Federal Register, Volume 73 Issue 67 (Monday, April 7, 2008)

[Federal Register Volume 73, Number 67 (Monday, April 7, 2008)]
[Rules and Regulations]
[Pages 18918-18942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 08-1094]

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Part III

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Part 423

Medicare Program; Standards for E-Prescribing Under Medicare Part D and
Identification of Backward Compatible Version of Adopted Standard for
E-Prescribing and the Medicare Prescriptions Drug Program (Version
8.1); Final Rule

Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Rules
and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 423

[CMS-0016-F and CMS-0018-F]

RINs 0938-AO66 and 0938-AO42

Medicare Program; Standards for E-Prescribing Under Medicare Part
D and Identification of Backward Compatible Version of Adopted Standard
for E-Prescribing and the Medicare Prescription Drug Program (Version
8.1)

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

ACTION: Final rule.

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SUMMARY: This final rule adopts uniform standards for medication
history, formulary and benefits, and fill status notification (RxFill)
for the Medicare Part D electronic prescribing (e-prescribing) drug
program as required by section 1860D-4(e)(4)(D) of the Social Security
Act (the Act). In addition, we are adopting the National Provider
Identifier (NPI) as a standard for identifying health care providers in
e-prescribing transactions. It also finalizes the June 23, 2006 interim
final rule with comment period that identified the National Council for
Prescription Drug Programs (NCPDP) Prescriber/Pharmacist Interface
SCRIPT standard, Implementation Guide, Version 8.1 (``NCPDP SCRIPT
8.1'') as a backward compatible update of the NCPDP SCRIPT 5.0 (``NCPDP
SCRIPT 5.0''), until April 1, 2009. This final rule also retires NCPDP
SCRIPT 5.0 and adopts the newer version, NCPDP SCRIPT 8.1, as the
adopted standard. Finally, except as otherwise set forth herein, we are
implementing our compliance date of 1 year after the publication of
these final uniform standards. This is the second set in a continuing
process of issuing e-prescribing final standards for the Medicare Part
D program,

DATES: Effective Date: These regulations are effective on June 6, 2008.
The incorporation by reference of the publications listed in this final
rule is approved by the Director of the Federal Register June 6, 2008.

FOR FURTHER INFORMATION CONTACT: Denise M. Buenning, (410-786-6711) or
Andrew Morgan, (410) 786-2543.

SUPPLEMENTARY INFORMATION:

I. Background

Section 101 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) (Pub. L. 108-173) amended Title XVIII
of the Social Security Act (the Act) to establish a voluntary
prescription drug benefit program. Prescription Drug Plan (PDP)
sponsors, Medicare Advantage (MA) organizations offering Medicare
Advantage-Prescription Drug Plans (MAPDs) and other Medicare Part D
sponsors are required to establish electronic prescription drug
programs to provide for electronic transmittal of certain information
to the prescribing provider and dispensing pharmacy and the dispenser.
This includes information about eligibility, benefits (including drugs
included in the applicable formulary, any tiered formulary structure
and any requirements for prior authorization), the drug being
prescribed or dispensed and other drugs listed in the medication
history, as well as the availability of lower cost, therapeutically
appropriate alternatives (if any) for the drug prescribed. Section 101
of the MMA established section 1860D-4(e)(4)(D) of the Act, which
directed the Secretary to promulgate final uniform standards for the
electronic transmission of such data.
There is no requirement that prescribers or dispensers implement e-
prescribing. However, prescribers and dispensers who electronically
transmit prescription and certain other prescription-related
information for Medicare Part D covered drugs prescribed for Medicare
Part D eligible individuals, directly or through an intermediary, are
required to comply with any applicable final standards that are in
effect.
Section 1860D-4(e)(4) of the Act generally requires the Secretary
to conduct a pilot project to test initial standards recognized under
section 1860D-4(e)(4)(A) of the Act, prior to issuing final standards
in accordance with section 1860D-4(e)(4)(D) of the Act. Section 1860D-
4(e)(4)(C)(ii) of the Act created an exception to the requirement for
pilot testing of standards where, after consultation with the National
Committee on Vital and Health Statistics (NCVHS), the Secretary
determined that there already was adequate industry experience with the
standards. Such standards could be recognized by the Secretary and
adopted through notice and comment rulemaking as final standards
without pilot testing.
We exercised this option in the E-Prescribing and Prescription Drug
Program final rule, published on November 7, 2005 (70 FR 67568), when
we adopted three ``foundation standards'' that met the criteria for
adoption without pilot testing. Those foundation standards are as
follows:
The National Council for Prescription Drug Programs
(NCPDP) SCRIPT standard, Implementation Guide, Version 5, Release 0
(Version 5.0), hereinafter referred to as ``NCPDP SCRIPT 5.0,'' for
communicating prescription or prescription related information between
prescribers and dispensers for the transactions listed at Sec.
423.160(b)(2).
Accredited Standards Committee (ASC) X12N 270/271-Health
Care Eligibility Benefit Inquiry and Response, Version 4010 and Addenda
to Health Care Eligibility Benefit Inquiry and Response, Version 4010A1
for communicating eligibility information between Medicare Part D
sponsors and prescribers.
NCPDP Telecommunication Standard Specification, Version 5,
Release 1 (Version 5.1) and equivalent NCPDP Batch Standard Batch
Implementation Guide, Version 1, Release 1 (Version 1.1) supporting
Telecommunications Standard Implementation Guide, Version 5, Release 1
(Version 5.1) for NCPDP Data Record in the Detail Data Record,
hereinafter referred to as ``NCPDP Telecom 5.1'' for communicating
eligibility information between Medicare Part D sponsors and
dispensers.
In that same final rule, we established three exemptions to the use
of the NCPDP SCRIPT foundation standard. The first exemption provided
for entities transmitting prescriptions or prescription-related
information by means of computer-generated facsimile. We ultimately
modified this exemption in the CY 2008 Physician Fee Schedule final
rule with comment period, which was published November 27, 2007 (72 FR
66222). (For a more in-depth discussion of the computer-generated
facsimile exemption, please see the preamble discussion in the November
27, 2007 final rule with comment at 72 FR 66334.)
The second exemption required the use of either HL7 or the adopted
NCPDP SCRIPT standards in electronic transmittals of prescriptions or
prescription related information when the sender and recipient are part
of the same legal entity (for example, within a staff model HMO). The
third exemption was when an entity is required by law to issue a
prescription for a patient to a nonprescribing provider (such as a
nursing facility) that in turn forwards the prescription to a
dispenser. This

[[Page 18919]]

exemption was established to accommodate many legitimate business needs
of entities in the long-term care setting.
The November 7, 2005 final rule (70 FR 67579) also established a
means of addressing the industry's desire for a streamlined standards
updating and maintenance process that could keep pace with changing
business needs. That process provided that a standard could be updated
with a new version, and identified whether and when the update/
maintenance would necessitate notice and comment rulemaking. Where it
is determined that the notice and comment rulemaking is not required,
the new version is adopted by incorporating the new version by
reference through a Federal Register publication. In that case, use of
either the new or old version would be considered compliant. ``Backward
compatible'' new versions of standards are eligible for recognition
through this process. This version updating and maintenance of the
implementation specifications for the adopted identifying and e-
prescribing standards allows for the correction of technical errors,
the elimination of technical inconsistencies, and the addition of
functions that are unnecessary for the specified e-prescribing
transaction.
Subsequent industry input indicated that the adopted e-prescribing
standard for the transactions listed at Sec. 423.160(b)(2) should be
updated to permit the use of NCPDP SCRIPT 5.0 or a later version of the
standard, NCPDP SCRIPT standard, Implementation Guide, Version 8,
Release 1 (Version 8.1), October 2005, hereinafter referred to as NCPDP
SCRIPT 8.1.
Using the streamlined process established in the November 7, 2005
rule, we published an interim final rule with comment period on June
23, 2006, updating the adopted NCPDP SCRIPT standard, thereby
permitting either NCPDP SCRIPT 5.0 or 8.1 to be used. (For more
information, see section III of this final rule and the June 23, 2006
interim final rule with comment period (71 FR 36020).)
Previously, six initial standards were recognized by the Secretary
in 2005 and then tested in a pilot project during calendar year (CY)
2006. Based upon the evaluation of the pilot project, the Secretary
issued a report to Congress on the pilot results. The Secretary is
required to issue this set of final uniform standards for e-prescribing
by no later than April 1, 2008. These final standards must be effective
not later than 1 year after the date of their issuance.
Based on the pilot results as detailed in the report to Congress,
we issued a notice of proposed rulemaking on November 16, 2007 (72 FR
64900) and solicited comments from stakeholders and other interested
parties on industry experience with certain standards. In that proposed
rule (72 FR 64906 through 64907), we also solicited comments regarding
the impact of adopting NCPDP SCRIPT 8.1 and retiring SCRIPT 5.0. Those
comments and our responses are addressed in section III. B.1. of this
final rule.
For a complete discussion of the statutory basis for this final
rule and the statutory requirements at section 1860D-4(e) of the Act,
please refer to the E-Prescribing and the Prescription Drug Program
proposed rule published November 16, 2007 (72 FR 64901).

II. Pilot Testing of Initial Standards

In the November 16, 2007 proposed rule (72 FR 64901), we discussed
the provision at section 1860D-4(e)(4)(A) of the Act which requires the
Secretary develop, adopt, recognize or modify ``initial uniform
standards'' for e-prescribing in 2005 and pilot test these initial e-
prescribing standards in 2006. To fulfill this requirement, the
Secretary ultimately recognized (based in part on NCVHS input) six
``initial'' standards in a September 2005 ``Request for Applications''.
For more information on the pilot test findings, refer to the November
16, 2007 proposed rule (72 FR 64904 through 64906).
In the November 16, 2007 proposed rule (72 FR 64903) we noted that,
as we had not published a final rule identifying the foundation
standards at the time the Request for Applications was published, the
proposed foundation standards were included among the Request for
Applications list of ``initial standards'' to be tested. Any proposed
foundation standards that were not adopted as foundation standards were
to be tested as initial standards in the pilot project. Furthermore, if
the proposed foundation standards were ultimately adopted as foundation
standards, those standards nevertheless were to be used in the pilot
project to ensure interoperability with the initial standards.
The Request for Applications also specified that pilot sites would
use NCPDP SCRIPT 5.0. With the Secretary's adoption of the updated
NCPDP SCRIPT 8.1, the Agency for Healthcare Research and Quality
(AHRQ), in its capacity as the administrator of the pilot project, gave
pilot sites the option to voluntarily use NCPDP SCRIPT 8.1 in place of
NCPDP SCRIPT 5.0.
As a result, all grantees/contractors in the pilot sites
voluntarily decided to use the updated NCPDP SCRIPT 8.1 in their
various testing modalities.
The initial standards and the results of the pilot test are as
follows:
Formulary and benefits information--NCPDP Formulary and
Benefits Standard, Implementation Guide, Version 1, Release 0
(hereinafter referred to as NCPDP Formulary and Benefits 1.0), to
provide prescribers with information from a plan about a patient's drug
coverage at the point of care.
The Medicare Part D e-prescribing formulary and benefits standard
must provide a uniform means for pharmacy benefit payers (Medicare Part
D sponsors) to communicate a range of formulary and benefits
information to prescribers via point-of-care (POC) systems. These
include general formulary data; formulary status of individual drugs;
preferred alternatives (including any coverage restrictions, such as
quantity limits and need for prior authorization); and co-payment.
NCPDP Formulary and Benefits 1.0 enables the prescriber to consider
this information at the point of care and make the most appropriate
drug choice without extensive back-and-forth administrative activities
with the pharmacy or the health plan. The pilot sites demonstrated that
NCPDP Formulary and Benefits 1.0 can be successfully implemented
between prescriber and plan, and is ready to be used as part of the e-
prescribing program under Medicare Part D.
Exchange of medication history--``The Medication History
Standard'', included in the National Council for Prescription Drug
Programs (NCPDP) Prescriber/Pharmacist Interface SCRIPT standard,
Version 8, Release 1 and its equivalent NCPDP Prescriber/Pharmacist
Interface SCRIPT Implementation Guide, Version 8, Release 1
(hereinafter referred to as the Medication History Standard), provides
a uniform means for prescribers and payers to communicate about the
list of drugs that have been dispensed to a patient. It may provide
information that would help identify potential drug interactions. This
Medication History Standard meets the requisite objectives,
functionality and criteria required by the MMA for use in the Medicare
Part D e-prescribing program and has been widely adopted by the
prescribing industry. The pilot sites found that the Medication History
Standard supported the exchange of this information, and is ready to be
used for the Medicare Part D e-prescribing program.

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Structured and Codified Sig--NCPDP Structured and Codified
Sig Standard 1.0, (hereinafter referred to as NCPDP Structured and
Codified Sig 1.0), provides a standard structured code set for
expressing patient instructions for taking medications (such as ``by
mouth, three times a day''). These instructions are currently generally
provided as free text at the end of a prescription. Pilot sites tested
NCPDP Structured and Codified Sig 1.0 and found that it needed
additional work on field definitions and examples, field naming
conventions, and clarifications of field use. There were contradictions
with other structured fields, and there were limitations on the ability
to capture directions for use of topical drugs (such as the area of
application). Analysis showed that NCPDP Structured and Codified Sig
1.0 was not able to meet the requisite objectives, functionality and
criteria required by the MMA for use in the Medicare Part D e-
prescribing program.
Fill status notification--The Fill Status Notification, or
RxFill, was included in NCPDP SCRIPT 5.0 and the updated NCPDP SCRIPT
8.1, but it previously was not proposed as a foundation standard due to
a lack of adequate industry experience. RxFill is a function within
versions 5.0 and 8.1 of the NCPDP SCRIPT standard that enables a
pharmacy to notify a prescriber when the prescription has been
dispensed (medication picked up by patient), partially dispensed
(partial amount of medication picked up by the patient), or not
dispensed (medication not picked up by patient, resulting in the
medication being returned to stock). This information can provide
prescribers with information regarding their patients' adherence to a
prescribed medication regimen, especially for those patients with
chronic conditions such as hypertension and diabetes, which require
medication management. It also has the potential to assist in combating
fraud and abuse, and contribute to preventing prescription drug
diversion. While the standard was technically capable of performing the
function, the pilot sites' experiences and observations indicated there
was no marketplace demand for this information. Prescribers had
previously expressed concerns about being inundated with data if they
were to receive fill status notifications every time a patient picked
up a prescription at the pharmacy, and weren't sure how useful the
information that the Fill Status Notification transaction generated
would be in their medical practices. Dispensers were concerned about
having to make significant business process changes, such as, having to
check to make sure that fill status notification information was being
transmitted by their pharmacy to those prescribers who requested it.
The proposed rule therefore relayed that adoption of RxFill ``May cause
an unnecessary administrative burden on prescribers and dispensers.''
(72 FR 64905). As such, in the proposed rule, we asked about the
marketplace demand for Fill Status Notification and solicited
stakeholder comments regarding their potential utilization of RxFill
for the Fill Status Notification transaction. Those comments and our
responses are addressed in section III.C.1. of this final rule.
Clinical drug terminology--RxNorm, a standardized
nomenclature for clinical drugs developed by the National Library of
Medicine (NLM), provides standard names for clinical drugs (active
ingredient + strength + dose form) and for dose forms as administered
to a patient. These concepts are relevant to how a physician would
order a drug. It provides links from clinical drugs, both branded and
generic, to their active ingredients, drug components (active
ingredient + strength), and related brand names. National Drug Codes
(NDCs) for specific drug products (where there are often many NDCs for
a single product) are linked to that product in RxNorm. NDCs for
specific drug products identify not only the drug but also the
manufacturer and the size of the package from which it is dispensed.
NDCs are relevant to how a pharmacy would dispense the drug. There are
often several NDCs for any specific drug product, which are linked to a
specific drug product code in RxNorm. RxNorm links its drug product
codes to many of the drug vocabularies commonly used in pharmacy
management and drug interaction software. By providing links between
these vocabularies, RxNorm can mediate messages between systems not
using the same software and vocabulary.
The pilot sites demonstrated that RxNorm had significant potential
to simplify e-prescribing, create efficiencies, and reduce dependence
on NDCs among dispensers. In some testing, RxNorm erroneously linked
some NDCs to lists of ingredients rather than to the drugs themselves
and sometimes the NDCs linked by RxNorm did not match to the semantic
clinical drug (SCD), which always contains the ingredient(s), strength
and dose form, in that order. This indicates either an error in
matching to the correct RxNorm concept, or an error with RxNorm itself,
with more than one term being available for the same clinical drug
concept (that is, unresolved synonymy). Analysis showed that, as of the
time of the pilot study, RxNorm was not able to meet the requisite
objectives, functionality and criteria required by section 1860D-
4(e)(3) of the Act for use for Medicare Part D e-prescribing.
Prior authorization--The Accredited Standards Committee
(ASC) X12N 275 Version 4010 with HL7, and ASC X12N 278, Version 4010
and addendum 4010A1, (hereinafter collectively referred to as the Prior
Authorization standard), were utilized in concert to allow prescribers
to obtain certification from a plan that a patient meets the coverage
criteria for a given drug. Prior Authorization is a very complex
standard to implement, involving four different standards and multiple
payer requirements. The pilot sites found that the combination of the
ASC X12N 278, and the ASC X12N 275 with the HL7 Prior Authorization
(PA) attachment was cumbersome, confusing and required expertise that
may limit adoption. Because health plans typically require prior
authorization only for a small subset of drugs, the pilot sites had
limited live experience with this standard.
Investigators agreed that the HIPAA Prior Authorization standard--
the ASC X12N 278 Version 4010, and Addendum 4010A-- was not adequate to
support e-prescribing prior authorization because it was designed for
service or procedure prior authorizations, not for medication prior
authorization. Modifications to the standard would need to be made
prior to adoption as a final standard for the Medicare Part D e-
prescribing program.
As required by section 1860D-4(e)(4)(C)(iv)(II), the Secretary
issued a report to Congress, ``Pilot Testing of Initial Electronic
Prescribing Standards,'' in April 2007 on the results of the pilot test
of the initial standards. The report is available at http://www.healthit.ahrq.gov/erxpilots.

