[Federal Register Volume 84, Number 100 (Thursday, May 23, 2019)]
[Rules and Regulations]
[Pages 23832-23884]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-10521]



[[Page 23831]]

Vol. 84

Thursday,

No. 100

May 23, 2019

Part II





Department of Health and Human Services





-----------------------------------------------------------------------





 Centers for Medicare & Medicaid Services





-----------------------------------------------------------------------





42 CFR Parts 422 and 423





 Modernizing Part D and Medicare Advantage To Lower Drug Prices and 
Reduce Out-of-Pocket Expenses; Final Rule

  Federal Register / Vol. 84, No. 100 / Thursday, May 23, 2019 / Rules 
and Regulations  

[[Page 23832]]


-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 422 and 423

[CMS-4180-F]
RIN 0938-AT92


Modernizing Part D and Medicare Advantage To Lower Drug Prices 
and Reduce Out-of-Pocket Expenses

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

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule amends the Medicare Advantage (MA) program 
(Part C) regulations and Prescription Drug Benefit program (Part D) 
regulations to support health and drug plans' negotiation for lower 
drug prices and reduce out-of-pocket costs for Part C and D enrollees. 
These amendments will improve the regulatory framework to facilitate 
development of Part C and Part D products that better meet the 
individual beneficiary's healthcare needs and reduce out-of-pocket 
spending for enrollees at the pharmacy and other sites of care.

DATES: These regulations are effective on January 1, 2020, except for 
the amendments to Sec. Sec.  422.629, 422.631, 422.633, 423.128, and 
423.160, which are effective January 1, 2021.

FOR FURTHER INFORMATION CONTACT: Joella Roland, (410) 786-7638 or 
Christian Bauer, (410) 786-6043, Part D Issues.
    Marty Abeln, (410) 786-1032, Jelani Murrain, (410) 786-2274, or 
Brandy Alston, (410) 786-1218, Part C Issues.

SUPPLEMENTARY INFORMATION:

I. Executive Summary and Background

A. Purpose

    This final rule amends regulations to support Medicare health and 
drug plans' negotiation for lower drug prices and to reduce out-of-
pocket costs for Part C and D enrollees. Although satisfaction with the 
MA and Part D programs remains high, these provisions are responsive to 
input we received from stakeholders while administering the programs, 
as well as through our requests for comment.
    The Trump Administration Blueprint to Lower Drug Prices and Reduce 
Out-of-Pocket Costs (May 16, 2018, 83 FR 22692) sought to find out more 
information about lowering drug pricing using these four strategies: 
Improved competition, better negotiation, incentives for lower list 
prices, and lowering out-of-pocket costs. We are finalizing a number of 
provisions that implement these four strategies in an attempt to lower 
out-of-pocket costs. There is also a particular focus in this final 
rule on strengthening negotiation leverage for MA and Part D plans and 
increasing competition in the market for prescription drugs. We are 
finalizing policies that provide more tools to MA plans that negotiate 
with manufacturers of Part B drugs, so these plans are equipped with 
similar negotiation capabilities that group health plans and issuers 
have in the commercial market. We sought to drive robust competition 
among health plans and pharmacies, so consumers can shop based on 
quality and value. These provisions align with the Administration's 
focus on the interests and needs of beneficiaries, providers, MA plans, 
and Part D sponsors. We are also finalizing policies that will increase 
transparency of drug pricing and drug price increases, giving 
beneficiaries and prescribers tools to help improve adherence, lower 
prescription drug costs, and minimize beneficiary out-of-pocket costs.

B. Summary of the Major Provisions

1. Providing Plan Flexibility To Manage Protected Classes (Sec.  
423.120(b)(2)(vi))
    Except in limited circumstances, current Part D policy requires 
Part D sponsors to include on their formularies all Part D drugs in six 
categories or classes: (1) Antidepressants; (2) antipsychotics; (3) 
anticonvulsants; (4) immunosuppressants for treatment of transplant 
rejection; (5) antiretrovirals; and (6) antineoplastics. We proposed 
three exceptions to this protected class policy that would allow Part D 
sponsors to: (1) Implement broader use of prior authorization (PA) and 
step therapy (ST) for protected class Part D drugs, including to 
determine use for protected class indications; (2) exclude a protected 
class Part D drug from a formulary if the drug represents only a new 
formulation of an existing single-source drug or biological product, 
regardless of whether the older formulation remains on the market; and 
(3) exclude a protected class Part D drug from a formulary if the price 
of the drug increased beyond a certain threshold over a specified 
lookback period. This regulatory provision finalizes one of the three 
proposed exceptions with modifications: The first exception related to 
PA and ST.
    The first exception permits Part D sponsors to use PA and ST for 
protected class Part D drugs. We are finalizing this exception with 
modifications. As modified, the exception is a codification of existing 
policy and does not place additional limits on beneficiary access to 
medications. Specifically, the exception will permit PA and ST only for 
new starts (that is, enrollees initiating therapy), including to 
confirm the use is for a protected-class indication, for five of the 
six protected classes (that is, all protected classes except for 
antiretroviral medications). PA and ST will not be permitted for 
antiretrovirals under this exception. This exception will permit 
indication-based formulary design and utilization management for new 
starts in five of the six protected classes, allowing Part D sponsors 
to exclude a protected class Part D drug in these five classes from the 
formulary for non-protected class indications only. As is required for 
all other Part D drug categories or classes, these formulary design and 
utilization management edits will be subject to CMS review and approval 
as part of our annual formulary review and approval process, which 
includes reviews of PA and ST edits that restrict access, ST criteria, 
PA outliers, and PA criteria. (For an extensive description of our 
annual formulary checks see section II.A.1. of this final rule.)
    The second exception would have permitted Part D sponsors to 
exclude from the formulary a protected class Part D drugs that is a new 
formulation of a protected class Part D drug, even if the older 
formulation is removed from the market. That is, Part D sponsors would 
have been permitted to exclude from their formularies a protected class 
Part D drug that is a new formulation that does not provide a unique 
route of administration, regardless of whether the older formulation 
remains on the market. Based on comments, we are not finalizing this 
exception.
    The third exception would have permitted Part D sponsors to exclude 
from the formulary any protected class Part D drug whose price 
increases, relative to the price in a baseline month and year, beyond 
the rate of inflation calculated based on the Consumer Price Index for 
all Urban Consumers (CPI-U). Based on comments, we are not finalizing 
this exception.
2. E-Prescribing and the Part D Prescription Drug Program; Updating 
Part D E-Prescribing Standards (Sec.  423.160)
    This final rule requires under section 1860D-4(e)(2)(D) of the 
Social Security Act (Act) that Part D plan sponsors implement an 
electronic real-time benefit tool (RTBT) capable of integrating with at 
least one prescriber's electronic prescribing (eRx) system or

[[Page 23833]]

electronic health record (EHR). We believe that this requirement is 
appropriate given the Act's support of interactive real-time standards 
whenever feasible, and for standards that improve the cost-
effectiveness of the Part D benefit. RTBTs currently used in the 
industry have the ability to make beneficiary-specific drug coverage 
and cost information visible to prescribers who want to consider that 
information at the point-of-prescribing. Because there currently are no 
industry-wide electronic standards for RTBTs, we are finalizing a 
requirement that each Part D plan implement at least one RTBT of its 
choosing that is capable of integrating with at least one prescriber's 
eRx system or EHR to provide prescribers who care for its enrollees 
complete, accurate, timely and clinically appropriate patient-specific 
real-time formulary and benefit (F&B) information (including cost, 
formulary alternatives and utilization management requirements) by 
January 1, 2021. However, we strongly encourage plans to start 
implementing this provision prior to 2021.
3. Medicare Advantage and Step Therapy for Part B Drugs (Sec. Sec.  
422.136, 422.568, 422.570, 422.572, 422.584, 422.590, 422.618, and 
422.619)
    This final rule provides requirements under which MA plans may 
apply step therapy as a utilization management tool for Part B drugs 
and adopts new adjudication timeframe requirements for organization 
determinations and plan reconsiderations related to requests for Part B 
drugs. In addition, CMS will incorporate the shorter adjudication 
timeframes for Part B drug requests into the contract deadlines that 
apply to Part C Independent Review Entity (IRE) reconsiderations under 
Sec.  422.592(b). In this final rule, we reaffirm MA plans' existing 
authority to implement appropriate utilization management and prior 
authorization programs (meaning policies and procedures) for managing 
Part B drugs to reduce costs for both beneficiaries and the Medicare 
program. The use of utilization management tools, such as step therapy, 
for Part B drugs enhances the ability of MA plans to negotiate Part B 
drug costs and ensures that taxpayers and MA enrollees face lower per 
unit costs or pay less overall for Part B drugs while maintaining 
access to medically-necessary Medicare-covered services and drugs. In 
order to make sure enrollees maintain access to all medically necessary 
Part B covered drugs, we are modifying the Part C adjudication time 
periods for organization determinations and appeals involving Part B 
drugs.

C. Summary of Costs and Benefits

          Table 1--Costs and Benefits for the Major Provisions
------------------------------------------------------------------------
           Provision               Description             Impact
------------------------------------------------------------------------
Providing Plan Flexibility to   We allow the       We estimate neither
 Manage Protected Classes        following          cost nor savings
 (Sec.   423.120(b)(2)(vi)).     exception          from this provision.
                                 related to
                                 protected class
                                 Part D drugs:
                                 Use of PA and ST
                                 for new starts
                                 of five of the
                                 six protected
                                 classes,
                                 including to
                                 determine use
                                 for protected
                                 class
                                 indications.
E-Prescribing and the Part D    We require each    This provision is
 Prescription Drug Program;      Part D plan        scored as a
 Updating Part D E-Prescribing   sponsor to         qualitative savings.
 Standards (Sec.   423.160).     implement one or   Based on commenter
                                 more RTBTs of      response we do not
                                 its choosing       believe there will
                                 that are capable   be significant cost
                                 of integrating     to implement RTBT
                                 with at least      since i) Based on
                                 one provider's e-  informal
                                 Rx system or EHR   conversations with
                                 and delivering     plans and commenter
                                 complete,          response, 30 percent-
                                 accurate, timely   90 percent of plans
                                 and clinically     are estimated as
                                 appropriate        already supporting
                                 patient-specific   an RTBT tool and ii)
                                 real- time F&B     plans that do not
                                 information        have it are most
                                 beginning on 01/   likely to use
                                 01/2021.           existing
                                                    intermediaries.
                                                    Commenters were
                                                    overwhelmingly
                                                    enthusiastic on the
                                                    savings potential
                                                    due to reduced drug
                                                    costs arising from
                                                    cheaper
                                                    alternatives. The
                                                    Trust Fund and
                                                    enrollees will save.
                                                    However, this
                                                    savings is
                                                    classified as a
                                                    transfer since a
                                                    cheaper drug is
                                                    being substituted
                                                    for a more expensive
                                                    one. Because of the
                                                    complexity of
                                                    prescription drug
                                                    usage we are unable
                                                    to meaningfully
                                                    quantify this
                                                    savings.
Part D Explanation of Benefits  We require the     There is an estimated
 (Sec.   423.128).               inclusion of       cost of $4.7 million
                                 negotiated drug    in the first year of
                                 pricing            implementation for
                                 information and    programmers to
                                 lower cost         update systems.
                                 alternatives in    There is an annual
                                 the Part D         estimated cost in
                                 Explanation of     all years (including
                                 Benefits           the first) of $5.7
                                 beginning on 01/   million arising from
                                 01/2021. The       the cost of paper,
                                 intent of the      printer toner, and
                                 provision is to    postage for mailing
                                 provide            one extra page in
                                 enrollees with     the Part D EOB with
                                 greater            added information
                                 transparency,      about alternatives.
                                 thereby
                                 encouraging
                                 lower costs.
Medicare Advantage and Step     We added certain   The estimated savings
 Therapy for Part B Drugs        new requirements   to enrollees due to
 (Sec.  Sec.   422.136,          for when MA        reduced out-of-
 422.568, 422.570, 422.572,      plans may apply    pocket costs are
 422.584, 422.590, 422.618,      step therapy as    between $5 and $8
 and 422.619).                   a utilization      million for 2020-
                                 management tool    2029 resulting in an
                                 for Part B drugs.  aggregate savings of
                                                    $62 million over 10
                                                    years. The savings
                                                    to the Trust Fund
                                                    are between $145 and
                                                    $240 million for
                                                    2020-2029, resulting
                                                    in an aggregate
                                                    savings over 10
                                                    years of 1.9
                                                    billion. There is a
                                                    modest cost to the
                                                    government and its
                                                    contractors of $1 to
                                                    $1.3 million in 2020-
                                                    2029 due to a
                                                    projected increased
                                                    in appeals,
                                                    resulting in an
                                                    aggregate cost of
                                                    $11.2 million cost
                                                    over 10 years. These
                                                    estimates reflect
                                                    the impact of
                                                    allowing step
                                                    therapy for MA
                                                    organizations in
                                                    2020 and future
                                                    years.
------------------------------------------------------------------------

D. Background

    In the proposed rule titled ``Modernizing Part D and Medicare 
Advantage to Lower Drug Prices and Reduce Out-of-Pocket Expenses'' 
which appeared in the November 30, 2018 Federal Register (83 FR 62152 
through 62201), we proposed revisions to the Medicare Advantage program 
(Part C) regulations and Prescription Drug Benefit program (Part D) 
regulations that

[[Page 23834]]

will have the effect of lowering the cost of medications and reducing 
out-of-pocket costs for enrollees in the Part C and D programs. The 
changes, as finalized in this rule, will also streamline different 
aspects of the Part D program and reduce associated burden on the 
government and sponsoring organizations of MA plans and Part D plans.
    In response to the proposed rule, we received 7,898 timely pieces 
of correspondence containing multiple comments each. Although we are 
not finalizing all of our proposals to provide plan flexibility to 
manage protected classes, we are finalizing all other provisions with 
changes varying from minor clarifications to more significant 
modifications, based on the comments received. We also sought comment 
on the possibility of adopting a new definition of ``negotiated price'' 
under which plan sponsors would be required to pass through all 
pharmacy price concessions at the point of sale. We will carefully 
review all input received from stakeholders on this issue as we 
continue our efforts to meaningfully address rising prescription drug 
costs for beneficiaries. We also note that some of the public comments 
received were outside of the scope of the proposed rule. These out-of-
scope public comments are not addressed in this final rule. Summaries 
of the public comments that are within the scope of the proposed rule 
and our responses to those public comments are set forth in the various 
sections of this final rule under the appropriate headings.

II. Provisions of the Proposed Rule and Analysis of and Responses to 
Public Comments

A. Providing Plan Flexibility To Manage Protected Classes (Sec.  
423.120(b)(2)(vi))

    Section 1860D-4(b)(3)(G) of the Act requires Part D sponsors to 
include in their formularies all covered Part D drugs in classes and 
categories of clinical concern identified by the Secretary using 
criteria established through rulemaking. The statute specifies that 
until such time as the Secretary establishes the criteria to identify 
drug categories or classes of clinical concern through rulemaking, the 
following drug categories or classes shall be identified as categories 
or classes of clinical concern: Anticonvulsants, antidepressants, 
antineoplastics, antipsychotics, antiretrovirals, and 
immunosuppressants for the treatment of transplant rejection. This 
policy is frequently called the ``protected class'' policy in the Part 
D program, with the drug categories or classes of clinical concern 
being the ``protected classes.'' Section 1860D-4(b)(3)(G) of the Act 
permits the Secretary to establish exceptions that permit a Part D 
sponsor to exclude from its formulary (or to otherwise limit access to 
such a drug, including through PA or utilization management) a 
particular covered Part D drug that is otherwise required to be 
included in the formulary. The Secretary must engage in rulemaking to 
establish these exceptions. Section 423.120(b)(2)(vi) currently 
provides three regulatory exceptions to the protected class policy that 
permit Part D sponsors to: (1) Exclude from their formulary 
therapeutically equivalent drugs, (2) apply utilization management (UM) 
edits for safety, and (3) exclude other drugs that CMS specifies 
through a medical and scientific process which also permits public 
notice and comment.
    The protected class policy, inclusive of its current limitations on 
PA, is unique to the Medicare Part D program and does not appear 
elsewhere in other Federal programs, such as the Veterans Health 
Administration (VA), TRICARE, the Federal Employees Health Benefits 
Program (FEHBP), the Patient Protection and Affordable Care Act 
Essential Health Benefits (EHB) Benchmark Plans, or in commercial 
private health plans. We are concerned that requiring essentially open 
coverage of certain drug categories or classes in Part D presents both 
enrollee cost and welfare concerns, as well as increased costs for the 
Part D program as a result of overutilization (for example, 
antipsychotics used for sedation) and increased drug prices due to lack 
of competition between manufacturers to achieve inclusion on plan 
formularies. In our January 2014 proposed rule entitled, ``Medicare 
Program; Contract Year 2015 Policy and Technical Changes to the 
Medicare Advantage and the Medicare Prescription Drug Benefit 
Programs'' (79 FR 1918, hereinafter referred to as the ``January 2014 
proposed rule''), we detailed concerns that the policy potentially 
facilitates the overutilization of drugs within the protected classes 
(79 FR 1938). Despite some formulary flexibility and ability to use 
drug UM techniques for protected class Part D drugs, Part D sponsors 
are not able to negotiate rebates across the protected classes at 
levels commensurate with other Part D drugs or prescription drugs 
covered in the commercial market.
    Consequently, although we did not propose to eliminate any of the 
protected classes, we proposed to use the authority under section 
1860D-4(b)(3)(G) of the Act to revise Sec.  423.120(b)(2)(vi). 
Specifically, we proposed to use the authority under section 1860D-
4(b)(3)(G) of the Act to establish additional exceptions to the 
requirement that all drugs in a protected class be included in the 
formulary and to permit additional use of UM. We proposed to revise 
Sec.  [thinsp]423.120(b)(2)(vi) to permit Part D sponsors to implement 
PA and ST requirements for protected class Part D drugs for broader 
purposes than allowed currently. We also proposed to allow Part D 
sponsors to exclude specific protected class Part D drugs from their 
formularies if they are a single-source drug or biological product for 
which the manufacturer introduces a new formulation with the same 
active ingredient or moiety that does not provide a unique route of 
administration or to exclude single-source drugs or biological products 
that have certain price increases beyond a certain threshold over a 
specified look back period. However, we noted that these exceptions 
will apply only to the requirement that the drug be included on the 
formulary because it is a protected class Part D drug. In other words, 
an exception from the protected class policy will not supersede our 
other formulary requirements in Sec.  423.120(b)(2).
    We received the following comments and our response follows:
    Comment: Many commenters stated that all three of our proposals 
greatly compromised access to needed therapy (that is, delays and/or 
interruptions in therapy) for patients taking protected class Part D 
drugs, which would lead to adverse health outcomes for these enrollees, 
and, in the case of HIV, endanger public health.
    Response: In considering whether to propose these exceptions, CMS 
took our other enrollee access protections into account, which have 
successfully protected beneficiary access to needed medications in the 
more than 12 years the Part D program has been operational. There are 
five such enrollee protections, which include formulary transparency, 
formulary requirements, reassignment formulary coverage notices, 
transition supplies and notices, and the expedited coverage 
determination and appeals processes.
    The first protection is our requirement for formulary transparency 
to beneficiaries. Part D sponsors are required to provide comprehensive 
formulary drug listings to the public through their own websites and 
printed materials, as well as to CMS for access through the online 
interactive drug plan comparison tool, the Medicare Plan Finder (Plan 
Finder). Beneficiaries or

[[Page 23835]]

their representatives can complete a personalized search on the Plan 
Finder to locate and select a Part D plan that covers their drugs. 
Thus, beneficiaries who review plan formularies can select plans that 
cover their current medications.
    The second type of protection is the Part D formulary requirements 
(Sec.  423.120(b)(2)). Our annual formulary review and approval process 
is designed to ensure that Part D formularies do not substantially 
discourage enrollment by certain beneficiaries and that the formularies 
include adequate representation of all necessary Part D drug categories 
or classes for the Medicare population. The formulary review and 
approval process includes the following:
     Category and Class Review (Sec.  [thinsp]423.272(b)(2)). 
Distinct from our other formulary checks, CMS reviews and approves drug 
lists that are consistent with best practice formularies currently in 
widespread use today. CMS evaluates the sufficiency of a Part D 
sponsor's formulary drug categories or classes in conjunction with the 
plan's formulary drug list to ensure that the formulary provides access 
to an acceptable range of Part D drug choices.
     Two Drugs Requirement (Sec.  [thinsp]423.120(b)(2)(i)). 
Each submitted formulary is reviewed for the inclusion of at least two 
distinct drugs from each of the submitted categories or classes, except 
as provided in Sec.  [thinsp]423.120(b)(2)(ii).
     Formulary Tier Review (Medicare Prescription Drug Benefit 
Manual, Chapter 6, section 30.2.7). The tiering structure of each 
formulary is reviewed to ensure that each category or class generally 
has at least one drug in a preferred tier.
     Common Medicare Drugs Review (Sec.  
[thinsp]423.120(b)(2)(iii)). Formularies are reviewed for inclusion of 
the drugs or drug classes that are most commonly utilized by the 
Medicare population. We use prior years' data to identify the drugs or 
drug classes with the highest utilization in Medicare Part D, and use 
these drugs or drug classes as the basis for our review in this area.
     Treatment Guidelines \1\ Review (Sec.  
[thinsp]423.120(b)(2)(iii)). We analyze formularies to determine 
whether appropriate access is afforded to drugs or drug classes 
included in widely accepted treatment guidelines.
---------------------------------------------------------------------------

