b). (70 FR 4568) The
definition of ``projected value'' in Sec. 423.560 includes ``future
charges that will be incurred within 12 months from the date the
request for coverage determination or exception is received by the
plan'' as part of the projected value formula. However, the projected
value formulas on page 4360 of the preamble to the final rule and Sec.
423.610(b) of the regulations include ``any costs the enrollee could
incur based on the number of refills prescribed for the drug(s) in
dispute during the plan year.'' Our policy regarding how to calculate
projected value is consistent with the definition of projected value
provided on page 4360 of the preamble to the final rule and in the
regulation text at Sec. 423.610(b). Therefore, we are revising the
definition of projected value in Sec. 423.560 to state: ``Projected
value of a Part D drug or drugs includes any costs the enrollee could
incur based on the number of refills prescribed for the drug(s) in
dispute during the plan year. Projected value includes enrollee co-
payments, all expenditures incurred after an enrollee's expenditures
exceed the initial coverage limit, and expenditures paid by other
entities.''
2. Expediting Certain Coverage Determinations (Sec. 423.570)
We are amending the regulation text of Sec. 423.570(d)(3) because
we inadvertently omitted language indicating who is entitled to receive
written notice of a plan sponsor's denial of a request to expedite a
coverage determination. (70 FR 4564) Our policy requires a plan sponsor
to send written notice to the enrollee when it denies a request to
expedite a coverage determination. We believe the regulation text of
Sec. 423.570(d)(3) must be revised to accurately reflect our policy.
Accordingly, we propose to codify in the regulation text of Sec.
423.570(d)(3) the requirement that when a Part D sponsor denies a
request to expedite a coverage determination, it must ``subsequently
deliver to the enrollee, within 3 calendar days, equivalent written
notice.''
3. Expediting Certain Redeterminations (Sec. 423.584)
We are revising the regulation text of Sec. 423.584(b) because we
inadvertently omitted regulatory language regarding the procedures for
filing and withdrawing a request for an expedited redetermination. (70
FR 4566) Sections 423.582(b), (c), and (d) explain the process for
filing and withdrawing a request for a standard redetermination. These
procedures also apply to requests for expedited redeterminations. We
are revising the regulation text of Sec. 423.584(b) to accurately
reflect our policy that the provisions in Sec. 423.582(b), (c), and
(d) would also apply to Sec. 423.584(b). We are revising Sec.
423.584(b) by adding ``(3) The provisions set forth in Sec.
423.582(b), (c), and (d) also apply to expedited redeterminations.''
4. Right to an ALJ Hearing (Sec. 423.610)
We are revising the regulation text of Sec. 423.610(c)(2) due to
typographical errors. (70 FR 4568) The three requirements listed under
Sec. 423.610(c)(2) should have been numbered with (i), (ii), and
(iii). We are revising Sec. 423.610(c)(2) to reflect appropriate
numeration. It will now read as follows: ``Multiple enrollees. Two or
more appeals may be aggregated by multiple enrollees to meet the amount
in controversy for an ALJ hearing if--(1) the appeals have previously
been reconsidered by an IRE; (2) the request for ALJ hearing lists all
of the appeals to be aggregated and each aggregated appeal meets the
filing requirement specified in Sec. 423.612(b); and (3) the ALJ
determines that the appeals the enrollees seek to aggregate involve the
same prescription drug.''
I. Subpart P--Premiums and Cost-Sharing Subsidies for Low-Income
Individuals
1. Premium Subsidy Amount (Sec. 423.780)
a. Low-Income Benchmark Premium Amount
Section 1860D-14 of the Act requires CMS to subsidize the monthly
beneficiary premium and cost-sharing amounts incurred under Part D by
Part D eligible individuals with income and resources below certain
thresholds. Our rules mirror the statute's structure, which divides
low-income subsidy eligible individuals into two different groups,
based on income and resources: (1) Full subsidy eligible individuals;
and (2) other low-income subsidy eligible individuals. The different
groups are entitled to different amounts of premium assistance and
reductions in cost sharing.
Since the Part D benefit has become operational, we have become
aware that certain sections of part 423 subpart P need to be corrected
to accurately reflect the statutory language. Specifically, there is an
error in Sec. 423.780(b). (70 FR 4574) As written, this section states
that the premium subsidy amount is based upon the lesser of the plan's
premium or the low-income benchmark premium amount. The low-income
benchmark premium amount, as defined in the statute at section 1860D-14
of the Act, specifically describes how to calculate the low-income
subsidy for regions with only one PDP sponsor. At section 1860D-
14(b)(2)(A)(i) of the Act, the statute indicates that ``* * * the term
* * * `low-income benchmark premium amount' means, with respect to a
PDP region in which all prescription drug plans are offered by the same
PDP sponsor, the weighted average of the amounts described in
subparagraph (B)(i) for such plans.'' However, while the final
regulation described the low-income benchmark premium amount
calculation for regions with multiple drug plan sponsors, it did not
describe the methodology for determining the low-income benchmark
premium amount in a region with any number of MA-PD plans, but with
only one PDP sponsor (although the preamble to the final rule did). We
are correcting this error to comport with the statute and our intent as
outlined in the preamble by adding a new subparagraph (A) to Sec.
423.780(b)(2)(i). The new text will make clear that when there is only
one PDP sponsor in the region, the low income benchmark weighted
average includes only the premiums of basic PDPs in the area. The
weighted average does not count the premium amounts of PDP plans
offering supplemental coverage or MA-PD plans. This is in contrast to
the weighted average calculated when there are multiple PDP sponsors.
In that situation, the benchmark calculation includes not just the
premiums of basic PDPs; it also includes the portion of a premium
attributable to basic coverage, when a PDP offers both basic and
supplemental coverage. In addition, for multiple-PDP regions, the
benchmark would also include the amount charged for Part D coverage by
MA-PD plans. We note that in 2006, all PDP regions included multiple
PDP sponsors.
We also are revising Sec. 423.780(b)(2)(ii). We want to make
[[Page 29414]]
clear that in multiple-PDP sponsor regions, the MA-PDs included in the
weighted average are coordinated care plans.
b. Premiums Subsidy for Late Enrollment Penalty
We need to correct an omission related to the subsidy of the late
enrollment penalty for other low-income subsidy individuals in the
regulation text at Sec. 423.780(e). In this paragraph, we
inadvertently omitted a provision from the statute at section 1860D-
14(a)(2)(A) of the Act, which requires a late enrollment penalty
subsidy for other low-income subsidy eligible individuals. This subsidy
is based on a linear sliding scale, with a higher subsidy available to
individuals with incomes at or below 135 percent of the FPL (but who do
not meet the asset requirements of a full subsidy eligible individual),
and the lowest level subsidy available to individuals with incomes
below 150 percent of the FPL. Specifically, section 1860D-14(a)(2)(A)
of the Act reads, ``(2) OTHER INDIVIDUALS WITH INCOME BELOW 150 PERCENT
OF POVERTY LINE.--In the case of a subsidy eligible individual who is
not described in paragraph (1), the individual is entitled under this
section to the following: (A) SLIDING SCALE PREMIUM SUBSIDY.--An
income-related premium subsidy determined on a linear sliding scale
ranging from 100 percent of the amount described in paragraph (1)(A)
for individuals with incomes at or below 135 percent of such level to 0
percent of such amount for individuals with incomes at 150 percent of
such level.'' (emphasis added). The ``amount described in paragraph
(1)(A)'' encompasses the subsidy for the late enrollment penalty.
