[Federal Register Volume 77, Number 123 (Tuesday, June 26, 2012)]
[Proposed Rules]
[Pages 38019-38022]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-15507]


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DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 199

[Docket ID: DOD-2012-HA-0049]
RIN 0720-AB57


Civilian Health and Medical Program of the Uniformed Services 
(CHAMPUS)/TRICARE: TRICARE Retail Pharmacy Program

AGENCY: Office of the Secretary, Department of Defense (DoD).

ACTION: Proposed rule.

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SUMMARY: This proposed rule would make several administrative changes 
to the TRICARE Pharmacy Benefits Program regulations in order to 
conform them more closely to the statute and to clarify some procedures 
regarding the operation of the uniform formulary. Specifically, the 
proposed rule would: conform the regulation to the statute regarding 
point-of-service availability of non-formulary drugs; clarify the 
process for formulary placement of newly approved drugs; streamline the 
process for updating copayment requirements; specify the method for 
applying the statutory formula for maximum non-formulary drug 
copayments; and clarify several other uniform formulary practices. This 
rule is separate from, but not inconsistent with, the legislative 
proposal made by the Department to implement portions of the 
President's Budget for Fiscal Year 2013 relating to the TRICARE 
Pharmacy Benefits Program.

DATES: Written comments received at the address indicated below by 
August 27, 2012 will be considered and addressed in the final rule.

ADDRESSES: You may submit comments, identified by docket number and/or 
RIN number and title, by any of the following methods:
    Federal eRulemaking Portal: http://www.regulations.gov. Follow the 
instructions for submitting comments.
    Mail: Federal Docket Management System Office, 4800 Mark Center 
Drive, 2nd floor, East Tower, Suite 02G09, Alexandria, VA 22350-3100.
    Instructions: All submissions received must include the agency name 
and docket number or Regulatory Information Number (RIN) for this 
Federal Register document. The general policy for comments and other 
submissions from members of the public is to make these submissions 
available for public viewing on the Internet at http://www.regulations.gov as they are received without change, including any 
personal identifiers or contact information.

FOR FURTHER INFORMATION CONTACT: Rear Admiral Thomas McGinnis, Chief, 
Pharmacy Operations Directorate, TRICARE Management Activity, telephone 
703-681-2890.

SUPPLEMENTARY INFORMATION: 

A. Executive Summary

1. Purpose of the Proposed Rule

    The purpose of this proposed rule is to make several administrative 
changes to the TRICARE Pharmacy Benefits Program regulation to conform 
more closely to the statute (10 U.S.C. 1074g) and to clarify some 
procedures regarding the uniform formulary.
    The legal authority for this proposed rule is 10 U.S.C. 1074g.

2. Summary of the Major Provisions of the Proposed Rule

    a. It would conform the regulation to the statute regarding the 
number of points of service where non-formulary drugs are required to 
be available. They would be generally required only in the mail order 
program.
    b. It would clarify the process for formulary placement of newly 
approved drugs by the Food and Drug Administration (FDA), giving the 
Pharmacy and Therapeutics Committee up to 120 days to recommend tier 
placement on the uniform formulary.
    c. It would streamline the process for updating cost sharing 
requirements by eliminating the process step of a recommendation from 
the P&T Committee.
    d. It would state there is no regulatory requirement, just as there 
is no statutory requirement, that copayment amounts are the same for 
active duty dependents as they are for retired members and their 
dependents.
    e. It would specify the method for applying the current statutory 
formula for maximum non-formulary drug copayments, stating that they 
would be calculated based on the average government cost of all 
prescriptions, other than generic drug prescriptions, in

[[Page 38020]]

four groups based on beneficiary category and point of service.
    3. Costs and Benefits. This proposed rule is limited to 
administrative changes. It does not itself affect costs. The benefits 
of the proposed rule are that it will more closely conform the 
regulation to the statute and facilitate more effective administration 
of the TRICARE Pharmacy Benefits Program.