III. Provisions of and Analysis and Response to Public Comments for the
June 23, 2006 Interim Final Rule With Comment Period and the November
16, 2007 Proposed Rule

A. June 23, 2006 Interim Final Rule With Comment Period

Using the streamlined process established in the November 7, 2005
rule, we published an interim final rule with comment on June 23, 2006
updating the adopted NCPDP SCRIPT standard, thereby permitting either
NCPDP SCRIPT 5.0 or 8.1 to be used for the covered transactions listed
below

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effective June 23, 2006. Version 8.1 of the NCPDP SCRIPT standard is an
update to Version 5.0, and we had determined that it was backward
compatible with the adopted NCPDP SCRIPT Version 5.0. (Although Version
8.1 of the NCPDP SCRIPT standard has additional e-prescribing
functionalities, we did not adopt any of these additional
functionalities at that time.) Use of Version 8.1 of the NCPDP SCRIPT
standard for the communication of a prescription or prescription-
related information between prescribers and dispensers, for the
following functions, therefore constituted compliance with the adopted
e-prescribing standard:
Get message transaction.
Status response transaction.
Error response transaction.
New prescription transaction.
Prescription change request transaction.
Prescription change response transaction.
Refill prescription request transaction.
Refill prescription response transaction.
Verification transaction.
Password change transaction.
Cancel prescription request transaction.
Cancel prescription response transaction.

We received 5 timely public comments on this interim final rule with
comment period. The following is a summary of the comments and our
responses:
Comment: All commenters supported the voluntary use of the backward
compatible functions of version 8.1 of the NCPDP SCRIPT standard. Four
commenters recommended that it be adopted as soon as reasonably
possible, and that NCPDP SCRIPT 5.0 be retired as soon as reasonably
practicable. They also indicated that NCPDP SCRIPT 8.1 was already in
widespread use throughout their respective industries. One commenter
indicated a concern with making backward compatibility ``the criteria''
for determining if notice and comment rulemaking is required. The
commenter stated that backward compatibility must be viewed as just one
factor in making a determination to adopt a modified standard.
Response: We agree with the commenters who supported the retirement
of NCPDP SCRIPT 5.0 in favor of NCPDP SCRIPT 8.1. Regarding the comment
that backward compatibility should not be the single criterion for
determining if notice and comment rulemaking is used for the purpose of
adopting a modified standard and that we should look for and support
other effective alternatives to the backward compatibility issue, we
note that we are required by law to employ notice and comment
rulemaking to modify an adopted e-prescribing standard. We are also
required by section 1860D-4(e)(3) of the Act to ensure, among other
things, that the adopted standards meet certain objectives and design
criteria. Based on these various statutory requirements and our own
policies, we analyze various factors in addition to backward
compatibility such as the standard modification's impact on affected
entities relative to cost and benefit projections, productivity and
workflow losses/gains, etc., as well as industry and stakeholder
feedback by both the written comment process and input from the NCVHS.
(For more information, see the June 23, 2006 interim final rule with
comment (71 FR 36020).

B. November 16, 2007 Proposed Rule

In the November 16, 2007 proposed rule (72 FR 64900) we discussed
the results of the pilot test, and based largely on those results, we
proposed the following:
To retire NCPDP SCRIPT 5.0 and adopt NCPDP SCRIPT 8.1 as a
final standard for the transactions listed at Sec. 423.160(b)(1).
To adopt a final e-prescribing standard for the medication
history transaction.
To adopt a final e-prescribing standard for the formulary
and benefits transaction.
To adopt the National Provider Identifier (NPI) as a
standard for identifying health care providers in e-prescribing
transactions.
To establish a compliance date of 1 year after the
publication of the final uniform standards.
We received 70 timely comments on the November 16, 2007 proposed
rule from dispensers and physicians; national retail drug store chains;
vendors; national healthcare industry professional and trade
associations; a standards development organization (SDO); state
pharmacy associations; a state department of health; healthcare plans
and systems; consumer/beneficiary advocacy groups; national
prescription information exchange networks; long-term care industry
representatives; corporations and pharmaceutical manufacturers, and a
federal government agency. These documents frequently contained
multiple comments on the various proposals and issues detailed in the
proposed rule.
We also received comments outside the scope of the proposed rule.
These included one set of comments on another, unrelated notice of
proposed rulemaking, and comments on Medicare program operations that
are outside the scope of this final rule. The relevant and timely
comments within the scope of the proposed rule that we received and our
responses to those comments, are discussed in the following sections.
1. Proposed Retirement of NCPDP SCRIPT 5.0 and Adoption of NCPDP SCRIPT
8.1 as a Final Standard
In section III.A. of this final rule we discussed the
identification of NCPDP SCRIPT 8.1 as a backward compatible update to
NCPDP SCRIPT 5.0. In that discussion, we noted that under the interim
final rule with comment, the use of NCPDP SCRIPT 8.1 was voluntary.
Commenters to this rule recommended that NCPDP SCRIPT 8.1 be adopted as
soon as possible and that NCPDP SCRIPT 5.0 be retired.
Therefore, in the November 16, 2007 proposed rule (72 FR 64906
through 64907), we summarized comments received on the voluntary use of
NCPDP SCRIPT 8.1 and proposed to revise Sec. 423.160(b)(1) and (c) to
replace the NCPDP SCRIPT 5.0 standard with NCPDP SCRIPT 8.1 for the
transactions listed at Sec. 423.160(b)(1) (see section III.A. of this
final rule). We also solicited additional comments on the retirement of
NCPDP SCRIPT 5.0.
Comment: Most commenters supported the adoption of NCPDP SCRIPT
8.1, and retirement of NCPDP SCRIPT 5.0, for the transactions listed at
Sec. 423.160(b)(1). They noted that NCPDP SCRIPT 8.1 will provide a
uniform communications mechanism for prescribers, dispensers, and
payers, support reconciliation of useful data from a larger number of
sources, and raise awareness of the availability of medication history
and, subsequently, its use among prescribers. Some commenters noted
that the industry is already using NCPDP SCRIPT 8.1, so there would be
limited impact of converting to NCPDP SCRIPT 8.1 to only those few
still using NCPDP SCRIPT 5.0. They indicated that conversion from NCPDP
SCRIPT 5.0 to NCPDP SCRIPT 8.1 would not require any significant
enhancements for the majority of entities. Seven commenters supported
ultimately moving to NCPDP SCRIPT 10.5, but only one commenter
recommended bypassing NCPDP SCRIPT 8.1 and adopting version NCPDP
SCRIPT 10.5 directly.
Response: NCPDP SCRIPT 8.1 is already in widespread use, has
adequate industry experience, and supports the

[[Page 18922]]

e-prescribing transactions for which it was pilot tested (with the
exception of long-term care e-prescribing applications). Therefore, we
believe at this time that NCPDP SCRIPT 8.1 should be adopted in place
of NCPDP SCRIPT 5.0 at Sec. 423.160(b)(2)(ii) and (c). In keeping with
the pilot findings, the exception to this standard at Sec.
423.160(a)(3)(iii) for e-prescribing in long-term care settings will be
retained until a subsequent version of NCPDP SCRIPT is adopted that
will support transactions in that setting.
Regarding the comment that we bypass NCPDP SCRIPT 8.1, and adopt
NCPDP SCRIPT 10.5, NCPDP SCRIPT 10.5 has not yet been approved by the
NCPDP Board of Directors and the Accredited National Standards
Institute (ANSI).\1\ Based on the Department's criteria consistently
applied to the adoption of e-prescribing standards, NCPDP SCRIPT 10.5
will not be considered by the Secretary for adoption until such time as
that SDO/ANSI approval process has been completed.
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\1\ ANSI accredits the procedures of national standards
development organizations. Accreditation by ANSI signifies that the
procedures used by the standards body in connection with the
standard's development meet the Institute's requirements for
openness, balance, consensus and due process. Refer to www.ansi.org
for additional information.
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Comment: A number of commenters favored adoption of NCPDP SCRIPT
8.1, but with the caveat that CMS not preclude stakeholders who need to
use the advanced functionalities of NCPDP SCRIPT 10.2 or higher, such
as those in long-term care settings, from doing so voluntarily. One
commenter noted that any version of NCPDP SCRIPT 10.0 or higher would
be acceptable. Others said that NCPDP SCRIPT 10.2 or 10.3 would be the
appropriate standard for use in long-term care. We also received
comments that the agency should retire NCPDP SCRIPT 8.1 in favor of
NCPDP SCRIPT 10.5 by the year 2010, and one commenter supported the
current adoption of NCPDP SCRIPT 8.1, but with adoption of NCPDP SCRIPT
10.5 within a year's time.
Response: By their very nature, standards are subject to updating
and modifications as new business needs, workflows and other issues are
identified and resolved. We recognize industry's desire for adoption of
the most current and robust versions of standards. We note that, in
instances where a subsequent standard is backward compatible with
previously adopted standards, the streamlined process described earlier
can allow for use of subsequent versions of the adopted standard as
well as the previously adopted version of the standard. Under this
process, the Secretary may identify a subsequent backward compatible
version(s) of an adopted non-HIPAA standard, and, with publication of
an interim final rule with comment in the Federal Register, adopt such
subsequent versions of the standard for voluntary use. As new backward
compatible versions of non-HIPAA e-prescribing standards such as NCPDP
SCRIPT are identified, they could be adopted under this process for
voluntary use as an alternative to NCPDP SCRIPT 8.1.
With regard to the recommendation that we adopt versions of
standards ``X.X or higher,'' we cannot adopt versions of standards that
do not currently exist. Notice and comment rulemaking requires a
meaningful opportunity to comment. It is not possible to comment
meaningfully on a version of a standard that is not yet in existence,
and as such, is not available for public review.
Comment: One commenter suggested voluntary use of the Get Message
and Password Change transactions supported by NCPDP SCRIPT 8.1.
Response: The NCPDP SCRIPT 5.0 standard includes standards for the
Get Messsage and Password Change transactions (70 FR 67594). The NCPDP
SCRIPT 8.1 standard also includes standards that support these
transactions. Those who elect to electronically transmit prescription
and prescription-related information for Medicare Part D covered drugs
prescribed for Medicare Part D eligible individuals, directly or
through an intermediary, are required to comply with final standards
that are in effect.
We will finalize the recognition of NCPDP SCRIPT 8.1 as a backward
compatible version of the adopted NCPDP SCRIPT 5.0, but in response to
the comments that were received to that interim final rule with
comment, as of April 1, 2009, we will retire NCPDP SCRIPT 5.0 and leave
NCPDP SCRIPT 8.1 as the adopted standard. To effectuate this, we are--
Redesignating and amending proposed Sec. 423.160(b)(1) as
Sec. 423.160(b)(2)(ii) to apply to transactions on or after April 1,
2009;
Adding a new Sec. 423.160(b)(1) to identify which
paragraphs are applicable to which timeframes; and
Adding new Sec. 423.160(b)(2)(i) to apply to transactions
before April 1, 2009 and adding the appropriate regulatory citations to
Sec. 423.160(b) to identify where each standard is incorporated by
reference, if applicable.
2. Proposed Adoption of an E-Prescribing Standard for Medication
History Transaction
In the November 16, 2007 proposed rule (72 FR 64907), we discussed
that if NCPDP SCRIPT 8.1 is adopted in place of NCPDP SCRIPT 5.0 at
Sec. 423.160(b)(1), we would also add a new Sec. 423.160(b)(3) to
adopt the NCPDP SCRIPT 8.1 Medication History Standard for electronic
medication history exchange among the Medicare Part D sponsor,
prescriber, and the dispenser when e-prescribing Medicare Part D
covered drugs for Medicare Part D eligible individuals.
We also discussed how the adoption of the NCPDP SCRIPT 8.1
Medication History Standard will provide a uniform communications
mechanism for prescribers, dispensers and payers, support
reconciliation of useful data from a large number of sources, and raise
awareness of medication history availability and use among prescribers.
Comment: Most commenters supported the adoption of the NCPDP SCRIPT
8.1 Medication History Standard, noting that over time, medication
history will help reduce adverse drug events, doctor shopping, and
prescription drug diversion/fraud, and provide for emergency
prescription drug histories in case of natural disasters. One commenter
believes that large scale implementation of the NCPDP SCRIPT 8.1
Medication History Standard will result in significant challenges as
well as useful refinement of the standard.
A number of commenters supported adoption of the standard, but only
on a voluntary basis between trading partners, noting that requiring
use of the medication history function could cause some current e-
prescribers to revert to paper prescribing if they cannot meet the
compliance date. One commenter on the NCPDP SCRIPT 8.1 Medication
History Standard stated that the pilot test was performed in a closed
system and is not scalable in larger deployments, and also indicated
that the medication history transaction, while relatively mature in the
prescribing sector, is not widely used in the dispensing sector. The
commenter recommended that the use of the standard be encouraged but
not required.
Response: The Medication History Standard was tested in four of
five pilot project sites, among community physicians, dispensers, plans
and payers. The testing included the two national prescription
information exchange networks. While tested within closed systems, the
pilot project

[[Page 18923]]

evaluators determined that the testing adequately supported concluding
that the standard met the requisite objectives, functionality and
criteria (including not imposing an undue burden on the industry thanks
to there being adequate health care industry experience with the
standard) for adoption as a Medicare Part D e-prescribing standard. The
pilot project demonstrated that the NCPDP SCRIPT 8.1 Medication History
Standard works effectively, and includes the functionality and meets
the e-prescribing standards criteria and objectives identified in
sections 1860D-4(e)(2) and 1860D-4(e)(3) of the Act, and we will adopt
it as a standard. We note that, while Medicare Part D sponsors are
required to support all e-prescribing functions for which standards
have been adopted, prescribers and dispensers are not required to do
so. As a result, prescribers and dispensers who currently use e-
prescribing but do not utilize the medication history function will not
be required to conduct transactions using the NCPDP SCRIPT 8.1
Medication History Standard. However, if they choose to conduct an
electronic medication history transaction in the context of e-
prescribing Medicare Part D covered drugs for Medicare Part D eligible
individuals, they must use the adopted standard. Regarding the comment
that some current e-prescribers might revert to paper prescribing if
they are required to use the NCPDP SCRIPT 8.1 Medication History
Standard by the proposed compliance date, we refer back to comments
received from a wide spectrum of the industry, that NCPDP SCRIPT 8.1 is
already in widespread use, and the Medication History function already
resides on the standard. Most providers need only to enable the
function on their software system. For those who already enjoy the
benefits of e-prescribing, reverting to paper would constitute a
setback for their practices. We assume that they would continue to
build upon the investment they have already made in their e-prescribing
systems and become current, within the time allowed, with the adopted
standards for those e-prescribing functionalities they choose to
transact.
Comment: Commenters made a number of recommendations about the
completeness and availability of medication history data to prescribers
and dispensers. Several noted that information about all medications
should be made available through the medication history transaction,
including controlled substances (which cannot be e-prescribed under
current law), over-the-counter drugs, drugs for which the beneficiary
paid in cash, and drugs not covered under Medicare Part D, including
those prescribed in the hospital setting. Other commenters recommended
that medication history should be available 24 hours a day, 7 days a
week through downloads to any prescriber and pharmacy, and that
medication history data should not be limited to those who subscribe to
any given e-prescribing system or network. One commenter suggested that
any Medicare Part D e-prescribing standard for medication history
should accommodate family and medical history information that supports
linkage of these data sources to an electronic health record system.
Response: Our intent for the scope of this final rule is to
establish standards that will be used to support the Medicare
electronic prescription program. These standards will provide
additional common language and terminology for those operating in the
Medicare Part D e-prescribing environment that will further the
electronic exchange of information in a data format that is consistent
and recognizable.
We agree that the more complete a medication history is, the more
useful it will be to the prescriber. However, prescriptions paid for in
cash that are not adjudicated through insurance claims systems, and
over-the-counter medications, for example, may not be captured by the
patient's Medicare Part D sponsor medication history, and therefore
would not be available for communication using the standard. The
suggestion that we include family and medical history information in
the NCPDP SCRIPT 8.1 Medication History Standard is outside of the
scope of this rule. While the MMA does provide for the establishment of
appropriate medical history standards, no initial standards were
identified for this function. The NCPDP SCRIPT 8.1 Medication History
Standard is the product of NCPDP, a voluntary consensus standards
development organization. Only NCPDP could expand the NCPDP SCRIPT 8.1
Medication History Standard to encompass medical history. Despite its
limited function, we believe that the NCPDP SCRIPT 8.1 Medication
History Standard will facilitate the flow of available medication
history data from Medicare Part D sponsors, and we expect this will
have a positive impact on medication errors and ADEs.
Comment: Several commenters noted operational and business flow
shortcomings that could limit the utility of medication history. One
commenter indicated that the current criteria for medication history
match is higher than that for formulary and benefits, and that current
experience with one prescription information exchange network
demonstrates a 50 to 65 percent match rate for submitted eligibility
requests. Another commenter mentioned that many physicians are unable
to access all medication history information, and that physicians
should be able to add medications to the medication history without
having to generate a prescription. Another commenter noted that as the
pilot results showed, clinicians' willingness to access medication
history was limited due to incomplete information, and that further
testing of the standard is needed prior to adoption to clarify
requirements for completeness and usability of information, and to
determine where the information can be most effectively introduced and
exchanged within the provider's workflow. Another commenter noted that
the current medication history transaction does not support drug
utilization review and medication management.
Response: In the November 16, 2007, proposed rule, we acknowledged
that many physicians were unaware of the medication history function
likely because, while it resides within the widely used NCPDP SCRIPT
8.1 suite of functional standards, most users have apparently not
activated this feature on their e-prescribing systems. We expect that,
as the standard achieves widespread use, industry feedback to the SDO
will result in improvements and modifications that support more robust
and complete medication history capacities. While industry input
indicates there may be many reasons for less than a 100 percent match
rate, including incomplete access to eligibility data, data
inconsistencies and inaccuracies, etc., they also indicate that this
could be corrected through the use of a unique identifier. While there
is significant opportunity to improve the use of medication history, we
believe that adopting the standard and expanding its use will help
identify and drive process improvements.
We have adopted the NCPDP SCRIPT 8.1 Medication History Standard as
proposed with two technical changes. We redesignated the standard from
Sec. 423.160(b)(3) to Sec. 423.160(b)(4) and added a reference to the
paragraph regarding the incorporation by reference of this standard.