The current regulation does not include this sliding scale
calculation. The regulation only cites the subsidy for the late
enrollment penalty as something which is available only to full subsidy
eligible individuals. Accordingly, we are proposing to revise Sec.
423.780(e) to accurately reflect the statute. The sliding scale for the
late enrollment penalty subsidy will be calculated based on the linear
sliding scale for the premium subsidy, which is described in paragraph
(d) of the regulation. Beneficiaries with incomes on the sliding scale
will receive a late enrollment penalty subsidy that will be equal to a
percentage of the late enrollment penalty subsidy for full subsidy
individuals, based on the same 5 percent increment scale that applies
for the premium subsidy in paragraph (d) (that is, 135, 140, 145 and
150 percent of FPL).
For the first 60 months the penalty is imposed, full subsidy
individuals receive a late enrollment penalty subsidy equal to only 80
percent of the penalty amount. Therefore, the sliding scale premium
subsidy percentages for each income level in paragraph (d) must be
multiplied by 80 percent to arrive at the percentage of the late
enrollment penalty that is subsidized for each income level for the
first 60 months. For example, for individuals with incomes greater than
135 percent, but at or below 140 percent of the FPL applicable to the
family size, the late enrollment penalty subsidy will be equal to 60
percent of the late enrollment penalty for the first 60 months during
which the penalty is imposed. Sixty percent is equal to 75 percent (the
percentage of the premium subsidized for individuals with incomes
greater than 135 percent, but at or below 140 percent of the FPL
applicable to the family size in accordance with paragraph (d)(2))
multiplied by 80 percent (which, as stated, will be the amount of the
late enrollment penalty that will be subsidized for full subsidy
eligible individuals for the first 60 months during which the penalty
is imposed on them, as described in paragraph (e)).
After the first 60 months the penalty is imposed, the sliding scale
premium subsidy percentages for each income level in paragraph (d) will
be multiplied by 100 percent, as 100 percent of the late enrollment
penalty will be subsidized for full subsidy eligible individuals after
the first 60 months. As stated, the resulting percentages will be the
percent of the late enrollment penalty that will be subsidized and can
therefore be multiplied by the individual's late enrollment penalty to
give the subsidy. The below table illustrates the penalty subsidy
available to other low income subsidy individuals.
------------------------------------------------------------------------
Percent of Percent of
penalty penalty
subsidized during subsidized after
Income level the first 60 the first 60
months individual months individual
is subject to is subject to
penalty penalty
------------------------------------------------------------------------
<=135% FPL........................ 80 100
>135% and <=140% FPL.............. 60 75
>140% and <=145% FPL.............. 40 50
>145% and <150% FPL............... 20 25
>=150% FPL........................ 0 0
------------------------------------------------------------------------
J. Subpart R--Payments to Sponsors of Retiree Prescription Drug Plans
1. Requirements for Qualified Retiree Prescription Drug Plans (Sec.
423.884)
a. Application Timing
[If you choose to comment on issues in this section, please include
the caption ``APPLICATION TIMING'' at the beginning of your comments.]
The enactment of Title I of the MMA provides sponsors of retiree
prescription drug plans with multiple options for providing drug
coverage to their retirees who are Medicare beneficiaries. One of these
is section 1860D-22(a) of the Act, which permits the sponsor of a
qualified retiree prescription drug plan to receive a subsidy with
respect to certain allowable prescription drug costs incurred by
qualifying covered retirees, who must be eligible for, but not enrolled
in, Part D. This is referred to in the regulations as the Retiree Drug
Subsidy (RDS).
In implementing the statute, the regulations at Sec. 423.884(c)
outline the application requirements for the Retiree Drug Subsidy. (70
FR 4577) Section 423.884(c)(5)(i) requires a plan sponsor to file an
application for the subsidy by no later than 90 days before the
beginning of its plan year, unless an extension is requested and
granted (for example, the deadline for 2007 calendar year plans under
the regulation would be October 2, 2006). Upon further review of this
requirement, we believe that an end-of-month deadline would be
administratively simpler for both plan sponsors and CMS to track. For
example, for the 2006 calendar year, the initial deadline for the RDS
applications, as established in the regulation, was September 30, 2005,
which is actually 92 days before the
[[Page 29415]]
start of the plan year. In order to establish an appropriate
application date for each contract year, we can announce the date in
published guidance in advance to allow stakeholders sufficient time to
do the necessary preparation and filing. Accordingly, we are proposing
to replace the 90 day requirement with the phrase ``by a date specified
by CMS in published guidance'' in this provision of the final rule to
allow us the discretion to specify an end-of-month deadline in the
future through guidance. This will also give CMS the flexibility to
take into account operational systems changes in determining the
Retiree Drug Subsidy application deadline, while providing adequate
advance notice to plan sponsors and their advisers.
b. Data Match
[If you choose to comment on issues in this section, please include
the caption ``DATA MATCH'' at the beginning of your comments.]
In order to properly administer the Retiree Drug Subsidy program,
we must compare the retiree data that a plan sponsor submits to CMS
records to ensure that sponsors are not claiming the subsidy for
individuals that are enrolled in a Part D plan and are therefore not
qualifying covered retirees. In Sec. 423.884(c)(7)(i), we specifically
referenced the Medicare Beneficiary Database (MBD) as the system of
record for the data match. (70 FR 4578) While the MBD is currently the
system by which the retirees' status is verified, we also may use other
systems of record for purposes of the data match. Accordingly, we
propose to modify our language to be more suitable by substituting a
general reference to ``CMS database(s)'' for the ``Medicare Beneficiary
Database (MBD)'' in the regulation text at Sec. 423.884(c)(7)(i).
c. Actuarial Equivalence (Sec. 423.884)
(1) Medicare Supplemental Adjustment
Section 1860D-22(a)(2)(A) of the Act requires that a plan sponsor
provide an attestation that its plan is actuarially equivalent to
Medicare standard prescription drug coverage in order to claim RDS.
Section 423.884(d)(5) sets forth a two-prong test for determining the
actuarial value of the defined standard prescription drug coverage
under Part D against which the actuarial value of the retiree coverage
is measured. (70 FR 4578) The actuarial equivalence test includes a
``gross test'' and a ``net test.'' Section 423.884(d)(5)(iii)(B)(2)
states that the net test includes a ``Medicare supplemental
adjustment'' which allows a plan sponsor that provides supplemental
coverage for its retirees that elect Part D coverage to reflect the
impact of the supplemental coverage on the net value of Part D
coverage. Supplemental coverage for this purpose means drug coverage
over and above Part D coverage for those retirees that enroll in Part D
coverage. Our intent, which we clarified in operational guidance to
plan sponsors, was that a sponsor must actually provide supplemental
employer-provided retiree drug coverage in order to qualify for the
Medicare supplemental adjustment. (See CMS Guidance on the Actuarial
Equivalence Standard for the Retiree Drug Subsidy (April 7, 2005)
available at http://www.cms.hhs.gov/employerretireedrugsubsid.) In
accordance with our existing guidance, we are therefore revising Sec.
423.884(d)(5)(iii)(B)(2) to indicate that plan sponsors must actually
provide supplemental drug coverage for their retirees that elect Part D
in order to do the adjustment to the net value of Part D in the
actuarial equivalence test. We view this revision as merely
incorporating previously issued guidance, and not as a new policy
proposal.