B. Background

    In 1999, Congress enacted 10 U.S.C. 1074g to, among other things, 
establish a uniform formulary program to incentivize the use of more 
cost-effective pharmaceutical agents and points of service. There are 
four points of service under the Pharmacy Benefits Program--military 
facility pharmacies, retail network pharmacies, retail non-network 
pharmacies, and the TRICARE mail order pharmacy program (TMOP)--and 
three uniform formulary tiers--First Tier for generic drugs, Second 
Tier for preferred brand name drugs (also referred to as ``formulary 
drugs''), and Third Tier for non-preferred brand name drugs (also 
referred to as ``non-formulary drugs''). In addition to establishing 
procedures for assigning drugs to one of the three tiers, the statute 
includes several other specifications, such as: That formulary drugs 
are generally available in all three points of service; that non-
formulary drugs are available in at least one point of service; that 
TRICARE may establish copayment requirements for all formulary tiers 
and all points of service, but the maximum copayment may not exceed for 
non-formulary drugs amounts generally equal to 20% for active duty 
family members and 25% for retirees and their family members; and that 
when clinically necessary, non-formulary drugs are provided at the 
copayment level of formulary drugs.
    TRICARE's regulations implementing this statute, issued in 2004, 
established or continued prior rules for, among other things: assigning 
drugs to a formulary tier based on cost-effectiveness; point of service 
availability for the respective tiers; copayment requirements that are 
lower for more cost-effective drugs and points of service; and updates 
over time of the copayment amounts. Although the statute required Third 
Tier drugs to be available in only one point of service, the 
regulations made them available in two. And while the statute allows 
copayments for prescriptions in all points of service and formulary 
tiers, the regulations exempted military facility pharmacies.
    TRICARE's administration of the Pharmacy Benefits Program has 
achieved some improvements in cost-effectiveness. However, overall 
costs of the TRICARE Pharmacy Benefits Program have continued to 
increase substantially, from approximately $2 billion in fiscal year 
2001, to approximately $8 billion projected for fiscal year 2012. For 
fiscal year 2012, the program updated for the first time since 2001 
copayment amounts, increasing retail network pharmacy copayments from 
$3/$9/$22 to $5/$12/$25 for the respective tiers, and changing mail 
order program copayments from $3/$9/$22 to $0/$9/$25. Co-payments for 
retail prescriptions are for up to a 30 day supply; mail order 
prescriptions for up to a 90 day supply. This difference is part of the 
incentive for beneficiaries to use the more cost-effective mail order 
program, as is the recent elimination of copayments for mail order 
program generic drugs. Encouraging increased use of DoD's more cost-
effective points of service (i.e., the highly convenient mail order 
pharmacy or a military treatment facility pharmacy) and more cost-
effective pharmaceutical products (i.e., those on First Tier and Second 
Tier) continues to be a TRICARE program objective.