    \1\ The World Health Organization (WHO) defines a standard 
treatment guideline as a systematically developed statement designed 
to assist practitioners and patients in making decisions about 
appropriate health care for specific clinical circumstances 
(available at http://www.who.int/medicines/technical_briefing/tbs/10-PG_Standard-Treatment-Guidelines_final-08.pdf).
---------------------------------------------------------------------------

     Vaccines Review (Sec.  [thinsp]423.100). Each formulary 
submission is reviewed to ensure the formulary includes Part D 
vaccines.
     Specialty Tier Review (Sec.  [thinsp]423.578(a)(7)). For 
formularies using a specialty tier, we perform an extensive review of 
the composition of each specialty tier. We apply a standard outlined in 
the annual Call Letter to determine whether drugs placed in specialty 
tiers meet the relevant cost criteria.
     Quantity Limits (QL) Amount Review (Sec.  
[thinsp]423.153(b)). QL restrictions are reviewed for appropriateness. 
The standard for the review is generally based on the maximum 
recommended dose when such dosage limits are identified in the Food and 
Drug Administration (FDA)--approved labeling.
     Restricted Access Review (Sec.  [thinsp]423.153(b)). 
Formularies are reviewed for use of PA and ST edits across drug 
categories or classes. We decline to approve UM for entire drug 
classes, other than for those categories or classes where the UM edits 
are considered to be consistent with best practices, for example, for 
erythropoietin stimulating agents (ESAs), due to the high likelihood of 
Part B versus Part D coverage issues, as well as a boxed warning in the 
FDA labeling that warns of significant adverse events when these drugs 
are used outside of their approved indications and therapeutic targets.
     Step Therapy Criteria Review (Sec.  [thinsp]423.153(b)). 
The ST requirements are reviewed to ensure that the ST algorithms are 
consistent with best practices, including prerequisite drugs, current 
industry standards and appropriate treatment guidelines.
     Prior Authorization Criteria Review (Sec.  
[thinsp]423.153(b)). We review the criteria for drugs requiring PA on 
the formulary submissions. We look to existing best practices, current 
industry standards, and appropriate treatment guidelines to check that 
the Part D plans' use of PA is consistent with such best practices. 
Submitted criteria are also compared to recognized compendia (that is, 
those compendia described in section 1927(g)(1)(B)(i) of the Act: 
American Hospital Formulary Service Drug Information and DRUGDEX 
Information System) and FDA-approved indications.
     Mid-year formulary change restrictions (Sec.  
[thinsp]423.120(b)(5)); Chapter 6 of the Medicare Prescription Drug 
Benefit Manual, section 30.3.3). Except when: (1) The FDA deems a Part 
D drug unsafe, (2) a manufacturer removes a Part D drug from the 
market, or (3) in the circumstances described under Sec.  
423.120(b)(5)(iv) when a new generic drug becomes available, a Part D 
sponsor may not remove a covered Part D drug from its formulary, or 
make any adverse change in preferred or tiered cost-sharing status of a 
covered Part D drug, between the beginning of the annual coordinated 
election period described in Sec.  [thinsp]423.38(b) and 60 days after 
the beginning of the contract year associated with the annual 
coordinated election period. However, prescription drug therapies are 
constantly evolving, and new drug availability, medical knowledge, and 
opportunities for improving safety and quality in prescription drug use 
at a lower cost will inevitably occur over the course of the year. As 
recognized in regulation, these new developments may require formulary 
changes during the year in order to provide high-quality, affordable 
prescription drug coverage. Moreover, CMS will not approve mid-year 
changes, other than the three types of changes listed here, unless the 
Part D sponsor grandfathers coverage for the remainder of the plan year 
for enrollees that are already taking the drug being removed (or 
subjected to an adverse change in preferred or tier cost sharing) at 
the time of the change.
    Thus, in summary, our formulary rules both ensure that all Part D 
formularies contain sufficient drugs to treat all disease states in the 
Medicare population and protect enrollees from significant changes in 
formularies during the course of a coverage year.
    The third type of enrollee protection is the annual notice to 
reassigned enrollees required under section 3305 of the Patient 
Protection and Affordable Care Act (PPACA, Pub. L. 111-148). Effective 
January 1, 2011, we provide individuals who receive the Low Income 
Subsidy (LIS individuals) who are reassigned to a different Part D plan 
with information on the differences under the new plan formulary, as 
well as information on the enrollee's grievance and appeal rights in 
the new plan. Thus, (in order to maintain access to a $0 premium) any 
individual who has his or her plan selection decision made through our 
reassignment process receives detailed coverage status information for 
each drug for which he or she filled a prescription between January and 
August of the previous year. With regard to the new plan, this notice 
describes for each drug whether it is on the formulary, whether the 
brand or generic version is covered, and whether UM may be applied. 
Moreover, the notice also provides a list of other available plans into 
which the enrollee can enroll with no premium if they

[[Page 23836]]

would prefer not to remain in the plan where they were reassigned. We 
send notices after the individual's reassignment and in time to allow 
for the LIS individual to make a voluntary selection of another plan 
effective January 1. Thus, any reassigned LIS individual receives 
advance notice of any change in formulary coverage of their medications 
in plenty of time to work with their prescribers if they wish to remain 
in the new plan, or to select a different Part D plan.
    The fourth type of enrollee protection is our unique transition 
supply and notice requirements. A Part D sponsor must provide for an 
appropriate transition process for Part D drugs that are not on its 
formulary with respect to: (1) The transition of new enrollees into 
prescription drug plans following the annual coordinated election 
period; (2) the transition of newly-eligible Medicare beneficiaries 
from other coverage; (3) the transition of individuals who switch from 
one plan to another after the start of the contract year; and (4) in 
some cases, current enrollees affected by formulary changes from one 
contract year to the next (see Sec.  [thinsp]423.120(b)(3) Chapter 6 of 
the Medicare Prescription Drug Benefit Manual, section 30.4). Within 
the first 90 days of an enrollee's enrollment in a new plan, plans must 
provide a temporary fill of at least an approved month's supply when 
the enrollee requests a fill of a non-formulary drug or a Part D drug 
that is on a plan's formulary but requires PA or ST under a plan's UM 
rules. This requirement applies beginning on an enrollee's first 
effective date of coverage, regardless of whether this is within the 
first 90 days of the contract year. Additionally, if a Part D sponsor 
cannot determine at the point of sale (POS) whether an enrollee is 
currently taking a drug (for example, a new enrollee filling a 
prescription for the first time), we instruct the Part D sponsor to 
provide the enrollee with a transition supply.
    A successful transition process is contingent not only upon 
providing the transitional drug supply, but also upon informing 
affected enrollees, their caregivers, and their prescribers about the 
enrollee's options for ensuring that his or her medical needs are 
safely accommodated within a Part D sponsor's formulary. For this 
reason, when providing a temporary supply of non-formulary Part D drugs 
or Part D drugs that are on a plan's formulary but require PA or ST 
under a plan's UM rules, Part D sponsors must provide enrollees and 
their prescribers with written notice within three business days after 
adjudication of the temporary fill that they are receiving a transition 
supply and that they must take action. The temporary fill and written 
notice provide enrollees with a reasonable amount of time during which 
they and their prescribers can address the issue (by requesting a 
formulary exception or transitioning to a formulary drug) and prevents 
them from having to abruptly change or go without their medication (see 
Transition notice requirements (to enrollees and providers) [Sec.  
[thinsp]423.120(b)(3)(iv and v); Chapter 6 of the Medicare Prescription 
Drug Benefit Manual, section 30.4.10]). Thus all enrollees and their 
prescribers have advance notice of any issue with continued coverage of 
a previously initiated therapy and sufficient time to resolve those 
issues without any lapse in appropriate therapy. The preceding 
formulary review and transition requirements are described in Chapter 6 
of the Medicare Prescription Drug Benefit Manual (located at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Chapter6.pdf).
    The fifth enrollee protection we took into account is the 
requirement for a robust coverage determination and appeal process, 
including the right of an enrollee or his or her prescriber to request 
an exception to the plan's UM criteria, tiered cost-sharing structure, 
or formulary. Part D sponsors are required to issue a coverage decision 
and notify the enrollee (and the prescriber, as appropriate) in writing 
in accordance with strict regulatory timeframes. In general, consistent 
with Sec.  423.578, a plan must grant a tiering or formulary exception 
(for example, provide coverage for a non-formulary drug or a formulary 
exception to the UM criteria) when it determines that the requested 
drug is medically necessary, consistent with the prescriber's 
supporting statement indicating that preferred alternatives(s) would 
not be as effective and/or would have adverse effects.
    We have established by regulation both an expedited adjudication 
timeframe if the plan or prescriber believes that applying the standard 
timeframe may jeopardize the enrollee's health, and a requirement that 
plans must issue all coverage decisions as expeditiously as the 
enrollee's health condition requires. The requirements at Sec.  423.568 
for coverage determinations and Sec.  423.572 for expedited coverage 
determinations state that the plan must notify the enrollee ``as 
expeditiously as the enrollee's health condition requires, but no later 
than [72 or 24 hours, respectively] after receiving the request, or, 
for an exceptions request, the physician's or other prescriber's 
supporting statement.'' That is to say, if an enrollee's health 
condition requires a response in less than 24 hours, the plan is 
obligated to provide one.
    If, based on the initial review of the request, the Part D sponsor 
expects to issue a partially or fully adverse decision based on medical 
necessity, the coverage determination must be reviewed by a physician 
or other appropriate health care professional with sufficient medical 
and other expertise, including knowledge of Medicare coverage criteria, 
before the Part D sponsor issues the decision on the coverage 
determination. If the Part D sponsor makes an adverse coverage 
determination, the required written notice must explain the specific 
reason(s) for the denial and include a description of the enrollee's 
right to a standard or expedited redetermination by the plan, and the 
rest of the five-level appeals process, including the right to request 
independent review. At the redetermination level of appeal, when the 
issue is the denial of coverage based on a lack of medical necessity, 
the redetermination must be made by a physician with expertise in the 
field of medicine that is appropriate for the services at issue. If a 
plan fails to make a coverage decision and notify the enrollee within 
the required timeframe, the request must be forwarded to the 
independent review entity (IRE) to be adjudicated.
    Moreover, while we do not treat a claim transaction as a coverage 
determination, we require Part D sponsors to arrange with network 
pharmacies to provide enrollees with a written copy of the Office of 
Management and Budget (OMB)-approved standardized pharmacy notice 
(``Notice of Denial of Medicare Prescription Drug Coverage,'' CMS-
10146) when the enrollee's prescription cannot be filled under the Part 
D benefit and the issue cannot be resolved at the point-of-sale (POS). 
The notice instructs the enrollee on how to contact his or her plan and 
explains the enrollee's right to request a coverage determination. 
Thus, all enrollees immediately receive clear, concise instructions on 
how to pursue their right to request a coverage determination when a 
prescription cannot be filled at POS. For additional information on the 
coverage determination, appeals, and grievance process, including 
information about the pharmacy notice, see 42 CFR part 423, subparts M 
and U, and the Parts C & D Enrollee Grievances, Organization/Coverage 
Determinations, and Appeals Guidance, available at https://www.cms.gov/
Medicare/Appeals-and-

[[Page 23837]]

Grievances/MedPrescriptDrugApplGriev/index.html.
    CMS will be monitoring appeals activity to ensure Part D enrollees' 
requests are appropriately evaluated. Additionally, we also plan to 
implement a protected class-specific Complaints Tracking Module (CTM) 
monitoring project in 2020 to monitor access to protected class Part D 
drugs. Finally, as discussed elsewhere in this final rule, CMS is 
taking steps in 2020 and future rulemaking to include e-prescribing 
improvements such as real time benefit tools (RTBTs) and Part D 
electronic prior authorization (ePA) as required by section 6062 of the 
SUPPORT for Patients and Communities Act (Pub. L. 115-271), which could 
reduce the need for coverage determinations and appeals. Taken 
together, these initiatives and the five beneficiary access protections 
described previously will help to protect enrollees from any 
unnecessary or inappropriate delay in access to medically necessary 
drugs.
    Comment: Several commenters stated that Part D sponsors already 
have enough tools to manage protected class Part D drugs, including PA 
on new starts, formulary tiering, and generic utilization. Some 
commenters added that by using these tools, Medicare currently only 
covers two-thirds of protected class Part D drugs, and plans already 
use PA on nearly one half of protected class Part D drugs. However, 
many other comments that we received expressed support for additional 
formulary management tools.
    Response: It is unclear on what basis commenters are making the 
assertions regarding Medicare only covering two-thirds of protected 
class Part D drugs and plans already using PA on nearly one-half of 
protected class Part D drugs, as plans are required to include all 
protected class Part D drugs on their formularies, with limited 
exceptions as specified at Sec.  423.120(b)(2)(vi), and the use of PA 
has been limited to new starts under our existing policy. Although we 
are not able to speak to the actual rebate values, our internal 
analyses of rebate data reported by Part D sponsors generally support 
the assertion that Part D sponsors obtain substantially smaller rebates 
for protected class Part D drugs than they do for non-protected class 
Part D drugs. Due to restrictions on disclosure of rebate data, CMS is 
not able to release this analysis to the public.
    Comment: Some commenters claimed that proposing exceptions without 
previously or concurrently proposing clinical criteria is out of order, 
and not allowed by the plain reading of the statute.
    Response: Section 1860D-4(b)(3)(G)(ii) of the Act specifies that 
subject to section 1860D-4(b)(3)(G)(iv) of the Act, the Secretary 
``shall identify, as appropriate,'' categories or classes the Secretary 
determines are of clinical concern, using criteria the Secretary 
establishes. Section 1860D-4(b)(3)(G)(iv) of the Act states that until 
such time as the Secretary establishes the criteria, the existing 
protected class categories ``shall be identified'' under section 1860D-
4(b)(3)(G)(ii) of the Act. The statute clearly contemplates that the 
existing protected classes--that is, those set forth in section 1860D-
4(b)(3)(G)(iv) of the Act--are the identified classes for purposes of 
section 1860D-4(b)(3)(G)(ii)(II) of the Act, as well as section 1860D-
4(b)(3)(G)(i)(I) of the Act, and therefore the Secretary need not 
establish criteria for identifying new or different protected classes 
before establishing exceptions.
    Comment: Some commenters claimed that CMS's protected class 
proposals violate the statutory non-discrimination provision, 
particularly with respect to enrollees who take high-cost drugs in the 
protected classes. Other commenters asserted that HIV patients, LIS 
enrollees, and dually-eligible enrollees (particularly children) would 
be disproportionately affected by our proposals.
    Response: The non-discrimination provision and the protected class 
provision are not at odds. Non-discrimination applies to all Part D 
enrollees, while the protected class provision establishes additional 
requirements for drugs in protected classes. Section 1860D-4(b)(3)(G) 
of the Act authorizes formulary exclusion and UM for protected class 
Part D drugs, which indicates that non-discriminatory formulary 
exclusion and UM are contemplated by the statute. Therefore, excluding 
a protected class drug from the formulary or imposing UM criteria would 
not be discriminatory in itself. Our approach to approving PA and ST 
criteria for protected class Part D drugs will be consistent with our 
discrimination analysis for all other categories or classes--that is, 
to ensure that these criteria, as applied, would not substantially 
discourage enrollment by certain Part D eligible individuals. As 
described previously, we conduct a discrimination review to ensure that 
plans' formulary designs are not likely to substantially discourage 
enrollment by certain Part D eligible individuals. We will conduct the 
same review with respect to the protected class drugs that plans wish 
to exclude from the formulary or for which they wish to impose PA or 
ST, in each case only as permitted under the exceptions we are 
finalizing in this rule. Moreover, there are other, non-protected 
categories and classes of drugs that consist of high-cost therapies 
(for example, drugs used to treat hepatitis C) for which CMS has been 
able to ensure a benefit design that is not likely to substantially 
discourage enrollment by certain Part D eligible individuals.
    Comment: Some commenters asserted that CMS's proposals are 
inconsistent with Congressional intent and in conflict with our 
regulation. Specifically, commenters pointed to the language we adopted 
at Sec.  423.120(b)(2)(vi)(C) specifying that any exception to the 
criteria is based upon scientific evidence and medical standards of 
practice (and, in the case of antiretroviral medications, is consistent 
with the Department of Health and Human Services Guidelines for the Use 
of Antiretroviral Agents in HIV-1-infected Adults and Adolescents).
    Response: Section 1860D-4(b)(3)(G)(i)(II) of the Act specifically 
allows the Secretary to establish exceptions that permit a Part D 
sponsor to exclude from its formulary a particular covered Part D drug 
in a category or class that is otherwise required to be included in the 
formulary, or to otherwise limit access to such a drug, including 
through PA or UM. Our existing exception at Sec.  423.120(b)(2)(vi)(C) 
was adopted after enactment of the Medicare Improvements for Patients 
and Providers Act (MIPPA) (section 176 of Pub. L. 110-275). However, 
the PPACA (section 3307 of Pub. L. 111-148) removed this statutory 
requirement. While our existing regulations at Sec.  
423.120(b)(2)(vi)(C) discuss an exception for protected class Part D 
drugs that is ``based upon scientific evidence and medical standards of 
practice (and in the case of antiretroviral medications is consistent 
with the [HHS] Guidelines for the Use of antiretroviral Agents in HIV-1 
Infected Adults and Adolescents),'' this is a separate and distinct 
exception from the exceptions proposed in this rulemaking. In other 
words, these exceptions can exist contemporaneously, and are not in 
conflict with each other.
    Comment: Stakeholders provided alternative policies to lower drug 
prices, such as allowing copay assistance cards for Part D enrollees 
and other federal healthcare program beneficiaries, encouraging Part D 
plans to institute benefit designs that include ``select care'' tiers 
that would cover drugs with low or no patient cost sharing (including 
antineoplastic drugs), exploring new ways to encourage Part D

[[Page 23838]]

plans to offer supplemental benefits for enrollees, further developing 
demonstration models that provide supplemental benefits or reduced cost 
sharing for patients with specific conditions or needs, or proposing an 
exception that would permit Part D sponsors to exclude protected class 
Part D drugs when therapeutic alternatives exist.
    Response: We thank commenters for their suggestions.
    We are finalizing our proposal to redesignate the existing 
paragraph that appears at Sec.  423.120(b)(vi)(C) that permits CMS to 
exempt other drugs that CMS specifies. However, because we are not 
finalizing our proposed exceptions regarding new formulations and price 
increases, paragraph Sec.  423.120(b)(vi)(C) will be redesignated as 
paragraph (D), instead of (F) as originally proposed.
1. Broader Use of Prior Authorization for Protected Class Part D Drugs
    Under section 1860D-4(b)(3)(G)(i)(II) of the Act, the Secretary can 
establish exceptions to permit a Part D sponsor to exclude from its 
formulary, or otherwise limit access through PA or UM, a particular 
Part D drug that is otherwise required to be on the formulary because 
it is in a protected class. This authority is specific to Part D drugs, 
and moreover, applies without regard to whether an enrollee is 
initiating therapy (new starts) or is currently taking a drug (existing 
therapy).
    Part D coverage is limited to those drugs that meet the definition 
of a Part D drug in Sec.  423.100. Therefore, regardless of a drug's 
potential status as a protected class drug, Part D sponsors are 
responsible for ensuring that coverage is limited to Part D drugs. In 
order to accomplish this, Part D sponsors use PA \2\ on drugs that have 
a high likelihood of: (1) Coverage that is available under Parts A or B 
(versus D) for the drug as prescribed and dispensed or administered; 
(2) exclusion from Part D coverage (for example, a drug or drug class 
or its medical use that is excluded from coverage or otherwise 
restricted under Part D as defined in section 1927(d)(2) of the Act); 
or (3) use other than for a medically accepted indication as defined in 
section 1860D-2(e)(4) of the Act, in the Part D sponsor's experience or 
as directed by CMS, consistent with sections 10.6 and 30.2.2.3 of 
Chapter 6 of the Medicare Prescription Drug Benefit Manual. 
Additionally, relative to medically accepted indications, consistent 
with section 10.6.1 of Chapter 6 of the Medicare Prescription Drug 
Benefit Manual, Part D sponsors may retrospectively identify and 
confirm--either as part of their retrospective review programs required 
under Sec.  423.153, or incident to another UM review--that a dispensed 
drug, including when dispensed as a transition supply, was not 
prescribed for a medically accepted indication for a particular 
individual. CMS does not consider the use of CMS-approved PA 
requirements for these purposes to be subject to section 1860D-
4(b)(3)(G) of the Act because section 1860D-4(b)(3)(G) of the Act is 
specific to Part D drugs. Consequently, consistent with current policy, 
CMS will continue to permit Part D sponsors to apply PA for potential 
protected class drugs to determine whether such drugs can be covered 
under Part D, for both new starts and existing therapy, for those drugs 
with a high likelihood of being excluded from Part D for the reasons 
provided previously, subject to CMS review and approval.
---------------------------------------------------------------------------

    \2\ Consistent with section 10.6 of Chapter 6 of the Medicare 
Prescription Drug Benefit Manual, Part D sponsors should 
consistently use prior authorization (PA) for those drugs with the 
highest likelihood of non-Part D covered uses unless plans are able 
to reliably use tools other than PA to determine appropriate 
coverage for the drug.
---------------------------------------------------------------------------