(2) Non-Calendar Year Plans
[If you choose to comment on issues in this section, please include
the caption ``NON-CALENDAR YEAR PLANS'' at the beginning of your
comments.]
Sec. 1860D-22(a)(2)(A) of the Act requires a plan sponsor to
provide an attestation that its plan is actuarially equivalent to the
Medicare defined standard prescription drug coverage in order to claim
RDS. As explained above, our regulation at Sec. 423.884(d)(5) sets
forth a two-prong test for actuarial equivalence. The actuarial
equivalence test requires that the value of the plan sponsor's retiree
drug coverage be compared to the hypothetical value of the Medicare
defined standard prescription drug coverage had the sponsor's Part D
eligible individuals taken that coverage.
Sections 423.884(d)(5)(iii)(C) and (D) state that the valuation of
the Medicare defined standard prescription drug coverage for this
purpose is based on the initial coverage limit, cost sharing amounts,
and out-of-pocket threshold in effect at the start of the plan year.
However, the attestation must be submitted to CMS no later than 60 days
after the publication of the Part D coverage limits for the upcoming
calendar year; otherwise, the valuation must be based on the initial
coverage limit, cost sharing amounts, and out-of-pocket threshold for
the upcoming plan year. The intent of this 60 day provision is to
prevent actuaries from having to redo calculations for non-calendar
year plans that were based on the current calendar year initial
coverage limit, cost sharing amounts, and out-of-pocket threshold when,
after doing their calculations, but before the RDS application is
submitted, we publish the Part D coverage limits for the upcoming
calendar year.
Actuaries of plan sponsors have indicated to us that they believe
they should have the flexibility for non-calendar year plans to use the
Part D initial coverage limit, cost-sharing amounts, and out-of pocket-
threshold for the upcoming plan year, provided it does not impact their
ability to meet the application deadline. We agree that actuaries
should have this flexibility, and so we are proposing to amend the
Sec. 423.884(d)(5)(iii)(C) to permit a non-calendar year plan's
actuary to use either the current or subsequent year's Part D cost
limits when the attestation is submitted within 60 days of the
publication of the following year's cost limits. We also propose to
make corresponding changes to Sec. 423.884(d)(5)(iii)(C).
(3) Benefit Options
Employment-based retiree health coverage often has different plan
design features or benefit options that apply to specific groups of
retirees. Section 423.882 defines a benefit option as a particular
benefit design, category of benefits, or cost sharing arrangement
offered within a group health plan. Section 423.884(d)(5)(iv) states
that a plan with more than one benefit option must pass the gross test
separately on a disaggregated basis for each option, but that it may
pass the net test on an aggregated or disaggregated basis. As we have
indicated in subsequent guidance, our intent was that a plan sponsor
should also have the option of aggregating a subset of the benefit
options in a plan for the actuarial equivalence net test in addition to
aggregating all of the options or evaluating each option individually.
(See CMS Guidance on the Actuarial Equivalence Standard for the Retiree
Drug Subsidy (April 7, 2005); available at www.cms.hhs.gov/employerretireedrugsubsid.) If the sponsor combines two or more benefit
options, the sponsor may not claim the subsidy for those benefit
options excluded from the net value calculation, even if those options
meet the gross test. We are amending the final rule to reflect this
clarification of our intent, which reflects policy that has been
applied
[[Page 29416]]
consistently since the rule was published.
(4) Submission of Actuarial Attestation Upon Material Change
Section 1860D-22(a)(2)(A) of the Act requires that a plan sponsor
submit an actuarial attestation annually or at another time as the
Secretary may require. Section 423.884(d)(6)(ii) requires submission of
an attestation no later than 90 days before the implementation of a
material change to the coverage. While the term ``material change'' can
be construed broadly to include any change to the value of a sponsor's
plan, we have issued guidance indicating that a resubmission is not
necessary when a plan remains actuarially equivalent and no benefit
options are being added. In this preamble we are also reiterating this
interpretation: We would not require submission of an attestation under
Sec. 423.884(d)(6)(ii) where a plan sponsor still meets the actuarial
equivalence test after the change, and there are no benefit options
being added.
K. Subpart S--Special Rules for States--Eligibility
1. General Payment Provisions--Coordination With Medicare Prescription
Drug Benefits (Sec. 423.906)
Section 1935(d) of the Act contains specific provisions regarding
Medicaid coordination with Medicare prescription drug benefits. In the
case of a full benefit dual eligible individual, Federal Financial
Participation in State Medicaid expenditures is not available for
Medicaid covered drugs that could be covered under Part D or for cost
sharing related to these drugs. We are correcting Sec. 423.906(b) and
(c) to make clear that, in accordance with the statutory requirement in
section 1935(d)(2) of the Act, only drugs specifically excluded from
the definition of Part D drugs may be covered by medical assistance.
Currently, Sec. Sec. 423.906(b) and (c) includes the word
``covered.'' (70 FR 4583) Since our regulatory definition of ``Covered
Part D drugs'' excludes drugs that are not on a plan's formulary,
States may have interpreted the regulation to allow States to provide
additional medical assistance for coverage of drugs not on a Part D
plan's formulary. The effect of these changes is to make clear that
Federal financial participation is not available to States for coverage
of drugs that would be Part D covered drugs except that they are not on
a plan's formulary. We are also adding a definition of ``non-covered
drugs'' to the Sec. 423.902.
2. States' Contribution to Drug Benefit Costs Assumed by Medicare
(Sec. 423.910)
Section 1935(b) of the Act, as amended by the MMA, requires States
and the District of Columbia to be responsible for making monthly
payments to the Federal government beginning in January 2006 to defray
a portion of the Medicare drug expenditures for full benefit dual
eligible individuals. The statute further defines full benefit dual
eligible individuals to mean ``for a State for a month an individual
who has coverage for the month for covered part D drugs under a
prescription drug plan under part D of title XVIII, or under an MA-PD
plan under part C of such title. * * *''. In the January 28, 2005 final
rule, we explained the calculation of the monthly State phased-down
contributions. The calculation of the monthly state contribution is
dependent upon the state's reporting of the total number of full-
benefit dual eligible individuals for the State in the applicable
month. States are required, in accordance with the Sec. 423.910(d), to
submit an electronic file, in a manner specified by CMS, identifying
each full benefit dual eligible individual enrolled in the State
Medicaid program for each month. For States that do not submit an
acceptable file by the end of the month, the phased down State
contribution for that month is based on data deemed appropriate by CMS.
In Sec. 423.910(b)(1) of the Medicare Prescription Drug Benefit
final rule, we made a typographical error. (70 FR 4584) Section
423.910(b)(1) specified that ``[f]or States that do not meet the
quarterly reporting requirement for the monthly enrollment reporting, *
* *''. The text should have read ``For States that do not meet the
monthly reporting requirement for the monthly enrollment reporting, * *
*'', since there is no State quarterly reporting requirement referred
to in either the statute or regulation when calculating the phased-down
State contribution. Accordingly, we are revising the text consistent
with the statute.
III. Collection of Information Requirements
This document does not impose additional information collection and
recordkeeping requirements. Consequently, it need not be reviewed by
the Office of Management and Budget under the authority of the
Paperwork Reduction Act of 1995.