[[Page 18924]]

3. Proposed Adoption of an E-prescribing Standard for Formulary and
Benefits
In the November 16, 2007, proposed rule (72 FR 64907), we discussed
that, as a result of pilot testing, we proposed to add Sec.
423.160(b)(4) to adopt NCPDP Formulary and Benefits 1.0, as a standard
for electronic transactions communicating formulary and benefits
information between the prescriber and the Medicare Part D sponsor when
e-pre scribing for covered Medicare Part D drugs for Medicare Part D
eligible individuals.
Comment: We received many comments supporting adoption of the NCPDP
Formulary and Benefits 1.0, which noted that the pilot test
demonstrated that NCPDP Formulary and Benefits 1.0 was technically
capable of communicating the intended information to support this
transaction. A prescription information exchange network also
concurred, relaying that they began certifying physician software
vendors and payers for formulary and benefits functionality last year,
and have had good results implementing it since that time. A few
commenters also pointed to the inherent complexities associated with
implementing the standard, saying that without real-time information,
patient information is often outdated and lacks detail, which can lead
to higher co-pays and confusion for patients. They said that plans,
carriers, and pharmacy benefit managers (PBMs) should be required to
provide accurate, timely and complete formulary and benefits
information. One commenter recommended that plans not be required to
conduct the transaction, but if they do so, they must use the standard.
Several commenters indicated that use of the transaction be voluntary
among trading partners.
Response: Based on pilot test results and industry comments on the
proposed rule, we agree that NCPDP Formulary and Benefits 1.0 has met
the requisite objectives, functionality and criteria requirements of
the MMA for use in the Medicare Part D e-prescribing program, and we
will adopt it as a standard.
E-prescribing under Medicare Part D, as outlined in section 101 of
the MMA, is voluntary for providers and dispensers. However, Medicare
Part D sponsors must support the use of, and comply with, these
standards when electronically transmitting prescriptions or
prescription-related information for covered Medicare Part D drugs for
Medicare Part D eligible individuals.
We do not believe that there would be any additional value gained
from continued pilot testing of the standard. We acknowledge that
formularies are complex, frequently change due to updates in coverage
decisions, and that coverage benefits are fluid, sometimes changing
from day to day. Currently, the industry practice is to send formulary
and benefits information periodically and in batch-file format. We
agree that the capacity to provide this information on a real-time
basis is an important step toward realizing the full potential of the
benefit of the standard, and expect that, as the standard gains
widespread use, marketplace forces will encourage incorporation of
real-time transaction capacities into the formulary and benefits e-
prescribing process. In the meantime, we believe that additional
testing, not of the standard itself but of the ability to provide real-
time benefit responses, is desirable as the industry seeks to maximize
e-prescribing system capabilities, and it is our understanding that
industry efforts are underway to test real-time transactions through
electronic prescription information exchange networks.
Also, as the NCPDP commented, there is an effort underway to bring
industry participants together for further analysis and testing to
address any remaining NCPDP Formulary and Benefits 1.0 implementation
issues, which result from missing or incomplete data, and are not the
result of the standard functioning inadequately for the transaction.
NCPDP also is following up on a Healthcare Information Technology
Standards Panel (HITSP) recommendation that NCPDP evaluate data
element/list requirements and propose solutions to any outstanding
issues.
Comment: Several commenters stated the need to restrict the ``list
of alternative drugs'' to only those products that are bioequivalent or
that have received the ``AB'' designation from the Food and Drug
Administration (FDA), preventing the prescribing of potentially
inappropriate or unsafe therapeutic substitutions. They supported
adoption of the standard, but not the current version that includes
``preferred'' or ``formulary alternatives lists.''
Response: NCPDP Formulary and Benefits 1.0 supports a codified way
of sending information that includes ``preferred'' or ``formulary
alternatives lists,'' if a health plan offers such products. The
standard does not assess the appropriateness of the alternatives,
rather it merely conveys the applicable formulary requirements,
including any step therapy requirements, of a given patient's health
coverage. The Medicare Part D program provides for formularies in which
therapeutically non-equivalent and non-bioequivalent drugs are offered
in each category and class of a Medicare Part D drug formulary. (See
Sec. 423.120(b)(2).) The Medicare Part D program allows Medicare Part
D sponsors to have utilization review management procedures, including
step therapy guidelines, within approved formularies. Our adoption of
NCPDP Formulary and Benefits 1.0 applies specifically to e-
prescriptions for Medicare Part D covered drugs prescribed for Medicare
Part D eligible individuals. As such, we believe that it should support
conveying formulary information about the non-equivalent and non-
bioequivalent drugs that are part of an approved Medicare Part D
sponsor's formulary.
We have adopted the NCPDP Formulary and Benefits 1.0 standard as
proposed with two technical changes. We redesignated the standard from
the proposed Sec. 423.160(b)(4) to Sec. 423.160(b)(5) and added a
reference to the paragraph regarding the incorporation by reference of
this standard.
4. Adoption of the National Provider Identifier (NPI) as a Standard for
Use in E-Prescribing
In the November 16, 2007, proposed rule (72 FR 64908), we proposed
to add Sec. 423.160(b)(5) to adopt the National Provider Identifier
(NPI) as a standard identifier for health care providers for use in e-
prescribing among the Medicare Part D sponsor, prescriber, and the
dispenser. NCPDP SCRIPT 8.1, which we proposed to adopt, supports the
use of the NPI.
We solicited comments from the industry and other stakeholders on
the adoption of the NPI as an e-prescribing standard, and we
specifically requested comments as to whether use of the NPI in HIPAA-
compliant transactions constitutes adequate industry experience for
purposes of using NPI as a covered health care provider identifier in
Medicare Part D e-prescribing transactions.
Comment: Commenters generally acknowledged industry familiarity
with the NPI from having used it in HIPAA standard transactions. While
most commenters supported the use of the NPI on electronic
prescriptions to identify the prescriber and the dispenser, they agreed
that the NPI must not be used for routing transactions (message
envelope), or sender/receiver-level information used in e-prescribing
routing transactions, as it does not offer the clarity needed for
routing data to destinations. However, it can be used to identify an
organization or a provider involved in electronic prescribing

[[Page 18925]]

transactions. We received several comments about how the adoption of
the NPI as a health care provider identifier for use in e-prescribing
would improve the ability to uniquely identify a prescriber, but that
the NPI must be used to identify a prescriber at the individual versus
organizational level. A number of commenters urged CMS to provide more
specific guidance on the use of the NPI in e-prescribing.
Three commenters opposed the adoption of the NPI as a standard
identifier for use in Medicare e-prescribing because they contend that,
as it is currently constructed, the NPI does not convey appropriate
location and routing information which is essential to the e-
prescribing process. One commenter said the NPI works as a name, but
not as an address (that is, the location and setting of the
prescriber). Another commenter stated that they do not use the NPI for
e-prescribing because its use would force the industry to incur
significant implementation costs. This commenter took issue with CMS'
assumption that experience in using NPI in HIPAA-covered transactions
constitutes adequate industry experience for adopting it for use in e-
prescribing Medicare Part D covered drugs for Medicare Part D eligible
individuals. One other commenter stated that, since it was not pilot
tested, the NPI should be adopted only after pilot testing has been
conducted and evaluated.
Response: Our intention in proposing the use of the NPI in e-
prescribing transactions was to extend the functionality of the NPI
from HIPAA-covered transactions to non-HIPAA e-prescribing transactions
so that those with NPIs could use one identifier for both HIPAA-covered
transactions and non-HIPAA e-prescribing transactions, versus a
separate identifier(s), and allow the identification of both an
individual prescriber and the dispensers. As the NPI has the ability to
identify health care providers such as prescribers and dispensers, and
as NCPDP SCRIPT 8.1 supports the NPI, its use in the e-prescribing of
Medicare Part D covered drugs for Medicare Part D eligible individuals
would fulfill the function for which it was intended. If the NPI is
used as we proposed, as that of an identifier of individual, non-
institutional health care providers, and not for routing or location
purposes, we see nothing that would preclude its use for purposes of
identification, or that would require pilot testing. Therefore, in
NCPDP SCRIPT 8.1, the NPI would be used in the PVD Provider Segments to
identify the prescriber or the dispenser. However, the NPI would not be
used in the UIH Interactive Interchange Control Segment to route the
transaction.
Based on our analysis of the comments received, we will adopt the
NPI for use in e-prescribing to identify the individual healthcare
prescriber and the dispenser. We note that, in doing this, we do not
alter the compliance dates or other requirements under HIPAA for
covered entities with respect to e-prescribing transactions that are
also HIPAA covered transactions. For instance, we do not intend to
alter any provisions requiring the use of the NPI for identifying
institutional providers in HIPAA transactions, including those HIPAA
transactions which are also e-prescribing transactions. We will also
provide specific guidance in the future regarding how the NPI should
and should not be used in e-prescribing Medicare Part D covered drugs
for Medicare Part D eligible individuals.
Comment: A number of commenters noted that not all prescribers are
covered entities under HIPAA, and expressed concern that if the NPI
were mandated as the sole identifier for prescribers, prescribers who
do not have an NPI may not be able to engage in e-prescribing.
Response: While not all providers are required by HIPAA to obtain
an NPI, they are all permitted to do so. Moreover, we believe that
most, if not all, providers who treat Medicare beneficiaries, already
have an NPI, either because they are HIPAA-covered entities, or if not,
because as providers they are otherwise identified on HIPAA
transactions (for example, as a rendering physician) or on submitted
paper claims, as Medicare requires the use of the NPI on paper claims.
Comment: One commenter suggested that the DEA number be used to
clarify the identity of the prescribing provider when the NPI number is
not adequately specific. Another noted that the DEA number is still
required for prescribing controlled substances, but it is unclear as to
whether prescribers will need to use their DEA number in the e-
prescribing of controlled substances once it is allowable under law.
Response: Not all providers prescribe controlled substances and
thus, not all providers have DEA numbers. As e-prescribing of
controlled substances is still not allowed by law, we cannot speculate
as to the potential role of the DEA number in that process. We also
note that as the intent of the NPI is to consolidate multiple and/or
proprietary prescriber identifiers for use in the Medicare program, it
would appear to be counterproductive to use one number, namely the DEA
number, to clarify another number, the NPI.
Comment: One commenter requested that CMS allow adequate time for
adoption.
Response: We will monitor industry feedback regarding this issue
and respond accordingly.
Comment: One commenter stated that dispensers should not be deemed
to be in violation of e-prescribing standards if the prescriber does
not have an NPI or fails to include an NPI in an e-prescribing message,
and questioned what effect that may have on the dispenser's compliance
with e-prescribing regulations.
Response: If a prescriber is e-prescribing under the Medicare Part
D program, the prescriber is required to use the adopted standards, in
this case, the NPI, to identify an individual e-prescribing provider.
By the compliance date of this final rule, we expect that providers who
participate in Medicare, including those who submit paper claims, will
have already have obtained their NPI for claims reimbursement purposes.
Absent an NPI, prescribers likely would not be engaged in e-
prescribing. However, in the instance of a dispenser receiving an e-
prescription for a Part D covered drug for a Part D eligible individual
from a prescriber without an NPI, the prescriber, not the dispenser,
would be considered to be in violation of Part D e-prescribing
regulations.
We have adopted the NPI as a standard identifier as proposed with a
technical change. We redesignated this standard from the proposed Sec.
423.160(b)(5) to Sec. 423.160(b)(6).
5. Proposed Compliance Date
In accordance with sections 1860D-4(e)(1) and 1860D-4(e)(4)(D) of
the Act, the Secretary must issue certain final uniform standards for
e-prescribing no later than April 1, 2008, to become effective not
later than 1 year after the date of their promulgation. Therefore, in
accordance with this requirement, we proposed a compliance date of 1
year after the publication of the final rule. We also proposed adopting
NCPDP SCRIPT 8.1 as the e-prescribing standard for the transactions
listed in section II.A. of the proposed rule (72 FR 64906), effective 1
year after publication of the final rule. We solicited comments in the
proposed rule regarding the impact of these proposed dates on industry
and other interested stakeholders, and whether an earlier compliance
date should be established.
Comment: Many commenters supported a compliance date of 1 year
after issuance of the final rule, stating that based on their
respective industry feedback and experience with NCPDP

[[Page 18926]]

SCRIPT 8.1, 1 year should be adequate time for the industry to work
toward implementation of these standards with minimum impact. A few
thought that industry compliance prior to that time could be achieved.
A few other commenters said that the proposed compliance date is
extremely aggressive and does not take into consideration vendor system
development life cycles, release dates of supporting systems, and time
and resources required for health systems to adopt and deploy the
needed infrastructure to attain the expected financial and safety
benefits of e-prescribing. One commenter stated that the proposed
implementation date is problematic for Medicare Part D sponsors that
own dispensers that have already begun to adopt e-prescribing, because
having to retrofit standards into existing systems may be more costly
and time consuming. This commenter suggested an additional year or two
beyond the proposed compliance date to allow adopters to bring current
e-prescribing systems into compliance. Another recommended that
providers be given a minimum of 2 years to comply. Two commenters
requested that we consider contingency plans if the industry is unable
to meet the 1 year compliance timeframe. One commenter recommended that
CMS conduct a study to identify pharmacy preparedness, and that once
the final rule is released, that CMS monitor the progress of the
industry in implementing the standards, and develop an extended
adoption timeframe as warranted.
Response: Section 1840D-4(e)(4)(D) of the Act requires that final
e-prescribing standards be promulgated by the Secretary by April 1,
2008, with implementation no more than 1 year following that date,
which would place the latest possible implementation date at April 1,
2009. We agree that, based on comments received, adoption of these
standards with the 1 year compliance date imposes no undue burden on
the industry, and concur with commenters who supported the proposed 1
year compliance date.
Based on industry feedback, numerous e-prescribing software systems
now using NCPDP SCRIPT 8.1 have been certified for use by electronic
prescribing networks. The NCPDP Formulary and Benefits 1.0 standard is
based on a proprietary transaction developed by RxHub, which is
currently being used to communicate this information in many e-
prescribing products. The NCPDP SCRIPT 8.1 Medication History Standard
is already contained in NCPDP SCRIPT 8.1, which is in widespread use.
We anticipate that any e-prescribing software vendor or service has
already, or will provide, these standards upgrades as part of a monthly
subscription charge or annual maintenance fee, and that it would not
require massive systems changes that would be overly burdensome. We
have received no extensive stakeholder or vendor feedback that upgrades
to current e-prescribing systems are more burdensome than installations
of new e-prescribing systems. There will always be modifications to
standards to which e-prescribing systems must be retrofitted, and we
trust that industry software vendors will anticipate these
modifications and accommodate standards upgrades to make their use by
existing customers as smooth and seamless a transition as possible. We
cannot delay the implementation date for the standards adopted under
section 1860D-4(e)(4)(D) of the Act, which is set by statute, and
continue to believe that 1 year is adequate time to accomplish any
system changes necessitated by the adoption of these final standards.
However, we will monitor industry feedback relative to their ability to
meet the 1 year compliance timeframe and determine the need for any
other action based on that information within the applicable statutory
parameters.
We are adopting a compliance date of 1 year after publication of
the final standards as proposed. Therefore, to clarify the compliance
dates for the revised and existing standards, we have revised Sec.
423.160(b) as follows:
Redesignated the proposed paragraphs (b)(1) through (b)(5)
(we proposed to add new paragraphs (b)(3) through (b)(5)) as paragraphs
(b)(2) through (b)(6).
Added a new paragraph (b)(1) that identifies the
compliance dates for each standards in paragraphs (b)(2) through
(b)(6).
In newly redesignated (b)(2) (the prescription standard),
revised the standard to separately identify the NCPDP SCRIPT 8.1 and
NCPDP SCRIPT 5.0 based on the compliance dates of these standards.