C. Provisions of the Proposed Rule

    The purpose of this proposed rule is to make several administrative 
changes to the TRICARE Pharmacy Benefits Program regulation to conform 
more closely to the statute (10 U.S.C. 1074g) and to clarify some 
procedures regarding the uniform formulary. One change is to conform 
the regulation to the statute regarding the number of points of service 
where non-formulary drugs are required to be available. The statute 
requires availability in one of the three primary points of service 
(military facility, retail network, and mail order program); the 
current regulation specifies that non-formulary drugs are generally 
unavailable in military facilities and generally available in the 
retail network and mail order. This change would provide that non-
formulary drugs are available only in TMOP, unless medical necessity is 
established for dispensing in one of the other venues. This change 
would reinforce DoD policy encouraging use of more cost-effective drugs 
and points of service, without adverse effect on beneficiaries. A 
beneficiary always has the option of asking the health care provider to 
change the prescription to a comparable formulary drug, or, in cases of 
medical necessity, obtaining approval for dispensing the non-formulary 
drug at the formulary copayment amount. Another option for most 
prescriptions when the beneficiary prefers a non-formulary drug is to 
have the prescription transferred to TMOP.
    Another administrative change would clarify the process for 
formulary placement of newly approved drugs by the Food and Drug 
Administration (FDA). Current practice for brand name drugs is that 
they are placed in the Second Tier the day FDA approves the drug. This 
practice has not lead to the most cost-effective placement of these 
newly approved drugs. DoD proposes that at the next quarterly meeting 
of the Pharmacy and Therapeutics (P&T) Committee following FDA 
approval, the drug will be evaluated for its relative clinical benefit 
and relative cost in comparison to other drugs in the drug class and a 
recommendation will be made to the Director of the TRICARE Management 
Activity for Tier placement of the drug. The current regulation does 
not specifically address the status of the drug from the date of date 
of FDA approval to the date the P&T Committee's recommendation is 
eventually implemented. The proposed rule would address this by 
providing a period of up to 120 days for the P&T Committee to act. This 
will normally be the next quarterly meeting, but in cases when the FDA 
approval happens too close to a scheduled meeting for the necessary 
research to be done, it would be the following meeting. The 120 day 
time period accommodates this. During the period prior to a decision on 
Tier placement, the newly approved drug will be covered by TRICARE 
under terms comparable to those applicable to Third Tier drugs.
    Several additional administrative changes in this proposed rule 
relate to the process for updating copayment amounts. First, as a 
``housekeeping'' matter, the proposed rule would update the regulation 
to incorporate the copayment adjustments that were implemented for 
fiscal year 2012, as noted above. Second, it would streamline the 
process for updating cost sharing requirements by eliminating the 
process step of a recommendation from the P&T Committee. Factors 
pertinent to updating copayment amounts relate mostly to government-
wide, industry-wide, or program-wide developments, rather than specific 
drug-by-drug clinical and cost considerations, which is the P&T 
Committee's primary mission. The decision maker for copayment updates 
would continue to be the Assistant Secretary of Defense for Health 
Affairs. Third, the proposed rule would state there is no regulatory 
requirement, just as there is no statutory requirement, that copayment 
amounts are the same for active duty dependents

[[Page 38021]]

as they are for retired members and their dependents. Fourth, it would 
specify the method for applying the statutory formula for maximum non-
formulary drug copayments. The statute provides that the maximum 
copayment may not exceed for non-formulary drugs amounts generally 
equal to 20% for active duty family members and 25% for retirees and 
their family members, but the current regulations do not indicate how 
this maximum amount will be calculated. The proposed rule would specify 
that it will be calculated based on the average government cost of all 
prescriptions, other than generic drug prescriptions, in four groups: 
retail prescriptions for active duty dependents; retail prescriptions 
for retirees and their dependents; mail order prescriptions for active 
duty dependents; and mail order prescriptions for retirees and their 
dependents. This part of the proposed rule should not be interpreted as 
suggesting that TRICARE intends to establish different copayments for 
active duty dependents from copayments for retirees and their 
dependents or to increase copayments to the maximum level allowed. This 
part of the rule is simply to clarify the applicable requirements and 
how the maximum copayment frame of reference will be calculated.
    The proposed rule would continue the current regulatory policy of 
exempting from copayments prescriptions filled in military facility 
pharmacies. This is allowed by the statute and arguably spreading 
copayment requirements across all points of service could reduce the 
potential need for higher copayments in any one point of service; but 
the current regulation and this proposed rule specify no copayment for 
all such prescriptions. Although no change is proposed, DoD invites 
comments on this provision.
    Finally, the proposed rule would incorporate into the regulation 
several details of current practice. While the current regulation 
provides that a uniform formulary drug that is not a generic drug may 
be grouped for copayment purposes with generic drugs if it is judged to 
be as cost effective as generic drugs in the same drug class, the 
proposed rule would add that a generic drug may be classified as non-
formulary if it is less cost effective than non-generic formulary drugs 
in the same drug class. Further, in the case of generic drugs, the 
beneficiary copayment amount for any prescription may not exceed the 
total charge for that prescription. Also, the rule would state that 
active duty members are not authorized to use retail non-network 
pharmacies.

D. Regulatory Procedures

Executive Order 12866, ``Regulatory Planning and Review'' and Executive 
Order 13563, ``Improving Regulation and Regulatory Review''

    Executive Orders (EOs) 12866 and 13563 require that a comprehensive 
regulatory impact analysis be performed on any economically significant 
regulatory action, defined primarily as one that would result in an 
effect of $100 million or more in any one year. The DoD has examined 
the economic, legal, and policy implications of this proposed rule and 
has concluded that it is not an economically significant regulatory 
action under Section 3(f)(1) of the EO. But it is a significant 
regulatory action and it has been reviewed by the Office of Management 
and Budget.