IV. Regulatory Impact Analysis
A. Overall Impact
We have examined the impacts of this rule as required by Executive
Order 12866 (September 1993, Regulatory Planning and Review), the
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354),
section 1102(b) of the Social Security Act, the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132. With
exception of the statutory change addressing the payment of vaccine
administration under Part D beginning in 2008 for covered Part D
vaccines, the impact of the policy supporting the clarifications in
this proposed rule were addressed as part of a prior final rule and do
not require further analysis. Specifically, a full regulatory impact
analysis was performed for the January 28, 2005 final rule (70 FR 4454)
implementing the Part D provisions of the MMA. As we explain below,
many of the provisions in this proposed rule are simply clarifications
of that final rule.
Executive Order 12866 (as amended by Executive Order 13258, which
merely reassigns responsibility of duties) directs agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). A
regulatory impact analysis (RIA) must be prepared for major rules with
economically significant effects ($100 million or more in any 1 year).
Because of the addition of vaccine administration under Part D
beginning in FY 2008, this rule meets the threshold to be economically
significant; and is consequently a major rule. The RFA requires
agencies to analyze options for regulatory relief of small businesses.
For purposes of the RFA, small entities include small businesses,
nonprofit organizations, and small governmental jurisdictions. Most
hospitals and most other providers and suppliers are small entities,
either by nonprofit status or by having revenues of $6 million or less
to $29 million in any 1 year. Individuals and States are not included
in the definition of a small entity.
As stated previously the addition of vaccine administration under
Part D is estimated to have a net impact to the fiscal year (FY) 2008
budget in the amount of $100 million. Since the relevant monetary
threshold has been exceeded, the RFA requires us to conduct a
regulatory flexibility analysis
[[Page 29417]]
in regard to the implementation of vaccine administration under Part D.
Given the nature of immunization in the U.S. market and its relation to
the Part D benefit, we believe only two small business areas merit
discussion, retail pharmacy and physicians in private practice.
The Small Business Administration (SBA) considers pharmacies with
firm revenues of less than $6 million to be small businesses. The 2002
Business Census (the latest available detailed data) indicates that
there were about 19,488 firms operating about 40,152 retail pharmacies
and drug store establishments (NAICS code 44611). Of these firms,
17,332 had revenues under $5 million and operated a total of 19,488
establishments. Because more than 89 percent of retail pharmacy firms
are small businesses (as defined by the SBA size standards), we expect
that the inclusion of vaccine administration within the statutory
definition of a covered Part D drug will have some effect on a
substantial number of small retail pharmacies. However, we estimate
that overall the revenue effect on the retail pharmacy industry,
including small pharmacies, will be positive. In those states that
permit pharmacists to administer vaccinations (currently 44 of 50
states), we anticipate Medicare beneficiaries will consider receiving
immunization of Part D vaccines in a pharmacy setting, given the real-
time nature of the Part D benefit and the pharmacy's ability to bill
the Part D Sponsor without the beneficiary having to pay upfront for
the vaccine and its administration, as he or she might in the
physician's office. Over the past few years the number of beneficiaries
seeking to obtain immunizations from pharmacies has continued to
increase. We expect this trend to continue, when, beginning in 2008,
in-network pharmacies will be able to seek compensation for the
administration of Part D vaccines under the Part D program. While there
may be some additional cost for pharmacist time in administrating
vaccines, these should be more than offset by the reimbursement of
administration fees. Finally, a pharmacy could negotiate not to
administer vaccine administration services and continue to participate
in the Part D program, if it believed that the costs of providing
vaccinations outweighed any potential benefits.
Almost all physicians in private practice (or the practices of
which they are members) are small businesses, and, therefore, small
entities because their annual revenues do not meet the Small Business
Administration's threshold for ``small'' physician practices. We
expect, since a substantial number of vaccinations continue in the
physician office setting, that physicians will benefit from the
inclusion of vaccine administration in the statutory definition of a
covered Part D drug because the administering physician will have a new
source of reimbursement of Part D vaccine administration fees. We do
not expect there will be any additional costs to the physicians
practice.
With the respect to the other changes in the proposed rule, the
definitions of negotiated prices, gross covered drug costs, and
allowable risk corridor costs will not have a significant impact on
small businesses, such as small pharmacies. Instead, they will
primarily impact which drug costs are reported to CMS and how plans
calculate beneficiary cost sharing. Moreover, they will require minimal
if any changes in health plan, PBM and pharmacy operational systems.
Even with these proposed changes in beneficiary cost sharing, health
plans will still be required to ensure that pharmacies receive their
contracted rate. If there were any additional costs due to the change
in beneficiary costs, health plans would account for them in their
bids.
The other technical corrections and substantive clarifications are
not expected to affect small businesses in a significant manner, if at
all. For example, although the substantive clarification relating to
the delivery of home infusion medications may slightly increase the
cost of delivering these medications for some plan sponsors because it
may cost more for plan sponsors that do not currently have timeframe
delivery provisions in their contracts with home infusion pharmacies,
any increase will be accounted for in plan sponsors' bids. However,
this increase is expected to be minimal, and is not expected to affect
all plan sponsors. As for home infusion pharmacies themselves, the
requirement to meet performance timeframes should also have no cost
impact. Our ongoing communications with the home infusion industry
revealed that these timeframes were already an industry standard. Thus,
incorporation of these new requirements does not place any new burdens
on the pharmacy cost structure, as home infusion pharmacies have
already been meeting these performance standards in advance of our
rulemaking.
Section 1102(b) of the Act requires us to prepare a regulatory
impact analysis if a rule may have a significant impact on the
operations of a substantial number of small rural hospitals. This
analysis must conform to the standards of section 604 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area and has fewer than 100 beds. Because prescription
drugs including Part D vaccines, are dispensed in hospitals to Medicare
outpatients, this final rule could have an effect on small rural
hospitals who decide to offer Part D vaccines. Since a number of rural
hospitals offer vaccine administration on an outpatient basis, they too
will benefit by being able to collect a Part D vaccine administration
fee. Rural hospitals should already have the systems in place to
handle, store and administer vaccines and consequently small rural
hospitals should only benefit from the availability of this new
administration fee and should not incur new costs as a result of this
proposed rule.
The additional clarification and proposed revisions related to the
Medicare Part D drug benefit, which is the voluntary outpatient
prescription drug benefit, not regulations relating to any drug benefit
under Part A. Therefore these additional proposals do not affect small
rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. That threshold
level is currently approximately $120 million. Many of the proposed
changes are either corrections in the regulations to make the
regulations comply with the statute, or the proposed changes are merely
the formal proclamation of existing policies that are in line with the
statute and do not cross the $120 million dollar threshold. For
example, one clarification, which brings the regulation in line with
the statute, that will prohibit States from covering Part D drugs for
recipients of Medicaid may save States the money they would have
otherwise spent on these drugs, if they had chosen to cover the drugs
at issue. Because the statute only allows States to cover excluded
drugs, as opposed to noncovered drugs, and we expect that most States
complied with the statute, as opposed to the Part D regulation, we do
not believe that this clarification will significantly affect States.
Therefore we do not expect that it will affect State, local, or tribal
governments.
As stated previously, many of the proposed changes are either
corrections in the regulations to make the regulations comply with the
statute, or the proposed changes are merely the
[[Page 29418]]
formal proclamation of existing policies that are in line with the
statute. Although there may be added costs to plan sponsors with the
broadening of the definition of Part D drug to include ``[s]upplies
required to deliver insulin by inhalation[,]'' plan sponsors are aware
that new drugs and supplies become available on the market constantly
and they account for these changes in their bids. Furthermore, only
plan sponsors that choose to cover inhaled insulin will be affected.