C. Related Issues Included in and Analysis and Response to Public
Comments for the November 16, 2007 Proposed Rule

In the November 16, 2007 proposed rule, we requested comments on
various issues related to the e-prescribing process. We received
numerous comments on those and other issues and we discuss those
comments and our responses below.
1. Fill Status Notification (RxFill)
In the November 16, 2007 proposed rule, we explained that the Fill
Status Notification within the NCPDP SCRIPT 8.1 enables a pharmacy to
notify a prescriber when the prescription has been dispensed, partially
dispensed, or not dispensed. The pilot test demonstrated that the
standard was technically capable of performing this function, but pilot
sites questioned whether prescribers would be inundated with data, and
dispensers would be burdened by the business process changes that would
ensue. We solicited industry comments regarding RxFill's usefulness.
Comment: Many commenters noted that RxFill contains useful
functionality, such as monitoring patient adherence to a medication
regimen, or identifying drug diversion/abuse. However, most recommended
that the transaction be used on a voluntary basis among trading
partners, noting that the need for information provided by RxFill
varies by prescriber. One commenter predicted that physician demand for
this standard will increase dramatically following the rollout of the
2008 Physician Quality Reporting Initiative (PQRI) measures, as
performance on these measures is influenced by patient compliance with
therapy.
Several commenters stated that the NCPDP SCRIPT 8.1 Medication
History Standard offers prescribers and dispensers similar but richer
information, making RxFill unnecessary.
A number of commenters noted that there were business process and
implementation issues associated with RxFill. Others noted shortcomings
in the standard, such as omission of features such as pharmacy receipt,
patient pick up, reason for refusal of fill, and the placement of the
order in the prescription filling process. They recommended additional
analysis and testing prior to adoption.
Response: As stated in the November 16, 2007 proposed rule, we
previously referenced industry feedback that had indicated that the
adoption of RxFill ``may cause an unnecessary administrative burden on
prescribers and dispensers'' as a basis for not proposing the adoption
of RxFill. This feedback was derived from the findings contained in the
report to Congress on the results of the CY 2006 e-prescribing pilot
(http://www.healthit.ahrq.gov/erxpilots). The report noted that the
industry feared that adoption of the RxFill standard for electronic
fill status notification transactions might result in increased
``administrative workflow''

[[Page 18927]]

issues, namely being inundated with fill status notifications every
time a patient picked up (or conversely, did not pick up) a
prescription. However, it is now clear from the comments received in
response to the November 16, 2007 proposed rule that the industry, upon
further consideration, now perceives there to be no administrative
burden associated with the adoption of the RxFill standard. This is a
result of the realization by the industry that the prescriber would
have to use their e-prescribing system to electronically ``flag'' or
switch on the fill status notification transaction for those patients
whose medication adherence they wish to monitor. When a patient picks
up a prescription at the pharmacy, they likely sign an electronic
signature log. In instances in which the prescriber has switched on the
fill status notification transaction in their eRx system, this
electronic signature triggers a pharmacy software system update which,
in turn, would trigger a fill status notification message using the
RxFill standard to be sent back to the prescriber. Prescriber comments
in response to the proposed rule indicates that they perceived real
value in RxFill for prescribers whose patients with chronic conditions
may benefit from closer medication adherence monitoring. In addition,
the pilot demonstrated that RxFill supports the transactions for which
it was tested. Given the voluntary nature of e-prescribing for
dispensers and prescribers under Medicare Part D, prescribers can
choose whether or not they want to avail themselves of the information
that use of this standard in the electronic Fill Status Notification
transaction would provide, and voluntarily incur costs, if any,
associated with its use. Therefore, we will revise Sec. 423.160(c) and
add a paragraph (M) to Sec. 423.160(b)(2)(ii) to adopt the Rxfill
standard by adding the prescription Fill Status Notification and its
three business cases; Prescription Fill Status Notification
Transaction--Filled, Prescription Fill Status Notification
Transaction--Not Filled, and Prescription Fill Status Notification
Transaction--Partial Fill) to provide for the communication of fill
status notification of Medicare Part D prescription drugs for Medicare
Part D eligible individuals, among Medicare Part D sponsors,
prescribers and dispensers, to the list of transactions for which NCPDP
SCRIPT 8.1 is used.
Comment: Several commenters who supported RxFill's adoption
suggested modifications that they believed might make it less
burdensome to providers. These included the suggestion of identifying
only key categories of drugs, such as blood pressure or diabetes
medications, that would trigger an RxFill notification to a provider
from a pharmacy; or an RxFill notification if a patient did not pick up
an e-prescribed prescription at their pharmacy within one week to 10
days after its transmission. One commenter also suggested the use of
RxFill as a way to auto-populate medication history fields.
Response: We expect that increased use of RxFill will allow the
industry to identify a variety of functional and business flow
improvements that could be incorporated through the standards
maintenance process. The Department will continue to monitor the
further development of, and revisions to, this standard and will
consider updating the adopted standard when and as appropriate.
2. RxNORM, Structured and Codified Sig, and Prior Authorization
In the proposed rule we identified three of the six initial
standards that the pilot results showed were not ready for adoption:
RxNORM, NCPDP Structured and Codified Sig 1.0, and the Prior
Authorization Standard. We also noted that RxFill was technically ready
for adoption, but as previously discussed, we were unsure as to
industry's desire to adopt it as a standard. As a result, we did not
propose to adopt these standards, but we solicited public comment on
this decision.
Comment: Most commenters agreed that the standards for NCPDP
Structured and Codified Sig 1.0, clinical drug terminology (RxNorm) and
the Prior Authorization Standard were technically unable to convey the
needed information and lacked adequate industry experience. Only one
commenter asserted that all six initial standards tested in the CY 2006
pilot could feasibly be implemented by 2009.
Response: We agree that these standards are not ready for
implementation, and are not adopting them at this time.
Comment: Many commenters stressed the potential value of these
standards, and urged us to work actively with the industry to promptly
mitigate the problems and concerns with the standards. Commenters also
noted that there are efforts underway to bring industry participants
together for further analysis and testing of RxNorm, NCPDP Structured
and Codified Sig 1.0, and the Prior Authorization Standard, to expand
upon and bring to completion the work begun in the CY 2006 e-
prescribing pilot. Several commenters asked that CMS include language
``in the standards that commits it (CMS) to development and pilot
testing of the Prior Authorization Standard.''
One commenter who was familiar with the pilot of the initial
standards stated that many of the shortcomings of RxNorm that were
identified in the pilot test were focused on difficulties in conveying
information about drug delivery devices and packages, and not the
overall function of the standard in other contexts. They said that
while there may have been instances of unresolved synonymy, that at
least half of them, if not all of them, have already been resolved.
Commenters stated that they believed the Prior Authorization
Standard is an inefficient, time consuming process that is a source of
frustration for both physicians and patients, and a process that is
ripe for improvement. One commenter recommended additional research on
the Prior Authorization Standard to alleviate the manual administrative
burden associated with the high volume of prior authorizations in the
long-term care setting.
Response: One commenter asked that CMS include language in the
standards that commits it to development and pilot testing of the prior
authorization standard. We note that standards are guidelines, rules or
characteristics for activities, and are the purview of the standards
development organizations and not CMS; therefore, the inclusion of such
language as part of the technical specifications of a standard would be
inappropriate.
We agree that these three standards would contribute significant
value to e-prescribing, and will continue to work with the SDOs,
industry, and interested stakeholders toward readying these standards
for consideration by the Secretary for adoption as final standards for
e-prescribing Medicare Part D covered drugs for Medicare Part D
eligible individuals.
3. Exemption for Computer-Generated Facsimiles
The November 2, 2005 foundation standards final rule (70 FR 67568)
exempted entities that transmit prescriptions or prescription-related
information by means of a computer-generated facsimile from the
requirement to use the adopted NCPDP SCRIPT standard for the
transactions that, prior to this rule, were listed at Sec.
423.160(b)(1). In response to industry concerns that the exemption was
hindering the movement toward computer-to-computer e-prescribing, we
included a proposal to eliminate the exemption in the CY 2008 Physician
Fee Schedule proposed rule (July 12, 2007

[[Page 18928]]

(72 FR 38122, 38196)), effective January 2009. In the November 27, 2007
CY 2008 Physician Fee Schedule Final Rule with Comment, 72 FR 66334, we
modified the computer-generated facsimiles exemption, but did not
eliminate it entirely, allowing computer-generated facsimiles to be
used in the event that an EDI-transmitted prescription fails due to
network transmission failures or similar, temporary communication
problems that are episodic and nonrepetitive in nature.
In the November 16, 2007 proposed rule (72 FR 64902) we referenced,
but did not solicit comments on our inclusion of a proposal to remove
the exemption for computer-generated facsimiles in the CY 2008
Physician Fee Schedule proposed rule (72 FR 8196). However, we received
comments on this provision in response to our solicitation for comments
on the November 16, 2007 proposed rule.
Comment: Several commenters requested that we not eliminate the use
of all facsimiles (including computer-generated facsimiles) as a means
of transmitting prescriptions and prescription-related information
between provider and pharmacy, and vice versa. Commenters stated that
if all facsimiles of prescriptions and prescription-related information
were eliminated, it would constitute a burden on dispensers and
provider offices that would have to revert to paper, which would result
in decreased productivity and increased costs. Another commenter stated
that use of secure facsimile via computer to computer link or computer
to facsimile link, should be allowed when the NCPDP SCRIPT 8.1 standard
transmission is ``not available'' to all prescribers.
Two commenters stated that the elimination of the exemption for
computer-generated facsimiles should be delayed until January 2010; and
that the provisions of the final rule should be modified to allow its
use when transmitting prescription or prescription-related information
to dispensers and facilities that do not e-prescribe, or when
prescribing controlled substances.
Response: First, we note that transmitting paper prescriptions from
one facsimile machine to another for Medicare Part D covered drugs for
Medicare Part D eligible individuals, as described by one of the
commenters, does not constitute electronic data interchange. Such paper
faxing is not subject to the Medicare Part D e-prescribing standards
adopted for the e-prescribing of Medicare Part D covered drugs for
Medicare Part D eligible individuals.
In the July 2007 proposed rule, we did not propose the elimination
of the use of paper facsimiles as a way to transmit prescriptions and
prescription-related information. Rather, we proposed eliminating the
exemption for computer-generated e-prescribing facsimiles from the
adopted NCPDP SCRIPT standard for the communication of prescriptions
and prescription-related information between prescribers and dispensers
for the transactions listed at Sec. 423.160(b)(1)(i) through (xii). In
the final rule, we acknowledged that computer-generated facsimiles may
be needed for prescriptions which fail due to network transmission
failures or similar, temporary communication problems that are episodic
and non-repetitive in nature and preclude the use of NCPDP SCRIPT.
However, this exception applies only to transmission failures, and not
simply to those who choose to use e-prescribing software that does not
employ the NCPDP SCRIPT standard. We assume the commenter is referring
to such a situation when referencing that computer to computer link or
computer to facsimile link, should be allowed when the NCPDP SCRIPT 8.1
standard transmission is ``not available'' to all prescribers.
During the time period allotted for comment following the issuance
of the July 2007 proposed rule we received several comments regarding
the elimination of the exemption for computer-generated facsimiles. A
number of commenters disagreed with the lifting of the exemption,
indicating that its elimination could be problematic in performing a
certain e-prescribing function, that of prescription refill requests,
but only one of those commenters offered substantiation. Absent receipt
of any other industry feedback on the impact of the elimination of
computer-generated facsimiles on prescription refill requests, and not
considering these comments to constitute widespread concern regarding
the refill request function, we proceeded in CY 2008 Physician Fee
Schedule final rule (72 FR 66334) to amend the exemption to eliminate
the exemption except, as noted above, in cases of network failure.
Taken in the aggregate, we determined that the 1 year time period was
adequate time during which providers and dispensers would have the
opportunity to change over to conducting true e-prescribing (computer
to computer EDI) and that costs would be mitigated due to the growing
volume of e-prescriptions and practice of e-prescribing, with a
commensurate reduction in transmission, software and other costs during
that 1 year time period. These changes are due to become effective in
January 2009.
Since that time, we have been informed by the industry that the
elimination of the exemption for computer-generated facsimiles would
have a significant adverse effect in the electronic transmission of
prescription refill requests, and interested stakeholders have provided
us with more specific information regarding the economic and workflow
impact that will result from the modification of the exemption that was
not forthcoming during the public comment period. In particular,
dispensers have indicated that they use computer-generated facsimiles
for a significant volume of refill requests, and that eliminating the
exemption would require them to revert to paper facsimiles for those
transactions. We are now in the process of examining and considering
these data, and may soon issue a proposed solution through the
rulemaking process that we intend to finalize prior to the scheduled
January 2009 effective date. Through this process the public will, once
again, be afforded an opportunity to offer public comment.
4. Elimination of the Exemption for Non-Prescribing Providers (Long
Term Care)
In the proposed rule (72 FR 64902 through 64906), we noted that,
because NCPDP SCRIPT was not proven to support the workflows and legal
responsibilities in the long-term care setting, entities transmitting
prescriptions or prescription-related information where the prescriber
is required by law to issue a prescription for a patient to a non-
prescribing provider (such as a nursing facility) that in turn forwards
the prescription to a dispenser (``three-way prescribing
communications'' between facility, physician, and pharmacy), were
provided with an exemption from the requirement to use NCPDP SCRIPT 5.0
in transmitting such prescriptions or prescription-related information.
We also noted the results of the CY 2006 e-prescribing pilot relative
to the use of NCPDP SCRIPT 8.1 in the long-term care setting, namely
that workarounds were needed to accommodate the unique workflow needs
in long term care. We conveyed that, when an updated version of the
NCPDP SCRIPT standard in the long-term care setting, we would consider
removing the current exemption. We then solicited comments on the
impact and timing of lifting this exemption.

[[Page 18929]]

Comment: Commenters generally acknowledged that progress is being
made toward accommodating the specific needs of the long term industry
in e-prescribing standards, and supported the eventual elimination of
the long-term care exemption to the NCPDP SCRIPT standard. They noted
that, while NCPDP SCRIPT 8.1 may work well in most instances, each
higher level of NCPDP SCRIPT (10.0 or higher) contains more
functionality that ultimately will build to that which will be needed
for long-term care applications. They noted that one of these higher
level standards should be the designated standard for use if/when the
exemption for e-prescribing in the long-term care setting is
eliminated. Several commenters stated that the exemption for e-
prescribing in long-term care could be lifted upon adoption of NCPDP
SCRIPT version 10.2. This newer version of the standard is ANSI
approved, and, according to these commenters, meets the basic e-
prescribing needs of the long-term care industry. Another commenter
recommended adoption of NCPDP SCRIPT 10.3, citing its expanded ability
to support resupply requests, fill status and census notification
messages in the long-term care setting. Still other commenters insisted
that CMS should adopt NCPDP SCRIPT 10.5 for use in e-prescribing in the
long-term care setting. Commenters also stated that they anticipated
that the Certification Commission for Healthcare Information Technology
(CCHIT) would begin work in 2009 to launch certification of electronic
health records products for long-term care, and that in preparation for
that activity, national standards for e-prescribing for long-term care
will need to be in place. One commenter stated that the long-term care
exemption should remain in place until such time as e-prescribing
standards can support the needs of long-term care, taking in account
medication management across multiple care settings and providers.
Another stated that the exemption should not be lifted until all
standards for e-prescribing had been adopted, and the industry had
conducted adequate testing. One commenter recommended that CMS should,
with this final rule, remove the current exemption for long term care
entities from using the Medicare Part D e-prescribing standards,
effective with the compliance date of this rule.
Response: While NCPDP SCRIPT 10.2 was approved in July 2007, NCPDP
SCRIPT 10.3 is not scheduled for approval until April 2008, and NCPDP
SCRIPT 10.5 is not scheduled for approval until July 2008. We agree
with commenters that NCPDP SCRIPT 10.5 appears to meet all of the long-
term care business needs that have been identified to date, and
therefore would be appropriate for adoption. When NCPDP SCRIPT 10.5 is
approved by NCPDP, we will review it with the purpose of ascertaining
whether it is backward compatible with the adopted standard, and thus a
candidate for the streamlined process outlined earlier that would
permit its use in place of NCPDP SCRIPT 8.1, or if rulemaking will be
required. We anticipate eliminating the long-term care exemption when
rulemaking is utilized to retire the then-existing standard in favor of
version 10.5. From feedback received from the industry, NCPDP SCRIPT
10.2 meets the basic needs of the long-term care industry relative to
e-prescribing, including the ``need no later than'' date/time added for
special delivery needs. NCPDP SCRIPT 10.3 features this as well as
additional functionality, including medication history source and fill
number information for de-duplicate processing. NCPDP SCRIPT 10.5
features all of the functionality of these previous NCPDP SCRIPT 10.0
and above versions, and supports federal medication terminologies code
sets. We agree with commenters that NCPDP SCRIPT 10.5 appears to meet
all of the long-term care business needs identified to date. Therefore,
it would be appropriate to adopt the standard with the most robust
functions, since this is what vendors will incorporate into their
products. As we indicated in the previous discussion, once NCPDP SCRIPT
10.5. is balloted and approved by the NCPDP, and then approved by the
Accredited National Standards Institute (ANSI), we will review it with
the intent of moving forward if appropriate. However, we note that
long-term care facilities may voluntarily use the standard at any time,
and we encourage its adoption in that setting.
5. Electronic Prescribing for Controlled Substances
Comment: Several commenters noted that all categories of
prescriptions--including controlled substances--should be able to be
electronically prescribed, and that to require handwritten
prescriptions for controlled substances would necessitate a dual paper/
electronic system which would be a major barrier to adoption. For
example, a physician noted that one out of every ten prescriptions he
wrote could not be e-prescribed because they were for controlled
substances. One commenter recommended that it be mandated that
prescribers should check the identification of patients before
prescribing for them electronically.
Response: We agree that the inability to e-prescribe controlled
substances can hinder broader e-prescribing adoption. The Drug
Enforcement Administration (DEA) which has responsibility for
administering the Controlled Substances Act, currently requires that
controlled substances be prescribed on paper with a written signature.
We continue to work with the DEA toward revised requirements that would
permit such e-prescribing while maintaining safeguards against drug
diversion.
6. Diagnosis on Prescription
Comment: One commenter proposed that Medicare require diagnosis
information on electronic prescriptions, arguing that this would allow
the pharmacy to evaluate the drug prescribed against the diagnosis and
thus identify potential errors.
Response: NCPDP SCRIPT 8.1 does contain an optional field for
diagnosis, but requiring its use is outside the scope of our proposed
rule. We have not solicited nor have we received any industry feedback
on this issue, and therefore cannot attest as to the industry's use
and/or perceived value of this feature.
7. Issues Related to State Law
Comment: One commenter urged CMS to take a broader view of the
authority to preempt state law than we outlined in the November 7, 2005
final rule (70 FR 67574 through 67576). They stated that the lack of
national applicability of the standards we adopt serves as a barrier to
broader adoption of e-prescribing.
Response: In the November 7, 2005 final rule, we identified four
categories of State law that restrict the ability to carry out Medicare
Part D standards, and which pertain to electronic transmission of
prescription-related information. We encouraged States to consider the
impact on Federal e-prescribing standards of laws that could directly
or indirectly impede the adoption of e-prescribing technology and
standards on a statewide and national basis. We also urged States to
enact legislation consistent with, and complementary to, the goals of
the MMA's e-prescribing provisions. This included removing existing
barriers to e-prescribing.
The commenter did not identify any specific State laws that stand
as an obstacle to Congress's goal of implementing uniform e-prescribing
standards that are to be used in e-prescribing of Medicare Part D
covered drugs for Medicare Part D

