[Federal Register Volume 74, Number 208 (Thursday, October 29, 2009)]
[Rules and Regulations]
[Pages 55771-55776]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-26037]


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DEPARTMENT OF DEFENSE

Office of the Secretary

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

32 CFR Part 199


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

AGENCY: Department of Defense.

ACTION: Final rule.

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

DATES: Effective Date: This final rule is effective November 30, 2009.

FOR FURTHER INFORMATION CONTACT: RADM Thomas McGinnis, TRICARE 
Management Activity, Pharmaceutical Operations Directorate, telephone 
(703) 681-2890.

SUPPLEMENTARY INFORMATION: 

I. Double Coverage With Medicare Part D

    Section 101 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA), (Pub. L. 108-173), amended Title XVIII 
of the Social Security Act by establishing a new Part D: the Voluntary 
Prescription Drug Benefit Program (henceforth, Medicare Part D). The 
Department of Health and Human Services, CMS, published their Final 
Rule on January 28, 2005 (70 FR 4193-4585). The addition of a 
prescription drug benefit to Medicare represents a landmark change to 
the Medicare program, and became available to beneficiaries beginning 
on January 1, 2006.
    The Floyd D. Spence NDAA for FY 2001 (Pub. L. 106-398), established 
the TRICARE Senior Pharmacy Program under section 711 (which was 
effective April 1, 2001). The Act, also under section 712 (which was 
effective October 1, 2001), continued TRICARE eligibility for 
beneficiaries entitled to Medicare Part A on the basis of age, provided 
they also are enrolled in Medicare Part B. This program has come to be 
known as TRICARE for Life (TFL). Under section 701 of the National 
Defense Authorization Act for Fiscal Year 2000 (Pub. L. 106-65), 
codified at Title 10, U.S.C., Section 1074g, the Department established 
its new pharmacy benefits program for all TRICARE beneficiaries (as 
implemented by 32 CFR 199.21). The full implementation of the pharmacy 
benefit program was not effective until May 3, 2004; however, changes 
in pharmacy cost shares were effective with the implementation of 
TRICARE Senior Pharmacy on April 1, 2001.
    In implementing TRICARE Senior Pharmacy, DoD stated that the double

[[Page 55772]]