The expected costs to the private sector will be less than the $120
million threshold.
Executive Order 13132 establishes certain requirements that an
agency must meet when it issues a proposed rule (and subsequent final
rule) that imposes substantial direct requirement costs on State and
local governments, preempts State law, or otherwise has Federalism
implications. The proposed changes and technical clarifications will
not have a substantial effect on State or local governments. For
example, a clarification concerning timing of state reporting for the
purposes of calculating State phase-down contributions is not expected
to affect State governments, because monthly reporting is consistent
with the statute. Although there is a provision in this proposal that
relates to waivers of State plan licensure, there are no anticipated
Federalism implications because the clarification to the applicable
regulation makes the regulation comply with the existing statute.
B. Anticipated Effects
1. Effects on Health Plans, and Pharmacy Benefit Managers (PBM)
Part D plans will incur costs in implementing the reimbursement of
Part D vaccine administration fees, this is a new benefit passed by
Congress in the Tax Relief and Health Care Act of 2006. However, since
Congress defined the Part D vaccine administration fee as a Part D drug
cost, the impact will be no different than any other new drug entering
the market. Part D Plans will consider Part D vaccine administration as
part of their overall benefit and resulting bid. We estimate a net cost
for FY 2008 which considers the offset associated with beneficiary cost
sharing and the direct Federal subsidy and risking sharing, to be $100
million.
Accounting Statement.--Classification of Estimated Expenditures, FY 2008
[In millions]
----------------------------------------------------------------------------------------------------------------
Category Transfers
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers.................... $100.
From Whom To Whom?................................ Federal Government To Part D Plans.
----------------------------------------------------------------------------------------------------------------
Our other revisions to the regulation, such as the proposed plan-
to-plan reconciliation, we believe, merely reflect already existing
policy. Nevertheless, even if this requirement were a new standard, we
believe that all parties involved in the reconciliation would benefit,
because the reconciliation process will involve fewer tasks than if
pharmacies were required to reverse and re-adjudicate claims.
With respect to the proposed changes that will impact which drug
costs are reported to CMS and how Part D plans calculate beneficiary
cost sharing, we believe that the impact on pharmacies will be minimal,
as the total compensation received by pharmacies should remain
unaffected. The proposed changes may, however, require a small number
of Part D sponsors to renegotiate their contracts with their PBMs to
account for system changes to reflect the appropriate beneficiary cost
sharing. We believe that most PBMs will be unaffected by the proposed
changes in the drug costs reported and beneficiary cost sharing. Thus,
the expected financial impact of these proposed changes on PBMs is
minimal.
We do not believe the inclusion of inhaled insulin supplies or the
substantive clarification relating to the delivery of home infusion
medications will place any additional costs onto Part D plans. We
estimate the gross costs of inhaled insulin for FY 2008 will be $10
million. The approval of inhaled insulin onto the U.S. market has been
anticipated for years and should have been considered into the Part D
Sponsor's bid. As discussed earlier, the proposed home infusion
delivery standard appears to be an existing standard that plans should
be accustomed and consequently would not increase their costs in
providing the benefit.
C. Alternatives Considered
We considered not proposing the regulation to address our policy
clarifications and technical changes. However, we believed in order to
ensure public awareness of our policies, as well as to avoid potential
confusion regarding them, that we should codify our clarifications as
well as make certain technical corrections to the January 28, 2005
final rule. In addition, we believe it is important to propose a few
new clarifications for Part D plans as a result of our experience in
implementing Part D. Finally, we believe it is important to acknowledge
in this proposed rule changes made by the Congress to the statutory
definition of a covered Part D drug.
D. Conclusion
Given that the cost of implementing vaccine administration under
Part D is expected to exceed the $100 million threshold in FY 2008, we
have performed an economic impact analysis on those entities
potentially involved in providing Part D vaccine administration. Our
analysis showed that entities such as physicians and pharmacies are
situated to benefit from this change in 2008, whereas other entities
such as Part D Sponsors will experience no or little difference in
costs as a result of implementation.
As for other technical corrections and substantive clarifications
contained in this proposed rule, as stated earlier, a full analysis was
performed for the final regulations implementing the Part D provisions
of Medicare Prescription Drug Improvement and Modernization Act of
2003, and for the reasons cited, we believe these additional proposals
either do not require further analysis or are in practice today and, as
such, are not economically significant.
V. Response to Comments
Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this preamble,
and, when we proceed with a subsequent document, we will respond to the
comments in the preamble to that document.
[[Page 29419]]
List of Subjects
42 CFR Part 423
Administrative practice and procedure, Emergency medical services,
Health facilities, Health maintenance organizations (HMO), Medicare,
Penalties, Privacy, Reporting and recordkeeping.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services proposes to amend 42 CFR chapter IV as set forth
below:
PART 423--MEDICARE PROGRAM; MEDICARE PRESCRIPTION DRUG PROGRAM
1. The authority citation for part 423 continues to read as
follows:
Authority: Secs. 1102, 1860D-1 through 1860D-42, and 1871 of the
Social Security Act (42 U.S.C. 1302, 1395w-101 through 1395w-152,
and 1395hh).
Subpart B--Eligibility and Enrollment
2. Section 423.50 is amended by revising paragraph (f)(1)(v) to
read as follows:
Sec. 423.50 Approval of marketing materials and enrollment forms.
* * * * *
(f) * * *
(1) * * *
(v) Use providers, provider groups, or pharmacies to distribute
printed information comparing the benefits of different Part D plans
unless providers, provider groups or pharmacies accept and display
materials from all Part D plan sponsors with which the providers,
provider groups or pharmacies contract.
* * * * *
3. Section Sec. 423.56 is amended by revising paragraph (b)(6) to
read as follows:
Sec. 423.56 Procedures to determine and document creditable status of
prescription drug coverage.
* * * * *
(b) * * *
(6) Coverage under a Medicare supplemental policy (Medigap policy)
as defined at 42 CFR 403.205.
* * * * *
Subpart C--Benefits and Beneficiary Protections
4. Section 423.100 is amended by--
A. Revising the definition of ``contracted pharmacy network.''
B. Revising the definition of ``negotiated prices.''
C. Revising the definition of ``part D drug.''
The revisions read as follows:
Sec. 423.100 Definitions.
* * * * *
Contracted pharmacy network means licensed pharmacies, including
retail, mail-order, and institutional pharmacies, under contract with a
Part D sponsor to provide covered Part D drugs at negotiated prices to
Part D enrollees.
* * * * *
Negotiated prices means prices for covered Part D drugs that--
(1) The Part D sponsor (or other intermediary contracting
organization) and the network dispensing pharmacy or other network
dispensing provider have negotiated as the amount such network entity
will receive, in total, for a particular drug;
(2) Are reduced by those discounts, direct or indirect subsidies,
rebates, other price concessions, and direct or indirect remuneration
that the Part D sponsor has elected to pass through to Part D enrollees
at the point of sale; and
(3) Includes any dispensing fees.
* * * * *
Part D drug means--
(1) Unless excluded under paragraph (2) of this definition, any of
the following if used for a medically accepted indication (as defined
in section 1927(k)(6) of the Act):
(i) A drug that may be dispensed only upon a prescription and that
is described in sections 1927(k)(2)(A)(i) through (iii) of the Act.
(ii) A biological product described in sections 1927(k)(2)(B)(i)
through (iii) of the Act.