[[Page 18930]]

eligible individuals. Therefore, we will not re-evaluate the scope of
preemption at this time. We would consider recommendations related to
any specific statute or regulation if such laws and recommendations are
brought to our attention at some point in the future.
Comment: Another commenter noted that some State laws restrict
communication of ``sensitive'' medication information (for example,
drugs indicative of HIV status, substance abuse, genetic disorder,
etc.). The commenter recommended that we preempt any State or local
statute or regulation that would limit disclosure of a patient's
medication history, noting that these laws and regulations are often
inconsistent and hard to find, impeding the ability of vendors to
display this information to the prescriber at the point of care.
Response: We acknowledge that medication history data will be most
valuable to the prescriber when it is complete. However, these laws do
provide patients with additional safeguards for certain categories of
medical information. We believe that, as medication history becomes
more available to prescribers, these limitations will be identified,
and may be appropriate for future regulation. We will not, however,
address this issue at this time since it is outside of the scope of
this final rule.
8. Incentives to e-prescribing
Comment: A number of commenters suggested that CMS should support
adequate financial incentives, and should itself provide financial
incentives, to physicians and dispensers to assist them with their
investments in, and implementation of, e-prescribing.
Response: The Administration supports the adoption of health
information technology as a normal cost of doing business. However,
other means of encouraging the adoption of e-prescribing are already in
place, such as regulations that provide a safe harbor under the federal
anti-kickback statute and an exception under the federal Physician
Self-Referral (``Stark'') Law for certain arrangements involving the
donation of e-prescribing and electronic health records technology.
These regulations pave the way for increased adoption of health
information technology by physicians and other health care providers.
We also note that providers may participate in, and receive incentives
through, the 2008 Physician Quality Reporting Initiative (PQRI). This
project includes measures for patient compliance with therapy, which
can be supported through the utilization of e-prescribing transactions
such as fill status notification.
9. ``Pharmacist'' versus ``Dispenser''
Comment: One comment included a recommendation that we refer to
``pharmacists'', rather than ``dispensers'' in the final rule because
referring to a pharmacist as a ``dispenser'' ignores the clinical
component of pharmacist-patient interactions.
Response: We fully recognize and appreciate the importance of the
pharmacist-patient relationship, which provides critical clinical and
educational support to the patient. However, we wish to clarify that we
have defined the term ``dispenser'' at 42 CFR 423.159 to mean a person
or other legal entity licensed, registered, or otherwise permitted by
the jurisdiction in which the person practices or the entity is located
to provide drug products for human use by prescription. Based on this
definition, we will continue to use the term ``dispenser'' when
referencing these entities.
Comment: A number of commenters stated that the benefits of e-
prescribing will not be fully realized until e-prescribing is included
among CCHIT-certified interoperable electronic health records (EHR)
featuring robust decision-making software.
Response: We recognize the immediate benefits that e-prescribing as
a stand-alone function can bring to the health care community. However,
we support the Administration's health information technology
initiatives including EHR certification and standards harmonization,
and agree that the full benefits of e-prescribing will be realized
through the adoption of certified interoperable electronic health
records. Additionally, CMS has participated in the development of the
medication management use case that will ultimately result in
harmonized standards and support interoperable e-prescribing
functionality.
10. Mandatory e-prescribing
Comment: One commenter expressed support for the recommendation
from the American Health Information Community (AHIC) that the
Secretary seek authority to mandate e-prescribing under Medicare.
Another commenter opposed mandating e-prescribing, and another
suggested it not be mandated until at least 50 percent of prescribers
and dispensers are e-prescribing.
Response: Currently, e-prescribing under Medicare Part D, as
outlined in the MMA, is voluntary for prescribers and dispensers.
Medicare Part D sponsors must support the use of these standards in e-
prescribing transactions. The breadth of this final rule is limited to
that statutory authority.
11. Exemption for e-prescribing in a Closed Enterprise
Comment: Several commenters requested clarification regarding
whether prescriptions transmitted within a closed enterprise (for
example, from prescribers within an HMO plan to a plan-owned pharmacy)
are exempted from the use of the NCPDP SCRIPT standard.
Response: Entities may use either HL7 messages or the adopted NCPDP
SCRIPT standard to conduct internal electronic transmittals (that is,
when all parties to the transaction are employed by, and part of, the
same legal entity) for the specified NCPDP SCRIPT transactions as
described above.
12. Commercial Messaging
Comment: One commenter said that commercially oriented messages
should not be permitted in e-prescribing until adequate standards for
content, integrity, and display of these messages have been developed.
Response: We agree that there needs to be an appropriate balance
between providing appropriate information at the point of care, and
messaging that might steer the prescriber to use specific drugs and
therapeutics as specified at section 1860 D-4(e)(3)(D) of the Act. We
also recognize the potential for inappropriate messaging to occur in e-
prescribing and share concerns about how the provision of certain
information may unduly influence physician prescribing patterns. For
example, inappropriate messages include those that would steer the
filling of a prescription to a particular mail order pharmacy versus a
retail pharmacy, and electronic ``detailing'' messages from a
manufacturer promoting a particular brand or brand-name drug over and
above that which the Medicare Part D sponsor requires or to which it
gives preference. Moreover, if a drug manufacturer engages in this
practice to promote unapproved uses for a drug, this could be a
violation of the Federal Food, Drug, and Cosmetic Act. We will monitor
this as an operational issue and will provide guidance to Medicare Part
D sponsors at a future date and, if necessary, propose more specific
standards for messaging.
13. E-prescribing Errors
Comment: One commenter noted an increasing number of new errors are
associated with electronic prescribing. Computerized Physician Order
Entry (CPOE) systems have the potential to contribute to errors in
certain situations,

[[Page 18931]]

such as the selection of a wrong drug or dose selection from a drop
down menu that a dispenser, if they are aware of the error, must then
communicate to the prescriber to address. The commenter urged us to
consider the potential for new types of errors as the industry
implements e-prescribing standards and clarify in the final regulation
ways the agency will address or prevent such errors.
Response: We cite this commenter's example to raise the point that
no system, whether electronic or paper, is infallible. Just as in paper
prescribing, errors can still take place. E-prescribing helps to
substantially mitigate some risk, such as illegible prescriber hand
writing on a paper script that could be mis-interpreted by the
dispenser; and medication history, which supports the reduction of the
occurrence of adverse drug events at the prescriber level. We would
expect that e-prescribing software systems would employ safeguards and
redundancies, such as multiple prompts asking for prescriber review and
confirmation of non-conforming information, prior to transmission.
14. Privacy and Medication History
Comment: Two commenters expressed concern with privacy and
medication history. One inquired as to who would have access to
medication history under the HIPAA Privacy Rule; the other stated that
the HIPAA notice of privacy practices should make it very clear that e-
prescribing is taking place and that prescription information is part
of one's medical record. One commenter felt that individuals should
have the right not to participate in either e-prescribing or electronic
medical records, and to have the right to determine who has access to
their prescription histories.
Response: Patients can always ask their physicians to refrain from
requesting their personal medication histories as derived from the
patient's Medicare Part D sponsor. While there is no legal guarantee a
provider would agree to their request, patients may always ask that
their prescribers only use paper prescriptions when prescribing for
them.
15. Regular Cycle of Rulemaking
Comment: Two commenters suggested that CMS consider creating a
regular cycle of rulemaking in order to keep standards adoption in sync
with the rapid pace of standards development by the industry. For
example, CMS could issue a new notice of proposed rulemaking for e-
prescribing standards every 2 years in a particular month.
Response: The creation of a regular cycle of rulemaking to adopt e-
prescribing standards would restrict CMS' ability to adopt standards
when they meet the requisite objectives, functionality and other
criteria required that CMS employs in deciding whether to adopt e-
prescribing standards. We further reiterate that in response to
industry's desire for a streamlined updating process that could keep
pace with changing business needs, as previously discussed in this
final rule, we adopted a process for the Secretary to adopt subsequent
version(s) of a standard for voluntary use where the new version(s) are
backwards compatible with the adopted standard. The industry's request
for a regular cycle of rulemaking clearly indicates a desire to adopt
standards as soon as possible, which is contrary to a bi-annual
rulemaking process.
16. Medicaid Prescription Requirements
Comment: One commenter raised the issue that federal Medicaid
regulations require a prescriber's hand written authorization for
dispensers to dispense brand name drugs when an equivalent generic is
available, which would appear to be in conflict with federal e-
prescribing guidelines.
Response: The issue that the commenter raised applies to
prescriptions obtained under their Medicaid benefits. Under section
1860D-4(e) of the Act, e-prescribing regulations apply only to covered
Medicare Part D covered drugs prescribed for Medicare Part D eligible
individuals. In those instances in which Medicare Part D provides
prescription drug coverage for beneficiaries who receive their Medicaid
prescription drug benefits through the Medicare program (dual-eligible
beneficiaries), Medicare Part D e-prescribing regulations would apply.

IV. Collection of Information Requirements

Under the Paperwork Reduction Act of 1995 (PRA), agencies are
required to provide a 30-day notice in the Federal Register and solicit
public comment before a collection of information requirement is
submitted to the Office of Management and Budget (OMB) for review and
approval. In order to fairly evaluate whether an information collection
should be approved by OMB, section 3506(c)(2)(A) of the PRA requires
that we solicit comment on the following issues:
Whether the information collection is necessary and useful
to carry out the proper functions of the agency.
The accuracy of the agency's estimate of the information
collection burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We solicited public comment on each of these issues for 42 CFR
423.160, ``Standards for Electronic Prescribing.''
The emerging and increasing use of health care electronic data
interchange (EDI) standards and transactions have raised the issue of
the applicability of the PRA. It has been determined that a regulatory
requirement mandating the use of a particular EDI standard constitutes
an agency-sponsored third-party disclosure as defined under the PRA.
As a third-party disclosure requirement subject to the PRA,
Medicare Part D sponsors must support and comply with the adopted e-
prescribing standards relating to covered Medicare Part D drugs,
prescribed for Medicare Part D eligible individuals.
However, the requirement that Medicare Part D sponsors support
electronic prescription drug programs in accordance with standards set
forth in this section, as established by the Secretary, does not
require that prescriptions be written or transmitted electronically by
prescribers or dispensers. These entities are required to comply with
the adopted standards when they electronically transmit prescription or
prescription-related information for covered transactions.
Testimony presented to the NCVHS indicates that most health plans/
PBMs currently have e-prescribing capability either directly or through
contract with another entity. Therefore, we do not believe that
utilizing the adopted standards will impose an additional burden on
Medicare Part D sponsors.
Since the standards that have been adopted are already familiar to
industry, we believe the requirement to utilize them in covered e-
prescribing transactions constitutes a usual and customary business
practice. As such, the burden associated with the requirements is
exempt from the PRA as stipulated under 5 CFR section 1320.3(b)(2). As
required by section 3504(h) of the Paperwork Reduction Act of 1995, we
have submitted a copy of this document to OMB for its review of these
information collection requirements.

[[Page 18932]]

V. Regulatory Impact Analysis

We have examined the impacts of this rule as required by Executive
Order 12866 (September 1993, as further amended, 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 (March 22, 1995, Pub. L. 104-4),
Executive Order 13132 on Federalism and the Congressional Review Act (5
U.S.C. 804(2)).
Executive Order 12866 (as amended by Executive Order 13258, which
merely reassigns responsibility of duties, and as further amended by
Executive Order 13422) 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). Among other things, a
regulatory impact analysis (RIA) must be prepared for major rules with
economically significant effects ($100 million or more in any 1 year).
We estimate that this rulemaking will have an annual benefit on the
economy of $100 million or more and will have ``economically
significant effects.'' We believe that prescribers and dispensers that
are now e-prescribing have already largely invested in the hardware,
software and connectivity necessary to e-prescribe. We do not
anticipate that the retirement of NCPDP SCRIPT 5.0 in favor of NCPDP
SCRIPT 8.1 for the transactions listed at Sec. 423.160(b)(2), the
adoption of the NCPDP SCRIPT 8.1 Medication History Standard for the
exchange of medication history information, the adoption of the NCPDP
Formulary and Benefits 1.0 for formulary and benefits transactions, the
adoption of NPI for use in e-prescribing transactions and the adoption
of NCPDP SCRIPT 8.1 (RxFill) for electronic fill status notification
purposes will result in significant costs. We solicited industry and
other interested stakeholder comment and input on this issue.
We anticipate that the ability to utilize electronic formulary and
benefits inquiries will result in administrative efficiencies and
increased prescribing of generic drugs versus brand name drugs, and the
access to medication history at the point of care will result in
reduced adverse drug events (ADEs). The benefits accruing from using
the adopted standards in these transactions will have an economically
significant effect on Medicare Part D program costs and patient safety.
As this is a significant rule under Executive Order 12866, we are
required to prepare a regulatory impact analysis (RIA) for this final
rule.
The Regulatory Flexibility Act (RFA) requires agencies to analyze
options for regulatory relief of small entities. 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 qualifying as small businesses under the Small Business
Administration's size standards (revenues of $6.5 million to $31.5
million in any 1 year for the health care industry). States and
individuals are not included in the definition of a small entity. For
details, see the Small Business Administration's regulation that set
forth the current size standards for health care industries at http://sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf (refer to the 620000 series).
Based on our initial analysis, we expect this rulemaking will not
have a significant impact on a substantial number of small entities
because, while many prescribing physician practices and independent
dispensers would be small entities, e-prescribing is voluntary for
prescribers and dispensers. For prescribers and dispensers that have
already implemented e-prescribing, the adoption of NCPDP SCRIPT 8.1
would in most cases be accommodated through software upgrades whose
cost would already be included in annual maintenance fees. Medicare
Part D sponsors are required to support e-prescribing, and may incur
some costs to support the NCPDP Formulary and Benefits 1.0, the NCPDP
SCRIPT 8.1 Medication History Standard, the NCPDP SCRIPT 8.1 standard
for fill status notification (RxFill), and the National Provider
Identifier (NPI). However, using the SBA revenue guidelines, the
majority of Medicare Part D sponsors would not be considered small
entities as they represent major insurance companies with annual
revenues of over $31.5 million. We also do not anticipate that the
requirement to use NPI in e-prescribing would have any effect on
Medicare Part D sponsors, prescribers or dispensers as they likely are
already using the NPI in HIPAA-covered transactions.
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 provisions 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 core-bed
Metropolitan Statistical Area and has fewer than 100 beds. This rule
will not affect small rural hospitals because the program will be
directed at outpatient prescription drugs covered under Medicare Part D
and not drugs provided during a hospital stay. Prescription drugs
provided during hospital stays are covered under Medicare Part A as
part of Medicare payments to hospitals. Therefore, for purposes of our
obligations under section 1102(b) of the Act, we are not providing an
analysis.
Comment: It was recommended by one commenter that CMS prepare a
regulatory impact analysis for small rural hospitals, as this rule may
have a significant impact on small rural hospitals that dispense
discharge medication and ``after hours'' emergency medications to
patients.
Response: In the November 16, 2007 proposed rule (72 FR 64909), we
considered how adoption of these standards might affect small rural
hospitals. We determined that drugs dispensed to Medicare beneficiaries
by small rural hospitals are, for the most part, drugs dispensed in an
inpatient setting and as such, are covered under Medicare Part A. The
smaller volume of Medicare Part D drugs that might be dispensed as
noted by the commenter did not constitute a major impact to the extent
that it that would necessitate a regulatory impact analysis.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 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. In 2008, that
threshold is approximately $127 million. Since only Medicare Part D
sponsors are required to support e-prescribing, this rule does not
include any mandate that would result in this spending by State, local
or tribal governments. We acknowledge that there may be transaction
costs borne by payers and pharmacy benefit managers (PBMs), but, based
on our analysis, they would fall below the $127 million threshold. We
would expect that many Medicare Part D sponsors already support the
exchange of formulary, benefits, and medication history, because the
standards we are proposing are based on proprietary transactions
originally developed by RxHub which are already in use in the current
e-prescribing environment.