coverage rules in 32 CFR 199.8 are applicable to services provided to 
all beneficiaries under the retail pharmacy network, retail pharmacy 
non-network, or TRICARE Mail Order programs. In implementing TFL, DoD 
explained the double coverage rules under 10 U.S.C. 1086(d)(3). The 
statute states that if a TRICARE-Medicare dual-eligible beneficiary 
receives medical or dental care for which payment may be made under 
Medicare and TRICARE, the amount payable for that care by TRICARE shall 
be the amount of the actual out-of-pocket costs incurred by the person 
for that care over the sum of (i) the amount paid for that care under 
Medicare; and (ii) the total of all amounts paid or payable by third 
party payers other than Medicare. The amount payable by TRICARE may not 
exceed the total amount that would be paid under TRICARE, if payment 
for the care were made solely under TRICARE. TFL did not expand the 
scope of benefits available to this group of beneficiaries beyond the 
scope of TRICARE benefits available to other retirees and their 
families. The critical fact is whether the service or supply is payable 
by both Medicare and TRICARE. For health care services for which 
payment may be made under both Medicare and TRICARE, TRICARE will pay, 
up to the beneficiary's legal liability, the actual out-of-pocket costs 
incurred by the beneficiary, less any payments made by Medicare or 
other sources of insurance. Actual out-of-pocket costs incurred by the 
beneficiary include the initial deductible, which is for services 
payable by Medicare and TRICARE, but for the fact that the beneficiary 
has not met the deductible amount, and any subsequent beneficiary cost 
shares. However, if a health care service or supply is a benefit 
payable only by Medicare, but not by TRICARE, then Medicare has sole 
responsibility for payment of the health care service or supply, as 
defined by Medicare, and the beneficiary has the responsibility to pay 
any corresponding Medicare cost-share or deductible. Likewise, if a 
health care service or supply is a benefit payable only by TRICARE, but 
not Medicare, then TRICARE has sole responsibility for payment of the 
health care service and supply, and the beneficiary has the 
responsibility to pay any corresponding TRICARE cost-shares or 
deductible. Finally, if a health care service or supply is neither a 
benefit payable by Medicare or TRICARE, the beneficiary pays the total 
cost.
    TRICARE has applied the double coverage rules of 32 CFR 199.8 to 
the Pharmacy Benefits Program under Sec. 199.21(m), and said to the 
extent they provide a prescription drug benefit, Medicare supplemental 
insurance plans or Medicare health maintenance organization (HMO) plans 
are double coverage plans and will be the primary payer. This rule was 
written prior to Medicare providing a prescription drug benefit under 
Medicare Part D, and CMS's final rule on the Medicare Prescription Drug 
Coverage, Section 423.464(f)(l)(iv), military coverage, including 
TRICARE coverage under chapter 55 of title 10, U.S.C., qualifies as 
other prescription drug coverage with which a Part D plan must 
coordinate benefits.
    Medicare Part D plans are offered by private insurance companies 
that contract with CMS. Part D benefits may be offered by a stand-alone 
prescription drug plan sponsor, a Medicare Advantage Organization 
offering qualified prescription drug coverage, a Program for All-
Inclusive Care for the Elderly (PACE) organization offering qualified 
prescription drug coverage, or a cost plan offering qualified 
prescription drug coverage (collectively referred to as a ``Part D plan 
sponsor''). Each Part D plan sponsor submits a bid to CMS for plan 
benefit packages, which results in, among other things, the offering of 
Part D plans with varying monthly premiums and benefits designs. Part D 
plan sponsors may offer a defined standard benefit, which is the type 
of benefit used as an example in this preamble, or an actuarially 
equivalent standard benefit. Part D plan sponsors may also offer 
alternative prescription drug coverage, which may consist of basic 
alternative coverage or enhanced alternative coverage. Therefore 
depending on the Part D plan that a beneficiary chooses, monthly 
premiums, coinsurances, co-pays, deductibles and benefit design may 
vary from plan to plan. Under the Medicare Prescription Drug, 
Improvement and Modernization Act (MMA), certain low-income 
beneficiaries may be eligible for reduced premiums and cost-sharing for 
their drug coverage. In some cases, beneficiaries pay no premium and 
nominal cost-sharing. Other beneficiaries have a reduced premium and 
lower cost-sharing.
    The standard Medicare Part D plan benefit includes several phases 
of beneficiary spending, as described below.
    Premiums. Statute requires a beneficiary to pay a monthly premium 
to participate in the plan. A beneficiary who wants to participate in a 
standard Medicare Part D plan is solely responsible for payment of any 
premium that is not otherwise subsidized under the program. Beneficiary 
premiums do not count toward any required beneficiary cost-sharing to 
reach the deductible, coverage gap, or catastrophic limit (described 
below).
    Deductibles. Under the Medicare Part D defined standard benefit, 
the beneficiary is responsible for paying an out-of-pocket deductible 
($275 in 2008) that adjusts annually according to the annual percentage 
increase in spending on covered Part D drugs. For purposes of meeting 
the deductible, both spending by the beneficiary and spending by 
TRICARE on behalf of the beneficiary (i.e., the TRICARE wraparound 
coverage) qualify.
    Cost-sharing between deductible and coverage gap. After the 
deductible is met, the standard Part D plan sponsors are responsible 
for 75 percent of the actual cost of the covered Part D drug, and the 
beneficiary is responsible for 25 percent of the actual cost of the 
covered Part D drug, until the beneficiary reaches the coverage gap. 
TRICARE wraparound coverage qualifies as beneficiary cost-sharing 
between the deductible and coverage gap.
    Coverage gap. To reach the coverage gap, the beneficiary must reach 
a statutorily-specified amount of total drug spending. Total 
beneficiary spending needed to meet the coverage gap is defined as 
beneficiary out-of-pocket spending, or TRICARE spending on behalf of 
the beneficiary, and spending by the Part D plan sponsor. In 2008, a 
beneficiary reaches the coverage gap when he has incurred $2,510 in 
total drug spending and remains in the gap until he has incurred $4,050 
in beneficiary out-of-pocket spending. Individuals who qualify for the 
low-income subsidies pay lower cost-sharing amounts before they reach 
the coverage gap. In the coverage gap, the beneficiary is responsible 
for 100 percent of the cost of the drug, although the beneficiary by 
law is entitled to receive the plan's negotiated price. Individuals who 
qualify for low-income subsidies do not have a coverage gap.
    Catastrophic threshold. To reach the catastrophic threshold defined 
in the standard benefit, the beneficiary must have incurred total 
spending defined in statute as true out-of-pocket spending (TrOOP) 
($4,050 in 2008). In the catastrophic phase, the beneficiary is 
responsible for the greater of 5 percent of the cost of the drug, or, 
in 2008, $2.25 for a generic/preferred multi-source drug or $5.60 for 
other drugs. In the catastrophic phase of the defined standard benefit, 
the Part D plan sponsor and Medicare are responsible for what is not 
paid by the beneficiary