(iii) Insulin described in section 1927(k)(2)(C) of the Act.
(iv) Medical supplies associated with the injection of insulin,
including syringes, needles, alcohol swabs, and gauze.
(v) A vaccine licensed under section 351 of the Public Health
Service Act.
(vi) Supplies that are directly associated with delivering insulin
into the body through inhalation, such as the inhalation chamber used
to deliver the insulin.
(2) Does not include--
(i) Drugs for which payment as so prescribed and dispensed or
administered to an individual is available for that individual under
Part A or Part B (even though a deductible may apply, or even though
the individual is eligible for coverage under Part A or Part B but has
declined to enroll in Part A or Part B); and
(ii) Drugs or classes of drugs, or their medical uses, which may be
excluded from coverage or otherwise restricted under Medicaid under
sections 1927(d)(2) or (d)(3) of the Act, except for smoking cessation
agents.
* * * * *
5. Section 423.120 is amended by revising paragraphs (a)(2) and
(a)(4) to read as follows:
Sec. 423.120 Access to covered Part D drugs.
(a) * * *
(2) Applicability of some non-retail pharmacies to standards for
convenient access. Part D plans may count I/T/U pharmacies and
pharmacies operated by Federally Qualified Health Centers and Rural
Health Clinics toward the standards for convenient access to network
pharmacies in paragraph (a)(1) of this section.
* * * * *
(4) Access to home infusion pharmacies. A Part D plan's contracted
pharmacy network must provide adequate access to home infusion
pharmacies consistent with CMS guidelines and instructions. A Part D
plan must ensure that such network pharmacies, at a minimum--
(i) Are capable of delivering home infused drugs in a form that can
be administered in a clinically appropriate fashion;
(ii) Are capable of providing infusible Part D drugs for both
short-term acute care and long-term chronic care therapies;
(iii) Ensure that the professional services and ancillary supplies
necessary for home infusion therapy are in place before dispensing Part
D home infusion drugs; and
(iv) Provide delivery of home infusion drugs within at least 24
hours of discharge from an acute setting.
* * * * *
Subpart F--Submission of Bids and Monthly Beneficiary Premiums:
Plan Approval
6. Section 423.293 is amended by revising paragraph (a) to read as
follows:
Sec. 423.293 Collection of monthly beneficiary premium.
(a) General rule. Part D sponsors must charge enrollees a
consolidated monthly Part D premium equal to the sum of the Part D
monthly premium for basic prescription drug coverage (if any) and the
premium for supplemental coverage (if any and if the beneficiary has
enrolled in such supplemental coverage). Part D sponsors must permit
payment of monthly Part D premiums (if any) under the timing of
payments established in 422.262(e) of this chapter. Part D sponsors
must also permit each enrollee, at the enrollee's option, to make
payment of premiums (if any)
[[Page 29420]]
under this part to the sponsor using any of the methods listed in Sec.
422.262(f) of this chapter.
* * * * *
Subpart G--Payments to Part D Plan Sponsors for Qualified
Prescription Drug Coverage
7. Section 423.308 is amended by--
A. Adding the definition of ``administrative costs.''
B. Revising the definition of ``allowable risk corridor costs.''
C. Revising the definition of ``gross covered prescription drug
costs.''
The addition and revisions read as follows:
Sec. 423.308 Definitions and terminology.
* * * * *
Administrative costs means costs incurred by a Part D sponsor in
complying with the requirements of this Part for a coverage year and
that are not drug costs incurred to purchase or reimburse the purchase
of Part D drugs. Administrative costs include sponsor costs that exceed
the amount paid by or on behalf of the Part D sponsor to a pharmacy or
other entity that is the final dispenser of the drug for the provision
of a covered Part D drug under the plan. When an intermediary acts on
behalf of a Part D sponsor to negotiate prices with dispensing entities
such as pharmacies, any profit retained by the intermediary contracting
organization as a result of such negotiation (through discounts,
manufacturer rebates, or other direct or indirect price concessions) is
considered an administrative cost to the Part D sponsor and not a drug
cost.
* * * * *
Allowable risk corridor costs means the subset of actually paid
costs for Part D drugs (not including administrative costs, but
including dispensing fees) that are attributable to basic prescription
drug coverage only and that are incurred and actually paid by the Part
D sponsor to--
(1) A dispensing pharmacy or other dispensing provider (whether
directly or through an intermediary contracting organization) under the
Part D plan;
(2) The parties listed in Sec. 423.464(f)(1) with whom the Part D
sponsor must coordinate benefits, including other Part D plans, as the
result of any reconciliation process developed by CMS under Sec.
423.464; or
(3) An enrollee (or third party paying on behalf of the enrollee)
to indemnify the enrollee when the reimbursement is associated with
obtaining drugs under the Part D plan.
Costs must be based upon imposition of the maximum amount of copayments
permitted under Sec. 423.782. The costs for any Part D plan offering
enhanced alternative coverage must be adjusted not only to exclude any
costs attributable to benefits beyond basic prescription drug coverage,
but also to exclude any prescription drug coverage costs determined to
be attributable to increased utilization over standard prescription
drug coverage as the result of the insurance effect of enhanced
alternative coverage in accordance with CMS guidelines on actuarial
valuation.
* * * * *
Gross covered prescription drug costs mean those actually paid
costs incurred under a Part D plan to purchase or reimburse the
purchase of Part D drugs, excluding administrative costs, but including
dispensing fees, during the coverage year. They equal--
(1) The share of negotiated prices (as defined by Sec. 423.100 of
this chapter) actually paid by the Part D plan that is received as
reimbursement by the pharmacy or other dispensing entity, reimbursement
paid to indemnify an enrollee when the reimbursement is associated with
an enrollee obtaining covered Part D drugs under the Part D plan, or
payments made by the Part D sponsor to other parties listed in Sec.
423.464(f)(1) with whom the Part D sponsor must coordinate benefits,
including other Part D plans, as the result of any reconciliation
process developed by CMS under Sec. 423.464 of this chapter; plus
(2) All amounts paid under the Part D plan by or on behalf of an
enrollee (such as the deductible, coinsurance, cost sharing, or amounts
between the initial coverage limit and the out-of-pocket threshold) in
order to obtain covered Part D drugs that are covered under the Part D
plan. If an enrollee who is paying 100 percent cost sharing (as a
result of paying a deductible or because the enrollee is between the
initial coverage limit and the out-of-pocket threshold) obtains a
covered Part D drug at a lower cost than is available under the Part D
plan, such cost-sharing will be considered an amount paid under the
plan by or on behalf of an enrollee under the previous sentence of this
definition, if the enrollee's costs are incurred costs as defined under
Sec. 423.100 of this chapter and documentation of the incurred costs
has been submitted to the Part D plan consistent with plan processes
and instructions for the submission of such information. These costs
are determined regardless of whether the coverage under the plan
exceeds basic prescription drug coverage.
* * * * *
8. In Sec. 423.350 paragraph (b)(1) is revised to read as follows:
Sec. 423.350 Payment appeals
(b) * * *
(1) Time for filing a request. The request for reconsideration must
be filed within 15 days from the date of the final payment. For
purposes of this paragraph, the date of final payment is: for risk
adjustment, the date of the final reconciled payment under Sec.
423.343(b); for reinsurance, the date of the final reconciled payment
under Sec. 423.343(c); for low-income cost sharing subsidies, the date
of the final reconciled payment under Sec. 423.343(d); or for risk-
sharing payments, the date of the final payments under Sec. 423.336.