[[Page 18933]]

Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a rule that imposes substantial
direct costs on State and local governments, preempts State law, or
otherwise has Federalism implications. No State categorically bars e-
prescribing. In recent years, many States have more actively legislated
in this area. Should a State law be contrary to the Medicare Part D e-
prescribing standards, or should it restrict the ability to carry out
the Medicare Part D e-prescribing program, section 101 of the MMA
established preemption of that State law at section 1860D-4(e)(5) of
the Act. It provides the following:
(5) Relation to State Laws. The standards promulgated under this
subsection shall supersede any State law or regulation that--
(A) Is contrary to the standards or restricts the ability to carry
out this part; and
(B) Pertains to the electronic transmission of medication history
and of information on eligibility, benefits, and prescriptions with
respect to covered Medicare Part D drugs under this part.
For the same reasons given above, we have determined that States
would not incur any direct costs as a result of this proposed rule. We
believe that, taken as a whole, this final rule would meet these
requirements. We have consulted with the National Association of Boards
of Pharmacy directly and through participation in NCVHS hearings, and
we believe that the approach we suggested provides both States and
other affected entities the best possible means of addressing
preemption issues. This section constitutes the Federalism summary
impact statement required under the Executive Order.
The objective of this regulatory impact analysis is to summarize
the cost and benefits of implementing the standards for the conversion
from NCPDP SCRIPT 5.0 to NCPDP SCRIPT 8.1 at Sec. 423.160(b)(2); the
adoption of final uniform standards for the electronic communication of
prescription and prescription-related information on formulary and
benefits, medication history, and prescription fill notification
status; and the adoption of NPI for use as a health provider identifier
in e-prescribing. The adoption of these standards for use in Medicare
Part D e-prescribing will build upon the foundation standards e-
prescribing requirements that were published as a final rule on
November 7, 2005 (70 FR 67568). That rule contained an impact analysis
that addressed the costs associated with implementing the use of those
foundation standards, and it also discussed, in concept, the benefits
that will accrue from e-prescribing in general. In the November 7, 2005
final rule (70 FR 67589), we noted that commenters had suggested that
the estimated e-prescribing start-up costs for an individual physician
to be at least $1,500 and perhaps in excess of $2,000. For average e-
prescribing software implementation, according to a 2003 Center for
Information Technology Leadership (CITL) Report, ``The Value of
Computerized Provider Order Entry'' (http://www.citl.org/research), a
basic-e-prescribing system cost $1,248 plus $1,690 for annual support,
maintenance, infrastructure and licensing costs. The total first year
cost averaged approximately $3,000. The Journal of Healthcare
Information Management has published that physicians reported paying
user-based licensing fees ranging from $80 to $400 per month, although
we believe through anecdotal information that these licensing fees have
decreased over time to between $25 to $66 a month ($300 to $800
annually). (For further discussion of the start-up costs associated
with e-prescribing, see the November 7, 2005 final rule (70 FR 67589)).
The impact analysis built upon the foundation rule analysis, and we
referred to the foundation rule analysis to assure that costs and
benefits were not counted twice.
Comment: One commenter discussed CMS' assumptions regarding the
cost of e-prescribing systems for physicians, especially those
practices which have five or less physicians, which they categorize as
small practices. One commenter suggested that CMS consider scaling the
savings to be realized through e-prescribing according to practice
size. Another comment was that CMS omitted opportunity costs, and that
advanced e-prescribing systems that have more robust features differ
significantly from basic systems and are therefore, more costly, which
CMS did not take into account. They contend that CMS may have double
counted licensing fees that were already included in overall cost
figures, and that there are significant technology, training and
upgrade costs, as well as significant differences between the cost of a
T1 Internet access line in a rural versus urban area which the agency
should take into account. As only three of the six initial standards
were found to be technologically ready for use, they asked that the
adoption of standards should continue to be voluntary for physicians,
thus keeping their costs at a minimum. Another commenter also asked
that CMS recognize additional costs related to processing e-
prescriptions, and the ongoing expenses incurred by prescribers for
hardware/software and other associated costs.
Response: In the impact analysis for the November 16, 2007 proposed
rule, we attempted to address the cost and benefit of implementation of
the two standards that were proposed for adoption at that time, namely
medication history and formulary and benefits, and not that of e-
prescribing in general, so as not to double count costs already
attributed to the implementation of the foundation standards. In the
November 7, 2005 final rule (70 FR 67589), we considered the cost of e-
prescribing in general. At that time, all of the commenters suggested
estimated start-up costs for an individual physician to be at least
$1,500 and perhaps exceeding $2,000. This estimate would vary based on
market share, covered lives and local market competition. Given that,
we proffered a conservative estimate of $3,000, taking into account
variations in products, level of adoption, etc., and industry feedback
indicated that vendors often provided free and low cost handheld or
similar devices. The Journal of Healthcare Information Management
report cited by one commenter took this practice into account, but also
noted that physicians reported paying user-based licensing fees ranging
from $80 to $400 per month. We did not note that this cost was included
in the overall cost of e-prescribing as cited in that report, nor at
that time did we account for opportunity costs because e-prescribing
for Medicare Part D is voluntary for providers and dispensers, and we
received no feedback from industry and other interested stakeholders
indicating that opportunity costs should be considered.
As one commenter noted, The Journal of Healthcare Information
Management also reported that in some instances prescribers had to
invest in new or updated hardware, such as computer servers, and
networking infrastructure to use an e-prescribing system, but again,
that the amount varied significantly by product and level of adoption.
Since that time, we note that the cost of new or updated hardware in
particular has come down dramatically due to increased semi-conductor
production, improved computer manufacturing methods and total factor
productivity growth.\2\ One commenter said that e-prescribing requires
a T1 data transmission line, which may be

[[Page 18934]]

true for very large practices, but if the mainstream physician practice
constitutes less than five physicians, we believe that e-prescribing
can be initiated by many physician practices without the installation
of a T1 data transmission line.
---------------------------------------------------------------------------

\2\ Congressional Budget Office, The Role of Computer Technology
in the Growth of Productivity May 2002, http://www.cbo.gov/.
---------------------------------------------------------------------------

We have acknowledged, and continue to acknowledge, that e-
prescribing has both initial and ongoing costs associated with it.
Those include, and for the most part we have accounted for, some
initial loss of productivity, hardware costs, software costs, training,
etc., but with widespread e-prescribing, we anticipate that prescribers
will eventually absorb these as a cost of doing business, much as they
would any purchase of equipment. Additionally, provider costs for e-
prescribing are very much contingent on a wide variety of factors,
including the size of the practice; whether an e-prescribing system
under consideration for purchase is a stand-alone versus integrated
into an electronic health record system; the level at which a provider
enters into e-prescribing (in other words, entry-level necessitating
the purchase of hardware/software, versus integrating into existing
hardware/software); whether the provider is located in an urban versus
rural area, and the related costs/availability of connectivity; the
features, whether basic, intermediate or advanced, of any given e-
prescribing package; the number of patients seen per year, and the
number of prescriptions written, etc. Physicians in some medical
specialties (such as geriatrics or internal medicine) may regularly
prescribe a higher volume of prescription drugs per patient due to
severity of illness, multiple diagnoses, etc., versus other medical
specialties, and thus realize more benefits through more frequent,
repeated use. We also acknowledged in the proposed rule that benefits
will not be immediately recognized, that benefits will accrue over a
multi-year timeframe and that, with more widespread adoption, we
anticipate that costs will come down, systems capabilities will be more
robust, and the full benefits of e-prescribing will be realized.
We again reiterate that nothing in the proposed rule or this final
rule changes the tenet of section 101 of the MMA that e-prescribing
Medicare Part D covered drugs for Medicare Part D eligible individuals
is voluntary for prescribers and dispensers. Because adoption of e-
prescribing is voluntary under Medicare Part D, we also assume that an
individual provider or group practice will perform their own cost/
benefit analysis, and will make the decision to invest in e-prescribing
if they determine that their investment will yield a net benefit and
positive patient outcome results. Dispensers may incur higher
transaction fee costs as a result of the increased volume of electronic
prescriptions, and any costs associated with dispenser access to
medication history. Again, we anticipate that with this increased
volume of e-prescriptions, transaction fees will decrease, and whatever
residual transaction and/or access costs associated with medication
history remain, eventually will be absorbed into the dispenser's cost
of doing business, while benefits continue to accrue.
Comment: One commenter said that there currently is no way to
verify that the pharmacy has received an electronically transmitted
prescription or renewal, which, since many dispensers do not routinely
check their electronic prescription messages or facsimiles, results in
an increase of physician office inquiries and call backs from the
pharmacy. The commenter noted that this workflow issue was not
accounted for in the impact analysis relative to physician costs of e-
prescribing.
Response: We have received industry feedback that most physician e-
prescribing software packages feature a response mechanism that
indicates a successful transmission of the electronic prescription to
the pharmacy. In the case of EDI transmissions, we also understand that
the failure rate of EDI transmission is less than three tenths of one
percent. We assume that the small failure rate of EDI transmission,
combined with basic pharmacy workflow adjustments to routinely check on
the receipt of electronic prescriptions, that any resulting call backs
to physicians' offices would be minimized, and would not represent a
significant cost for either the dispenser or provider.

A. Overall Impact

In the November 7, 2007 proposed rule (72 FR 64912) we noted that
according to 2006 CMS data, approximately 24 million beneficiaries were
enrolled in a Medicare Part D sponsor's plan, either a stand-alone
Prescription Drug Plan or a Medicare Advantage Drug Plan. This data has
since been revised to approximately 25 million Medicare
beneficiaries.\3\ Another 7 million retirees were enrolled in employer
or union-sponsored retiree drug coverage receiving the Retiree Drug
Subsidy (RDS); 3 million in Federal retiree programs such as TRICARE
and the Federal Employees Health Benefits Plans (FEHBP) and 5 million
receiving drug coverage from alternative sources, including 2 million
who have coverage through the Veterans' Administration. The breadth of
Medicare's coverage suggests that e-prescribing under Medicare Part D
could impact virtually every pharmacy and a large percentage of the
physician practices in the country. Standards established for the e-
prescribing of Medicare Part D covered drugs for Medicare Part D
eligible individuals will, as a matter of economic necessity, be
adopted by vendors of e-prescribing and pharmacy software, and as a
result, would extend to other e-prescribing populations unless they are
manifestly unsuited for the purpose. However, we note again that e-
prescribing Medicare Part D covered drugs for Medicare Part D eligible
individuals is voluntary for both prescribers and dispensers under the
Medicare Part D e-prescribing program.
---------------------------------------------------------------------------

\3\ CMS, Total Medicare Beneficiaries with Prescription Drug
Coverage as of January 2008, 1-31-08, http://www.cms.hhs.gov/PrescriptionDrugCovGenIn/.
---------------------------------------------------------------------------

Our pilot testing and industry collaboration activities were
partially intended to prevent the development of multiple, ``parallel''
e-prescribing environments, with their attendant incremental costs. We
have worked to avoid imposing an undue administrative burden on
prescribing health care professionals, and dispensers. With the
exception of the NPI, the standards we are adopting in this final rule,
as with the foundation standards adopted previously, are maintained by
accredited standards development organizations. The standards for the
Medication History, Formulary and Benefits, and Fill Status
Notification transactions have been shown through pilot testing to work
effectively with the foundation standards.

B. Costs

Because e-prescribing is voluntary for prescribers and dispensers,
we anticipate that entities who currently do not now e-prescribe and
who will not implement e-prescribing during the period reflected in the
regulatory impact analysis will incur neither costs nor benefits.
Entities that do not now e-prescribe, but that will implement e-
prescribing during the period reflected in the regulatory impact
analysis will incur the costs and benefits associated with the
foundation standards (which we discussed in the November 7, 2005 final
rule (70 FR 67568) but we do not claim either in this analysis). We
assume that as e-prescribing becomes more widespread, workflow
adjustments will follow that will result in the full range

[[Page 18935]]

of benefits that can potentially be realized through e-prescribing.
Also, implementation of the standards that are adopted in this rule
will not materially affect the implementation cost that was projected
for NCPDP SCRIPT 5.0 in the foundation standards final rule. That is,
the cost to implement NCPDP SCRIPT 8.1 under Sec. 423.160(b)(2), the
NCPDP SCRIPT 8.1 Medication History Standard, NCPDP Formulary and
Benefits 1.0, the National Provider Identifier (NPI) and the NCPDP
SCRIPT 8.1 standard for fill status notification (RxFill) are not
materially higher than the cost of implementing the NCPDP SCRIPT 5.0
foundation standard alone. These entities could incur additional costs
for the purchase of new e-prescribing products that include functions
that support the ability to conduct transactions using these e-
prescribing standards. They would also incur the benefits of the all of
these final standards.
Comment: One commenter stated that our analysis did not take into
account the adoption of RxFill, and any associated costs and benefits.
Response: In the November 16, 2007, proposed rule we asked for
stakeholder comments on the potential utilization of RxFill in Medicare
Part D e-prescribing, but did not propose its adoption. As previously
discussed, in the proposed rule we referenced industry feedback that
the adoption of RxFill ``may cause an unnecessary administrative burden
on prescribers and dispensers,'' and solicited feedback regarding
industry's views on any potential administrative burden associated with
its use. Therefore, no cost/benefit analysis was performed in
consideration of the adoption of RxFill as a final uniform standard. As
a result of comments received through the notice and comment rulemaking
process, and as we discussed above, the industry has now indicated that
it believes there will be no administrative burden associated with the
adoption of the RxFill standard. Therefore, we will adopt both the NPI,
and the RxFill standard for fill status notification transactions for
use by providers who see value in utilizing electronic transaction
using the adopted standards to support patient medication management
and discuss both the costs and benefits here.
Because use of the electronic fill status notification transaction
is voluntary, we have no clear indication from the industry as to how
many providers potentially will see value in, and use transactions
utilizing the adopted e-prescribing standards for this function. The
feedback we have received from provider organizations indicates that
they envision that its use will be more prevalent among those providers
who wish to track medication adherence for Medicare Part D
beneficiaries who have chronic medical conditions, such as diabetes,
hypertension, etc., for whom following a medication regimen is
imperative. We also note that RxFill is limited to informing the
prescriber that the prescription has been filled, not filled, etc., and
it is but an initial indicator of a patient's intention to actually
take the prescribed medication. The assumption here is that a patient
is more likely to take a medication prescribed for him/her if they know
that the prescriber will be monitoring this information, and more
likely to take the medication if they have made the effort to go to the
pharmacy, purchase and take the prescription drug home.
We also understand from industry feedback that prescription
information exchange networks have fill status notification
functionality (RxFill) built into their systems but that most
physicians currently are not signed up to use it. When a patient picks
up a prescription at the pharmacy, they likely sign an electronic
signature log. This electronic signature triggers a pharmacy software
system update which, in turn, triggers a fill status notification
message transaction using the RxFill standard to be sent to the
prescriber, if the prescriber has requested receipt of such
information. Conversely, when a prescription is not picked up and
returned to inventory, this activity also triggers a similar message if
the prescriber has requested receipt of such information. Stand alone
e-prescribing systems usually send such updates to requesting
prescribers overnight; however, there are integrated e-Signature
systems which employ real-time notification. Given that most dispensers
who are already e-prescribing use an electronic signature pad to verify
prescription pick-up by the patient are already gathering this
information and need acknowledgement from the prescriber through a
``flag'' in their e-prescribing software system that they want to
receive this information, we do not believe that there will be any
significant changes to pharmacy or prescriber workflows once that
``flag'' is activated, and no cost impact associated with the use of
RxFill for those prescribers and dispensers who are currently e-
prescribing.
Those dispensers still using paper logs to record patient pick-up
of a prescription likely are not e-prescribing and therefore, would not
be impacted either from a workflow or economic perspective.
We agree with commenters who stated that neither the medication
history nor the formulary and benefits standard would result in
additional e-prescribing costs for those already e-prescribing, and
apply that rationale to RxFill. As the fill status notification
function resides on the NCPDP SCRIPT 8.1 standard alongside the
medication history function, we expect that it would also not result in
any additional costs being incurred. For those not currently e-
prescribing, they would incur the costs and benefits associated with
the foundation standards (which we discussed in the final rule at 70 FR
67568), but which we did not claim in our analysis.
One potential benefit anticipated from the use of RxFill are those
associated with better medication adherence on the part of patients,
and this varies depending on the clinical condition. According to a
study entitled, ``Impact of Medication Adherence on Hospitalization
Risk and Healthcare Cost'',\4\ adherence with medication therapy is
generally low--approximately 50 to 65 percent, on average, for common
chronic conditions such as hypertension and diabetes. In this study,
for diabetes, the average annual incremental drug cost associated with
a 20 percent increase in drug utilization was $177, and the associated
disease-related medical cost reduction was $1,251, for a net savings of
$1,074 per patient, or an average return on investment of 7.1:1. Other
studies of a mental health condition such as schizophrenia estimate the
cost of non-compliance with medication therapy to be about $705 million
over a 2-year period.\5\ Another study on medication therapy adherence
in hypertensive patients showed that interventions aimed at improving
compliance with medication regimens increased patient adherence by up
to 11 percent, and that when it came to prescription refills, partial
compliance with prescription refills identified important clinical
consequences of reduced compliance, with gaps in taking medication
resulting in an increase in hospitalizations.\6\
---------------------------------------------------------------------------

\4\ Michael C. Sokol, M.D., M.S.; Kimberly A. McGuigan, PhD;
Robert R. Vebrugge, PhD. And Robert S. Epstein, M.D., M.S.. Impact
of Medication Adherence on Hospitalization Risk and Healthcare Cost.
Medical Care. 2005;43:521-530.
\5\ Theida, Patricia, M.A., Beard, Stephen, M.S., Richter, Anke,
Ph.D., and Kane, John, M.D. An Economic Review of Compliance with
Medication Therapy in the Treatment of Schizophrenia. Psychiatric
Services. April 2003: 54:508-516.
\6\ Steiner, J.F., Prochazka, A.V. The assessment or refill
compliance using pharmacy records: methods, validity and
applications. Journal of Clinical Epidemiology. 1997: 50:105-116.