    Using the authority under section 1860D-4(b)(3)(G)(i)(II) of the 
Act, which applies without regard to new starts or existing therapy, we 
proposed to permit Part D sponsors to apply PA and ST requirements to 
new starts and existing therapy of protected class Part D drugs that 
are implemented to confirm use is intended for a protected class 
indication, ensure clinically appropriate use, promote utilization of 
preferred formulary alternatives, or a combination thereof, subject to 
CMS review and approval. We also solicited comment on whether PA and ST 
of protected class Part D drugs should be limited to new starts only.
    We received the following comments and our response follows:
    Comment: A number of commenters supported the proposal to expand 
the use of PA and ST for protected class Part D drugs from new starts 
only to new starts and existing therapy to confirm use is intended for 
a protected class indication, ensure clinically appropriate use, 
promote utilization of preferred formulary alternatives, or a 
combination thereof, subject to CMS review and approval.
    Response: We thank the commenters for their support.
    Comment: Many commenters asserted that treatments in the protected 
classes are neither interchangeable nor ``one-size-fits-all,'' adding 
that patients need access to the full range of therapies in these 
classes, and prescribers need the autonomy to make the best decision 
for each patient as an individual. Several commenters asserted that 
while clinical practice guidelines are publicly available, they are not 
intended to drive policy decisions. These commenters further added that 
while guidelines are important to give clinicians a starting point in 
the care of patients, it is ultimately up to the clinician who knows 
the full history of the individual patient to tailor treatments that 
will result in the best outcomes for that patient. Some commenters 
added that PA and ST policies intended to restrict access to physician-
directed care unnecessarily prolong ineffective treatment and prevent 
individuals from immediately starting the treatment their prescribers 
believe is best. Some commenters suggested that ST requirements should 
not be ironclad, but instead should be suggested clinical care pathways 
to provide clinical decision support. Other commenters added that the 
lack of autonomy damages the doctor-patient relationship.
    Response: Consistent with Sec.  [thinsp]423.120(b)(2)(iii) and 
Sec.  [thinsp]423.153(b), CMS conducts treatment guideline, ST 
criteria, and PA criteria reviews as part of the annual formulary 
review and approval process. CMS uses the FDA-approved labeling and 
widely accepted treatment guidelines to determine clinical 
appropriateness before approving PA or ST criteria. As discussed 
previously in this preamble, we will only approve PA and ST criteria 
that are clinically supported. These beneficiary protections, and 
specifically the limits we place on Part D sponsors' ability to apply 
PA and ST, differentiate Part D from other prescription drug benefits 
and help prevent the negative consequences (that is, prolongation of 
ineffective therapy and delaying accesses to appropriate therapy) 
suggested by the commenters and are designed to preserve the doctor-
patient relationship. Moreover, ST requirements are not ironclad 
because, consistent with Sec.  [thinsp]423.578, prescribers can request 
a formulary exception, and provided it meets the requirements at Sec.  
423.578, the supporting statement provided by a physician or other 
prescriber is given great weight when reviewing an exception request.
    Comment: Some commenters expressed concern that CMS has not 
provided specificity about the clinical criteria that will be applied 
to its formulary review or any additional oversight and monitoring that 
would be appropriate to ensure the well-being of Part D enrollees with 
chronic conditions. Commenters recommended a system whereby CMS signs 
off on ST

[[Page 23839]]

programs for protected classes based on certain defined criteria, 
including that the program is evidence-based, or for areas where 
adequate evidence is lacking, is based on accepted standards or best 
clinical practice. Additionally, commenters suggested CMS should create 
a specialty council with expertise in the fields of the various 
protected class indications to review formulary decisions.
    Response: As noted in response to the previous comment, consistent 
with Sec.  [thinsp]423.120(b)(2)(iii) and Sec.  [thinsp]423.153(b), CMS 
conducts treatment guideline, ST criteria, and PA criteria reviews as 
part of the annual formulary review and approval process. CMS uses the 
FDA-approved labeling and widely accepted treatment guidelines to 
determine clinical appropriateness before approving PA or ST criteria. 
We will only approve PA or ST criteria that are clinically supported. 
Please see section II.A. of the preamble to this final rule for an 
extensive description of our formulary review process. Consistent with 
Sec.  [thinsp]423.578, prescribers can also request a formulary 
exception if a desired outcome is not met with current formulary 
alternatives. Additionally, the CMS formulary team reviewing Part D 
formularies and related PA and ST criteria is composed of pharmacists 
who are board-certified pharmacotherapy specialists with extensive 
clinical experience reviewing PA and ST criteria. These pharmacists use 
the FDA-approved labeling and widely accepted treatment guidelines when 
considering PA and ST criteria for disease states.
    Comment: A number of commenters expressed concern that PA and ST 
policies can lead to patients' not filling their prescriptions or 
underutilizing medications, which leads to non-adherence. Commenters 
expressed concern that non-adherence, in turn, can lead to 
interruptions in therapy across the six classes, and in the case of 
HIV, would endanger public health because it is a communicable disease 
which can rapidly mutate and become resistant to therapy.
    Response: CMS acknowledges that PA and ST requirements can 
potentially cause the issues cited when they are implemented without 
the protections provided under the Part D program. However, we believe 
such concerns have been mitigated in Part D based upon our more than 12 
years of experience with the Part D program, including our existing 
policy that allows for PA and ST for new starts of protected class Part 
D drugs (except antiretrovirals), and the other unique Part D 
protections that are more robust than in comparable programs. For 
example, in all other Part D drug categories and classes, where wide 
use of PA and ST has been allowed since the beginning of the Part D 
program, subject to our other formulary requirements, we have no 
evidence to suggest that Part D enrollees routinely experience 
interruptions in therapy as a result of PA and ST requirements. 
Moreover, CMS is advancing improvements in price transparency, 
interoperability, and e-prescribing, such as RTBTs and Part D ePA as 
required by section 6062 of the SUPPORT for Patients and Communities 
Act (Pub. L. 115-271), that could help mitigate the kinds of 
administrative burdens sometimes associated with PA and ST that 
commenters claim could lead to underutilization.
    Comment: Several commenters asserted that the PA process is 
complicated and labor intensive, and also, given the high approval 
rate--particularly for protected class Part D drugs--PA requirements do 
not reduce medication utilization and thus simply impose unnecessary 
burdens on patient care. Some commenters added that this proposal is 
counter to CMS's Patients over Paperwork initiative.
    Response: We are concerned that the current policy potentially 
facilitates the overutilization of drugs within the protected classes, 
particularly antipsychotics.\3\ \4\ \5\ By limiting the ability of Part 
D sponsors to implement UM tools (for example, PA or ST requirements) 
for an entire category or class, we also limit their ability to prevent 
the misuse or abuse of drugs that are not medically necessary. 
Inappropriate use of Part D drugs can lead to adverse effects that can 
harm the enrollee and require medical treatment that will otherwise not 
have been necessary, thus increasing overall Medicare costs.\6\ We 
remain concerned there may be a link between the profitability of 
products not subject to normal price negotiations as the result of 
protected class status, such as antipsychotics, and overutilization, 
particularly off-label overutilization, of some of these drugs. 
Additionally, as discussed elsewhere in this final rule, CMS is 
advancing improvements in price transparency, interoperability, and e-
prescribing, such as RTBTs, and Part D ePA as required by section 6062 
of the SUPPORT for Patients and Communities Act (Pub. L. 115-271), that 
could help mitigate the kinds of administrative burdens sometimes 
associated with PA and ST and aligns this proposal with the Patients 
over Paperwork initiative.
---------------------------------------------------------------------------

    \3\ A May 2011 Department of Health and Human Services Office of 
Inspector General report found that of 2.1 million elderly persons 
who lived in nursing homes in the first 6 months of 2007, almost 
305,000 had a prescription for at least one atypical antipsychotic 
drug. Eighty-eight percent of these prescriptions were for off-
label, medically unacceptable uses and/or were associated with a 
specific FDA Black Box warning against their use by elderly persons 
with dementia. In all, unapproved uses and improperly documented 
claims for these drugs cost Medicare $116 million in one 6-month 
period. Medicare Atypical Antipsychotic Drug Claims for Elderly 
Nursing Home Residents. OEI-07-08-00150. https://oig.hhs.gov/oei/reports/oei-07-08-00150.pdf Accessed April 17, 2019.
    \4\ The percentage of long-term nursing home residents being 
given antipsychotic drugs dropped from about 24 percent in late 2011 
to under 15 in the third quarter of 2018. National Partnership to 
Improve Dementia Care in Nursing Homes: Antipsychotic Medication Use 
Data Report (January 2019). https://www.nhqualitycampaign.org/files/Antipsychotic_Medication_Use_Report.pdf. Accessed May 10, 2019.
    \5\ Advocates say even the lower rate of antipsychotic usage is 
excessive, given federal warnings that elderly people with dementia 
face a higher risk of death when treated with such drugs. February 
5, 2018. Crary D. Associated Press. ``New Report Details Misuse of 
Antipsychotics in Nursing Homes'' https://www.statnews.com/2018/02/05/antipsychotics-nursing-homes-elderly/ Accessed May 10, 2019.
    \6\ Prescription Drug Workgroup; American Academy of Actuaries. 
Issue Brief: Prescription Drug Spending the in US Healthcare System, 
an Actuarial Perspective. March 2018. https://www.actuary.org/content/prescription-drug-spending-us-health-care-system Accessed 
April 12, 2019.
---------------------------------------------------------------------------

    Comment: Commenters were divided over whether we should continue to 
allow PA and ST for UM purposes for new starts only. Some commenters 
strongly supported the idea. Many commenters expressed concern that 
requiring enrollees to undergo ST requirements after they have already 
been stabilized on a treatment regimen can cause disruptions to the 
overall success of the enrollee's treatment and create negative 
treatment health care outcomes. However, other commenters opposed to 
limiting PA and ST for new starts only, as contrasted to permitting PA 
and ST for new starts and existing therapy, expressed concern that data 
limitations for PDP sponsors to discern new starts from existing 
therapy at the POS would create operational issues that would 
ultimately cause them not to use this exception, which would 
sufficiently undermine the exception and render it ineffective.
    Some commenters suggested that rebate differences between the 
protected classes would yield greater cost savings for some protected 
classes, such as antipsychotics, antidepressants, and anticonvulsants, 
than the other protected classes (antiretrovirals, antineoplastics, and 
immunosuppressants). These commenters asserted that certain protected 
classes, like antiretrovirals to

[[Page 23840]]

treat HIV, do not have significant branded competition and therefore 
would not be expected to see significant rebating, even absent the 
protected classes policy.\7\ Other commenters suggested that CMS should 
introduce automatic permission for a 7-day temporary supply while 
approval is sought.
---------------------------------------------------------------------------

    \7\ See PEW Comments on Proposals to Modernize Medicare Drug 
Payments. https://www.pewtrusts.org/en/research-and-analysis/speeches-and-testimony/2019/01/25/pew-comments-on-proposals-to-modernize-medicare-drug-payments Accessed April 12, 2019.
---------------------------------------------------------------------------

    Response: CMS' current policy permits PA and ST for new starts only 
for protected class Part D drugs, except antiretroviral medications.
    We proposed to broaden the permissible use of PA and ST for 
protected class Part D drugs by permitting PA and ST for enrollees on 
existing therapy. Our goal was to provide additional flexibility so 
that Part D sponsors could better manage the benefit from a clinical as 
well as a cost savings perspective. We believe that the existing 
beneficiary protections, including our extensive clinical formulary 
review and approval process, would adequately protect enrollees from 
the inappropriate application of PA and ST requirements. Moreover, we 
would effectively limit most ST criteria to new starts as best 
practice, except when a change in therapy is clinically supported by 
the recognized compendia or widely accepted treatment guidelines. When 
step therapy is applied, we would expect to approve PA or ST 
requirements with initial treatment that is comparably supported by 
recognized compendia or widely accepted treatment guidelines.
    Nevertheless, CMS is persuaded by comments that expressed 
significant concern for the potential disruption of ongoing therapy of 
protected class Part D drugs used for protected class indications and, 
after considering all the comments, we conclude that the risks 
associated with inappropriately interrupting therapy for stabilized 
patients receiving protected class drugs for protected class 
indications by potentially subjecting them to PA or ST requirements 
outweighs the potential clinical benefits that some enrollees could 
gain from switching therapies that might be more appropriate and the 
potential cost savings that would accompany the additional formulary 
management flexibility. Therefore, we are finalizing a codification of 
existing policy that allows Part D sponsors to apply PA and ST 
requirements for protected class Part D drugs, except for 
antiretroviral medications, only for new starts, to determine if a 
drug's intended use is for a protected class indication, ensure 
clinically appropriate use, promote utilization of preferred formulary 
alternatives, or a combination thereof, subject to CMS review and 
approval. PA and ST will continue to be prohibited for antiretroviral 
medications. Because the statutory protected class provision applies 
only to Part D drugs, Part D sponsors may continue to use coverage 
determinations, including PA or other reliable tools, to determine a 
drug's status as a Part D drug irrespective of such drug's status as a 
new start or existing therapy. However, we clarify that for enrollees 
on existing therapy, Part D sponsors may not require PA to confirm that 
a drug's intended use is for a protected class indication if the drug 
otherwise does not have a high likelihood of use intended for a non-
medically accepted indication that would not be coverable under Part D. 
In other words, sponsors generally will need to rely on alternative 
approaches, such as retrospective DUR, to confirm the intended use is 
for a protected class indication for enrollees on existing therapy.
    CMS thanks the commenters for their suggestion about the 7-day 
supply. However, because of our transition policy, which requires at 
least a month's approved supply, a 7-day supply is not necessary.
    Comment: Some commenters expressed concern that expanded use of PA 
and ST will limit access to protected class Part D drugs for important 
uses that may not be considered a protected class indication, for 
example, enrollees who take various protected class Part D drugs for 
conditions like chronic pain or lupus. Commenters asserted that access 
limitations based on purported ``protected'' versus ``non-protected'' 
uses would be divorced from the clinical realities that exist for 
patients with complex and chronic conditions.
    Some commenters expressed concern that expanded use of PA and ST 
will limit access to protected class Part D drugs that have more than 
one protected class indication, for example, antidepressants with dual 
use as anxiolytics (antianxiety medications) or antipsychotics and vice 
versa, or as another example, anticonvulsants with use as adjunct 
anxiolytics or antidepressants. Other commenters added that the 
proposal does not protect off-label prescribing within a protected 
class, for example, tacrolimus for lung transplants.
    Response: A number of protected class Part D drugs have medically 
accepted indications for non-protected class uses. As discussed in the 
proposed rule, we are clarifying that we consider medically accepted 
indications consistent with the identified drug categories or classes 
of the protected classes to be ``protected class indications.'' In 
other words, when a Part D drug is used for a protected class 
indication, we consider it to be a protected class Part D drug. Using 
the commenter's example, tacrolimus for lung transplants would still be 
considered to be used for a protected class indication if use in lung 
transplant is a medically accepted indication. In addition, Part D 
drugs with multiple medically accepted protected class indications are 
protected for each such protected class indication, even if the 
indications are in more than one protected class. For example, 
aripiprazole has an FDA-labeled indication for acute and maintenance 
treatment of schizophrenia, and an FDA-labeled indication for 
adjunctive treatment of major depressive disorder; both of these uses 
are considered to be protected class indications.
    As discussed in the proposed rule at 83 FR 62158, CMS is concerned 
that unless a Part D sponsor can use PA to determine the indication for 
which the drug has been prescribed, there is the potential to increase 
Part D program costs when there may be a less expensive alternative 
available to treat a particular non-protected indication that would be 
clinically appropriate. Therefore, we will permit Part D sponsors to 
use PA only for new starts in the protected classes, except for 
antiretrovirals, to determine if such drugs' intended use is for non-
protected class indications. For those drugs that have both protected 
class and non-protected class indications, we may permit different PA 
requirements or formulary inclusion for non-protected class indications 
than those used for protected class indications, depending upon the 
clinical appropriateness and consistent with the July 25, 2018 and 
August 29, 2018 HPMS memos about indication-specific UM and formulary 
design. Additionally, to the extent that treatment guidelines for non-
protected class indications include drugs with both protected class and 
non-protected class indications, plans will still be required to meet 
all established Part D formulary criteria regarding access to such 
drugs for non-protected class uses.
    For example, for an enrollee who is a new start on topiramate, an 
anticonvulsant, the PA criteria used for topiramate could determine 
coverage and establish appropriate use in the following scenarios:

[[Page 23841]]

     If use is for weight loss (an excluded, use under Part D), 
the Part D sponsor would deny coverage. (We remind Part D sponsors that 
they may deny coverage for excluded use under Part D irrespective of 
the enrollee's status as a new start or continuing existing therapy);
     If use is as an anticonvulsant (a protected class 
indication), the plan would cover the drug; or
     If use is for migraine prophylaxis (a non-protected class, 
indication), the Part D sponsor could--
    ++ Deny coverage (if this use is not on formulary) and require the 
enrollee to seek an exception to obtain coverage; or
    ++ Apply another set of PA or ST requirements for this indication.
    We expect that all such issues or questions would be addressed 
during the coverage determination to avoid the possibility of enrollees 
needing to submit multiple coverage determination requests for the same 
drug.
    Application of PA criteria to determine use for weight loss, as an 
anticonvulsant, or for migraine prophylaxis would be consistent with 
our July 25, 2018 Health Plan Management System (HPMS) memorandum 
entitled, ``Indication-Based Utilization Management'' and our August 
29, 2018 HPMS memorandum entitled, ``Indication-Based Formulary Design 
Beginning in Contract Year (CY) 2020.''
    Finally, in their formulary materials, we would expect Part D 
sponsors to note differential formulary inclusion for drugs with regard 
to protected class versus non protected class indications.
    Comment: A few commenters suggested that, while they did not 
support our proposal to allow broader use of UM for protected class 
Part D drugs, one area in which they did support the use of such tools 
in the protected classes was to reduce the inappropriate prescribing of 
antipsychotics in the long-term care setting.
    Response: We share the commenters' concerns about inappropriate 
prescribing of antipsychotics in the long-term care setting. Allowing 
PA and ST for new starts of antipsychotics will help to limit 
overutilization of these drugs for non-protected class indications (for 
example, antipsychotic use for sedation in nursing homes).
    Comment: Some commenters expressed concern that expanded use of PA 
and ST will limit or delay access to more than one drug for an 
indicated use, asserting that individuals sometimes require more than 
one drug, or a specific combination of drugs, for a particular 
condition, and that this is particularly salient within the protected 
classes.
    Response: To the extent that the FDA labeling, recognized 
compendia, or treatment guidelines discuss the use of multiple drugs, 
or a particular combination of drugs, within the protected classes for 
a given protected class indication, consistent with our existing 
formulary requirements, plans will still be required to provide 
coverage of such drugs for those patients. Additionally, UM and 
retrospective drug utilization review (DUR) can be used to ensure that 
combinations are clinically appropriate and comport with treatment 
guidelines, even if such combination is not first-line therapy, for 
example, retrospective DUR to ensure the use of combination therapies 
of HIV medications comport with the HHS HIV Guidelines.
    Comment: Several commenters expressed concern that ST is not 
appropriate for protected class Part D drugs, particularly 
antineoplastics, antiretrovirals, and immunosuppressants.
    Response: We agree that in most circumstances of clinically 
appropriate care, ST would not be appropriate for protected class Part 
D drugs. However, as a general statement, we disagree with the 
commenters. Our more than 12 years of experience with the Part D 
program has provided evidence of inappropriate prescribing within the 
protected classes, across all of the classes, and particularly for 
antipsychotics. Additionally, we have recently seen evidence of 
fraudulent prescribing and diversion of antiretrovirals. Although we 
are taking a more limited approach to our application of PA and ST than 
we proposed and excluding antiretrovirals from the exception we are 
finalizing at Sec.  423.120(b)(vi)(C), we continue to believe that PA 
and ST are important tools to ensure clinically appropriate use of 
drugs, including those in the protected classes.
    Comment: Some commenters suggested that CMS should require plans to 
list all drugs that require PA and ST.
    Response: Plans are required to submit this information in their 
bids. Additionally, this information is available when beneficiaries 
search for plans by inputting their drugs into the Medicare Plan 
Finder. This information is also required to be available in the 
printed formulary, on the formulary on the plan's website, and 
available by calling the plan.
    Comment: Some commenters noted that the Emergency Medical Treatment 
and Labor Act (EMTALA) requirements preclude emergency physicians from 
asking patients about their insurance coverage before a medical 
screening examination is completed, and therefore, emergency physicians 
do not know which type of plan and formulary the patient may have at 
the point of prescribing. These commenters asserted that the urgency of 
treatment in the emergency setting requires emergency services 
personnel to provide medications that may not be on a Part D plan's 
formulary and suggested that CMS exempt prescriptions that originate in 
emergency settings from this exception.
    Response: Part D enrollees may be started on non-formulary 
medications as inpatients or in emergency settings that are subject to 
PA or ST requirements if continued upon discharge. If an enrollee who 
presented to the pharmacy a new prescription was started on protected 
class drugs in such a scenario, we would expect Part D sponsors to 
consider such enrollee to be continuing existing therapy. Additionally, 
as detailed previously, our transition requirements and exceptions and 
appeals process provides the necessary protection for enrollees that 
need to remain on such medications. Although Part D enrollees and 
prescribers may need to avail themselves of our exceptions and appeals 
processes, as discussed previously in this preamble and consistent with 
section 30.4.7 of Chapter 6 of the Medicare Prescription Drug Benefit 
Manual, we remind Part D sponsors that they are required to make 
coverage determinations and redeterminations as expeditiously as the 
enrollee's health condition requires.
    Comment: A commenter requested that CMS allow MA plans, through a 
step therapy edit, to require the use of a Part B drug prior to the use 
of a protected class Part D drug starting in 2020.
    Response: We noted in the proposed rule that the combination of our 
proposal to specify additional exceptions to the formulary requirements 
for protected class Part D drugs (section II.A. of the proposed rule, 
``Broader Use of Prior Authorization for Protected Class Part D 
Drugs'') and our proposal for step therapy for Part B drugs (section 
II.F of the proposed rule, ``Medicare Advantage and Step Therapy for 
Part B Drugs'') would allow MA-PD plans to require step therapy of a 
Part B drug before a Part D drug. However, step therapy of a Part B 
drug before a Part D protected class drug would be allowed only under 
the circumstances outlined in this regulation (for example, only for 
new starts of five of the six protected classes) and subject to our 
Part D formulary review process.