Subpart I--Organizational Compliance With State Law and Preemption
by Federal Law
9. Section 423.410 is amended by revising paragraph (d) to read as
follows:
Sec. 423.410 Waiver of certain requirements to expand choice.
* * * * *
(d) Special waiver for plan years beginning before January 1, 2008.
For plan years beginning before January 1, 2008, if the State has a
prescription drug plan or PDP sponsor licensing process in effect, CMS
grants a waiver upon a demonstration that an applicant to become a PDP
sponsor has submitted a substantially completed application for
licensure to the State.
* * * * *
Subpart J--Coordination of Part D Plans With Other Prescription
Drug Coverage
10. Section 423.458 is amended by revising paragraph (d)(2)(ii) to
read as follows--
Sec. 423.458 Application of Part D rules to certain Part D plans on
and after January 1, 2006.
* * * * *
(d) * * *
(2) * * *
(ii) A waiver of a requirement under this part otherwise applicable
to cost plans or PACE organizations, if such waiver improves
coordination of benefits provided by the cost plan under section 1876
of the Act, or by the PACE organization under section 1894 and 1934 of
the Act, with the benefits under Part D.
11. Section 423.464 is amended by--
(A) Revising paragraph (f)(1)(vii), and (f)(1)(viii).
(B) Adding new paragraphs (f)(1)(ix) and (f)(5).
[[Page 29421]]
The revision and additions read as follows:
Sec. 423.464 Coordination of benefits with other providers of
prescription drug coverage.
* * * * *
(f) * * *
(1) * * *
(vii) Rural health clinics. Rural health clinics as defined under
section 1861(aa)(2) of the Act.
(viii) Other Part D plans.
(ix) Other prescription drug coverage. Other health benefit plans
or programs that provide coverage or financial assistance for the
purchase or provision of Part D drugs on behalf of Part D eligible
individuals as CMS may specify.
* * * * *
(5) Plan-to-plan liability. In the process of coordinating benefits
between Part D plans when a Part D plan from which a beneficiary has
transferred has incorrectly made payment for covered prescription drug
costs incurred after the effective date of the Part D enrollee's
enrollment in the new Part D plan of record, the new Part D plan of
record must make the reconciling payments based on amounts reported to
it by CMS without regard to the Part D plan's own formulary or drug
utilization review edits.
(6) Use of other reconciliation processes. In the process of
coordinating benefits between the correct Part D plan of record and
another entity providing prescription drug coverage when that entity
has incorrectly paid as primary payer for a covered Part D drug on
behalf of a Part D enrollee, the correct Part D plan of record must
achieve timely reconciliation through working directly with the other
entity that incorrectly paid as primary payer, unless CMS has
established reconciliation processes for payment reconciliation, rather
than requesting pharmacy claims reversal and re-adjudication.
Subpart K--Application Procedures and Contracts With Part D
Sponsors
12. Section 423.504 is amended by revising paragraph (a) to read as
follows:
Sec. 423.504 General provisions.
(a) General rule. Subject to the provisions at Sec. 423.265
concerning submission of bids, to enroll beneficiaries in any Part D
drug plan it offers and be paid on behalf of Part D eligible
individuals enrolled in those plans, a Part D plan sponsor must enter
into a contract with CMS. The contract may cover more than one Part D
plan.
* * * * *
13. Section 423.505 is amended by revising paragraph (h)(1) to read
as follows:
Sec. 423.505 Contract provisions.
* * * * *
(h) * * *
(1) Federal laws and regulations designed to prevent fraud, waste,
and abuse, including, but not limited to applicable provisions of
Federal criminal law, the False Claims Act (31 U.S.C. Sec. Sec. 3729
et seq.), and the anti-kickback statute (section 1128B(b) of the Act).
* * * * *
14. Section 423.509 is amended by revising paragraph (a)(9) to read
as follows:
Sec. 423.509 Termination of contract by CMS.
(a) * * *
(9) Substantially fails to comply with the marketing requirements
in Sec. 423.50, or the information dissemination requirements of Sec.
423.128.
* * * * *
Subpart M--Grievances, Coverage Determinations, and Appeals
15. Section 423.560 is amended by
A. Revising the definition for ``Appointed representative.''
B. Revising the definition of ``Projected Value.''
Sec. 423.560 Definitions.
* * * * *
Appointed representative means an individual either appointed by an
enrollee or authorized under State or other applicable law to act on
behalf of the enrollee in filing a grievance, obtaining a coverage
determination, or in dealing with any of the levels of the appeals
process. Unless otherwise stated in this subpart, the appointed
representative has all of the rights and responsibilities of an
enrollee in filing a grievance, obtaining a coverage determination, or
in dealing with any of the levels of the appeals process, subject to
the rules described in part 422, subpart M of this chapter.
* * * * *
Projected value of a Part D drug or drugs includes any costs the
enrollee could incur based on the number of refills prescribed for the
drug(s) in dispute during the plan year. Projected value includes
enrollee co-payments, all expenditures incurred after an enrollee's
expenditures exceed the initial coverage limit, and expenditures paid
by other entities.
* * * * *
16. Section 423.570 is amended by revising paragraph (d)(3) to read
as follows:
Sec. 423.570 Expediting certain coverage determinations.
* * * * *
(d) * * *
(3) Subsequently deliver to the enrollee, within 3 calendar days,
equivalent written notice.
* * * * *
17. Section Sec. 423.584 is amended by adding a new paragraph
(b)(3) as to read as follows:
Sec. 423.584 Expediting certain redeterminations.
* * * * *
(b) * * *
(3) The provisions set forth in Sec. 423.582(b), (c), and (d) also
apply to expedited redeterminations.
* * * * *
18. Section Sec. 423.610 is amended by revising paragraph (c)(2)
to read as follows:
Sec. 423.610 Right to an ALJ hearing.
* * * * *
(c) * * *
(2) Multiple enrollees. Two or more appeals may be aggregated by
multiple enrollees to meet the amount in controversy for an ALJ hearing
if--
(i) The appeals have previously been reconsidered by an IRE;
(ii) The request for ALJ hearing lists all of the appeals to be
aggregated and each aggregated appeal meets the filing requirement
specified in Sec. 423.612(b); and
(iii) The ALJ determines that the appeals the enrollees seek to
aggregate involve the same prescription drug.
Subpart P--Premiums and Cost Sharing Subsidies for Low-Income
Individuals
19. Section 423.780 is amended by--
A. Revising paragraph
(b)(1) introductory text, (b)(1)(i), (b)(1)(ii), and (b)(2)(i).
B. Revising paragraph (e).
The revisions read as follows:
Sec. 423.780 Premium subsidy.
* * * * *
(b) * * *
(1) The premium subsidy amount is equal to the lesser of--
(i) Under the Part D plan selected by the beneficiary, the portion
of the monthly beneficiary premium attributable to basic coverage (for
enrollees in PDPs) or the portion of the MA monthly prescription drug
beneficiary premium attributable to basic prescription drug coverage
(for enrollees in MA-PD plans) or
(ii) The greater of the low-income benchmark premium amount
(determined under paragraph (b)(2) of
[[Page 29422]]
this section) for the region in which the subsidy eligible individual
resides or the lowest monthly beneficiary premium for a PDP that offers
basic prescription drug coverage in the region.