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[[Page 18936]]

Researchers generally agree that it is difficult to arrive at a
dollar figure that would reflect the outcomes of medication adherence
for all clinical conditions, but we believe that, based on studies such
as those cited, it is prudent to assume that in the Medicare Part D
program, an increase in prescription drug utilization by patients as a
result of better medication adherence would be far offset by a larger
reduction in the cost of Medicare beneficiary hospitalizations,
outpatient procedures and other clinical treatments that might result
from non-adherence to medication regimens.
Relative to the NPI, in the proposed rule we discussed that we did
not anticipate any significant costs to be associated with the use of
the NPI by vendors, prescribers, dispensers or Medicare Part D sponsors
for e-prescribing transactions under section 1860D-4(e). Use of the NPI
is already required in order to conduct HIPAA-covered transactions
which require the identity of HIPAA-covered health care providers; and
the compliance date for the NPI, May 27, 2007, has already passed. The
NPI is easily obtainable, and there is no cost associated with applying
for and/or obtaining an NPI. Once received, the NPI is usually entered
by the physician initially into their e-prescribing software system,
and it is carried thereafter by the system, which automatically
populates the NPI field on the NCPDP SCRIPT 8.1 standard. The NPI is in
widespread use by HIPAA-covered entities in HIPAA transactions.
Although the transactions using the NCPDP SCRIPT standard are not HIPAA
transactions, the prescribers and dispensers that conduct such
transactions would be HIPAA-covered entities, and as such, they would
already be using NPI as they conduct their HIPAA transactions. They
would, therefore, already be familiar with the NPI, even though they
may not currently use it in the context of transactions using the NCPDP
SCRIPT standard.
For e-prescribers whose software products are not able to generate
transactions using the NCPDP SCRIPT 8.1 standard, they will not have
the capability to use the NCPDP Formulary and Benefits Standard 1.0,
the NCPDP SCRIPT 8.1 Medication History transaction, or the NCPDP
SCRIPT 8.1 RxFill standard. Costs would be incurred if they were to
replace such software with software that generates transactions that
comply with the adopted standards. We anticipate that the NCPDP SCRIPT
8.1 will be accommodated in later software version upgrades where that
standard is not already utilized. We believe that the implementation of
the NPI would be accomplished as part of this transition. Prescribers
and dispensers already should be using the NPI to conduct retail
pharmacy drug claim transactions.
Medicare Part D sponsors will not be significantly affected by the
adoption of the NPI because the Medicare Part D sponsors already use
the NPI in HIPAA transactions, such as the retail pharmacy drug claim.
Software vendors are already implementing NCPDP SCRIPT 8.1 in their
products, NPI is supported by NCPDP SCRIPT 8.1, and we believe that any
needed upgrades will be included in routine version upgrades.
Benefits for the use of the NPI in e-prescribing under Medicare
Part D have not been quantified by the industry. The NPI provides a
standard way for dispensers to identity individual prescribers in an e-
prescribing transaction. We anticipate that its use will help
dispensers reduce the number of callbacks to a physicians office to
verify an e-prescriber's identity, although it is unclear and
unsubstantiated from industry feedback as to what percentage of
callbacks between the dispenser and the prescriber can be attributed
solely to this inquiry.
Comment: One commenter offered that neither the adoption of NCPDP
SCRIPT 8.1 nor adoption of the standards for medication history and
formulary and benefits would result in significant costs as the
majority of the e-prescribing industry is already using these
standards. The commenter agreed that the costs for entities that do not
now e-prescribe, but will be implementing the e-prescribing technology
in the future, would not be substantially increased by the adoption of
these standards. Another commenter said although the NCPDP SCRIPT 8.1
Medication History transaction and the NCPDP Formulary Benefit Standard
1.0 are relatively new, it is not accurate for CMS to state that they
are not currently deployed for use in the functions that were listed at
Sec. 423.160(b)(1).
Response: From industry feedback, we have learned that the
medication history and formulary and benefits functions were adopted by
some entities nearly two years ago, and there are others in the
industry that have been using them for even longer. As such, our
conclusion remains the same that adoption of these standards now would
result in no new additional costs.
Entities that e-prescribe now using a software product that cannot
use the NPI and conduct medication history, formulary and benefits, and
fill status notification standards, and that cannot be upgraded to
conduct them (for example, stand-alone Microsoft Word-based
prescription writers) will not be required to conduct these
transactions (if they choose to conduct these transactions) using the
NCPDP SCRIPT standard until April 2009. If they decide to upgrade their
entire e-prescribing system to take advantage of the benefits of these
new standards, they would incur costs. However, we have no clear sense
of how many entities would fall into this category.
Entities that e-prescribe now using a product that could be
upgraded to conduct medication history, formulary and benefits, and
fill status notification using the three adopted standards would incur
no cost or benefit if they decide not to upgrade. If they decide to
upgrade, they would incur the cost of the upgrade (unless the upgrade
is included in their maintenance agreement) and any testing costs, and
would incur the benefits of utilizing these three standards. This would
also apply to entities that e-prescribe now using a product that
conducts the three transactions using nonstandard (Non NCPDP SCRIPT)
formats, but the functionality is not used. Based on our research, this
category likely is the one in which most current e-prescribers fall.
Entities that e-prescribe now using a product that conducts one or
more of the three transactions using nonstandard formats and who
continue to use the electronic transactions would have to upgrade their
software. They would not enjoy all the benefits of conducting
transactions using the three new standards since they would have
already been performing them in some manner, but definitely would incur
cost savings due to the increased interoperability of using the NCPDP
SCRIPT standards. However, any entity engaging in e-prescribing would
incur benefits due to increased interoperability, as the existence of
standards simplifies data exchange product selection and testing.
1. Retail Pharmacy
Because e-prescribing is voluntary for dispensers, unless they were
to commence e-prescribing, those who do not currently conduct e-
prescribing would not incur any costs related to any of the provisions
of this rule. However, we recognize that costs would be incurred by
those dispensers that currently conduct e-prescribing transactions, as
well as those who voluntarily implement e-prescribing during the period
reflected in our regulatory impact analysis. Industry estimates are
that 97 percent of the

[[Page 18937]]

nation's retail chain dispensers currently e-prescribe, in contrast to
only 27 percent of independent dispensers that e-prescribe.\7\
---------------------------------------------------------------------------

\7\ Surescripts, National Report on E-prescribing, December
2007. http://www.surescripts.com/report/ report/.
---------------------------------------------------------------------------

Transactions using NCPDP Formulary and Benefits 1.0 are carried out
between the plan and prescriber and, therefore, dispensers will not
incur any cost related to this transaction.
While the NCPDP SCRIPT 8.1 Medication History Standard can be used
in transactions to support communication between the dispenser and
prescriber, its use is, nonetheless, voluntary for both. We assume for
purposes of this analysis that the NCPDP SCRIPT 8.1 Medication History
Standard will be used in medication history exchange transactions.
Effective May 23, 2008 dispensers are required under HIPAA to use
the NPI to conduct retail pharmacy drug claim transactions. Therefore,
we associate no additional costs with the use of the NPI in Medicare
Part D e-prescribing for retail dispensers.
Comment: One commenter remarked that the cost of migrating to NCPDP
SCRIPT 8.1 has already been borne by dispensers and their system
vendors, and that there should be no cost associated with adoption of
NCPDP Formulary and Benefits 1.0. However, the commenter acknowledged
that there may be some costs to dispensers that supply data to support
the medication history functionality and these costs are already being
borne by participating dispensers.
Response: The benefits of e-prescribing in general, and the
specific standards to be adopted through this final rule, are
significant, especially in terms of patient safety. As noted in the
November 16, 2007 proposed rule (72 FR 64912), depending on their stage
of e-prescribing adoption, there may be costs associated with the
adoption of these standards for dispensers. These costs are far
outweighed by the eventual economies realized by improved workflows and
productivity savings within the pharmacy environment; marketplace
forces should come into play as e-prescribing volume increases, which
will help drive down costs and realize economies of scale.
The adoption of NCPDP SCRIPT 8.1 in place of the NCPDP SCRIPT 5.0
foundation standard for the transactions listed at Sec. 423.160(b)(2)
will impact dispensers that conduct e-prescribing. Dispensers will have
to ensure that their software can accept prescription transactions
using the NCPDP SCRIPT 8.1 standard, and they will need to test with
prescribers to assure that their electronic transactions are being
received and can be processed. We believe there is little, if any,
incremental costs associated with these activities. Software vendors
have or are already incorporating NCPDP SCRIPT 8.1 in their products,
and we believe that any needed upgrades will be included in routine
version upgrades. The number of current e-prescribers per pharmacy is
small, and the testing process is not complicated. We believe that the
implementation of the NPI will be accomplished as part of this
transition. Prescribers and dispensers already use the NPI to conduct
retail pharmacy drug claim transactions.
2. Medical Practices
Medical practices, compared to dispensers, face a different set of
costs in implementing information systems for clinical care and
financial management. Unlike dispensers, where technology has become an
important part of operations (especially for larger retail chains),
many providers have been cautious in their adoption of health
information technology. We assume that, based on industry estimates,
anywhere from 5 to 18 percent of physicians are e-prescribing today.\8\
Because e-prescribing is voluntary for prescribers, medical practices
that do not currently conduct e-prescribing would not incur any costs
related to any of the provisions of this rule. However, we recognize
that costs would be incurred by those prescribers currently e-
prescribing, as well as those who voluntarily begin to e-prescribe
during the period reflected in our regulatory impact analysis. If a
practice decides to implement e-prescribing at a later time, we
anticipate that the software products on the market would be compliant
with these standards and, therefore, no additional cost would be
incurred. In assessing the cost to prescribers that are currently e-
prescribing, many of the e-prescribing software products generally
already contain some capability to communicate formulary and benefits
and medication history information because they incorporate the RxHub
proprietary format on which the proposed standards were based. We
expect that any changes that might be necessary as a result of this
rulemaking would likely be included in routine version upgrades that
are covered by annual maintenance and subscription fees.
---------------------------------------------------------------------------

\8\ E-Prescribing and the Prescription Drug Program final rule,
published November 7, 2005 (70 FR 67568).
---------------------------------------------------------------------------

For e-prescribers whose software products are not able to generate
transactions using the NCPDP SCRIPT 8.1 standards, they will not have
the capability to conduct electronic transactions using the NCPDP
Formulary and Benefits Standard 1.0 and NCPDP SCRIPT 8.1 Medication
History Standard. Costs would be incurred if they were to replace such
software with software that can conduct transactions that comply with
the proposed standards. We anticipate that the NCPDP SCRIPT 8.1 will be
accommodated in later software version upgrades where that standard is
not already utilized. We believe that the implementation of the NPI
will be accomplished as part of this transition.
As the fill status notification function resides on the NCPDP
SCRIPT 8.1 standard alongside the medication history function, we
expect that it would also not result in any additional costs being
incurred. However, we recognize that the use of RxFill may result in
workflow changes for the prescriber who must determine what he/she will
do with the information provided by the RxFill transaction relative to
their clinical practices. For those not currently e-prescribing, they
would incur the costs and benefits associated with the foundation
standards (which we discussed in the final rule at (70 FR 67568)), but
which we did not claim in our analysis.
3. Medicare Part D Sponsors and Pharmacy Benefit Managers (PBMs)
Medicare Part D sponsors will be required to support NCPDP SCRIPT
8.1 for the transactions listed at Sec. 423.160(b)(2), the NCPDP
Formulary and Benefits 1.0, and the NCPDP SCRIPT 8.1 Medication History
Standard. They will need to assure that their software can receive and
conduct transactions utilizing NCPDP Formulary and Benefits 1.0 and the
NCPDP SCRIPT 8.1 Medication History Standard, and that their internal
systems and databases can supply the information needed to build the
transaction. For example, they will need to be able to extract
prescription claims history and format it according to the NCPDP SCRIPT
8.1 Medication History Standard. We believe that many Medicare Part D
sponsors will have already implemented this functionality because the
standards we are proposing are based on proprietary file transfer
protocols developed by Rx-Hub that have been included in many e-
prescribing products. Medicare Part D sponsors may need to restructure
systems to assure

[[Page 18938]]

that the data output is in the proper format, but, for the most part,
the needed functionality is in place.
We recognize that some Medicare Part D sponsors may need to make
additional investments to support these standards.
Because plans typically pay the per transaction network fees for
eligibility transactions, which likely includes providing a formulary
and benefits response as well as a medication history response,
Medicare Part D sponsors will incur increased transaction costs for
formulary and benefits and medication history transactions as the
frequency in which these transactions are conducted electronically
increases.
Through information provided by SureScripts and industry
consultants, this transaction fee appears to range from 6 cents to 25
cents per transaction, with the midpoint being 15 cents. In 2006,
RxHub, one of the nation's largest electronic prescription and
prescription-related information routing networks, estimated that their
transaction volume increased 50 percent, from 29 million in 2005 to
more than 43 million in 2006. These transactions were real-time
requests for patient eligibility and benefits, formulary, and
medication history information.\9\
---------------------------------------------------------------------------

\9\ RxHub Announces 2006 e-Prescribing Results and Highlights
Milestones for 2007, St. Paul, MN, February 23, 2007, http://www.rxhub.com.
---------------------------------------------------------------------------

Based on data available at that time, we estimated that
approximately 24 million Medicare beneficiaries received Medicare Part
D benefits in 2006. (These data have since been revised to
approximately 25 million Medicare beneficiaries). \10\ This figure
reflected those Medicare beneficiaries enrolled in a Medicare
Prescription Drug Plan (PDP) or a Medicare Advantage plan with
Prescription Drug coverage (MA-PD) or both, for which we have
prescription drug event data. Approximately 825,000,000 claims
(prescription drug events) were finalized and accepted for 2006
payment. The annual percentage increase in the number of Medicare Part
D prescriptions was estimated by CMS at 4.6 percent based on industry
feedback (http://www.imshealth.com/ims/portal/front/articleC/0,2777,6599_3665_80415465,00.html). So that impact comparisons could
be made equally across all years, inflation was removed from the price
effects. Conservatively, we calculated the increase in the number of
Medicare Part D prescriptions and applied the current estimates of 5
and 18 percent electronic prescribing adoption rates to arrive at the
number of Medicare Part D electronic transactions, and cost them out at
a range of a low of 6 cents per transaction to a high of 25 cents per
transaction. We estimated costs for Medicare Part D sponsors of between
$2 million to $46 million per year.
---------------------------------------------------------------------------

\10\ CMS, Total Medicare Beneficiaries with Prescription Drug
Coverage as of January 2008, 1-31-08, http://www.cms.hhs.gov/PrescriptionDrugCovGenIn/.
---------------------------------------------------------------------------

Medicare Part D sponsors may negotiate the cost of e-prescribing
transactions as part of the dispensing fees included in their pharmacy
contracts, and account for these costs in their annual bids to
participate in the Medicare Part D program. In these instances,
inclusion of these costs may increase the cost of their Medicare Part D
bids. However, we anticipated that these costs would be negated by the
savings from an increased rate of conversion from brand name to generic
prescriptions realized through utilization of NCPDP Formulary and
Benefits 1.0, which would more than offset the transaction costs.
Medicare Part D sponsors would not be affected by the adoption of
the NCPDP SCRIPT 8.1 for the transactions listed at Sec. 423.160(b)(2)
because these transactions are conducted between prescribers and
dispensers, and Medicare Part D sponsors are not involved.
Medicare Part D sponsors would not be significantly affected by the
adoption of the NPI as a standard for use in e-prescribing transactions
among the Medicare Part D sponsors, prescribers, and dispensers because
the Medicare Part D sponsors already use the NPI in HIPAA transactions,
such as the retail pharmacy drug claim.
4. Vendors
Vendors of e-prescribing software would incur costs to bring their
products into compliance with these requirements. However, we
considered the need to enhance functionality and comply with industry
standards to be a normal cost of doing business that will be subsumed
into normal version upgrade activities. Vendors may incur somewhat
higher costs connected with testing activities but vendors should be
able to address this potential workload on a flow basis. We believed
these costs to be minimal.
Comment: A commenter noted that the costs to vendors of migrating
to NCPDP SCRIPT 8.1 for the transactions listed at Sec. 423.160(b)(2),
as well as adding the NCPDP SCRIPT 8.1 Medication History Standard, the
fill status notification standard (RxFill), and the NCPDP Formulary and
Benefits 1.0 to their applications, are a normal cost of vendors doing
business, and these costs have in large part already been borne by e-
prescribing vendors.
Response: We agree with the commenter's contention that minimal
additional costs will be incurred by vendors by switching to the NCPDP
SCRIPT 8.1 standard, nor by adding the use of the NPI, RxFill, the
NCPDP SCRIPT 8.1 Medication History Standard and the NCPDP Formulary
and Benefits 1.0 to their applications. Many of them have already
incorporated Formulary and Benefits 1.0 into their software products,
and have already transitioned to NCPDP SCRIPT 8.1, which houses the
RxFill and the Medication History functionality on its platform. As
previously discussed in the Cost section of this regulatory impact
analysis, software vendors are already implementing NCPDP SCRIPT 8.1 in
their products, NPI is supported by NCPDP SCRIPT 8.1, and we believe
that any needed upgrades will be included in routine version upgrades.
Vendors did not indicate in their comments in response to the proposed
rule that the use of the NPI in e-prescribing will create any
additional vendor costs, and we assume that any costs that might be
incurred, such as testing, would be absorbed by vendors as a cost of
doing business.

C. Benefits

In the November 16, 2007 proposed rule (72 FR 64913), we assumed
that the benefits of the proposed adoption of standards for formulary
and benefits and medication history transactions would take place over
a multiyear timeframe. (For discussion of the benefits associated with
the adoption of these standards, refer to the discussion in the
November 16, 2007 proposed rule (72 FR 64913).)
1. Formulary and Benefits Standard--Generic Drug Usage
We based our assumptions on industry estimates that approximately 5
percent to 18 percent of group practices are e-prescribing today. We
anticipated that transactions utilizing NCPDP Formulary and Benefits
1.0 would allow the prescriber to view formulary drugs, alternative
preferred drugs in a given class that may offer savings to the patient,
or to see in advance what other, less costly drugs within a given drug
classification or generic drugs can be substituted for a given brand
name prescription drug, resulting in reduced calls to the plan, and
fewer callbacks from a pharmacy because a prescribed drug is not on a
beneficiary's drug plan formulary.
In the first half of 2006, the ratio of generic versus brand name
prescription drugs in the Medicare Part D program was 60 percent versus
40 percent. An

[[Page 18939]]

industry study indicated a 15 percent increase in generic substitution
rates for physicians with e-prescribing. However, not all beneficiaries
will accept generic prescription drugs and there are some instances in
which the brand name prescription drug has proven through physician
experience to be the more effective drug. Therefore, we applied a more
conservative 7 percent increase in generic prescriptions.
Based on industry data, we assumed the cost of a brand name
prescription drug at $111.02 and the cost of a generic drug at
$32.23.\11\
---------------------------------------------------------------------------

\11\ http://www.nacds.org/wmspage.cfm?parm1=5507. National
Association of Chain Drug Stores data.
---------------------------------------------------------------------------