[[Page 55773]]

up to the Part D plan sponsor's negotiated price.
    Under 42 CFR 423.100, incurred costs means costs incurred by the 
Part D enrollee for covered Part D drugs: (1) That are not paid for 
under the Part D plan as a result of application of any annual 
deductible or other cost-sharing rules for covered Part D drugs prior 
to the Part D enrollee satisfying annual out-of-pocket threshold amount 
under section 423.104(d)(5)(iii); and, (2) that are paid for by the 
Part D enrollee or on behalf of the enrollee by another person, and the 
enrollee or other person is not reimbursed through insurance or 
otherwise, a group health plan or other third party arrangement. 
Because TRICARE falls under the definition of ``or otherwise,'' which 
refers to ``government-funded health programs,'' wraparound payments 
made by TRICARE for covered Part D drugs on behalf of an enrollee 
eligible for both Part D and TRICARE do not count towards beneficiary 
incurred costs. Therefore, for purposes of reaching the catastrophic 
limit, only TrOOP counts as beneficiary spending. Although TRICARE 
supplementary coverage counts toward meeting the deductible and the 
initial coverage limit, it does not count toward meeting the 
catastrophic threshold.
    Generally, a Part D plan is primary payer under 42 CFR 423.464, 
coordination of benefits with other providers of prescription drug 
coverage, which includes military coverage (including TRICARE) under 
chapter 55 of title 10, U.S.C. A Part D plan under section 
423.464(f)(2) must exclude expenditures for covered Part D drugs made 
by TRICARE for purposes of determining whether a Part D enrollee has 
satisfied the out-of-pocket threshold, which for 2008 is $4,050.
    As a result of these provisions implementing Medicare Part D, 
TRICARE double coverage rules must be modified. If a TRICARE-Medicare 
beneficiary enrolls in a Part D plan that adds prescription coverage to 
their Medicare plan, the Medicare Part D plan is generally primary 
payer and TRICARE is secondary payer. TRICARE will pay the 
beneficiary's out-of-pocket costs for Medicare and TRICARE covered 
medications, including the initial deductible and Medicare Part D cost-
share. TRICARE will not pay the beneficiary's out-of-pocket cost 
associated with any monthly premium required to enroll in and 
participate in the Medicare Part D plan.
    In the coverage gap, the Part D plan is generally still the primary 
payer. Thus, assuming the beneficiary is accessing a pharmacy under 
contract with his or her Part D plan, the pharmacy would bill the Part 
D plan, which would respond by indicating that it is responsible for 
$0, at which point the pharmacy would bill TRICARE. When the 
beneficiary becomes responsible for 100 percent of the drug costs in 
the coverage gap, the beneficiary may use the TRICARE pharmacy benefit 
as the secondary payer. TRICARE will cost share during the coverage gap 
to the same extent as it does under Section 199.21 for beneficiaries 
not enrolled in a Medicare Part D plan. The beneficiary is responsible 
for the applicable TRICARE pharmacy cost-sharing amounts (and 
deductible if using a retail non-network pharmacy). During the coverage 
gap, TRICARE is incurring the cost of the drugs during the Medicare 
Part D coverage gap and not the beneficiary. Thus none of the costs of 
drugs borne by TRICARE will be applied to meeting the beneficiary's 
annual Medicare Part D TrOOP threshold. Generally, however the 
beneficiary's own TRICARE pharmacy benefit cost-share will accrue to 
meeting his annual Medicare Part D TrOOP spending because this cost-
sharing is an actual out-of-pocket expense to the beneficiary. Any 
actual out-of-pocket expense incurred by the beneficiary also will 
apply toward the TRICARE fiscal year catastrophic cap.
    Similarly, if the TRICARE-Medicare dual-eligible beneficiary 
enrolls in a Medicare Advantage drug plan, the beneficiary has to pay 
the plan's monthly premiums and obtain all medical care and 
prescription drugs through the Medicare Advantage plan. The Medicare 
Advantage plan will generally be the primary payer, and TRICARE will be 
the secondary payer. If the Medicare Advantage plan has a Part D drug 
benefit, TRICARE will pay secondary described above.