(2) * * *
(i) The low-income benchmark premium amount for a PDP region equals
either--
(A) The weighted average of the monthly beneficiary premiums for
all basic prescription drug plans (if all PDPs in the region are
offered by the same PDP sponsor), with the weight for each basic PDP
equal to a percentage, the numerator being equal to the number of Part
D eligible individuals enrolled in the plan in the reference month (as
defined in Sec. 422.258(c)(1) of this chapter) and the denominator
equal to the total number of Part D eligible individuals enrolled in
all basic PDPs in the PDP region in the reference month.
(B) The weighted average of the premiums described in paragraph
(b)(2)(ii) of this section (if the PDPs in the region are offered by
more than one PDP sponsor). The average is weighted using a percentage
for each PDP, as well as for each MA-PD that is described in Sec.
422.4(a)(1) of this chapter. Such percentage is calculated using a
numerator equal to the number of Part D eligible individuals enrolled
in each such plan in the reference month (as defined in Sec.
422.258(c)(1) of this chapter) and the denominator equal to the total
number of Part D eligible individuals enrolled in all such PDPs and MA-
PD plans in the reference month.
* * * * *
(e) Premium subsidy for late enrollment penalty. (1) Amount of
premium subsidy for late enrollment penalty. Full subsidy eligible
individuals who are subject to late enrollment penalties under Sec.
423.46 are entitled to an additional premium subsidy equal to 80
percent of the late enrollment penalty for the first 60 months during
which the penalty is imposed and 100 percent of their late enrollment
penalty thereafter.
(2) Other low-income subsidy eligible individuals-- sliding scale
premium subsidy for late enrollment penalty. Other low-income subsidy
eligible individuals are entitled to a premium subsidy based on a
linear sliding scale as follows:
(i) For individuals with income at or below 135 percent of the FPL
applicable to the family size, a premium subsidy equal to 80 percent of
the late enrollment for the first 60 months during which the penalty is
imposed and 100 percent of their late enrollment penalty thereafter.
(ii) For individuals with income greater than 135 percent but at or
below 140 percent of the FPL applicable to the family size, a premium
subsidy equal to 60 percent of the late enrollment penalty for the
first 60 months during which the penalty is imposed and 75 percent of
their late enrollment penalty thereafter.
(iii) For individuals with income greater than 140 percent but at
or below 145 percent of the FPL applicable to the family size, a
premium subsidy equal to 40 percent of the late enrollment penalty for
the first 60 months during which the penalty is imposed and 50 percent
of their late enrollment penalty thereafter.
(iv) For individuals with income greater than 145 percent but below
150 percent of the FPL applicable to the family size, a premium subsidy
equal to 20 percent of the late enrollment penalty for the first 60
months during which the penalty is imposed and 25 percent of their late
enrollment penalty thereafter.
Subpart R--Payments to Sponsors of Retiree Prescription Drug Plans
20. Section Sec. 423.884 is amended by--
A. Revising paragraph (c)(5)(i).
B. Revising paragraph (c)(7)(i).
C. Revising paragraph (d)(5)(iii)(B)(2).
D. Revising paragraphs (d)(5)(iii)(C) and (D).
E. Revising the last sentence of paragraph (d)(5)(iv).
The affected paragraphs are revised to read as follows:
Sec. 423.884 Requirements for qualified retiree prescription drug
plans.
* * * * *
(c) * * *
(5) Timing. (i) General rule. An application for a given plan year
must be submitted prior to the beginning of the plan year by a date
specified by CMS in published guidance, unless a request for an
extension has been filed and approved under procedures set forth in
such guidance.
* * * * *
(7) * * *
(i) Matches the names and identifying information for the
individuals submitted as qualifying covered retirees with a CMS
database(s) to determine which retirees are Part D eligible individuals
who are not enrolled in a Part D plan.
* * * * *
(d) * * *
(5) * * *
(iii) * * *
(B) * * *
(2) An amount calculated to reflect the impact on the value of
defined standard prescription drug coverage of supplemental coverage
actually provided by the sponsor. Sponsors may use other actuarial
approaches specified by CMS as an alternative to the actuarial
valuation specified in this paragraph (d)(5)(iii)(B)(2).
(C) The valuation of defined standard prescription drug coverage
for a given plan year is based on the initial coverage limit, cost-
sharing amounts, and out-of pocket threshold for defined standard
prescription drug coverage under Part D in effect either at the start
of the plan year or that is announced for the upcoming calendar year.
In order to use the coverage limits in effect at the beginning of the
plan year, the attestation must be submitted to CMS no later than 60
days after the publication of the Part D coverage limits for the
upcoming calendar year; otherwise, the valuation is based on the
upcoming year's initial coverage limit, cost-sharing amounts, and out-
of-pocket threshold for defined standard prescription drug coverage
under Part D.
(D) Example: If a sponsor's retiree prescription drug plan operates
under a plan year that ends March 30, the sponsor has a choice of
basing the attestation for the year April 1, 2007-March 30, 2008 on
either: the initial coverage limit, cost-sharing amounts, and out-of-
pocket threshold amounts that apply to defined standard prescription
drug coverage under Part D in calendar year 2007, or the amounts
announced for calendar year 2008. However, in order to use the amounts
applicable in calendar year 2007, the sponsor must submit the
attestation within 60 days after the publication of the Part D coverage
limits for 2008. If the attestation is submitted more than 60 days
after the 2008 coverage limits have been published, the 2008 coverage
limits would apply.
(iv) * * *For the assurance required under paragraph (d)(1)(ii) of
this section, the assurance may be provided either separately for each
benefit option for which the sponsor provided assurances under
paragraph (d)(1)(i)of this section, or in the aggregate for all benefit
options (or for a subset of the benefit options).
* * * * *
Subpart S--Special Rules for States-Eligibility Determinations for
Subsidies and General Payment Provisions
21. Section 423.902 is amended by adding the definition of ``non-
covered drugs'' in alphabetical order to read as follows:
[[Page 29423]]
Sec. 423.902 Definitions.
* * * * *
Non-covered drugs are those drugs specifically excluded from the
definition of Part D drug, which may be excluded from coverage or
otherwise restricted under Medicaid under sections 1927(d)(2) or (d)(3)
of the Act, except for smoking cessation agents.
* * * * *
22. Section 423.906 is amended by--
A. Revising paragraphs (b)(1) and (2).
B. Revising paragraph (c).
The revisions read as follows:
Sec. 423.906 General payment provisions.
* * * * *
(b) * * *
(1) Part D drugs; or
(2) Any cost-sharing obligations under Part D relating to Part D
drugs.
* * * * *
(c) Non-covered drugs. States may elect to provide coverage for
outpatient drugs other than Part D drugs in the same manner as provided
for non-full benefit dual eligible individuals or through an
arrangement with a prescription drug plan or a MA-PD plan.
23. Section 423.910 is amended by revising paragraph (b)(1)
introductory text to read as follows:
Sec. 423.910 Requirements.
(b) * * *
(1) Calculation of payment. The State contribution payment is
calculated by CMS on a monthly basis, as indicated in the following
chart. For States that do not meet the monthly reporting requirement
for the monthly enrollment reporting, the State contribution payment is
calculated using a methodology determined by CMS.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: September 27, 2006.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
Approved: November 14, 2006.
Michael O. Leavitt,
Secretary.
Editorial Note: This document was received by the Federal
Register on May 21, 2007.
[FR Doc. 07-2577 Filed 5-21-07; 4:20 pm]
BILLING CODE 4120-01-P