Congressional Review Act, 5 U.S.C. 801, et seq.

    Under the Congressional Review Act, a major rule may not take 
effect until at least 60 days after submission to Congress of a report 
regarding the rule. A major rule is one that would have an annual 
effect on the economy of $100 million or more or have certain other 
impacts. This proposed rule is a not a major rule under the 
Congressional Review Act.

Sec. 202, Public Law 104-4, ``Unfunded Mandates Reform Act''

    This rule does not contain a Federal mandate that may result in the 
expenditure by State, local and tribunal governments, in aggregate, or 
by the private sector, of $100 million or more (adjusted for inflation) 
in any one year.

Public Law 96-354, ``Regulatory Flexibility Act'' (5 U.S.C. 601)

    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 a regulation which would 
have a significant impact on a substantial number of small entities. 
This proposed rule does not have a significant impact on a substantial 
number of small entities.

Public Law 96-511, ``Paperwork Reduction Act'' (44 U.S.C. Chapter 35)

    This proposed rule contains no new information collection 
requirements subject to the Paperwork Reduction Act (PRA) of 1995 (44 
U.S.C. 3501-3511).

Executive Order 13132, ``Federalism''

    This proposed rule does not have federalism implications, as set 
forth in Executive Order 13132. This rule does not have substantial 
direct effects on the States; the relationship between the National 
Government and the States; or the distribution of power and 
responsibilities among the various levels of Government.

Public Comments Invited

    This is a proposed rule. DoD invites public comments on all of its 
provisions.

List of Subjects in 32 CFR Part 199

    Claims, Health care, Health insurance, Military personnel, Pharmacy 
benefits.

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

PART 199--[AMENDED]

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

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

    2. Section 199.21 is amended by adding new paragraph (g)(5), by 
revising the heading for paragraph (h), by revising paragraphs 
(h)(1)(iii), (h)(3)(i) and (ii), (i)(2) introductory text, (i)(2)(i) 
through (v), and (i)(2)(x), and by adding new paragraphs (j)(4) and 
(5), to read as follows:


Sec.  199.21  Pharmacy Benefits Program.

* * * * *
    (g) * * *
    (5) Administrative procedure for newly approved drugs. In the case 
of a newly approved pharmaceutical agent, other than a generic drug, 
the agent will, not later than 120 days after the date of approval by 
the Food and Drug Administration, be added to the uniform formulary 
unless prior to that date the P&T Committee has recommended that the 
agent be listed as a non-formulary drug. If the Director, TMA 
subsequently approves that recommendation, the drug will be so listed. 
If the Director, TMA disapproves that recommendation, the drug will as 
soon as feasible be added to the uniform formulary. If, prior to the 
expiration of 120 days, the P&T Committee recommends that the agent be 
added to the uniform formulary, that will be done as soon as feasible. 
Pending action under this paragraph (5), the newly approved 
pharmaceutical agent will be available to beneficiaries under terms 
comparable to those applicable to non-formulary agents under this 
section.
* * * * *
    (h) * * *

[[Page 38022]]