[[Page 23842]]

    We thank stakeholders for their comments on the proposed expansion 
of PA and ST for protected class drugs. We are redesignating the 
existing paragraph at Sec.  423.120(b)(2)(vi)(C) as paragraph (D) and 
adding a new exception at paragraph (C), which we are modifying in 
response to comments: For enrollees that are not on existing therapy on 
the protected class covered Part D drug, and except for antiretroviral 
medications, PA and ST requirements that are implemented to confirm 
that the intended use is for a protected class indication, to ensure 
clinically appropriate use, to promote utilization of preferred 
formulary alternatives, or a combination thereof, subject to CMS review 
and approval. As modified, the exception is a codification of existing 
policy and does not place additional limits on beneficiary access to 
medications.
2. New Formulations
    We proposed two changes to our protected class exceptions to 
address new formulations. First, we proposed a change to the existing 
exception at Sec.  423.120(b)(2)(vi)(A) to reflect the forthcoming 
introduction of interchangeable biological products to the market by 
specifying drug or biological products that are rated as--(1) 
therapeutically equivalent (under the FDA's most recent publication of 
``Approved Drug Products with Therapeutic Equivalence Evaluations,'' 
also known as the Orange Book); or (2) interchangeable (under the FDA's 
most recent publication of the Purple Book: Lists of Licensed 
Biological Products with Reference Product Exclusivity and 
Biosimilarity or Interchangeability Evaluations).'' Second, we proposed 
to add a new exception at new paragraph Sec.  423.120(b)(2)(vi)(D) that 
would have specified that, in the case of a single-source drug or 
biological product for which the manufacturer introduces a new 
formulation with the same active ingredient or moiety that does not 
provide a unique route of administration, the new formulation may be 
excluded from a Part D sponsor's formulary. Under our existing policy, 
Part D sponsors are not required to include a new formulation of a drug 
on their formularies when the older formulation is still available.
    We received the following comments and our response follows:
    Comment: Many commenters requested that CMS define the term ``new 
formulation.''
    Response: We declined to propose a definition for ``new 
formulation'' because we believe Part D sponsors will be better able to 
make these determinations more quickly, and we saw merit and benefit in 
providing Part D sponsors with the flexibility to determine whether 
they will exclude the drug or negotiate with the manufacturer for 
formulary inclusion and placement.
    Comment: A few commenters asked CMS to expand the application of 
the proposed exception for new formulations beyond brand drugs to 
include generic drugs.
    Response: Multiple-source drugs that are therapeutic equivalents 
already can be excluded from the formulary in accordance with the 
existing exception at Sec.  423.120(b)(5)(vi)(A).
    Comment: Several commenters wanted CMS and not, as we proposed, 
Part D sponsors, to track which drugs would be eligible for exclusion 
under this exception and to publish a list of applicable drugs. 
Manufacturers largely wanted to limit the applicability of the 
exception, and plans generally wanted CMS to make the determinations 
for them.
    Response: We did not propose that CMS publish a list of such drugs 
because we believed Part D sponsors will be better able to make these 
determinations more quickly, and we saw merit and benefit in providing 
Part D sponsors with the flexibility to determine whether they will 
exclude the drug or negotiate with the manufacturer for formulary 
inclusion and placement.
    Comment: Some commenters expressed concern that CMS was attempting 
to fix a problem that has not happened yet, as there have been no 
instances of new formulations that that meet the proposed criteria for 
an exception within the protected classes. Other commenters further 
suggested that, while they understood CMS's attempts to fix a potential 
problem, our proposal, if finalized, would leave vulnerable enrollees 
without access to needed drugs.
    Response: The purpose of our proposed exception was to specify that 
even if a new formulation of a single-source drug or biological product 
in the protected class became the only formulation available, Part D 
sponsors would have been able to exclude it from their formularies, 
except as required by our other formulary requirements in Sec.  
423.120(b)(2) and subject to our review and approval, as part of our 
annual formulary review process. Under our existing policy, which will 
still apply, Part D sponsors are not required to include a new 
formulation of a drug on their formularies when the older formulation 
is still available. CMS was persuaded by the commenters' argument 
because under our proposed policy, in a scenario where our other 
formulary requirements did not require Part D sponsors to have the new 
formulation on their formulary, a Part D enrollee who is stable on the 
old formulation could be left without access to the new formulation. 
Consequently, we decline to finalize this exception.
    Comment: Several commenters asserted that the exception for new 
formulations is unnecessary if the exception for PA and ST is 
finalized.
    Response: We thank the commenters for their suggestion. We note 
that we are not finalizing the new formulations exception.
    Receiving no comments on the proposed change to the existing 
exception at Sec.  423.120(b)(2)(vi)(A) to reflect the forthcoming 
introduction of interchangeable biological products to the market, we 
are finalizing a change to Sec.  423.120(b)(2)(vi)(A) to allow an 
exception for interchangeable biological products, in addition to our 
existing policy of an exception for therapeutically equivalent generic 
drugs. We are not finalizing the proposed exception to specify that, in 
the case of a single-source drug or biological product for which the 
manufacturer introduces a new formulation with the same active 
ingredient or moiety that does not provide a unique route of 
administration, the new formulation may be excluded from a Part D 
sponsors' formulary.
3. Pricing Threshold for Protected Class Part D Drug Formulary 
Exclusions
    To address Part D sponsors' assertion that they have limited 
ability to negotiate manufacturer rebates and achieve appreciable 
savings relative to drugs within the protected classes, as well as 
price increases for such drugs, CMS proposed, effective for plan years 
starting on or after January 1, 2020, to permit Part D sponsors to 
exclude from their formularies any single-source drug or biological 
product that is a protected class Part D drug whose price increases, 
relative to the price in a baseline month and year, beyond the rate of 
inflation. We proposed the rate of inflation would be calculated using 
the Consumer Price Index for all Urban Consumers (CPI-U), and the price 
would be defined as the Wholesale Acquisition Cost (WAC).
    We received many comments regarding this proposal, including 
commenters that supported this proposed exception, and agreed with CMS 
that this flexibility would allow plans more negotiation power with 
manufacturers on protected class Part D drugs. However, we also 
received many

[[Page 23843]]

comments urging us not to finalize this proposed exception highlighting 
concerns with beneficiary access, and inability to adequately address 
rising launch prices, among other concerns. Based on the comments and 
responses summarized below, we are not finalizing this proposed 
exception.
    We received the following comments and our response follows:
    Comment: Several commenters supported this exception, and agreed 
with CMS that this flexibility would allow plans more negotiation power 
with manufacturers on protected class Part D drugs.
    Response: While we are not finalizing the exception, we thank 
commenters for their support.
    Comment: Many commenters stated that all three of our proposals 
greatly compromised access to needed therapy (that is, delays and/or 
interruptions in therapy) for patients taking protected class Part D 
drugs, which would lead to adverse health outcomes for these enrollees, 
and, in the case of HIV, endanger public health.
    Response: In considering whether to propose these exceptions, CMS 
took our other enrollee access protections into account, which have 
successfully protected beneficiary access to needed medications in the 
more than 12 years the Part D program has been operational. There are 
five such enrollee protections, which include formulary transparency, 
formulary requirements, reassignment formulary coverage notices, 
transition supplies and notices, and the expedited coverage 
determination and appeals processes. While we believe our current 
enrollee access protects are sufficient, we appreciate commenters 
concerns regarding beneficiary access and protections and as a result 
we are not finalizing the pricing threshold exception.
    Comment: Several commenters asserted that this proposed exception, 
since it is based on cost considerations rather than scientific 
evidence, medical standards, or clinical practice, represents an 
unexplained departure from established policy that would create 
discrimination in Part D. Commenters further asserted that basing 
exceptions to the protected classes on cost considerations is neither 
supported by statute nor our existing regulations at Sec.  
423.120(b)(2)(vi)(C).
    Response: While a price increase could have triggered a formulary 
exclusion, the exception we proposed would not have superseded our 
other formulary requirements, including our annual clinically and 
scientifically based formulary review and approval process, which 
includes extensive checks to ultimately ensure adequate representation 
of all necessary Part D drug categories or classes for the Medicare 
population.
    We would also like to clarify that we do not view an exception 
based on a pricing threshold as a departure from current policy. While 
our existing regulations at Sec.  423.120(b)(2)(vi)(C) discuss an 
exception for protected class Part D drugs that is ``based upon 
scientific evidence and medical standards of practice (and in the case 
of antiretroviral medications is consistent with the [HHS] Guidelines 
for the Use of Antiretroviral Agents in HIV-1-Infected Adults and 
Adolescents),'' this is a separate and distinct exception from the 
exceptions we proposed in this rulemaking. In other words, these 
exceptions can exist contemporaneously, and are not in conflict with 
each other.
    Finally, we remind commenters that CMS conducts a discrimination 
review to ensure that plans' formulary designs are not likely to 
substantially discourage enrollment by certain Part D eligible 
individuals.
    Comment: Some commenters suggested that this exception policy was 
based on the erroneous belief that prices of protected class Part D 
drugs are increasing rapidly and that plans need additional leverage to 
negotiate prices for protected class Part D drugs, citing evidence from 
MedPAC's March 2017 report \8\ that shows plans' ability to adequately 
manage utilization of protected class Part D drugs and drive enrollees 
toward use of generic drugs.
---------------------------------------------------------------------------

    \8\ MedPAC, Report to the Congress: Medicare Payment Policy 
(March 2017). p. 412.
---------------------------------------------------------------------------

    Response: MedPAC's finding that Part D plans ``have had success at 
moving enrollees toward generic drugs, which helps to slow the growth 
in prices, even when a drug has protected status,'' does not negate the 
unsustainable growth in protected class Part D drug prices or a Part D 
sponsor's limited ability to negotiate rebates for such drugs. For 
example, in addition to Part D sponsors' limited ability to negotiate 
rebates for protected class drugs, internal CMS analysis has also shown 
price trends for brand drugs are consistently higher for drugs in 
protected classes than such drugs in non-protected classes. On the 
whole, protected class drug prices have increased more than other, non-
protected drug classes between 2012 and 2017. More recently, the 
allowed cost per days' supply increased by 24 percent for protected 
class brand drugs between 2015 and 2016 and by 14 percent between 2016 
and 2017. In contrast, the allowed cost per days' supply increased by 
16 percent for non-protected class brand drugs from 2015 to 2016, and 
showed no growth for such drugs from 2016 to 2017. In addition, in the 
March 2017 MedPAC report, MedPAC also stated ``[the drug's protected 
class status] may limit the amount of rebates plan sponsors are able to 
obtain from manufacturers in these classes,'' which supports the basis 
for which we proposed this exception. Although we are not finalizing 
the proposed exception, we remain concerned about the pricing dynamics 
for protected class drugs.
    Comment: Some commenters suggested that if CMS finalized the 
exception to broaden use of PA and ST in the protected classes, then 
finalizing the exception based on a pricing threshold would not be 
necessary.
    Response: As discussed earlier in this rule, we are only finalizing 
the exception that exists under current policy, related to the use of 
utilization management in the protected classes, which we believe will 
continue to provide Part D sponsors with the flexibility to use PA and 
ST in the protected classes and help them achieve negotiating leverage 
to realize cost savings for their enrollees. We agree that, at that 
this time, the pricing threshold exception is not a necessary addition 
to the exceptions we are finalizing.
    Comment: A commenter suggested this policy exception was 
dangerously close to price fixing.
    Response: Although we are not finalizing, this proposed policy 
would not have placed restrictions on how manufacturers may price their 
products. We also note that Part D sponsors would not have been 
required to exclude a protected class Part D drug from formulary under 
this exception, rather, we were simply proposing to provide the sponsor 
the flexibility to do so. However, as discussed further below, concern 
over whether Part D sponsors would be motivated to exercise this 
flexibility is one reason why we are not adopting this exception in 
this final rule.
    Comment: Several commenters agreed with the proposal, but noted it 
would not limit growth in the launch prices of new drugs, which have 
been found to drive spending increases among specialty drugs, and might 
even lead to higher launch prices moving forward. Commenters also noted 
the potential for gaming by manufacturers to circumvent their drug 
being eligible for formulary exclusion under this exception.
    Response: We agree with commenters that there may be an incentive 
for

[[Page 23844]]

manufacturers to come in at higher launch prices for protected class 
Part D drugs as a result of this exception. In light of this concern 
and others noted previously, we are not finalizing this exception.
    Comment: A commenter noted that Part D sponsors' contracts with 
manufacturers may include price protections, and as such, may be 
protected from any change in WAC during the contract year. Thus, Part D 
sponsors' motivation to apply this exception may be muted.
    Response: We understand that all Part D sponsors may not be 
motivated to use this exception, particularly considering the limited 
savings associated with this exception. In light of this comment, we 
are not finalizing this exception as proposed.
    Comment: We received many comments in response to these requests 
for comment on several specific technical and operational elements of 
the exception, some in support of the proposed operational and 
technical components of the exception, and others that suggested 
alternative approaches to those proposed.
    Response: We thank commenters for their responsiveness to the 
comment solicitation, but we are not finalizing this proposed 
exception.
    Comment: A commenter suggested that, in order to discourage 
potential gaming for drugs not yet on the market as of September 1, 
2019, CMS establish a reference baseline price for drugs new to the 
market consistent with the inflation-adjusted launch prices of leading 
therapeutic alternatives in the class rather than allowing the 
manufacturer to establish its own baseline price.
    Response: CMS shares the commenter's concern over the risk of 
potential gaming, and, thus, we are not finalizing this exception while 
we continue to consider how best to align incentives to encourage 
manufacturers to keep drug prices low of their own volition, as was 
intended with the proposed exception.
    Comment: A commenter recommended that CMS apply this exception more 
broadly to include all National Drug Codes (NDCs) assigned to single-
source brand drugs, single-source generic drugs, and generic drugs, as 
well as both protected class and non-protected class Part D drugs and 
biological products. The commenter asserted that if only protected 
class Part D drugs are excluded based upon price increases beyond a 
certain threshold, that over time, manufacturers will have the ability 
to apply egregious price increases to an NDC that applies to more than 
one drug, as well as non-protected classes in order to make up for any 
lost compensation.
    Response: While we are not finalizing this exception, we remind the 
commenter that Part D sponsors already have the flexibility to exclude 
non-protected class Part D drugs from their formularies or apply PA and 
ST requirements to such drugs, unless the drug is required to be on 
formulary to be compliant with our formulary requirements. As discussed 
earlier in the preamble, this exception--which would have applied only 
to the requirement that all protected class Part D drugs be included on 
the formulary--does not supersede our formulary requirements at Sec.  
423.120(b)(2). Regarding multiple-source generic drugs, as discussed in 
the proposed rule (83 FR 62160), we declined to apply this exception to 
such drugs given the wide use of maximum allowable cost (MAC) pricing 
for such drugs which yields changes in list prices such as WAC 
meaningless.
    Regarding potential price increases for an NDC related to multiple 
drugs, it is unclear what the commenter means by referring to ``an NDC 
that applies to more than one drug'' because an NDC is specific to a 
drug, the manufacturer, strength, dosage form, and quantity. However, 
if the commenter simply means that manufacturers will increase prices 
for multiple other non-protected class Part D drugs to offset limiting 
price increases on a specific protected class drug or drugs to the 
cumulative change in CPI-U, we share those concerns. Based on the 
comments received, we are not finalizing this proposed exception.
4. Solicitation of Comment for Special Considerations
    In considering whether exceptions to the added protections afforded 
by the protected class policy are appropriate, we took other enrollee 
protections in the Part D program into account. As detailed earlier in 
section II.A of this final rule, there are five such enrollee 
protections which include formulary transparency, formulary 
requirements, reassignment formulary coverage notices, transition 
supplies and notices, and the expedited exception, coverage 
determination, and appeals processes. Our formulary review and approval 
process includes a formulary tier review, and for PA and ST, we also 
conduct restricted access, ST criteria, PA outlier, and PA criteria 
reviews. Additionally, our formulary review and approval process takes 
into consideration the applicable indication, proposed applicability to 
new or continuing therapy, and likelihood of comorbidities when 
reviewing PA and ST criteria submitted to CMS by Part D sponsors. We 
noted that best practice UM practices do not require an enrollee who 
has been stabilized on an existing therapy of a protected class Part D 
drug for a protected class indication to change to a different drug in 
order to progress through ST requirements, and we would not have 
expected Part D sponsors to require, nor would CMS have been likely to 
approve such requirements, unless clinically warranted (for example, an 
enrollee was started on clinically inappropriate therapy or received 
second- or third-line therapy for initial treatment of a condition, as 
described by the recognized compendia). Moreover, we believe our 
current approach, which ensures at least one drug within the class is 
offered on a preferred tier and free of PA and ST, is working well and 
should be maintained. Currently, Part D formularies frequently have 
more than one protected class Part D drug at a preferred cost sharing 
level, especially in classes with significant generic penetration, 
without any PA or ST requirement, and we do not expect that this policy 
will prompt Part D sponsors to stop including protected class Part D 
drugs on tiers with preferred cost sharing.
    Finally, our transition policy will continue to require Part D 
sponsors to provide all new enrollees with at least an approved month's 
supply if the Part D sponsor cannot determine at the point of sale 
whether the enrollee is currently taking such protected class Part D 
drug. (For a detailed discussion of our transition requirements, see 
section II.A. of this final rule and regulations at Sec.  
423.120(b)(3).)
    Nonetheless, it was our intent to make certain that the three 
proposed exceptions to the protected class policy (that is, broader use 
of PA, new formulations, and pricing thresholds) would not introduce 
interruptions for enrollees on existing therapy of protected class Part 
D drugs for protected class indications.
    We solicited comment on whether there are additional considerations 
that will be necessary to minimize: (1) Interruptions in existing 
therapy of protected class Part D drugs for protected class indications 
during PA processes; and (2) increases in overall Medicare spending 
from increased utilization of services secondary to adverse events from 
interruptions in therapy. These could include, but are not limited to, 
for example, special transition considerations for on-formulary 
protected class Part D drugs for which the Part D sponsor has

[[Page 23845]]

established PA requirements, or as another example, for transitioning 
some enrollees taking protected class Part D drugs for protected class 
indications to alternative Part D drugs. If so, we sought comment on 
why our current requirements and protections are inadequate, or could 
be improved. In addition, we solicited comment on what specific patient 
population(s), individual patient characteristic(s), specific protected 
class Part D drugs or individual protected drug classes will require 
such additional special transition or other protections and how such 
population(s) can be consistently identified. Finally, we solicited 
comment on other tools that could be used to minimize interruptions in 
existing therapy of protected class Part D drugs for protected class 
indications during PA processes, for example, wider use of diagnosis 
codes on prescriptions, ePA during e-prescribing, targeting protected 
class Part D drugs in Medication Therapy Management (MTM) programs, or, 
as another example, expanded use of a data-sharing tool to exchange 
information for enrollees transitioning from one plan to another.
    We received the following comments and our response follows:
    Comment: Several commenters expressed concerns that our proposals 
would increase costs for Medicare Part D enrollees, the Part D program, 
and Medicare overall due to increased utilization of other healthcare 
services, for example, emergency department visits and inpatient 
admissions. Some commenters requested that we exempt various protected 
class indications or enrollees in LTC settings or served by LTC 
pharmacies from the application of the proposed exceptions, asserting 
these enrollees will have higher hospital admission and readmission 
rates due to complications from ineffective medications and consequent 
needs for additional treatment.
    Response: CMS solicited comment on whether there are additional 
considerations that will be necessary to minimize increases in overall 
Medicare spending from increased utilization of services secondary to 
adverse events from interruptions in therapy but did not receive 
suggestions, apart from exempting virtually all of the applicable 
enrollees from the exceptions, to abate these concerns.
    We understand the importance of access and continuity of care with 
these as well as all classes and will take that into consideration when 
approving PA and ST criteria. Our annual formulary review and approval 
process includes extensive checks to ensure appropriate representation 
of drugs for all necessary Part D drug categories or classes for the 
Medicare population. Our process has been working well to ensure that 
enrollees have access to the drugs they need for their medical 
conditions. Formularies will still be subject to the entire CMS 
formulary review criteria, and our formulary review criteria look at 
widely accepted treatment guidelines.
    As discussed previously, we are finalizing one exception to the 
protected classes formulary inclusion requirements. We are finalizing 
an exception, consistent with current policy, to allow Part D sponsors 
to apply PA and ST requirements for protected class Part D drugs, 
except antiretrovirals, for new starts only to confirm intended use is 
for a protected class indication, ensure clinically appropriate use, 
promote utilization of preferred formulary alternatives, or a 
combination thereof. Under this exception, PA and ST will continue to 
be prohibited for antiretroviral medications. Any PA or ST requirements 
implemented under this exception will be subject to CMS review and 
approval.
    Comment: Several commenters expressed support for our existing 
transition requirements.
    Response: We thank the commenters for their support.
    Comment: We received comments in support of our suggestions on 
other tools that could be used to minimize interruptions in existing 
therapy of protected class Part D drugs for protected class indications 
during PA processes, for example, wider use of diagnosis codes on 
prescriptions, ePA during e-prescribing, targeting protected class Part 
D drugs in Medication Therapy Management (MTM) programs (including 
mandatory MTM for Part D enrollees in nursing homes on protected class 
Part D drugs), or, as another example, expanded use of a data-sharing 
tool to exchange information for enrollees transitioning from one plan 
to another. Additionally, a commenter urged improvements to electronic 
health records and claims processing.
    Response: We thank the commenters for their support. As discussed 
previously, CMS is taking steps to provide e-prescribing improvements 
such as RTBTs, and Part D electronic prior authorization as required by 
section 6062 of the SUPPORT for Patients and Communities Act (Pub. L. 
115-271). CMS could explore the generation of reports through data 
sharing platforms. Regarding electronic health records and claims 
processing, we thank the commenter and welcome more input on this 
suggestion.
    Comment: A number of commenters claimed that existing protections 
do not reliably ensure access to medically appropriate protected class 
Part D drugs. Some commenters in support of the proposals also 
encouraged CMS to improve enrollee protections, namely the appeals and 
exceptions processes. Commenters disputed our claim that our appeals 
and exceptions processes are mature and have proven workable, asserting 
that Medicare Part D enrollees afflicted with conditions addressed by 
protected class drugs continue to have considerable difficulty in 
navigating Part D, even after the improvements that CMS has recently 
taken to assist Medicare beneficiaries with selecting a plan and 
navigating the appeals and grievance processes. Commenters added that 
this is particularly concerning given that the proposal does not make 
mention of any additional CMS resources (such as additional staff or 
appropriations) to ensure that enrollees who need access to drugs 
within the protected classes are able to obtain their medications in a 
timely manner. Some commenters suggested that CMS should establish an 
expedited exceptions process that functions in less than 24 hours. 
Other commenters added that broader PA and ST should not be implemented 
without improvements to electronic health records (EHRs) and claims 
processing.
    Response: CMS disagrees with the assertion that existing appeals 
processes are inadequate to ensure access to needed to medically-
appropriate protected class Part D drugs, and commenters provided no 
evidence to support statements that Part D enrollees with protected 
class indications have difficulty navigating Part D. To that end, under 
the exceptions we are finalizing in this rule, the appeals process will 
work as it does today. If the enrollee's plan will not cover a drug the 
enrollee needs, or it will cover the drug at a higher cost than they 
believe they are required to pay, the enrollee or their prescriber can 
request a coverage determination (for example, a PA or tiering 
exception) from their plan. If their plan denies their request, they 
have the right to appeal that decision to obtain a redetermination. 
Additionally, the requirements at Sec.  423.568 for coverage 
determinations and Sec.  423.572 for expedited coverage determinations 
state that the plan must notify the enrollee ``as expeditiously as the 
enrollee's health condition requires, but no later than [72 or 24 
hours, respectively] after receiving the request, or, for an exceptions 
request, the physician's or other prescriber's