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

    Section 701 of the NDAA for FY 2000 (Pub. L. 106-65), codified at 
Title 10, U.S.C., Section 1074g, directs the Department to establish an 
effective, efficient, integrated pharmacy benefits program. The 
Department published the final rule on the Pharmacy Benefits Program on 
April 1, 2004 (69 FR 17035-17052) implementing the pharmacy benefits 
program, effective May 3, 2004. Congress in section 714 of the Ronald 
W. Reagan NDAA for FY05 has directed certain improvements to the 
TRICARE pharmacy benefits program.
    Section 714(a) directs that for a TRICARE-Medicare dual-eligible 
beneficiary, the cost-sharing requirements under the pharmacy benefits 
program may not be greater than the cost-sharing requirements 
applicable to all other beneficiaries covered by 10 U.S.C. 1086, which 
are beneficiaries who are retirees, their authorized dependents, 
survivors, and certain former spouses. Under 10 U.S.C. 1074g(a)(6), the 
Department may establish cost-sharing requirements for the pharmacy 
benefits program, which may be established as a percentage or fixed 
dollar amount, for generic, formulary, and non-formulary pharmaceutical 
agents. For non-formulary agents, cost-sharing shall be consistent with 
common industry practice and not in excess of amounts generally 
comparable to 20 percent for beneficiaries who are dependents of active 
duty members of the uniformed services, and 25 percent for 
beneficiaries who are retirees, their authorized dependents, survivors, 
and certain former spouses.
    In the TRICARE Pharmacy Benefits Program final rule, the Department 
published the cost share amounts for pharmaceutical agents based upon 
two factors: (1) The agent's status as generic, formulary, or non-
formulary; and (2) the venue in which the agent was obtained, that is, 
military treatment facility (MTF), TRICARE Mail Order Program (TMOP), 
retail network pharmacy, or retail non-network pharmacy. The Department 
is authorized under 10 U.S.C. 1074g(a)(6) to have two non-formulary 
cost-shares based upon the status of the beneficiary, no more than 20 
percent for active duty family members and no more than 25 percent for 
all others (other than active duty members who have no cost share). The 
Department chose to have one non-formulary cost-share equal to no more 
than 20 percent of the anticipated aggregated cost of non-formulary 
agents that is $22 for non-formulary agents obtained in the TMOP or 
retail network pharmacies, and $22 or 20 percent (whichever is greater) 
for non-formulary agents obtained in retail non-network pharmacies. 
(For more information on TRICARE Pharmacy Benefit Program cost shares, 
see Section 199.21(i)). Section 714(a) emphasizes that if the 
Department were to move to a two-tier non-formulary cost-share based 
upon the status of the beneficiary, the Department may not have a 
higher cost-share for TRICARE-Medicare dual-eligible beneficiaries than 
for other retirees, their authorized dependents, survivors, and certain 
former spouses.
    This final rule adds to section 199.21 a provision incorporating 
into the regulation the new statutory requirement.

[[Page 55774]]

III. Legislative Changes To Improve the Uniform Formulary Process

    Under 10 U.S.C. 1074g(a)(2)(E)(i), pharmaceutical agents included 
on the uniform formulary on the basis of relative clinical 
effectiveness and cost effectiveness are required to be available to 
beneficiaries through facilities of the uniformed services, consistent 
with the scope of health care services offered in such facilities. 
Section 714(b) of the Ronald Reagan NDAA for FY05 directs the 
Department to allow the DoD Pharmacy and Therapeutics (P&T) Committee 
to make additional relative clinical and cost effectiveness 
determinations for MTFs. This change in the law means that MTFs are not 
required to include on their formularies every pharmaceutical agent in 
a therapeutic class that is on the uniform formulary that is consistent 
with the scope of health care services offered in the MTF. This final 
rule incorporates into section 199.21 a provision reflecting the change 
in the statute.

IV. Transition to the Uniform Formulary

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

Public Comments

    A proposed rule (71 FR 78110-78115) was published on December 28, 
2006, and provided a 60-day comment period. Only one comment related to 
the rule was received and is responsed to below. Other comments 
unrelated to this rule were submitted by a national association 
representing retail drugstores. These comments were directed toward 
suggested overall program changes that would favor use of retail 
pharmacies.

Comment: Limiting Military Treatment Facility (MTF) Formularies

    A pharmaceutical manufacturer commented that it understood DoD to 
be limiting MTF formularies to only those drugs on the basic core 
formulary (BCF) or the extended core formulary (ECF), and if so, this 
action would limit other uniform formulary items availability at MTFs, 
drive up government costs, and increase beneficiary costs.