    (1) * * *
    (iii) Retail non-network pharmacies: Those are non-MTF pharmacies 
that are not part of the network established for TRICARE retail 
pharmacy services (Note: active duty members are not authorized to use 
retail non-network pharmacies); and
* * * * *
    (3) Availability of non-formulary pharmaceutical agents.--(i) 
General. Non-formulary pharmaceutical agents shall be generally 
available under the pharmacy benefits program from retail non-network 
pharmacies and the TRICARE Mail Order Pharmacy (TMOP).
    (ii) Availability of non-formulary pharmaceutical agents at 
military treatment facilities and retail network pharmacies. Even when 
particular non-formulary agents are not generally available at military 
treatment facilities or retail network pharmacies, they will be made 
available to eligible covered beneficiaries through those points of 
service for prescriptions approved through the non-formulary special 
approval process that validates the medical necessity for use of the 
non-formulary pharmaceutical agent. In those cases in the retail 
network, the non-formulary drug will be made available at the formulary 
copayment amount.
* * * * *
    (i) * * *
    (2) Cost-sharing amounts. Active duty members of the uniformed 
services do not pay cost-shares. For other categories of beneficiaries, 
cost-sharing amounts are as follows:
    (i) For pharmaceutical agents obtained from a military treatment 
facility, there are no co-payments.
    (ii) For pharmaceutical agents obtained from a retail network 
pharmacy there is a:
    (A) $12.00 co-payment per prescription required for up to a 30-day 
supply of a formulary pharmaceutical agent.
    (B) $5.00 co-payment per prescription for up to a 30-day supply of 
a generic pharmaceutical agent. For especially cost-effective drugs, 
upon the recommendation of the Pharmacy and Therapeutics Committee, 
prescriptions for a longer period supply, not to exceed 90 days, may be 
authorized for the same co-payment.
    (C) $25.00 co-payment per prescription for up to a 30-day supply of 
a non-formulary pharmaceutical agent.
    (D) $0.00 co-payment for vaccines/immunizations authorized as 
preventive care for eligible beneficiaries.
    (iii) For formulary and generic pharmaceutical agents obtained from 
a retail non-network pharmacy there is a 20/25 percent or $12.00 co-
payment (whichever is greater) per prescription for up to a 30-day 
supply of the pharmaceutical agent. The 20% amount applies to 
dependents of active duty members and others covered by 10 U.S.C. 1079; 
the 25% amount applies to retirees and others covered by 10 U.S.C. 
1086.
    (iv) For non-formulary pharmaceutical agents obtained at a retail 
non-network pharmacy there is a 20/25 percent or $25.00 co-payment 
(whichever is greater) per prescription for up to a 30-day supply of 
the pharmaceutical agent. The 20% amount applies to dependents of 
active duty members and others covered by 10 U.S.C. 1079; the 25% 
amount applies to retirees and others covered by 10 U.S.C. 1086.
    (v) For pharmaceutical agents obtained under the TMOP program there 
is a:
    (A) $9.00 co-payment per prescription for up to a 90-day supply of 
a formulary pharmaceutical agent.
    (B) $0.00 co-payment for up to a 90-day supply of a generic 
pharmaceutical agent.
    (C) $25.00 co-payment for up to a 90-day supply of a non-formulary 
pharmaceutical agent.
* * * * *
    (x)(A) The per prescription copayments established in this 
paragraph (i)(2) of this section may be adjusted periodically based on 
experience with the uniform formulary, changes in economic 
circumstances, and other appropriate factors. Any such adjustment shall 
be approved by the Assistant Secretary of Defense (Health Affairs). Any 
such adjusted amount will maintain compliance with the requirements of 
10 U.S.C. 1074g(a)(6) with respect to maximum copayment amounts for 
non-formulary drugs, which also apply to formulary drugs. In adjusting 
copayment amounts, there is no requirement that amounts be the same for 
dependents of active duty members (and other beneficiaries covered by 
10 U.S.C. 1079) as for retirees (and other beneficiaries covered by 10 
U.S.C. 1086).
    (B) For purposes of paragraph (i)(2)(x)(A) of this section (the 
requirement that non-formulary cost sharing shall not exceed amounts 
generally comparable to 20 percent for active duty dependents and 25 
percent for retirees and their dependents), those maximum amounts will 
be calculated based on the average government cost of all 
prescriptions, other than prescriptions for generic drugs, in the 
following four groups:
    (1) Retail prescriptions for active duty dependents;
    (2) Retail prescriptions for beneficiaries covered by 10 U.S.C. 
1086;
    (3) Mail order prescriptions for active duty dependents;
    (4) Mail order prescriptions for beneficiaries covered by 10 U.S.C. 
1086.
* * * * *
    (j) * * *
    (4) Upon the recommendation of the Pharmacy and Therapeutics 
Committee, a generic drug may be classified as non-formulary if it is 
less cost effective than non-generic formulary drugs in the same drug 
class.
    (5) The beneficiary copayment amount for any generic drug 
prescription may not exceed the total charge for that prescription.
* * * * *

    Dated: June 20, 2012.
Patricia L. Toppings,
OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2012-15507 Filed 6-25-12; 8:45 am]
BILLING CODE 5001-06-P