[[Page 23846]]

supporting statement.'' That is to say, if an enrollee's health 
condition requires a response in less than 24 hours, the plan is 
obligated to provide one. Therefore, our existing appeals requirements 
already provide for timeframes of less than 24 hours when warranted.
    CMS will continue to closely monitor appeals activity through 
audits and our Complaints Tracking Module (CTM) to ensure enrollees' 
requests are appropriately evaluated and that Part D sponsors are 
adhering to regulations. While we have confidence in our appeals 
process, CMS continues to take steps to improve the Part D Appeals 
process. Additionally, e-prescribing improvements such as real-time 
benefit tools (RTBTs) and Part D electronic prior authorization as 
required by section 6062 of the SUPPORT for Patients and Communities 
Act (Pub. L. 115-271) could reduce the need for appeals. CMS will take 
steps to further improve and strengthen the appeals process in response 
to any issues that arise.
    Finally, CMS does not foresee a need to augment its clinical review 
staff because we already review PA and ST in the protected classes for 
new starts.
    Comment: Some commenters claimed that the existing formulary review 
and approval process is inadequate to ensure non-discriminatory PA and 
ST requirements that would limit access to protected class Part D 
drugs, and the only way to ensure access to drugs in these classes is 
to maintain the policy as it exists today. Commenters asserted that our 
outlier analysis is an insufficient tool to provide oversight against 
potential discriminatory practices, particularly against enrollees who 
take high-cost drugs in these classes, HIV patients, LIS enrollees, and 
dually-eligible enrollees (particularly children). Commenters added 
that an outlier analysis is simply a test to determine if a certain 
plan is being more discriminatory than other plans but would not 
identify common discriminatory practices across plans. However, other 
commenters highlighted industry practices that are not currently 
allowed in Part D and were concerned that such practices would be 
allowed in Part D under our proposed modifications to the protected 
class policies. For example, some commenters expressed concern that we 
would allow PA for Truvada[supreg] which is indicated for prevention of 
HIV transmission. Other commenters cited commercial plans' requirements 
to use multi-tablet regimens for HIV, which are known to reduce 
medication adherence.
    Response: We conduct a discrimination review consistent with Sec.  
[thinsp]423.272(b)(2) to ensure that plans' formulary designs are not 
likely to substantially discourage enrollment by certain part D 
eligible individuals. Our clinical checks are intended to ensure that 
formularies are robust and do not substantially discourage enrollment 
by certain beneficiaries. Our outlier analysis is an additional step 
that allows us to further question why a specific formulary either has 
additional or fewer UM requirements than most other plans (for example, 
an outlier because a Part D sponsor has not imposed PA where most other 
Part D sponsors require PA, or an outlier because a Part D sponsor 
requires PA when most other Part D sponsors do not). Being an outlier 
in and of itself does not mean a formulary substantially discourages 
enrollment (it might be just the opposite), but rather ensures the plan 
can justify the basis for its additional or fewer UM requirements 
compared to other plans.
    All of our formulary requirements, when taken together, have 
resulted in CMS' ability, in its twelve-year experience implementing 
the benefit, to prevent formularies that are likely to substantially 
discourage enrollment by certain Part D-eligible individuals under 
plans. This includes protected class Part D drugs, due to our existing 
allowance of PA and ST for new starts. We do not anticipate that 
adoption of this policy will change our ability to prevent formularies 
that are likely to substantially discourage enrollment by certain Part 
D-eligible individuals under plans now. We are not aware of any 
industry-wide practices that would result in formularies that are 
likely to substantially discourage enrollment by certain Part D-
eligible individuals under plans that would also meet the totality of 
our formulary requirements.
    Comment: Some commenters expressed frustration that coverage 
determinations, exceptions, and appeal approvals are usually only 
granted for the duration of 1 plan year. Other commenters added that 
immunosuppressant approvals, specifically, should be extended to match 
the life of the transplanted organ.
    Response: Part D benefits operate on a plan year for 1 calendar 
year. While extended-duration (that is, longer than 1 calendar year) 
approvals may be possible for Part D enrollees who stay with a plan 
across multiple plan years, we recognize such approvals present 
challenges when Part D enrollees switch plans. CMS has instituted the 
Additional Beneficiary Information Initiatives (ABII) web portal to 
facilitate data sharing from Medicare Part A claims data relative to 
Medicare-covered transplants to aid Part D sponsors in making these 
determinations; plans may request access to ABII to receive this 
information about their enrollees. If a Part D enrollee switches plans, 
the transition policy would apply and plans would be required to 
provide the medication for at least an approved month's supply. As 
discussed previously, CMS could explore the generation of additional 
pertinent reports through secure data-sharing platforms.
    Comment: Related to the pricing threshold exception, a commenter 
suggested that enrollees doing well on a therapy should not lose their 
ability to take that therapy, and enrollees on an existing therapy 
should be grandfathered such that they do not lose the ability to 
continue on that therapy. In addition, for enrollees not eligible for 
grandfathering, Part D sponsors should be required to notify enrollees 
of their decision to exclude a therapy any time they do so pursuant to 
this exception.
    Response: We appreciate the concerns raised by these commenters 
and, as noted previously, will not be finalizing this proposal.
    We are finalizing the first exception with the modification to 
allow Part D sponsors to apply PA and ST requirements for protected 
class Part D drugs, except antiretrovirals, only for new starts to 
confirm intended use is for a protected class indication, to ensure 
clinically appropriate use, to promote utilization of preferred 
formulary alternatives, or a combination thereof, subject to CMS review 
and approval. PA and ST will continue to be prohibited for 
antiretroviral medications under this exception. As such, we also allow 
indication-based formulary design and utilization management for new 
starts of protected class Part D drugs, which would allow Part D 
sponsors to exclude the protected class Part D drug from the formulary 
for non-protected class indications. As is required for all other Part 
D drug categories or classes, these formulary design and utilization 
management edits will be subject to CMS review and approval as part of 
our annual formulary review and approval process, which includes 
reviews of PA and ST edits that will restrict access, step therapy 
criteria, PA outliers, and PA criteria. (For an extensive description 
of our annual formulary checks see section II.A.1. of this final rule.) 
We also are finalizing a change to permit exclusion of interchangeable 
biological products. As modified, the exception is a codification of 
existing policy and does not place additional limits on beneficiary 
access to medications.

[[Page 23847]]

    In response to comments, we are not finalizing the proposed 
exceptions to (1) allow Part D sponsors to exclude a protected class 
Part D drug from a formulary if it is a new formulation of a single-
source drug or biological product with the same active ingredient of 
moiety that does not provide a unique route of administration, 
regardless of whether the other formulation is removed from the market; 
and (2) to permit Part D sponsors to exclude from their formularies any 
single-source drug or biological product that is a protected class Part 
D drug whose price increases, relative to the price in a baseline month 
and year, beyond the rate of inflation.

B. Prohibition Against Gag Clauses in Pharmacy Contracts (Sec.  
423.120(a)(8)(iii))

    In October 2018, Congress enacted the ``Know the Lowest Price Act 
of 2018'' (Pub. L. 115-262). The measure, which amends section 1860D-4 
of the Act by adding a paragraph (m), prohibits Medicare Part D plan 
sponsors from restricting their network pharmacies from informing their 
Part D plan enrollees of the availability of prescription drugs at a 
cash price that is below what that the enrollee will be charged (either 
the cost sharing amount or the negotiated price when it is less than 
the enrollee's cost sharing amount) for the same drug under the 
enrollee's Part D plan. In effect, the legislation prohibits Part D 
sponsors from including in their contracts with their network 
pharmacies ``gag clauses'', a term used within the prescription drug 
benefit industry that refers to provisions of drug plan pharmacy 
contracts that restrict the ability of pharmacies to discuss with plan 
enrollees the availability of prescriptions at a cash price that is 
less than the amount the enrollee will be charged when obtaining the 
prescription through their insurance. The measure becomes effective 
with the plan year starting January 1, 2020.
    To make the Part D regulations consistent with the statute 
governing the Part D program, we proposed to incorporate the new 
requirement into the Part D regulations. Specifically, we proposed to 
amend the set of pharmacy contracting requirements at Sec.  
423.120(a)(8) by adding a paragraph (iii) that provides that a Part D 
sponsor may not prohibit a pharmacy from, nor penalize a pharmacy for, 
informing a Part D plan enrollee of the availability at that pharmacy 
of a prescribed medication at a cash price that is below the amount 
that the enrollee will be charged to obtain the same medication through 
the enrollee's Part D plan.
    Comment: A number of commenters expressed strong support and 
appreciation for our effort to incorporate into the Part D regulations 
the provisions of the ``Know the Lowest Price Act'' promptly after 
enactment of the legislation.
    Response: We thank the commenters for their support.
    Comment: Several commenters requested that CMS address additional 
issues related to beneficiaries' opting to purchase their prescriptions 
outside their Part D plan. Specifically, they suggested that CMS adopt 
policies to make it easier for plan enrollees to have their cash 
purchases reported electronically and automatically to their Part D 
plan sponsors, allowing the payment amounts to be counted toward 
beneficiaries' TrOOP and benefit deductible accumulations. Commenters 
also expressed their concern that prescriptions obtained outside the 
Part D benefit are not subject to plans sponsors' drug utilization 
review and medication therapy management tools, creating potential 
health and safety risks for beneficiaries who pay out of pocket for a 
covered medication. Some of these commenters urged CMS to take steps to 
ensure beneficiaries are made aware of this particular risk.
    Response: We thank the commenters for their perspectives, though 
their suggestions are outside the scope of this rule. We have 
previously advised in sub-regulatory guidance (Chapter 5, Section 30.1 
of the Medicare Prescription Drug Benefit Manual) that sponsors should 
accept paper claims for prescriptions their enrollees obtain without 
using their Part D benefit so that the sponsor can make the appropriate 
determinations concerning reimbursement, total gross covered drug cost, 
and TrOOP. Also, in our guidance, we have affirmed that it is in the 
best interests of beneficiaries to have their claims processed through 
their Part D sponsor so that concurrent drug utilization review can be 
performed (Chapter 14, Section 50.4.3 of the Medicare Prescription Drug 
Benefit Manual). We will continue to evaluate the impact on the Part D 
program of Part D plan enrollees filling their prescriptions outside 
their benefit plan and may consider proposing regulatory changes to 
address identified concerns in the future.
    Comment: A commenter noted that the language of the proposed rule 
did not exactly mirror the language of the underlying statute. 
Specifically, the statute states that a sponsor may not restrict a 
pharmacy from informing a beneficiary of a ``lower price the individual 
would pay for the drug'' if obtained without using insurance while the 
rule refers to a ``cash price'' that is below the amount that would be 
charged to obtain the drug through insurance. The commenter states that 
the term ``cash price'' is not used in the statute and therefore, to 
promote uniformity in practical application of the requirement 
throughout the payer and provider industry, it should not be used in 
the corresponding rule.
    Response: We appreciate the comment, though we believe that while a 
rule must reflect the meaning of its underlying statute, it need not 
simply re-state the statutory language. The commenter has not indicated 
how the use of the term ``cash price'' changes the meaning of the 
statute or could create confusion in its application. We have used the 
term ``cash price'' in previous Part D guidance addressing the issue of 
beneficiaries obtaining drugs outside their Part D benefit plans, 
including manual chapters and the May 2018 memorandum issued by the 
Administrator advising Part D sponsors that they should not include gag 
clauses in their pharmacy contracts. The term ``cash price'' is a term 
understood within the industry to mean a price charged by a pharmacy to 
customers not using insurance to obtain a prescription drug and its use 
in the rule promotes clarity in the statement of the new prohibition.
    For the reasons sets forth in the proposed rule and our response to 
the related comments, we are finalizing the proposed regulation at 
Sec.  423.120(a)(8)(iii) without modification.

C. E-Prescribing and the Part D Prescription Drug Program; Updating 
Part D E-Prescribing Standards (Sec.  423.160)

1. Legislative Background
    Section 101 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) (Pub. L. 108-173) requires the adoption 
of Part D E-Prescribing (eRx) standards. Prescription Drug Plan (PDP) 
sponsors and Medicare Advantage (MA) organizations offering Medicare 
Advantage Prescription Drug Plans (MA-PD) are required to establish 
electronic prescription drug programs that comply with the e-
prescribing standards that are adopted under this authority. There is 
no requirement that prescribers or dispensers implement eRx. However, 
prescribers and dispensers who electronically transmit and receive 
prescription and certain other information for covered drugs prescribed 
for Medicare Part D eligible

[[Page 23848]]

beneficiaries, directly or through an intermediary, are required to 
comply with any applicable standards that are in effect.
    For a further discussion of the statutory basis for this final rule 
and the statutory requirements at section 1860D-4(e) of the Act, please 
refer to section I. of the eRx and the Prescription Drug Program 
February 2005 proposed rule (70 FR 6256).
2. Regulatory History
    Part D eRx standards are periodically updated to take new 
knowledge, technology, and other considerations into account. CMS 
currently requires providers and dispensers to utilize the National 
Council for Prescription Drug Programs (NCPDP) SCRIPT standard, 
Implementation Guide Version 10.6, which was approved November 12, 
2008, to provide for the communication of a prescription or 
prescription-related information for certain named transactions. 
However, as of January 1, 2020, prescribers and dispensers will be 
required to use the NCPDP SCRIPT standard, Implementation Guide Version 
2017071, which was approved July 28, 2017 to provide for the 
communication of prescription or prescription-related information 
between prescribers and dispensers for the old named transactions and a 
handful of new transactions named at Sec.  423.160(b)(2)(iv). We also 
currently require (under Sec.  [thinsp]423.160(b)(5)) Medicare Part D 
plan sponsors and prescribers to convey electronic formulary and 
benefits information amongst themselves using Version 3 Release 0 
(Version 3.0), from April 2012 of the NCPDP Formulary and Benefits 
Standard Implementation Guides. (For a detailed discussion of the 
regulatory history of eRx standards see the November 2017 proposed rule 
(82 FR 56437 and 56438)).
    The NCPDP SCRIPT eRx standards (SCRIPT) and the NCPDP Formulary and 
Benefits standards (F&B) have become critical components of the Part D 
program. In the 2018 calendar year, over 66 percent of Part D 
prescriptions were transmitted electronically using the applicable 
SCRIPT standard, and all Part D plans implemented electronic F&B files 
using the adopted standard. Prescribers can use electronic F&B 
transactions during the eRx process. F&B is a batch mode transaction 
standard by definition, and therefore does not provide real-time 
information. A batch transaction allows plans to send the information 
nightly, weekly or even monthly. As plans make routine changes in their 
formularies, they may or may not be captured on the batch formulary 
files. In addition, F&B provides information on a contract level, 
rather than a patient level, and consequently could not provide out-of-
pocket costs for a given patient at a given point in time, since costs 
and applicability of utilization management could vary significantly 
for individual beneficiaries depending on a variety of factors. For 
example, a contract may have a prior authorization (PA) requirement on 
a drug and that requirement would be listed on F&B data. However, if a 
particular beneficiary has already completed that PA requirement, RTBT 
would erroneously indicate that PA would be required in order for the 
plan to pay for the drug as prescribed. Likewise, F&B data could 
display outdated information about beneficiary-specific out-of-pocket 
costs based on the applicable phase of the benefit. For example, it 
would not indicate the out of pocket costs for a particular beneficiary 
when the deductible has been exhausted.
    We proposed a real-time benefit tool (RTBT) to serve as a critical 
adjunct to the existing SCRIPT and F&B electronic standards. Should 
prescribers chose to implement electronic prescribing, the existing 
SCRIPT standard allows them a means to conduct electronic prescribing, 
while the F&B standard allows a prescriber to see what is on the plan's 
formulary. However, neither of those standards can convey patient-
specific real-time cost or coverage information that includes formulary 
alternatives or utilization management data to the prescriber at the 
point of prescribing. We proposed RTBT to be layered on top of F&B data 
to gain a more complete view of the beneficiary's prescription benefit 
information. It can augment the information available in F&B because, 
though F&B is useful, it is a batch mode transaction standard by 
definition and therefore does not provide real-time information.
    As described in more detail in the next section, we believe 
requiring plans to make one or more RTBTs available to prescribers will 
lead to higher prescriber use of F&B information during the eRx 
process. To be eligible for selection by a Part D sponsor, we proposed 
to require that the RTBT be capable of integrating with at least one 
prescriber's eRx and EMR system(s) the latter of which will hereinafter 
be referred to as an electronic health record or EHR for consistency 
with current Departmental terminology) and providing patient-specific 
coverage information at the point of prescribing to enable the 
prescriber and patient to collaborate in selecting a medication based 
on clinical appropriateness, coverage and cost.
    We believe that furthering prescription price transparency is 
critical to lowering overall drug costs and patients' out-of-pocket 
costs, and anticipate improved medication adherence, as well as support 
for the MMA objectives of patient safety, quality of care, and 
efficiencies and cost savings in the delivery of care.
3. Adoption of a Real-Time Benefit Tool
    As we explained in the proposed rule (83 FR 62152), the Medicare 
Part D program allows contracted entities that offer coverage through 
the program latitude to design plan benefits, provided these benefits 
comply with all relevant requirements. This flexibility results in 
variation in Part D plans' benefit design, cost-sharing amounts, 
utilization management tools (that is, prior authorization, quantity 
limits, and step therapy), and formularies (that is, covered drugs). We 
are aware of several Part D prescription drug plans that have begun to 
offer RTBT inquiry and response capabilities to some physicians to make 
beneficiary-specific drug coverage and cost data visible to prescribers 
who wish to use such data at the point-of-prescribing. We have reviewed 
multiple RTBT software solutions and have found that they are generally 
designed to provide patient-specific clinically appropriate information 
on lower-cost alternative therapies through the prescribers' eRx or EHR 
systems, if available, under the beneficiary's prescription drug 
benefit plan. However, for those software solutions that are capable of 
providing such decision support, based on our current experience, we 
understand that the prescribers will only embrace the technology if the 
prescriber finds the information to be readily useful. Thus, we stated 
in the proposed rule that to ensure success, we believe that the Part D 
sponsor must present prescribers with formulary options that are all 
clinically appropriate and accurately reflect the costs of their 
patient's specific formulary and benefit options under their drug 
benefit plan. In addition, as stated in the proposed rule, those who 
use plans' current RTBT technology report that prescribers are most 
likely to use the information available through RTBT transactions if 
the information is integrated into the eRx workflow and electronic 
health record (EHR) system. This will allow the prescriber and patient, 
when appropriate, to choose among clinically acceptable alternatives 
while weighing coverage and costs. Since eRx is generally performed 
within the provider's EHR system, integration of the RTBT function 
within the EHR generally, and the eRx workflow