Point of Clarification and Response

    DoD does not intend to change the current process by which MTFs 
create local formularies. MTFs must carry BCF items, and may augment 
those items based on the scope of health care services provided at the 
respective MTF. Therapeutic classes reviewed by the DoD P&T Committee 
will contain pharmaceutical agents that carry either a BCF or ECF 
designation. All pharmaceutical agents in therapeutic classes that the 
Committee has not reviewed have the presumption of inclusion on the 
Uniform Formulary and are available to augment local MTF formularies. 
These pharmaceutical agents remain available options for MTF Commanders 
to add to their formularies in accordance with their local MTF P&T 
Committee process.
    Comment: A national association representing retail drugstores 
offered comments unrelated to this rule regarding co-payments, 
recommendations for DoD to adopt electronic coordination of benefits, 
and stated that DoD should more diligently pursue it's authority to 
purchase pharmaceuticals at Federal discounts for dispensing in the 
retail network pharmacies.
    Response: None of these comments are related to this rule. DoD's 
copay structure is defined in law and is not affected by this rule. DoD 
implemented electronic coordination of benefits in 2007 and has 
successfully adjudicated millions of third party claims through this 
process. Regarding comments toward pursuit of Federal discounts for 
retail prescriptions, the FY08 National Defense Authorization Act 
included new legislative authority for DoD to access Federal discounts 
for retail prescriptions. A Final Rule implementing the legislation has 
been issued.

V. Regulatory Procedures

    Executive Order (EO) 12866 directs agencies to assess all costs and 
benefits available, regulatory alternatives and, when regulation is 
necessary, to select

[[Page 55775]]

regulatory approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity). The Order classifies a 
rule as a significant regulatory action requiring review by the Office 
of Management and Budget (OMB) if it meets any one of a number of 
specified conditions, including: having an annual effect on the 
national economy of $100 million or more, creating a serious 
inconsistency or interfering with an action of another agency, 
materially altering the budgetary impact of entitlements or the rights 
of entitlement recipients, or raising novel legal or policy issues. DoD 
has examined the economic, legal, and policy implications of this final 
rule and has concluded that it is a significant regulatory action as it 
addresses novel policy issues relating to implementation of 
coordination of medical benefits programs for covered beneficiaries of 
the uniformed services under TRICARE and the Medicare Prescription Drug 
Benefit.
    The double coverage payment procedures will implement the statutory 
designation of Medicare as primarily responsible for payment of 
prescription drug costs for TRICARE-Medicare dual-eligible 
beneficiaries who have prescription drug coverage under Medicare Part D 
during the double coverage period described in this rule. It is 
estimated that the cost avoidance for the DoD Medicare Eligible Retiree 
Health Care Fund will be approximately $1800 per beneficiary. As of 
January 2008, approximately 123,000 dual-eligible beneficiaries were 
enrolled in the Medicare Part D program, resulting in a decrease in the 
Medicare-Eligible Retiree Health Care (MERHC) fund liability of 
$22,140,000. Benefits of the final rule include implementation of the 
Congressional requirement for primary payment responsibility between 
the two programs. The rule has been determined not to be major under 
the Congressional Review Act.
    This final rule does not contain a Federal mandate that may result 
in the expenditure by State, local or tribunal governments, in 
aggregate, or by the private sector of $100 million or more in any one 
year.
    The Regulatory Flexibility Act (RFA) requires that each Federal 
agency prepare, and make available for public comment, a regulatory 
flexibility analysis when the agency issues regulations which would 
have significant impact on a substantial number of small entities. This 
rule does not require a regulatory flexibility analysis as it would 
have no significant economic impact on a substantial number of small 
entities.
    This final rule will not impose additional information collection 
requirements on the public under the Paperwork Reduction Act of 1995 
(44 U.S.C. 55). In order to determine which dual-eligible beneficiaries 
are participating in Medicare Part D, TRICARE will rely on the Defense 
Eligibility Enrollment Reporting System (DEERS) to identify which 
beneficiaries are enrolled in Medicare Part D through existing data 
sharing agreements with CMS and will not need to collect additional 
information from them.
    We have examined the impact(s) of the final rule under EO 13132 and 
it does not have policies that have federalism implications that would 
have substantial direct effects on the States, on the relationship 
between the national government and the States, or on the distribution 
of power and responsibilities among the various levels of government, 
therefore, consultation with State and local officials is not required.