While Medicare beneficiaries will be the most direct recipients of
the savings realized by the conversion of brand name to generic
prescription drugs, the Medicare program also will save money as it
will be paying for an increased number of lower cost generic
prescriptions versus higher cost, brand-name prescription drugs. We
calculated a ten-year cost savings of $95 million to $410 million.
Comment: A commenter agreed that while they did not conduct a
financial analysis, the benefits identified by CMS in the proposed rule
appeared to be reasonable. Another commenter stated that CMS
underestimated the benefits that the switch from brand name to generic
drugs would generate as a result of prescribers having access to
formulary and benefits information at the point of care, and that it
would vastly exceed CMS' 7 percent estimate.
Response: We made a good faith effort to estimate both costs and
benefits associated with the adoption of these standards using very
conservative assumptions on the benefit side, and estimating costs so
as to elicit industry and stakeholder comments on the feasibility of
our approach. While we believe that the benefits of adoption of these
standards could far exceed expectations, we also caution that any one
of a number of factors--for example, delays in making real-time
formulary and benefits information available to prescribers at the
point of care--could hinder the adoption of e-prescribing and the
benefits to be realized through, for example, anticipated wider use of
generic versus brand name prescription drugs in the Medicare Part D
prescription drug program. Given this, we estimated that realistically,
a 7 percent increase in the prescribing of generic versus brand name
drugs could be achieved through the use of formulary and benefits
information.
2. Formulary and Benefits Standard--Administrative Savings
a. Physician and Physician Office Staff
The 2004 Medical Group Management Association (MGMA) survey
entitled, ``Analyzing the Cost of Administrative Complexity'' (http://www.mgma.com/about/default.aspx?id=280) estimated the staff and
physician time spent, on a per physician full time equivalent (FTE)
basis, interacting with dispensers on formulary questions and generic
substitutions. Physician time was estimated at almost 16 hours a year;
another 14 hours were spent per physician per year on generic
substitution issues. Staff spent almost 26 hours per FTE physician on
formulary issues, and another 24 hours per FTE physician on generic
substitution issues.
CMS estimated the number of physicians in active practice who
participated in the Medicare program in 2006 at 1,048,243, and a
percentage rise in the number of physicians participating in the
Medicare program of .94 percent per year, so we applied that percentage
increase to estimate the number of Medicare physicians for 2009 through
2013. We also applied the previous assumption that from 5 to 18 percent
of prescribers are e-prescribing today. Per the MGMA survey, we assumed
a physician labor cost of $100 per hour and an average staff labor cost
of $22 per hour per physician FTE.
Pilot site experience shows that with e-prescribing, responding to
refill requests, and resolving pharmacy callbacks were all done more
efficiently with e-prescribing than before. However, full
implementation would be difficult to achieve, and we used an estimate
of 25 percent implementation. Our model calculated that, at that rate
of implementation, physicians and staff would realize savings ranging
from $55 million to $206 million.
b. Dispensers
If each physician and their office staff saved a total of 80 hours
a year by using the NCPDP Formulary and Benefits 1.0, and reduced the
time spent on the phone with dispensers, we assumed that dispensers
would save the equivalent amount of time by not making these calls.
Since the MGMA survey assumed a dispenser labor rate of $60 per hour,
our model predicted an annualized cost benefit savings ranging from a
low of $65 million to a high of $242 million at 25 percent
implementation.
Comment: A commenter expressed concern that the administrative
savings for dispensers as represented in Table 4 of the proposed rule
overestimated the administrative cost savings for dispensers. They
stated that while dispensers are on the phone waiting for a response
from a physician on a formulary question, dispensers often perform
other work concurrently, and thus devote less time than was estimated
for this particular task, which in turn affects the overall estimate of
administrative cost-savings benefits to dispensers.
Response: When estimating the benefits accrued to dispensers in
Table 4 of the proposed rule, we were conservative in our assumptions
so as not to unnecessarily inflate the benefit projections. We used the
generally accepted 5 and 18 percent e-prescribing adoption rates versus
much higher rates as projected in some widely read industry
publications. We relied upon the Medical Group Management Association
(MGMA) study of physician and staff time spent on the phone resolving,
among other things, formulary and benefits issues, and further reduced
our benefit projects down to the 25 percent level.
3. Medication History Standard--Reduction of Adverse Drug Events (ADEs)
Utilizing the medication history standard in the transmission of
medication history information will simplify medication reconciliation
through transitions in care and, in so doing, provide consumers with a
safer medication delivery system, and greater convenience.
Although outpatient ADEs were difficult to estimate, literature
estimated that, as of 2005, there were 530,000 preventable ADEs for
Medicare beneficiaries annually. Moreover, the estimated cost per ADE
ranged from $2,000 to upwards of $6,000 depending on the care setting.
We computed the benefits of using the NCPDP SCRIPT 8.1 Medication
History Standard based on data regarding ADEs as a percentage of the
total Medicare population. Based on CMS Medicare population data, we
calculated that of the total Medicare population, ADEs occur in about
1.24 percent of that population each year.
Based on pilot experience, we assumed that the reduction in the
risk of ADEs could be attributed mostly to the use of the NCPDP SCRIPT
8.1 Medication History Standard history rather than to e-prescribing in
general. The pilot project demonstrated that 50 percent of preventable
ADEs could be eliminated if e-prescribing is used, but also recognized
that the pilot project may not have accurately represented mainstream
experience. Given that, we conservatively assumed that the number

[[Page 18940]]

of ambulatory ADEs associated with Medicare Part D beneficiaries could
be reduced by the use of medication history by 25 percent for those
patients for whom prescriptions were written electronically; we used
the same uptake e-prescribing estimates (5 to 18 percent) as earlier
for e-prescribing adoption. We estimated a potential cost savings over
10 years of $13 million to $156 million from avoided ADEs.
4. RxFill--Medication Adherence
As previously discussed in the Cost section of this regulatory
impact analysis, one potential benefit anticipated from the use of
RxFill are those associated with better medication adherence on the
part of patients, and this varies depending on the clinical condition.
Researchers generally agree that it is difficult to arrive at a dollar
figure that would reflect the outcomes of medication adherence for all
clinical conditions, but we believe that it is prudent to assume that
in the Medicare Part D program, an increase in prescription drug
utilization by patients as a result of better medication adherence
would be far offset by a larger reduction in the cost of Medicare
beneficiary hospitalizations, outpatient procedures and other clinical
treatments that might result from non-adherence to medication regimens.
See the Cost section of this regulatory impact analysis for more
details regarding our benefit assumption for the use of RxFill.
5. National Provider Identifier (NPI)--Reduced Callbacks
We reiterate our previous discussion in the Cost section of this
regulatory impact analysis that benefits for the use of the NPI in e-
prescribing under Medicare Part D have not been quantified by the
industry. We anticipate that its use will help dispensers reduce the
number of callbacks to a physicians office to verify an e-prescriber's
identity, although it is unclear and unsubstantiated from industry
feedback as to what percentage of call backs between the dispenser and
the prescriber can be attributed solely to this inquiry.

D. Total Impact

We concluded that the cost of implementing these standards is
minimal, with quantifiable benefits reaped by dispensers, prescribers,
and beneficiaries. Over five years, we expected that these groups will
see average net benefits in a range from $218.0 million to $863.9
million from the utilization of formulary and benefits and medication
history transactions, and the promulgation of these standards. As
previously discussed, we do not expect that the adoption of RxFill and
the use of the NPI in e-prescribing will result in any additional
costs. We expect that their use will result in unquantifiable benefits
which include the assumption, in the case of RxFill, of better patient
medication adherence that will likely result in long-term savings for
the Medicare program; and for the NPI, in improved pharmacy workflows
via reduced call backs to physician offices to identify individual
prescribers.
Comment: A prescription information exchange network agreed that
the benefits to all stakeholders of utilizing the NCPDP Formulary and
Benefits 1.0 and adopting NCPDP SCRIPT 8.1 for the transactions listed
at Sec. 423.160(b)(2) will far exceed the financial costs. In their
estimation, the total benefits range of $218 to $863.9 million appears
to be realistic.
Response: Again, efforts were made to estimate both costs and
benefits associated with the adoption of the final standards using very
conservative assumptions on the benefit side, and conversely,
overestimating costs so as to elicit industry and stakeholder comments
on the feasibility of our approach. As previously discussed, in
addition to the anticipated costs and benefits associated with use of
medication history and formulary and benefits, we expect there will be
minimal or no cost associated with the use of either the NPI, or RxFill
by providers who find value in use of an electronic fill status
transaction for purposes of tracking patient adherence to medication
therapies. We expect use of the NPI will assist dispensers to identify
individual e-prescribing providers, resulting in a reduction of call
backs to physician offices. The use of the Fill Status Notification
standard by those providers who use an electronic fill status
transaction to monitor patient medication adherence will realize
benefits such as reduced patient hospitalizations, outpatient
procedures, and clinical treatments, and improved patient outcomes.
Comment: One commenter made the observation that actual drug costs
will increase due to increased volume related to improved patient
compliance, and that CMS should account for this in its discussions of
costs and benefits.
Response: We believe that the commenter was referring to the
increased drug cost to the Medicare Part D program because the number
of prescriptions being picked up at the pharmacy by a Medicare
beneficiary might increase with the use of the fill status
notification, and not an increase in the the actual cost of the drug
itself. It is true that the Medicare Part D program may incur
additional costs if more patients had their prescriptions filled, and
in some studies this could account for as much as an 11 percent
increase, depending on the clinical condition for which the
prescription is being dispensed (for example, diabetes versus
hypertension). However, we anticipate that medication adherence could
result in lower disease-related medical costs, such as hospitalization,
that would benefit the Medicare program. In the study, ``Impact of
Medication Adherence on Hospitalization Risk and Healthcare Cost,''
results showed that, for the four clinical conditions studied,
hospitalization rates were significantly lower for patients with high
medication adherence, and that drug costs are a relatively small
fraction of total healthcare costs. Drug costs have high leverage; in
other words, a small increase in drug costs (associated with improved
adherence) can produce a much larger reduction in medical costs. This
leverage will become even stronger as medications become available, and
are prescribed as generic drugs, lowering drug costs even more.\12\
---------------------------------------------------------------------------

\12\ Michael C. Sokol, M.D., M.S.; Kimberly A. McGuigan, PhD;
Robert R. Vebrugge, PhD; and Robert S. Epstein, M.D., M.S. Impact of
Medication Adherence on Hospitalization Risk and Healthcare Cost.
Medical Care. 2005;43:521-530.
---------------------------------------------------------------------------

E. Alternatives Considered

For more information on all the alternatives considered, refer to
the discussion in the November 16, 2007 proposed rule (72 FR 64916).
As we had successful results from the e-prescribing pilot project,
and the value added by the proposed additional standards is
substantial, we chose to proceed to a final rule. We considered
adopting the prior authorization, Structured and Codified Sig and
RxNorm standards for adoption, and elected not to do so until
outstanding issues with these standards have been resolved. In the case
of the RxFill standard, we considered not adopting it, but based on
industry feedback, opted for adoption so that those providers who felt
it was of value could benefit from the existence of a standard for use
in electronic fill status transactions.
We considered not adopting the NPI as a standard for identifying
health care providers in e-prescribing transactions for Medicare Part D
covered drugs for Medicare Part D eligible individuals. The fact that
large portions of the health care industry are required to use NPI as a
HIPAA standard, convinced us that

[[Page 18941]]

adoption at this time was feasible and desirable.
We considered providing for an effective date for these new and
updated standards that was less than the maximum amount of time allowed
by the MMA. Based on industry feedback, however, we decided to provide
the maximum allowed time prior to the effective date of this rule.

List of Subjects in 42 CFR Part 423

Administrative practice and procedure, Emergency medical services,
Health facilities, Health maintenance organizations (HMO), Health
professions, Incorporation by Reference, Medicare, Penalties, Privacy,
Reporting and recordkeeping requirements.

0
For the reasons set forth in the preamble, the Centers for Medicare &
Medicaid Services amends 42 CFR part 423 as follows:

PART 423--VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT

0
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).

0
2. Section 423.160 is amended by revising paragraphs (b) and (c) to
read as follows:

Sec. 423.160 Standards for electronic prescribing.

* * * * *
(b) Standards. (1) Entities described in paragraph (a) of this
section must comply with the following adopted standards for
transactions under this section:
(i) Before April 1, 2009 the standards specified in paragraphs
(b)(2)(i) and (b)(3) of this section.
(ii) On or after April 1, 2009, the standards specified in
paragraphs (b)(2)(ii) and (b)(3) through (b)(6) of this section.
(2) Prescription. (i) The National Council for Prescription Drug
Programs SCRIPT Standard, Implementation Guide, Version 5, Release 0,
(Version 5.0) May 12, 2004 (incorporated by reference in paragraph
(c)(1)(iv) of this section), or the National Council for Prescription
Drug Programs Prescriber/Pharmacist Interface SCRIPT Standard,
Implementation Guide, Version 8, Release 1, (Version 8.1) October 2005
(incorporated by reference in paragraph (c)(1)(i) of this section), to
provide for the communication of a prescription or prescription-related
information between prescribers and dispensers, for the following:
(A) Get message transaction.
(B) Status response transaction.
(C) Error response transaction.
(D) New prescription transaction.
(E) Prescription change request transaction.
(F) Prescription change response transaction.
(G) Refill prescription request transaction.
(H) Refill prescription response transaction.
(I) Verification transaction.
(J) Password change transaction.
(K) Cancel prescription request transaction.
(L) Cancel prescription response transaction.
(ii) The National Council for the Prescription Drug Programs
Prescriber/Pharmacist Interface SCRIPT standard, Implementation Guide,
Version 8, Release 1 (Version 8.1) October 2005 (incorporated by
reference in paragraph (c)(1)(i) of this section), to provide for the
communication of a prescription or prescription-related information
between prescribers and dispensers, for the following:
(A) Get message transaction.
(B) Status response transaction.
(C) Error response transaction.
(D) New prescription transaction.
(E) Prescription change request transaction.
(F) Prescription change response transaction.
(G) Refill prescription request transaction.
(H) Refill prescription response transaction.
(I) Verification transaction.
(J) Password change transaction.
(K) Cancel prescription request transaction.
(L) Cancel prescription response transaction.
(M) Fill status notification transaction.
(3) Eligibility. (i) The Accredited Standards Committee X12N 270/
271-Health Care Eligibility Benefit Inquiry and Response, Version 4010,
May 2000, Washington Publishing Company, 004010X092 and Addenda to
Health Care Eligibility Benefit Inquiry and Response, Version 4010, A1,
October 2002, Washington Publishing Company, 004010X092A1 (incorporated
by reference in paragraph (c)(2)(i) of this section), for transmitting
eligibility inquiries and responses between prescribers and Part D
sponsors.
(ii) The National Council for Prescription Drug Programs
Telecommunication Standard Specification, Version 5, Release 1 (Version
5.1), September 1999, and equivalent NCPDP Batch Standard Batch
Implementation Guide, Version 1, Release 1 (Version 1.1), January 2000
supporting Telecommunications Standard Implementation Guide, Version 5,
Release 1 (Version 5.1), September 1999, for the NCPDP Data Record in
the Detail Data Record (incorporated by reference in paragraph
(c)(1)(iii) of this section), for transmitting eligibility inquiries
and responses between dispensers and Part D sponsors.
(4) Medication history. The National Council for Prescription Drug
Programs Prescriber/Pharmacist Interface SCRIPT Standard,
Implementation Guide, Version 8, Release 1 (Version 8.1), October 2005
(incorporated by reference in paragraph (c)(1)(i) of this section) to
provide for the communication of Medicare Part D medication history
information among Medicare Part D sponsors, prescribers, and
dispensers.
(5) Formulary and benefits. The National Council for Prescription
Drug Programs Formulary and Benefits Standard, Implementation Guide,
Version 1, Release 0 (Version 1.0), October 2005 (incorporated by
reference in paragraph (c)(1)(ii) of this section) for transmitting
formulary and benefits information between prescribers and Medicare
Part D sponsors.
(6) Provider identifier. The National Provider Identifier (NPI), as
defined at 45 CFR 162.406, to identify an individual health care
provider to Medicare Part D sponsors, prescribers and dispensers, in
electronically transmitted prescriptions or prescription-related
materials for Medicare Part D covered drugs for Medicare Part D
eligible individuals.
(c) Incorporation by reference. The Director of the Federal
Register approves, in accordance with 5 U.S.C. 552(a) and 1 CFR Part
51, the incorporation by reference of certain publications into this
section. You may inspect copies of these publications at the
headquarters of the Centers for Medicare & Medicaid Services (CMS),
7500 Security Boulevard, Baltimore, Maryland 21244, Monday through
Friday from 8:30 a.m. to 4 p.m. or at the National Archives and Records
Administration (NARA). For more information on the availability of this
material at NARA, call (202) 741-6030, or go to http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html. The publications approved for incorporation by
reference and their original sources are as follows:
(1) National Council for Prescription Drug Programs, Incorporated,
9240 E. Raintree Drive, Scottsdale, AZ 85260-7518; Telephone (480) 477-
1000; and

[[Page 18942]]

Facsimile (480) 767-1042 or http://www.ncpdp.org.
(i) National Council for Prescription Drug Programs Prescriber/
Pharmacist Interface SCRIPT Standard, Implementation Guide, Version 8,
Release 1, October 2005.
(ii) The National Council for Prescription Drug Programs Formulary
and Benefits Standard, Implementation Guide, Version 1, Release 0,
October 2005.
(iii) National Council for Prescription Drug Programs
Telecommunication Standard Specification, Version 5, Release 1 (Version
5.1), September 1999 and equivalent National Council for Prescription
Drug Programs (NCPDP) Batch Standard Batch Implementation Guide,
Version 1, Release 1 (Version 1.1), January 2000 supporting
Telecommunication Standard Implementation Guide, Version 5, Release 1
(Version 5.1) for the NCPDP Data Record in the Detail Data Record.
(iv) National Council for Prescription Drug Programs SCRIPT
Standard, Implementation Guide, Version 5, Release 0, May 12, 2004,
excluding the Prescription Fill Status Notification Transaction (and
its three business cases; Prescription Fill Status Notification
Transaction--Filled, Prescription Fill Status Notification
Transaction--Not Filled, and Prescription Fill Status Notification
Transaction--Partial Fill).
(2) Accredited Standards Committee, 7600 Leesburg Pike, Suite 430,
Falls Church, VA 22043; Telephone (301) 970-4488; and Facsimile: (703)
970-4488 or http://www.x12.org.
(i) Accredited Standards Committee (ASC) X12N 270/271-Health Care
Eligibility Benefit Inquiry and Response, Version 4010, May 2000,
Washington Publishing Company, 004010X092 and Addenda to Health Care
Eligibility Benefit Inquiry and Response, Version 4010A1, October 2002,
Washington Publishing Company, 004010X092A1.
(ii) Reserved.

(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

Dated: March 14, 2008.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.

Approved: March 28, 2008.
Michael O. Leavitt,
Secretary.
[FR Doc. 08-1094 Filed 4-2-08; 10:44 am]
BILLING CODE 4120-01-P