[[Page 23849]]

specifically, appears to be critical for the successful implementation 
of the technology. However, we recognize that without an industry 
standard for RTBT, prescribers may be offered multiple technologies, 
which may overwhelm and create burden for EHR vendors. We also 
recognized that without a standard, the RTBT tool provided may not be 
integrated with a prescriber's EHR, thus limiting its utility.
    As stated in the proposed rule (83 FR 62152), we are interested in 
fostering the use of these real-time solutions in the Part D program, 
given their potential to lower prescription drug spending and minimize 
beneficiary out-of-pocket costs. Not only can program spending and 
beneficiary out-of-pocket costs be reduced, but evidence suggests that 
reducing medication cost also yields benefits in patients' medication 
adherence. As mentioned in the proposed rule, a 2012 review of studies 
found that 85 percent of studies demonstrated that increasing patient 
cost-share for a medication was associated with a significant decrease 
in medication adherence.\9\ This review also revealed that 86 percent 
of these studies demonstrated that increased medication adherence was 
associated with improved clinical outcomes. With respect to studies 
that directly measured the impact of out-of-pocket costs on outcomes, 
76 percent found that increased medication out-of-pocket costs was 
associated with adverse non-medication related outcomes such as 
additional medical costs, office visits, hospitalizations, and other 
adverse events. Subsequently published studies continue to reflect 
similar findings.\10\ \11\
---------------------------------------------------------------------------

    \9\ Eaddy, M. T., Cook, C. L., O'Day, K., Burch, S. P., & 
Cantrell, C. R. (2012). How Patient Cost-Sharing Trends Affect 
Adherence and Outcomes: A Literature Review. Pharmacy and 
Therapeutics, 37(1), 45-55.
    \10\ Hershman, D.L., Tsui, J., Meyer, J., et al. (2014). The 
change from brand-name to generic aromatase inhibitors and hormone 
therapy adherence for early-stage breast cancer. Journal of the 
National Cancer Institute. 106(11), dju319.
    \11\ Chen SY, Shah SN, Lee YC, et al. (2014). Moving branded 
statins to lowest copay tier improves patient adherence. American 
Journal of Managed Care. 20, 34-42.
---------------------------------------------------------------------------

    Therefore, we proposed that each Part D sponsor be required to 
implement one or more RTBT capable of integrating with at least one 
prescriber's eRx and EHR systems to provide complete, accurate, timely, 
clinically appropriate and patient-specific real-time formulary and 
benefit information to the prescriber. We also encouraged plans to use 
RTBTs to promote full drug cost transparency by showing each drug's 
full negotiated price (as defined in Sec.  423.100), in addition to the 
beneficiary's out-of-pocket cost information.
    We also stated that health care providers using the RTBT should 
ensure that individuals are aware that information about services or 
treatment, such as a future prescription, may be disclosed to the plan 
by the tool, and effectuate the individual's disclosure restriction 
request by refraining to use the tool in instances in which the patient 
intends to self-pay in full. We encouraged covered health care 
providers to discuss with the individual whether the individual desires 
the prescriber to use the RTBT as doing so will generally eliminate the 
beneficiary's ability to request disclosure restrictions as the plan 
will already be in possession of the query data regarding the desire to 
prescribe something for a specified condition.
    We sought comments on our proposal, including the feasibility for 
plans to meet the proposed January 1, 2020 deadline, and how our 
proposal may or may not expedite our goal of giving each Part D 
enrollee and the clinicians who serve them access to meaningful 
decision support through RTBT. We also sought relevant feedback about 
RTBT standardization efforts; this includes the planned fulfillment of 
any milestones that standardization bodies have already met, or are 
likely to meet in advance of the proposed January 1, 2020 deadline. We 
noted that we would consider retraction of our rule if we received 
feedback indicating that it would be contrary to advancing RTBT within 
Part D, or if a standard has been voted upon by an accredited Standard 
Setting Organization or there were other indications that a standard 
would have been available before the proposed 2020 effective date. In 
such case, we indicated that we would review such standard, and if we 
find it suitable for the Part D program consider proposal of that 
standard as a requirement for implementation in our 2021 rulemaking, 
effective January 1, 2021. We also solicited comments regarding the 
impact of the proposal on plans and providers, including overall 
interoperability and the impact on medical record systems. Finally, we 
solicited comments regarding the impact of the proposed effective date 
on the industry and other interested stakeholders.
    We received approximately 194 comments on this proposal. Following 
are summaries of the comments we received and responses to these 
comments.
    Comment: Commenters expressed widespread conceptual support for our 
proposal as a way to accelerate use of electronic Real-time Benefit 
Tools (RTBT) in the Part D program. These commenters believed that the 
provision of patient-specific price and coverage transparency at the 
point of prescribing will enable patients and providers to make more 
informed decisions about medication therapy.
    Response: We thank commenters for their support.
    Comment: We received numerous comments relating to the proposed 
January 1, 2020 implementation date. Although several commenters stated 
that the 2020 deadline was achievable, the majority of comments 
expressed concern. Most commenters believed that it would be prudent to 
delay the implementation date until an industry standard was available 
with some commenters characterizing the proposed time frame as overly 
aggressive or unrealistic given the level of effort required to 
implement RTBT.
    Response: These comments have persuaded us that implementing RTBT 
will take substantial effort and that a 2020 deadline may be too 
difficult to achieve for those plans that have not yet begun to 
implement a real time solution. Given the considerable level of effort 
involved in developing RTBT we are delaying the required implementation 
date until January 1, 2021. However, given the potential benefits of 
RTBT, we strongly encourage plans to facilitate earlier use of RTBT 
when possible and start implementing prior January 1, 2021.
    Comment: Many commenters stated that requiring RTBT in absence of 
an industry standard will impede integration of real-time information 
into EHRs and eRx systems. Many commenters urged CMS to continue to 
work with the industry through the National Council for Prescription 
Drug Programs (NCPDP) to develop a national standard that could meet 
the Part D program's needs. A few commenters asked CMS to wait a year 
or two after a standard becomes available in order to give the industry 
time to implement it. They noted that the cost of integrating multiple 
RTBT systems into EHRs will be prohibitive and may be passed on to 
prescribers through fees to the providers. A commenter suggested that 
CMS require that RTBT be provided to prescribers free of charge.
    Response: CMS continues to support interoperability as a way to 
reduce the burden on health care providers and, as noted in our 
proposed rule, we would have preferred to consider and name a single 
industry standard for use in Part D. However as an industry standard is 
not yet available and we wish to bring the benefits of RTBT to the Part 
D

[[Page 23850]]

market as soon as feasible, we are finalizing the provision that each 
plan implement an RTBT of its choosing. Should a suitable RTBT standard 
emerge sometime in the future, we can consider it for future 
rulemaking. We also note that prescribers will be unlikely to use RTBT 
tools that impose a significant financial burden on their practices. We 
therefore encourage plans to work with those responsible for their 
real-time solutions to make sure that they present value to 
prescribers. The Department of Health and Human Services will continue 
to engage with standards development organizations, such as NCPDP to 
encourage the development of standards.
    Comment: Several commenters cautioned that holding plan sponsors 
solely accountable for implementation of RTBT places an unfair burden 
on the plans and will not result in furthering CMS's goals of 
widespread use of the technology. Other commenters asked if a Part D 
sponsor would be considered compliant with this provision if their RTBT 
only integrates with one EHR.
    Response: Though we believe that EHR and eRx providers will adopt 
well-developed RTBT solutions, we recognize that such acceptance is not 
always in the Part D plan's control. The proposed and final regulatory 
language make it clear that the Part D plan is responsible for 
supporting an RTBT capable of integrating with at least one EHR or eRX 
system, but stops short of placing the responsibility for widespread 
prescriber adoption on the plan. We are only requiring compatibility 
with at least one prescriber's eRx or EHR, since CMS realizes that 
without an industry-adopted standard, it would be operationally 
unattainable for a plan to support an RTBT capable of integrating with 
all EHR or eRx systems that prescribers are potentially using. And, 
although Part D plans can make sure that the RTBT system is capable of 
integrating with an EHR or eRx system, the decision to integrate the 
RTBT with specific prescriber-facing systems is out of the plan's 
control. Since this rule addresses Part D requirements, we can only 
address the plan's readiness for integration at this point.
    Comment: Some commenters sought guidance about what features and 
information would satisfy the requirement for a RTBT. Commenters 
suggested that RTBT include information on the drug that the physician 
intends on prescribing along with formulary alternatives; they asked if 
RTBT should include drugs' applicable cash price, beneficiary 
copayment, any drug utilization controls, or side effects of 
alternative therapies presented. Some commenters believe that 
presenting negotiated prices to the prescriber would provide value to 
the RTBT process, while most commenters believe that that information 
was either not relevant or was considered proprietary information that 
should not be widely shared. Some commenters believed that RTBT should 
include information with respect to all available pharmacy and delivery 
options while others believe that only the prices of alternatives 
available at member's selected pharmacy should be populated by the 
RTBT.
    Response: Our proposed regulation indicated that the goal of RTBT 
is to provide decision support to prescribers by presenting them with 
relevant details about formulary information and alternatives to the 
drug which the provider intends on prescribing. Although we encourage 
the inclusion of the negotiated price in RTBT, we are not mandating it 
at this time as the majority of commenters opposed its inclusion 
stating that the information was proprietary and overly confusing. 
Provider groups opposed its inclusion, since it was outside the scope 
of their responsibility. However, we believe that RTBT must include 
some minimal data points that will enable a prescriber and patient to 
make informed medication choices at the point of prescribing. These 
include benefit information about the drug which the provider intends 
on prescribing, enrollee cost-sharing information, and comparable 
information on formulary alternatives (meaning those medications that 
may have a different copayment or coinsurance amount than the 
medication about to be prescribed but may have the same therapeutic 
efficacy). The benefit information should include patient-specific 
utilization requirements (such as prior authorization or step therapy 
requirements) that have yet to be satisfied at the time when the 
prescription is written, and copayment or coinsurance (or negotiated 
price values if included) at the patient's selected pharmacy.
    Comment: Some commenters expressed concerns that the data populated 
in the RTBT would not be reliable, that the data would be inaccurate or 
that it would be used for purposes other than to provide decision 
support to the prescriber. Commenters stated that existing real-time 
solutions vary in their functionality and reliability. One provider 
group pointed out that prescribers are already seeing that some of the 
RTBT systems are not providing useful information. They report that 
these systems are causing more effort on the part of the prescriber 
without providing useful decision support. Other providers noted that 
the quality of the information provided by multiple vendors is 
variable, and suggested that CMS assess the outcomes of the alternative 
vendors.
    Response: CMS expects that data presented through RTBT will be 
patient-specific, timely, and accurate. Part D plans must make sure 
that they comply with these requirements. We are unsure what commercial 
purposes were of concern to commenters and how they would adversely 
impact the intended functionality. Should CMS become aware that RTBTs 
are being used in ways that are contrary to the Part D program goals, 
we will address the issues as they arise. Further, we believe that Part 
D plans are in the best position to assess the effectiveness of the 
RTBT solutions, since they have a financial stake in ensuring that 
their enrollees have access to the most cost-effective medications. We 
expect that widespread adoption of RTBT will, over time, facilitate 
improved functionality and administrative ease of using the tools in 
clinical practice. However, if such concerns are not mollified, we 
would expect that EHR vendors would offer feedback to the plans.
    Comment: A few commenters suggested that we refer to RTBTs using 
other terms, such as real-time pharmacy benefit check or real-time 
pharmacy benefit transaction to more clearly describe our proposal. A 
commenter requested that we refer to the technology as a benefit check 
and not a tool.
    Response: We understand that some terms may be clearer to certain 
readers. However, the ubiquity of the term RTBT leads us to believe 
that it is the correct term to use. In addition, the suggested terms 
were sufficiently close to our proposed term that we are convinced that 
RTBT is an accurate description of our regulatory requirement.
    Comment: We received a number of comments objecting to our proposal 
that providers receive explicit patient consent before reviewing RTBT 
solutions. Commenters explained to us that requiring affirmative 
consent would result in providers having to modify their workflow and 
systems to capture such explicit consent. These systematic changes 
would require at least 18 months to adopt, implement, test, and remedy 
any issues. Educating providers across the country on this requirement 
and implementing the system changes would take at least another three 
months, which calls into question the ability to fulfill this 
requirement prior to January 1, 2020. Though one commenter

[[Page 23851]]

appreciated the proposed level of protection, all other commenters who 
addressed the issue stated that the proposed requirement would be a 
serious obstacle to the real-time process. For example, making system 
changes that normally require at least 18 months to make, within less 
than 6 months would require the hiring of significant amounts of new 
staff and put a burden on their systems to implement prior to the 
January 1, 2020 deadline.
    Response: We are committed to ensuring that RTBT implementation 
happens as smoothly as possible. The RTBT regulation requires that each 
Part D plan implement one or more real-time benefit tools, but does not 
specify the circumstances under which a prescriber should use the 
technology. We expect that prescribers will only use RTBT when the 
information provided is useful. As the intent of the RTBT is to help 
the clinician know if a medication will be covered under a patient's 
prescription benefit coverage, we do not expect that prescribers will 
use the tool in those rare instances when a patient has expressed a 
desire to buy the medication outside of the insurance benefit. Yet, 
given the importance of protecting an individual from unauthorized 
disclosure of health information, we considered requiring patient 
consent before the RTBT was being used just to make sure that patients 
are fully cognizant that RTBT will be used.
    However, on further reflection, under the current RTBT scheme, we 
believe that requiring that patients provide explicit affirmative 
consent before each use of an RTBT is unnecessary. In most instances, 
we expect that the choice about what prescription to prescribe will 
happen when a beneficiary is present, because the current ePrescribing 
standard requires the beneficiary to choose where the prescription is 
to be sent. This means they will be aware that their data will likely 
be transmitted to parties other than the prescriber. Furthermore, 
beneficiaries have the opportunity to ask their prescribers about what 
data is being sent over to the pharmacy.
    We conducted more detailed research into how RTBTs would function 
in the Part D context, and we discovered that after the prescriber 
finishes consulting with the RTBT, they typically transmit the 
prescription to the pharmacy electronically. If the enrollee decides to 
private pay at a pharmacy, the pharmacy is required to send a failed 
claim notice if a beneficiary decides to pay for the prescription out 
of pocket, rather than all the information about the prescribed 
medication. This failed claim notice satisfies the Sec.  423.120(c)(3) 
requirement for pharmacies to submit claims to the Part D sponsors or 
its intermediary whenever the Part D member ID card is presented or is 
on file at the pharmacy, which is a requirement without RTBT use. Thus, 
we encourage providers to discuss with the individual whether the 
individual desires to self-pay as after the prescriber uses the RTBT 
the patient will no longer be able to withhold information about the 
prescription from their plan under 45 CFR 164.522(a)(1)((vi) (allowing 
the beneficiary to request disclosure restrictions if they pay for 
their prescription).
    After reviewing the comments, we weighed these potential privacy 
concerns against the potential disruptions to effective adoption of 
RTBT raised by commenters. Especially since pharmacy benefit 
information is generally already available to prescribers and 
pharmacies under typical patient interactions, we believe that RTBT use 
will fall within the category of health care treatment disclosures 
making the disclosure of health care data generally permissible without 
patient authorization. Nonetheless, we encourage prescribers to use 
RTBT judiciously and must always allow an individual enrolled in a Part 
D plan to instruct a prescriber not to use the system for any or all 
prescriptions, and prescribers should heed that instruction.
    Comment: Several commenters suggested that CMS work with the Office 
of the National Coordinator for Health Information Technology (ONC) to 
develop incentives for integration of RTBT products into EHRs.
    Response: CMS thanks the commenters for this suggestion. However, 
we do not believe that these incentives are required. Based on our 
research, we believe many EHRs are moving to integrate RTBTs into 
prescribers' works flows. In addition, since RTBTs are variable in 
their functionality it would be difficult for ONC to incentivize use of 
RTBT until an industry standard is implemented and tested.
    Comment: A few commenters suggested that the F&B standards are no 
longer necessary and others asked us to clarify the role that the F&B 
standard should play in the future.
    Response: In our proposed rule we clarified that F&B remains an 
important component of the Part D electronic prescription standard and 
plans must continue to support it. However, the future interaction 
between RTBT and the F&B standards are out of scope of this regulation.
    Comment: A commenter requested that long-term care facilities be 
exempt from having to use a RTBT.
    Response: CMS intends this regulatory requirement to apply solely 
to Part D plans. Although we encourage the use of RTBTs among 
providers, guidance for providers is outside of the scope of this final 
rule.
    Comment: A few commenters suggested that CMS require Part D plans 
to develop a patient tool to provide prescription cost information to 
patients in addition to, or instead of, the prescriber facing tool we 
proposed.
    Response: We appreciate the comments. However, our proposal was for 
a prescriber facing tool. A patient tool is outside the scope of this 
rule.
    We are finalizing the proposal for each Part D plan to implement an 
RTBT of its choosing, effective January 1, 2021. We strongly encourage 
plans to start implementing this provision prior to 2021. We are 
removing the proposed requirement that covered health care providers 
obtain explicit beneficiary consent prior to using the RTBT.

D. Part D Explanation of Benefits (Sec.  423.128)

    Section 1860D-4(a)(4)(A) of the Act requires Part D sponsors to 
furnish to each of their enrollees a written explanation of benefits 
(EOB) and, when the prescription drug benefits are provided, a notice 
of the benefits in relation to the initial coverage limit and the out-
of-pocket threshold for the current year. We codified this EOB and 
notice requirement at Sec.  423.128(e) by requiring the Part D EOB to 
include specific information written in a form easily understandable to 
enrollees. Part D sponsors must provide enrollees with an EOB no later 
than the end of the month following any month in which the enrollee 
utilized their prescription drug benefit.
    Information about negotiated price changes for each of the 
prescription drugs covered for a beneficiary, including information 
about lower cost therapeutic alternatives, is not required to be in the 
EOB under the current regulation. Based on comments received, we are 
finalizing our proposal that sponsors must include negotiated price 
increases and lower cost therapeutic alternatives in their 
beneficiaries' Part D EOBs.
    The Part D EOB is one of the principal documents that beneficiaries 
can rely on to understand where they are in the benefit phases and 
their changing out-of-pocket costs throughout the year. This document 
is provided to beneficiaries every month for the immediately preceding 
month that the

[[Page 23852]]

Part D benefit is used. As a retroactive monthly report, the EOB is the 
means by which beneficiaries can monitor their benefit utilization and 
prescription costs on a regular and frequent basis.
    We received approximately 79 comments on this proposal. We have 
included a summary of the comments and our responses.
    Comment: Commenters unanimously supported increasing drug pricing 
transparency for beneficiaries.
    Response: We thank the commenters for their support. Lowering 
prescription drug costs is of critical and immediate concern to 
beneficiaries and the Administration.
    Comment: Many commenters voiced concern that including drug pricing 
information on the EOB would be ineffective for the following reasons: 
(1) Its retroactive nature makes the price information not meaningful 
or actionable for the beneficiary; (2) its timing during a benefit year 
makes it not actionable by the beneficiary because of limitations on 
enrollment changes; (3) the nature of acute prescriptions means the 
information is not useful for short-term medications; and (4) this 
information is not discernable without being read with the prescriber. 
While asserting different reasons, these commenters generally agreed 
that the drug cost information would not be meaningful, actionable or 
useful for the beneficiary due to the enumerated circumstances.
    Response: Despite the EOB being a retroactive report, the 
information provided will allow beneficiaries to engage with their 
prescriber at their next point of care and discuss their choices in 
medication. This may lead to beneficiaries switching to a lower cost 
drug. Even if a beneficiary is not able to change plans mid-year based 
on the EOB information, the information may still be useful to the 
beneficiary in the situation we just described--to engage with their 
prescriber about their medication choices within their existing plan. 
To address the comments concerning acute prescriptions, we note that on 
the EOB as it is written today an acute prescription filled one time is 
not carried over on multiple EOBs. However, we believe there is no harm 
in including a negotiated price increase and a lower cost alternative 
for an acute prescription claim, when available. This additional 
information empowers the beneficiary and provides them with a holistic 
approach when reviewing their Part D benefit. We believe this, in turn, 
will ultimately spark dialogue between the beneficiary and their 
prescriber(s) about lower cost therapeutic alternatives in the future. 
Thus, we conclude that the EOB will empower the beneficiary with 
information about drug costs that the beneficiary does not currently 
have. This initiative will support CMS' commitment to promoting drug 
price transparency in the Medicare Part D program.
    Comment: Many commenters suggested that drug pricing information 
will be more useful if provided through a prospective tool, such as a 
real-time benefit tool (RTBT) at the time of prescribing, rather than 
the EOB. They highlighted that beneficiary knowledge would be more 
accurate with real-time information on which decisions could be made 
with their prescriber at the point of care.
    Response: Implementing a real-time benefit tool for beneficiaries 
is an effective way to provide beneficiary-specific information about 
drug costs (for additional discussion about RTBTs, please see the 
previous section of this final rule). However, the EOB provides a 
different method of communicating drug pricing information directly to 
beneficiaries. Both are valuable price transparency tools.
    Comment: Multiple commenters were concerned that displaying the 
percentage change in negotiated price would not be a helpful metric for 
beneficiaries when evaluating their Part D benefits. The commenters 
asserted that the negotiated price is not the correct price to display 
as it may not change throughout the benefit year, or if it does change, 
it may not impact the cost-sharing for the beneficiary. However, 
commenters did not provide alternative pricing that would be of greater 
impact to the beneficiary.
    Response: We do not agree and believe providing this information to 
the beneficiary is valuable. The negotiated price information required 
to be included in the EOB is the percentage increase in the total cost 
for each prescription, when there is an increase, since the first claim 
of the current benefit year for each prescription drug claim in the 
EOB, which would display under each medication. Currently and under 
this new requirement, the EOB would still display the price paid by the 
beneficiary, plan and any other payer. While increases in negotiated 
prices may or may not be directly proportionate to a change in a 
beneficiary's cost-sharing for a variety of reasons, we believe that 
ensuring beneficiary access to information about changes in drug 
pricing in the context of their specific use of the benefit will allow 
them to better assess the value they receive from their Part D benefit.
    Comment: Multiple commenters pointed out the Part D EOB is meant to 
be a brief document but is lengthy and complex. As such, these 
commenters pointed out that including additional details would only 
make the document longer, thereby paradoxically making a beneficiary 
less inclined to read the document thoroughly. Therefore, our EOB 
proposal would defeat the intent of requiring additional information in 
it. Some commenters also mentioned that the EOB is not the appropriate 
document to disseminate the pricing information and will inevitably 
lead to increased beneficiary confusion. Commenters suggested improving 
the functionality of the Medicare Plan Finder and other beneficiary-
facing tools to convey this information.
    Response: We find the current structure of the EOB to be well-
suited to include additional information on individual prescription 
drug claims. Other beneficiary materials are delivered on an annual 
basis, and are geared toward assisting Part D beneficiaries make 
enrollment decisions whether to remain with their current prescription 
drug plan or switch to another. By including these negotiated price 
increases and lower cost alternatives on a monthly basis in EOBs, 
beneficiaries will be in greater control of their prescription drug 
benefits and, with their prescribers, will be able to make more 
informed decisions about their care. Beneficiaries will have documented 
drug pricing information and will be able to seek assistance from their 
prescribers, pharmacists, SHIPs, and family members.
    Comment: A few commenters believed that the proposed rule did not 
provide sufficient definition of a lower cost therapeutic alternative.
    Response: The lower cost therapeutic alternatives will be 
determined by the sponsor based on its formulary, not by CMS. As such, 
any drug may be identified as a lower-cost therapeutic alternative for 
another drug if a Part D sponsor reasonably determines it to be so. As 
stated in the preamble of the proposed rule, lower-cost therapeutic 
alternatives (meaning drugs with lower cost-sharing or lower negotiated 
prices) will not be limited to therapeutically-equivalent generic drugs 
if the original prescription fill is for a brand drug.
    Comment: A few commenters wrote that the estimated implementation 
cost with respect to this proposal was understated in the proposed 
rule. These commenters also provided an estimate of their increased 
costs, citing that the programming would be more than CMS estimated, 
and also that these changes would contribute to increasing the length 
of the EOB document, thereby increasing printing and mailing costs for