List of Subjects in 32 CFR Part 199

    Claims, health care, health insurance, military personnel, pharmacy 
benefits.

0
Accordingly, 32 CFR part 199 is proposed to be amended as follows:

PART 199--[AMENDED]

0
1. The authority citation for part 199 continues to read as follows:

    Authority: 5 U.S.C. 301; 10 U.S.C. chapter 55.


0
2. Section 199.8 is amended by adding paragraph (d)(1)(iii)(C) and 
revising paragraph (d)(1)(vi) to read as follows:


Sec.  199.8  Double coverage.

* * * * *
    (d) * * *
    (1) * * *
    (iii) * * *
    (C) For Medicare beneficiaries who enroll in Medicare Part D, the 
Part D plan is primary and TRICARE is secondary payer. TRICARE will pay 
the beneficiary's out-of-pocket costs for Medicare and TRICARE covered 
medications, including the initial deductible and Medicare Part D cost-
sharing amounts up to the initial coverage limit of the Medicare Part D 
plan. The Medicare Part D plan, although the primary plan, pays nothing 
during any coverage gap period. When the beneficiary becomes 
responsible for 100 percent of the drug costs under a Part D coverage 
gap period, the beneficiary may use the TRICARE pharmacy benefit as the 
secondary payer. TRICARE will cost share during the coverage gap to the 
same extent as it does under Section 199.21 for beneficiaries not 
enrolled in Medicare Part D plan. The beneficiary is responsible for 
the applicable TRICARE pharmacy cost-sharing amounts (and deductible if 
using a retail non-network pharmacy). Part D plan sponsors may offer a 
defined standard benefit, or an actuarially equivalent standard 
benefit. Part D plan sponsors may also offer alternative prescription 
drug coverage, which may consist of basic alternative coverage or 
enhanced alternative coverage. Therefore depending on the Part D plan 
that a beneficiary chooses, monthly premiums, coinsurances, co-pays, 
deductibles and benefit design may vary from plan to plan. TRICARE 
payment of the beneficiary's initial deductible, if any, along with 
payment of any beneficiary cost share count towards total spending on 
drugs, and may have the effect of moving the beneficiary more quickly 
through the initial phase of coverage to the coverage gap. Irrespective 
of the phase of the benefit in which a beneficiary may be, if a 
beneficiary is accessing a pharmacy under contract with his or her Part 
D plan, the provider will bill the Part D plan first, then TRICARE. If 
the beneficiary chooses to use his or her TRICARE pharmacy benefit 
during a coverage gap under Part D, the beneficiary may do so, but the 
beneficiary is responsible for the TRICARE cost-shares.
* * * * *
    (vi) Effect on enrollment in Medicare Advantage Prescription Drug 
(MA-PD) plan. In the case of a beneficiary enrolled in a MA-PD plan who 
receives items or services for which payment may be made under both the 
MA-PD plan and CHAMPUS/TRICARE, a claim for the beneficiary's normal 
out-of-pocket costs under the MA-PD plan may be submitted for CHAMPUS/
TRICARE payment. However, consistent with paragraph (c)(4) of this 
section, out-of-pocket costs do not include costs associated with 
unauthorized out-of-system care or care otherwise obtained under 
circumstances that result in a denial or limitation of coverage for 
care that would have been covered or fully covered had the beneficiary 
met applicable requirements and procedures. In such cases, the CHAMPUS/
TRICARE amount payable is limited to the amount that would have been 
paid if the beneficiary had received care covered by the Medicare 
Advantage plan. If the TRICARE-Medicare beneficiary enrolls in a MA-PD 
drug plan, it generally will be governed by Medicare Part C, although

[[Page 55776]]

plans that offer a prescription drug benefit must comply with Medicare 
Part D rules. The beneficiary has to pay the plan's monthly premiums 
and obtain all medical care and prescription drugs through the Medicare 
Advantage plan before seeking CHAMPUS/TRICARE payment. CHAMPUS/TRICARE 
payment for such beneficiaries may not exceed that which would be 
payable for a beneficiary under paragraph (d)(1)(iii)(C) of this 
section.
* * * * *

0
3. Section 199.21 is amended by adding new paragraphs (g)(4) and 
(i)(2)(xi), and by revising paragraphs (h)(2)(ii) and (m), to read as 
follows:


Sec.  199.21  Pharmacy benefits program.

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

    Dated: October 23, 2009.
Patricia L. Toppings,
OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. E9-26037 Filed 10-28-09; 8:45 am]
BILLING CODE 5001-06-P