[[Page 23853]]

plans. Commenters did not provide alternative solutions for including 
the drug pricing information and/or lower-cost therapeutic 
alternatives.
    Response: We thank the commenters for providing us with their cost 
estimates. We have revised the estimated cost to implement the EOB 
updates; however, we still believe that these updates are necessary for 
adhering to the Administration's goal of drug price transparency and 
lowering beneficiary out-of-pocket costs. We will work with 
stakeholders to improve the model EOB to include this information in 
the most efficient and effective manner for beneficiaries and sponsors.
    Comment: Many commenters wrote that amending the Part D EOB to 
include this information for the upcoming contract year, beginning 
January 1, 2020, was unreasonable and too burdensome.
    Response: We thank the commenters for their concerns, and 
acknowledge that there will be administrative and programmatic costs to 
implement these changes. Given the level of effort involved in updating 
the Part D EOB, we are delaying the implementation date until January 
1, 2021. However, given the potential benefits of these changes, we 
strongly encourage plans to begin implementing this requirement prior 
to January 1, 2021.
    After consideration of comments received, we are finalizing the 
reassignment of paragraphs (e)(5) and (e)(6) of Sec.  423.128(e) as 
paragraphs (e)(6) and (e)(7) to add a new paragraph (e)(5) that will 
require sponsors to include information about negotiated price 
increases, if any, and lower-cost therapeutic alternatives in the Part 
D EOBs. Based on comments received, as to information about negotiated 
drug price increases, we will require that Part D sponsors include the 
cumulative percentage increase, if any, in the negotiated price since 
the first claim of the current benefit year for each prescription drug 
claim in the EOB.
    Second, CMS will require that Part D sponsors provide information 
about drugs that are therapeutic alternatives with lower cost-sharing, 
from the applicable approved plan formulary for each prescription drug 
claim, when such therapeutic alternative are available as determined by 
the plan. Also, the plan may include therapeutic alternatives with the 
same copayments if the negotiated price is lower.
    Part D sponsors will be permitted and encouraged by CMS to take 
into consideration relevant beneficiary-specific information, such as 
diagnosis, the indication for the prescription and completed step 
therapy or exception requests, when providing formulary therapeutic 
alternatives in the EOB that have lower cost-sharing. For example, if a 
plan is aware that a beneficiary has already fulfilled step therapy 
requirements and the beneficiary's physician has attested that the 
beneficiary is not able to tolerate a formulary alternative, that 
formulary alternative does not need to be included on the EOB for that 
beneficiary.

E. Medicare Advantage and Step Therapy for Part B Drugs (Sec. Sec.  
422.136, 422.568, 422.570, 422.572, 422.584, 422.590, 422.618, 422.619, 
422.629, 422.631, 422.633)

1. Medicare Advantage and Step Therapy for Part B Drugs: General 
Requirements
    In a HPMS memo released August 7, 2018,\12\ CMS announced that 
under certain conditions beginning in contract year 2019, MA plans may 
use utilization management tools such as step therapy for Part B drugs; 
such utilization management tools, including prior authorization, can 
be used by MA organizations to both prevent overutilization of 
medically unnecessary health services and control costs. CMS proposed 
requirements under which MA plans may apply step therapy as a 
utilization management tool for Part B drugs and affirmed, based on our 
reinterpretation of the applicable statute, MA plans' authority to 
implement appropriate utilization management tools, including prior 
authorization, for managing Part B drugs in a manner to reduce costs 
for both enrollees and the Medicare program. Under Part B, traditional 
Medicare generally pays based on a statutory formula--average sales 
price plus a 6-percent add-on--for drugs and biological products that 
are not usually self-administered, such as injections and infusions. We 
stated in the proposed rule how we believe there is minimal negotiation 
between MA plans and drug manufacturers to reduce the price of these 
drugs. Prior to the August 7, 2018, HPMS memo and subsequent FAQs, \13\ 
CMS interpreted existing law to prohibit MA plans from using step 
therapy for Part B drugs because there was a concern that such 
utilization management tools could have created an unreasonable barrier 
to coverage of and access to Part B benefits that MA plans must provide 
under the law. However, as we explained in the proposed rule, CMS 
recognizes that utilization management tools, such as step therapy, can 
provide the means for MA plans to better manage and negotiate the costs 
of providing Part B drugs. Based on this and for the reasons explained 
in more detail in this final rule, CMS rescinded the prior guidance 
prohibiting step therapy for Part B drugs and services in MA, and we 
are finalizing our proposal to allow MA plans to use step therapy for 
Part B drugs, subject to certain parameters. In the proposed rule, we 
explained how we believe the flexibility to use step therapy programs 
for Part B drugs would considerably assist MA plans in negotiating on 
behalf of enrollees to get better value for Part B drug therapies. 
Using internal bid data, excluding MA employer group plans, CMS 
estimates $9 billion in spending by MA plans for Part B drugs furnished 
during contract year 2018.
---------------------------------------------------------------------------

    \12\ Prior Authorization and Step Therapy for Part B Drugs in 
Medicare Advantage (August 2018). https://www.cms.gov/Medicare/Health-Plans/HealthPlansGenInfo/Downloads/MA_Step_Therapy_HPMS_Memo_8_7_2018.pdf.
    \13\ Available online at: https://dpapportal.lmi.org/DPAPMailbox/Documents/Part%20B%20Step%20Therapy%20Questions%20FAQs_8-29-18.pdf.
---------------------------------------------------------------------------

    As discussed in the proposed rule, we believe that these tools will 
better enable MA organizations to take steps to ensure that MA plans 
and MA enrollees pay less overall or per unit for Part B drugs which 
could result in lower MA capitation payments by the government to MA 
organizations and lower average sales prices for Part B drugs, on which 
Medicare FFS payments for such drugs are based, while also maintaining 
access to medically necessary Medicare-covered drugs and services. 
These goals--reducing costs across the Medicare program while ensuring 
access to medically-necessary Medicare-covered benefits--underlie this 
final rule. We proposed adding a new regulation, at Sec.  422.136, 
entitled ``Medicare Advantage and Step Therapy for Part B Drugs.''
    Sections 1852(c)(1)(G) and (c)(2)(B) of the Act, and the MA 
regulations at Sec.  422.4(a)(1)(ii) expressly reference a MA plan's 
application of utilization management tools, like prior authorization 
and other ``procedures used by the organization to control utilization 
of services and expenditures.'' This indicates that MA plans are not 
prohibited by the statute from implementing utilization management 
tools such as step therapy. In light of this, we proposed to define 
step therapy in Sec.  422.2 and adopt requirements under which MA plans 
may apply step therapy as a utilization management tool for Part B 
drugs. We solicited comments concerning the impact that allowing step 
therapy for Part B drugs will have on MA plans and enrollees.
    We clarified that for contract year 2020 and subsequent years, 
coupling

[[Page 23854]]

drug management coordination with rewards and incentives was not part 
of our proposal. While MA plans may still offer rewards and incentives 
programs, savings realized from Part B step therapy must be reflected 
in the plan's bid, as such savings would reduce the revenue necessary 
for MA plans to provide basic benefits that MA plans must furnish 
enrollees and supplemental benefits that MA plans may opt to offer. 
Additional Part C rebate dollars associated with the lower bid, as with 
all Part C rebate dollars, must be used to provide supplemental 
benefits and/or lower premiums for the plans' enrollees.
    We noted that existing requirements in Sec. Sec.  422.112(b) and 
422.152 for care coordination activities are sufficient to promote 
positive health outcomes for both drugs and services; we relied on this 
and did not propose text at Sec.  422.136 that an MA plan must offer a 
drug management program. We also recognized that we issued the August 
7, 2018 memo that announced our reinterpretation of the statute after 
bids were submitted for the 2019 plan year and therefore expected plans 
to utilize the drug management program as a means to pass 2019 savings 
on to enrollees through rewards and incentives. Because we are 
finalizing this rule prior to the 2020 bid deadline, MA plans must 
include savings from implementing Part B step therapy in their bids for 
2020 and future years, as the savings will affect the revenue necessary 
to provide benefits (see Sec.  422.254).
    We acknowledged in the proposed rule the potential for utilization 
management tools like step therapy to create administrative burden and 
process challenges for network providers. We also explained how, in 
light of that, we expect MA plans to work closely with the provider 
community and to adopt best practices that streamline requirements and 
minimize burden. We also encouraged continued development and 
advancement of electronic prior authorization processes to more 
efficiently administer this process. We solicited comment whether our 
proposed regulation text imposing education and information 
responsibilities in combination with existing regulations on care 
coordination are sufficient to ensure that MA organizations 
specifically address step therapy programs for Part B drugs as part of 
those care coordination responsibilities and if we should finalize a 
provision in Sec.  422.136 that addresses the administrative burden 
imposed on network providers by MA plans.
    We proposed and this final rule adopts a number of safeguards that 
ensure enrollees have timely access to all medically necessary Medicare 
Part B medications. MA plans will be required to administer the 
existing organization determination and appeals processes under new 
time frames that are similar to the timeframes applicable in Part D for 
coverage determinations; enrollees will be able to seek organization 
determinations in advance--or when the MA (or MA-PD) plan first starts 
the step therapy protocol for the enrollee--if the enrollee (typically 
after consultation with their health care provider) believes they need 
direct access to a Part B drug that will otherwise only be available 
after trying an alternative drug. We explained that MA plans will 
adjudicate these organization determinations based on medical necessity 
criteria. If an enrollee is dissatisfied with the plan's organization 
determination, the enrollee has the right to appeal. We noted that CMS 
monitors organization determination and appeals activity through the 
audit process and regular discussions with the Part C Independent 
Review Entity (IRE) to ensure enrollee requests are appropriately 
evaluated and processed within applicable timeframes.
    As discussed in the proposed rule, our existing disclosure 
requirements at Sec.  422.111 would require MA plans that apply step 
therapy to Part B drugs to disclose that Part B drugs may be subject to 
step therapy requirements in the plan's Annual Notice of Change (ANOC) 
(when initially adopted or subsequently changed) and Evidence of 
Coverage (EOC) documents. In the ANOC, this information must be 
included under the Changes to Benefits and Costs for Medical Services. 
In the EOC, this information must be included in the Medical Benefits 
Chart under ``Medicare Part B prescription drugs.'' Under existing 
requirements at Sec.  422.202(b), MA plans must establish policies and 
procedures to educate and fully inform contracted health care providers 
concerning plan policies on utilization management, which will include 
the plan's step therapy policies. We proposed to also include a 
requirement at Sec.  422.136(a)(2) for plans to establish policies and 
procedures to educate and inform health care providers and enrollees 
specifically concerning its step therapy policies. We noted in the 
proposed rule that preferred provider organization plans (PPOs) are 
required, as part of the definition of a PPO at section 
1852(e)(3)(A)(iv)(II) of the Act and under the MA regulation at Sec.  
422.4(a)(1)(v)(B), to reimburse or cover benefits provided out of 
network; while higher cost sharing is permitted, PPOs are prohibited 
from using prior authorization or preferred item restrictions in 
connection with out of network coverage. As such, PPOs must provide 
reimbursement for all plan-covered medically necessary services 
received from non-contracted providers without prior authorization or 
step therapy requirements. We solicited comment whether the final rule 
should include a specific regulatory provision clarifying this issue.
    We proposed at Sec.  422.136 (a)(3), that MA plans will be required 
to use a Pharmacy and Therapeutics (P&T) committee to review and 
approve step therapy programs (meaning policies and procedures); we 
explained that this is necessary to ensure medically appropriate 
implementation of step therapy for Part B drugs. We explained how we 
believe the burden of this requirement will be limited because MA-PD 
plans and MA plans would be authorized to use any existing Part D P&T 
committees established by the MA-PD plan (or an MA-PD plan under the 
same contract as an MA-only plan) to comply with part 423 requirements 
for the Part D benefit. The Paperwork Reduction Act listing for P&T 
committee record keeping is OMB Control Number 0938-0964. We noted that 
P&T committee decisions are not public information. We proposed, in the 
introductory text of proposed paragraph (b), that a MA organization 
must establish or utilize an existing P&T committee prior to 
implementation of a Part B step therapy program so that the P&T 
committee reviews Part B step therapy programs. In addition, we noted 
in the proposed rule how we continued to actively consider expanding 
the role of MA P&T committees. Therefore, we solicited comments on our 
proposal that MA plans with Part B step therapy programs will be 
required to have P&T committees and, in addition, whether the 
requirement for this MA P&T committee should be expanded to all MA 
plans that have any utilization management policy (such as prior 
authorization or dosage limits) applicable to Part B drugs, and whether 
there are other options that will meet the policy goal of ensuring that 
Part B step therapy programs are medically appropriate underlying the 
P&T committee proposal. We proposed to codify P&T committee 
requirements for MA plans in Sec.  422.136(b).
    Our proposal for the P&T committee mirrors the Part D requirements 
for such committees currently codified at

[[Page 23855]]

Sec.  423.120(b) with regard to membership, scope, and 
responsibilities. We explained our position that existing Part D P&T 
requirements at Sec.  [thinsp]423.120(b) are adequate to ensure MA 
plans implement step therapy for Part B drugs that is medically 
appropriate. We note that if necessary we may release subregulatory 
guidance concerning application of the P&T committee requirements in 
the context of Part B drugs.
    We proposed requirements in Sec.  422.136(b) that would be 
consistent with Part D requirements for a P&T committee. Specifically, 
we proposed that the majority of members comprising the P&T committee 
will be required to be practicing physicians or practicing pharmacists. 
The committee will be required to include at least one practicing 
physician member and at least one practicing pharmacist; these specific 
individuals will be required to be independent and free of conflict 
with the MA organization, the MA plan, and pharmaceutical 
manufacturers. In addition, the plan will be required to include at 
least one practicing physician member and one practicing pharmacist who 
are experts in the care of elderly and disabled persons. We also 
encourage MA plans to select P&T committee members representing various 
clinical specialties (for example, geriatrics, behavioral health) to 
ensure that all conditions are adequately considered in the development 
of step therapy programs. We proposed provisions for the 
responsibilities and scope of the P&T Committee at Sec.  422.136(b)(4) 
through (11) that would mirror the current regulation text applicable 
to Part D P&T Committees under Sec.  423.120(b)(1)(iv) through (xi), 
with minor revisions to tailor the proposed MA regulation to the Part B 
drug step therapy programs offered by MA plans. We reiterated in the 
proposed rule how our proposal was to substantially align the 
requirements of a P&T committee reviewing Part B drugs with Part D 
requirements because the Part D requirements have proved sufficient in 
ensuring that plans implement medically appropriate step therapy and 
utilization management protocols in Part D.
    CMS proposed, as a beneficiary protection, to limit Part B step 
therapy requirements to only new starts of Part B drug therapies. CMS 
explained in the proposed rule that we believe new step therapy 
requirements should not disrupt ongoing Part B drug therapies for 
enrollees. In order to ensure that step therapy requirements do not 
disrupt ongoing Part B drug therapies, we proposed under Sec.  
422.136(a)(1), that step therapy may not disrupt enrollees' ongoing 
Part B drug therapies. Specifically, we proposed that step therapy only 
be applied to new prescriptions or administrations of Part B drugs for 
enrollees who are not actively receiving the affected medication; we 
proposed to require MA plans to use a lookback period of 108 days, in 
order to be consistent with established Part D policy with respect to 
transition requirements for new prescriptions, to determine if the 
enrollee is actively taking a Part B medication. In the proposed rule, 
we explained how the Part D lookback period was created with clinical 
and pharmaceutical input and that CMS believed the same criteria were 
appropriate to use in setting a lookback period for Part B drugs. We 
proposed that an MA plan would have to use the lookback period when an 
enrollee elects a new MA plan (regardless of whether previously 
enrolled in a MA plan, traditional Medicare, or new to Medicare) to 
determine whether the enrollee has taken the Part B drug (that will 
otherwise be subject to step therapy) within the past 108 days.
    We explained that under our proposal, if the enrollee is actively 
taking the Part B drug, such enrollee will be exempted from the plan's 
step therapy requirement concerning that drug. We proposed to allow MA 
plans flexibility in implementing step therapy for Part B drugs within 
specific parameters. Specifically, we proposed that MA plans would be 
able to use a step therapy program to ensure that an enrollee who is 
newly diagnosed with a particular condition will begin treatment with a 
cost-effective biological product licensed under section 351(k) of the 
Public Health Service Act or generic medication before progressing to a 
more costly drug therapy if the initial treatment is ineffective or if 
there are adverse effects. We did not propose that Sec.  422.136 
specifically address the standard for exemptions or movement within a 
step therapy program because, as we explained in the proposed rule, we 
interpret the MA plan's responsibility to provide all medically 
necessary covered services and items covered under the original 
Medicare program to mean that ineffectiveness or adverse effects of a 
treatment required in a step therapy program would be sufficient basis 
to grant an exemption or move an enrollee to a higher step in the 
protocol.
    Consistent with existing Part D guidelines, we proposed at Sec.  
422.136(c) to permit MA plans to require an enrollee to try and fail an 
off-label medically accepted indication (that is, an indication 
supported by one or more citations in the statutory compendia) before 
providing access to a drug for an FDA-approved indication (on-label 
indication). However, we proposed that using off-label drugs in step 
therapy will only be permitted in cases where the off-label indication 
is supported by widely used treatment guidelines or clinical literature 
that CMS considers best practices. We solicited comments on our 
proposal to permit MA plans to use off-label drugs in a Part B step 
therapy program only when such drugs are supported by widely used 
treatment guidelines or clinical literature that CMS considers to 
represent best practices.
    We also proposed, at Sec.  422.136(d), that a step therapy program 
must not include as a component of a step therapy protocol or other 
condition or requirement any drugs not covered by the applicable MA 
plan as a Part B drug or, in the case of an MA-PD plan, a Part D drug. 
Specifically, we proposed Sec.  422.136(d) to prohibit an MA 
organization from using a non-covered drug as a step in the step 
therapy program (that is, as a condition to coverage). Under our 
proposal, each step in a step therapy program would have to be another 
drug covered by the MA plan (another Part B drug) or MA-PD plan 
(another Part B drug or a Part D drug) to ensure that step therapy 
programs are not, intentionally or unintentionally, barriers to 
services that must be covered by the MA plan pursuant to section 1852 
of the Act. Therefore, at Sec.  422.136(d), we proposed regulation text 
to clarify that only Medicare covered Part B drugs (plus for MA-PD 
plans, Part D drugs) may be used in a step therapy program. We 
explained in the proposed rule that we intended to permit an MA plan to 
require one Part B drug be used before a different Part B drug and to 
permit MA plans that also offer prescription drug coverage (also known 
as ``MA-PD plans'') to use step therapy to require a Part D drug 
therapy prior to allowing a Part B drug therapy because the Part D drug 
will be covered by the plan.
    Additionally, we noted in the proposed rule that the combination of 
our proposal to specify additional exceptions to the formulary 
requirements for protected class Part D drugs (section II.A.1 of the 
proposed rule, ``Broader Use of Prior Authorization for Protected Class 
Part D Drugs'') and our proposal for step therapy for Part B drugs 
(section II.F. of the proposed rule, ``Medicare Advantage and Step 
Therapy for Part B Drugs'') would allow MA-PD plans to require use of a 
Part B drug before a Part D drug as part of a step therapy program. Our

[[Page 23856]]

proposal about Part D protected class drugs is being finalized with 
modifications in this final rule. As noted previously, we are 
permitting the use of step therapy for protected class Part D drugs 
(other than antiretrovirals) for enrollees that are not already using 
the drug for a protected class indication (that is, ``new starts''), 
and therefore MA-PD plans may, starting in 2020, require step therapy 
of Part B drugs before Part D drugs for the protected classes as well, 
consistent with the requirements we are adopting at Sec.  
423.120(b)(2)(vi)(C). MA-PD plans that use cross-benefit step therapy 
programs must ensure that these requirements are clearly outlined in 
the Part D prior authorization criteria for the affected Part D drugs 
and are otherwise consistent with Part D requirements. We also stated 
in the preamble, as is required for all other drug categories or 
classes in Part D coverage, that Part D step therapy requirements will 
be subject to CMS review and approval, as part of our annual Part D 
formulary review and approval process, which includes formulary tier 
review, and relative to prior authorization and step therapy, 
restricted access, step therapy criteria, prior authorization outlier, 
and prior authorization criteria reviews.
    We also solicited comments on the following aspects of our 
proposal:
     The restriction of step therapy to new starts of Part B 
drugs.
     The new requirement for a P&T committee for MA plans that 
implement step therapy and the use of that P&T committee.
     The prohibition on using non-covered drugs, and in certain 
circumstances, off-label drugs, in the step therapy programs.
    We thank commenters for helping inform CMS's Medicare Advantage and 
Step Therapy for Part B drugs policy. We received approximately 153 
comments on this proposal; we summarize them and our responses follow:
    Comment: Some commenters strongly encouraged CMS to issue 
operational guidance for allowing step therapy for Part B drugs more 
quickly following the finalization of the Medicare Advantage and Step 
Therapy for Part B drugs final rule. These commenters argued that 
quickly finalizing this rule will allow for better compliance with CMS 
requirements.
    Response: CMS appreciates commenters concerns regarding finalizing 
this rule and issuing operational guidance in a timely manner. The step 
therapy regulation we are finalizing here will be effective for plan 
years and coverage beginning on and after January 1, 2020. We will 
continue to work with MA stakeholders to ensure that any additional 
Part B step therapy program guidance, which may follow the rule, is 
timely, transparent, and geared to producing positive health care 
outcomes for enrollees.
    Comment: Many commenters expressed concern that the step therapy 
for Part B drugs proposal would lead to negative health outcomes as a 
result of restricted access to care or delayed care. Commenters also 
expressed concern that CMS has not demonstrated how it will ensure that 
plans' step therapy policies are clinically appropriate and do not 
impede access to needed care. Some commenters urged CMS to study the 
effectiveness of step therapy on cost savings and its impact on health 
outcomes before finalizing this policy. A few commenters supported 
allowing step therapy as a cost effective utilization management tool.
    Response: CMS appreciates commenters' feedback regarding the impact 
of this rule, including those who expressed concern that the Part B 
step therapy program will lead to negative health outcomes as a result 
of restricted access to care or delayed care. MA plans must comply with 
the statutory requirement that they provide enrollees with access to 
all medically necessary Part A and Part B benefits available in 
Original Medicare, as provided at section 1852(a)(1) of the Act. This 
final rule does not change or limit this requirement for MA plans. 
Accordingly, step therapy or other utilization management policies may 
not be used as an unreasonable barrier to deny coverage of medically 
necessary services or as a means to eliminate access to medically 
necessary Part B covered benefits. CMS has included a number of 
safeguards to ensure that access to medically necessary Part B services 
is maintained for MA enrollees who are subject to step therapy for Part 
B drugs. We note that consistent with MA regulations at 42 CFR 422.206, 
MA plans may not restrict the ability of a treating physician to advise 
enrollees about their treatment options. Thus, if a treating physician 
believes, based on their own medical judgment, that an MA enrollee 
should not be subject to step therapy for a Part B drug for medical 
reasons, the health care provider can furnish advice consistent with 
that and advocate on behalf of the enrollee. The treating physician can 
request an organizational determination under Sec.  422.566(c) and the 
MA plan will make a formal determination of medical necessity that if 
denied, will require that the enrollee be notified of their right to a 
timely appeal. Pre-service reconsiderations of a plan denial may also 
be requested by a treating physician under Sec.  422.578.
    CMS appreciates commenters' recommendations that more study is 
needed to ensure that enrollees' health is not compromised. Although we 
are finalizing the step therapy policies, we will continue to monitor 
MA plan's use of Part B step therapy policies and will conduct 
oversight to ensure compliance with these rules. CMS will conduct 
audits that target pre-service organization determination and appeal 
cases related to requests for Part B drugs, monitor the Complaints 
Tracking Module (CTM) for access concerns, and closely monitor the 
implementation and operation of step therapy programs.
    We believe that this final rule also contains adequate protections 
to ensure that step therapy policies are clinically appropriate and do 
not impede access to medically necessary care. This final rule will 
require that P&T committees have a majority of members who are 
practicing physicians or pharmacists in order to bring adequate 
clinical experience to the committee. The P&T committee requirements 
finalized at Sec.  422.136(b)(2) require that P&T committee members 
must be free of conflict relative to the MA organization, the MA plan, 
and pharmaceutical manufacturers. Further, pursuant to Sec.  
422.136(b)(5), clinical decisions of the P&T committee must be based on 
the strength of scientific evidence and standards of practice, 
including assessing research literature and data as appropriate. We 
believe P&T committee requirements finalized at paragraph (b)(6) will 
help ensure MA plans' Part B step therapy policies are based on 
objective decisions that meet the needs of enrollees, by considering 
whether a Part B drug included in a step therapy program has 
therapeutic advantages in terms of safety and efficacy, while allowing 
practicing providers a role in developing and implementing Part B step 
therapy program guidance. This final rule, at Sec.  422.136(b)(8), 
requires an annual reevaluation and analysis of the step therapy 
protocols and procedures. P&T committees must, pursuant to Sec.  
422.136(b)(9), document their decisions, which we believe must show how 
the committee complies with the regulation. These requirements will 
ensure that P&T committees' decisions with respect to Part B step 
therapy are conducted in a manner that is documented, evidenced-based, 
free from conflict of interest, and subject to CMS oversight. Finally, 
CMS will hold plans' P&T committees accountable by requesting written 
documentation, as

[[Page 23857]]

needed, regarding the development and revision of step therapy 
programs.
    Comment: Some commenters expressed concern that MA plan step 
therapy policies would focus more on cost (as opposed to clinical 
appropriateness), interfere in personalized care, and interfere with 
provider autonomy. A few commenters expressed concern that this 
proposal would lead to increased administrative burden, which will 
frustrate physicians and cause them to leave the practice of medicine.
    Response: CMS acknowledges the potential for step therapy programs 
to create administrative burden and process challenges for network 
providers. We remind readers that MA PPO plans may not impose limits 
like prior authorization or step therapy on benefits furnished by out-
of-network providers. In a previous rulemaking (70 FR 4616 through 
4617), CMS interpreted section 1852(e)(3)(A)(iv) of the Act and 42 CFR 
422.4(a)(1)(v)(B) as precluding PPO plans from requiring enrollees to 
obtain as a condition of coverage pre-certification or pre-
authorization, or a coverage determination before receiving a covered 
service out-of-network. The requirement that both local and regional 
PPO plans cannot require prior authorization as a condition for out-of-
network coverage of services is also described in CMS guidance in 
Chapter 4, Sec.  110.4 of the Medicare Managed Care Manual. We expect 
MA plans to work closely with providers to adopt best practices that 
streamline operations and minimize burden. We consider such efforts 
consistent with the obligation, under Sec.  422.202, of MA plans to 
establish a mechanism to consult with the physicians who have agreed to 
provide services under the MA plan offered by the organization, 
regarding the organization's medical policy, quality improvement 
programs and medical management procedures. We also encourage continued 
development and advancement of electronic prior authorization processes 
to more efficiently administer Part B step therapy programs.
    With respect to clinical concerns and interference with provider 
care, we reiterate that step therapy or other utilization management 
policies may not be used as unreasonable means to deny coverage of 
medically necessary services or to eliminate access to medically 
necessary Part B covered drugs. The requirements in this rule, in 
combination with current MA program regulations, ensure access to Part 
B drugs and limit the potential for step therapy policies to interfere 
with medically necessary care. Specifically, MA plans must ensure 
access, consistent with the requirements at Sec.  422.100(a) and Sec.  
422.101(a) and (b), to all medically necessary Part A and Part B 
benefits that are available in Original Medicare. Further, we are not 
changing or eliminating the existing requirements that MA plans must 
comply with national and local coverage determinations and guidelines. 
Organizations have been and remain subject to the MA regulations and 
must comply with national and applicable local coverage determinations. 
Step therapy protocols cannot be stricter than an NCD or LCD with 
specified step therapy requirements. Based on how Sec. Sec.  422.100 
and 422.101 will interact with Sec.  422.136, if an NCD or LCD 
prohibits or establishes step therapy programs in connection with 
coverage of a Part B drug, the MA plan must comply with the applicable 
NCD or LCD.
    As finalized in Sec.  422.136(a)(1), Part B drug step therapy 
requirements may not apply to ongoing courses of Part B drug therapies. 
This limitation is designed to prevent interference with the provision 
of care to patients who have already started a drug treatment. As noted 
in the proposed rule, we recognize that negative health outcomes can 
arise from disruptions in existing treatment regimens and wish to avoid 
such occurrences.
    Further, the MA regulation at Sec.  422.206 prohibits an MA plan 
from interfering with health care professionals' medical advice to 
enrollees. Therefore, a provider's statement in support of a pre-
service organization or appeal for access to a Part B drug cannot be 
prohibited by an MA plan. We expect MA plans to give weight to a 
provider's medical judgment and expertise when making organization 
determinations and deciding appeals related to access to Part B drugs 
that are subject to step therapy protocols; we remind MA plans that 
under Sec. Sec.  422.566(d) and 422.590(g)(2), all denials of coverage 
based on medical necessity--which we expect will be the crux of 
requests by enrollees to avoid step therapy programs--must be reviewed 
by a physician or other appropriate health care professional with 
sufficient medical and other expertise, including knowledge of Medicare 
coverage criteria, before the MA organization issues the organization 
determination decision. We note as well that under this final rule, the 
adjudication time periods for Medicare Advantage organization 
determinations are being shortened for cases related to coverage of 
Part B drugs. The ability for providers and enrollees to receive a pre-
service decision regarding coverage on a Part B drug on this shortened 
timeframe will greatly reduce the potential for delay in access to 
medically necessary Part B drugs.
    Furthermore, MA plans using step therapy must ensure that step 
therapy programs are clinically appropriate under this rule and 
existing rules governing the MA program. Pursuant to Sec.  
422.202(b)(1), MA organizations must formally consult with contracted 
physicians when developing utilization management guidelines, so that 
policies like step therapy are based on reasonable medical evidence or 
consensus of medical professionals, consider the needs of enrollees, 
and are reviewed and updated; taken together these standards mean that 
step therapy programs, like other utilization management policies, are 
clinically appropriate. As we stated previously, we are requiring that 
P&T committees must have a majority of members who are participating 
physicians or pharmacists and they must follow the requirements at 
Sec.  422.136(b)(5) through (10) in review, evaluation and approval of 
step therapy policies. We believe this will help ensure that a MA 
plan's Part B step therapy policies will be clinically driven and that 
practicing providers, including network providers, will have a voice as 
practice guidelines are developed and implemented.
    Comment: Some commenters stated Part B Step Therapy conflicted with 
section 1852(a)(1) of the Act. Specifically, these commenters argued 
that section 1852(a)(1) of the Act which requires MA plans to cover all 
Part A and Part B benefits (except for specifically excluded benefits 
like hospice), means that MA plan coverage policies not be more 
restrictive than Original Medicare and that CMS cannot allow plans to 
impose additional restrictions to Part B drug coverage. The commenters 
argued step therapy amounts to a denial of access to Part B benefits.
    Response: As referenced in the proposed rule, CMS's 
reinterpretation of section 1852 of the Act means that MA plans' may 
implement appropriate utilization management tools, including prior 
authorization and step therapy, for managing Part B drugs in a manner 
to reduce costs for both enrollees and the Medicare program while not 
denying access to medically necessary services. Section 1852(a)(1) of 
the Act requires MA plans to provide coverage of items and services for 
which benefits are available under parts A and B of the Medicare 
statute, except for hospice care and, beginning 2021, excludes organ 
acquisitions costs for kidney

[[Page 23858]]

transplants. Although CMS previously interpreted this as requiring MA 
coverage of Part A and Part B benefits to be no more restrictive than 
coverage in Original (FFS) Medicare, the need to control drug costs 
prompted our review of the authority and CMS changed this 
interpretation with respect to utilization management programs applied 
to Part B drugs upon more careful consideration of the statute as a 
whole. As discussed in the proposed rule, we expect the use of step 
therapy for Part B drugs to lead to lower costs for the government and 
Medicare beneficiaries; lowered costs are undoubtedly a means to ensure 
the continued health of the Medicare program and a reasonable basis for 
revisiting the statute to evaluate whether there is authority to 
provide more flexibility to MA plans in connection with utilization 
management policies.
    Section 1852, in imposing the requirement that MA plans furnish or 
cover Part A and Part B benefits, does not expressly prohibit the use 
of utilization management. To the contrary, sections 1852(c)(1)(G) and 
(c)(2)(B) of the Act expressly reference an MA plan's application of 
utilization management tools, like prior authorization and other 
``procedures used by the organization to control utilization of 
services and expenditures.'' This clearly indicates that MA plans are 
not expressly prohibited by the statute from implementing utilization 
management tools such as step therapy. Although some commenters 
disagreed that step therapy is a utilization management tool, 
characterizing it instead as a limitation or restriction on coverage, 
we believe that it is such a tool and that the reasonable limits these 
protocols place on when a drug is covered are the means of controlling 
utilization and cost. All Part B drugs must be covered by the MA plan 
when medically necessary, for example, when a stepped drug is not 
effective or appropriate for the patient, the patient must be allowed 
direct access to an alternative Part B drug. We disagree with 
commenters that characterize these limits as meaning that certain Part 
B drugs are no longer covered by the MA plan; these limits on coverage 
do not eliminate coverage, rather they ensure the most cost effective, 
clinically appropriate treatment is provided. This is consistent with 
our current interpretation of the requirement in section 1852 of the 
Act that MA plans must furnish or cover medically necessary Part A and 
Part B services, excluding hospice and, beginning 2021, excluding 
kidney acquisition costs.
    Further, we do not believe that the statute must list every 
possible procedure or policy that controls utilization of services or 
expenditures for the statute to authorize their use. Section 1860D-4(c) 
of the Act does not expressly refer to step therapy, but because it is 
an appropriate method for managing drug costs, we have historically 
permitted Part D plans to use step therapy as a utilization management 
program authorized by the statute. Section 1852(c)(1)(G) and (c)(2)(B) 
of the Act contemplates that MA plans will use utilization management 
policies that are not used in Original Medicare. If the statute 
permitted only prior authorization, requiring disclosure of 
``procedures used by the organization to control utilization of 
services and expenditures'' would be unnecessary because subsection 
(c)(1)(G) already requires disclosure of prior authorization policies. 
Our interpretation gives meaning to both provisions and reasonably 
interprets the reference to controlling utilization of services and 
costs as including step therapy policies.
    Further, we have explained our reinterpretation consistently. In 
the August 7, 2018 HPMS memo \14\ and subsequent FAQs,\15\ CMS 
recognized that utilization management tools, such as step therapy, can 
provide the means for MA plans to better manage and negotiate the costs 
of providing Part B drugs. In the proposed rule, we explained how we do 
not believe that MA plans subject to our prior guidance and 
interpretation engaged in negotiation over the cost of Part B drugs. As 
previously noted using internal bid data, excluding MA employer group 
plans, CMS estimates $9 billion in spending by MA plans for Part B 
drugs during contract year 2018. By providing a basis on which MA plans 
may more effectively negotiate the price they pay for Part B drugs, 
this reinterpretation of the statute allows for more cost-effective 
coverage of these drugs. Further, by using policies that promote the 
use of more cost effective drugs first when such drugs adequately and 
appropriate treat an enrollee's condition, step therapy programs can 
result in lower utilization while ensuring consistent beneficial 
outcomes.
---------------------------------------------------------------------------

    \14\ Available online at: https://www.cms.gov/Medicare/Health-Plans/HealthPlansGenInfo/Downloads/MA_Step_Therapy_HPMS_Memo_8_7_2018.pdf.
    \15\ Available online at: https://dpapportal.lmi.org/DPAPMailbox/Documents/Part%20B%20Step%20Therapy%20Questions%20FAQs_8-29-18.pdf.
---------------------------------------------------------------------------

    Because the statute contemplates MA plans use of utilization 
management policies and procedures and because Part B drugs are 
accessible and covered when medically necessary (such as if other 
medications that are used first in a step therapy program are not 
effective), we have concluded that an MA plan may fulfill its 
obligations to furnish Part B benefits even if a step therapy program 
is used. As discussed elsewhere in response to comments, new Sec.  
422.136 contains beneficiary protections and limits on how step therapy 
can be used in order to ensure access to medically necessary Part B 
drugs. CMS reiterates that MA plans must comply with the statutory 
requirement that they provide enrollees with access to all medically 
necessary Part A and Part B benefits available in Original Medicare, as 
provided section 1852(a)(1) of the Act. This final rule does not 
contravene this statutory requirement for MA plans.
    Comment: Several commenters expressed concerns that the proposal 
did not include adequate oversight from CMS. Several commenters argued 
that CMS cannot guarantee consistent enforcement and provide enrollees 
clinically appropriate Part B medication. Some commenters recommended 
CMS establish procedures, similar to Part D, in which plans are 
required to submit step therapy policies for CMS review and approval 
prior to implementation and use. Commenters also recommended that CMS 
actively monitor plans to ensure that plan policies and procedures are 
implemented in a manner that does not violate CMS rules. Commenters 
also suggested CMS closely monitor the extent to which organization 
determinations and appeals are being sought so that CMS can assess the 
need for additional patient protections.
    Response: Although Sec.  422.136 does not explicitly address 
monitoring and enforcement, CMS will leverage its existing oversight 
programs to include targeted monitoring of the Part B step therapy 
programs implemented by MA plans.
    CMS will monitor beneficiary complaints and organization 
determinations and appeals related to Part B drug step therapy 
programs. CMS has regularly scheduled meetings with the Part C IRE 
contractor; during these meetings, CMS and the IRE contractor identify 
and evaluate systemic problems with coverage decisions that rise to the 
IRE based on denials at the plan level. When systemic coverage issues 
are

[[Page 23859]]

identified, CMS takes steps with the MA plan, or the industry as a 
whole, to ensure correction of the problem. CMS will also monitor 
compliance with organization determination and appeal adjudication 
timeframes, both existing and those adopted in this final rule, by MA 
plans. When MA plans are selected for audit, CMS will target sample 
pre-service organization determination and appeals related to requests 
for Part B drugs to ensure compliance with Sec.  422.136, particularly 
the beneficiary protection requirements like the lookback period and 
the requirements to educate and inform health care providers and 
enrollees concerning its step therapy policies. CMS will also monitor 
step therapy related complaints it receives from stakeholders to learn 
how MA plans are implementing step therapy programs, including whether 
plan communications explaining the program and involvement of 
contracted providers, as we have outlined elsewhere in this final rule, 
are consistent with program requirements. Finally, when CMS identifies 
concerns about a step therapy program, CMS may request written 
documentation from the plan's P&T committee under authority in Sec.  
422.136(b)(9) and any other related plan information CMS deems 
necessary, in accordance with Sec.  422.504(f)(2), in order to assess 
and evaluate the MA plan's step therapy program and ensure compliance 
with CMS requirements.
    We note that CMS interprets its authority to review Part C bids and 
plan designs as the authority under which we could review MA plans use 
of Part B drug step therapy programs. However, given all of these 
oversight means and tools, we believe CMS can effectively monitor MA 
plan step therapy programs without reviewing all of the coverage 
policies and procedures an MA plan adopts for step therapy in advance. 
As discussed elsewhere in the final rule, P&T committees are 
responsible for reviewing and implementing Part B step therapy programs 
that are clinically appropriate and are based in scientific evidence 
and standards of practice. CMS does not review other utilization 
management practices (that is, prior authorization) for Part B items or 
services in advance of implementation by an MA plan. We will continue 
to hold plans accountable for ensuring coverage of medically necessary 
Medicare covered items and services through CMS's oversight activities.
    CMS solicited comment on the rule's restriction to new medication 
starts only.
    Comment: Some commenters requested CMS remove the new start 
restriction and allow step therapy for all Part B drug therapies. 
Several commenters requested that CMS increase the lookback period to 
determine if the enrollee is actively taking a Part B medication from 
108 to 365 days to better ensure uninterrupted care. These commenters 
pointed out that there are many clinical differences in the drugs 
covered under Part B compared to those covered under Part D and noted 
that the FDA-approved dosage period for many Part B drugs exceeds 108 
days. One commenter highlighted the following drugs (and their dosage 
periods) specifically:

 Zoledronic acid for osteoporosis is 1 year
 Denosumab for osteoporosis is 6 months
 Hyaluronic acid injections for knee osteoarthritis are 6 
months
 Rituximab for rheumatoid arthritis is dosed at two infusions 
repeated every 4 to 6 months

Given these examples, these commenters and others recommended a 365-day 
lookback period to better ensure uninterrupted care, noting that a 
disruption in therapy could result in poorer disease control including 
relapse of symptoms and other bad outcomes, such as hospitalization and 
death, depending on the drug and condition. Commenters also reasoned 
that a 108 day lookback period may not be clinically appropriate for 
some disease states, as many patients receive less frequent infusions 
that may not be captured in this short time period.

    Response: Although we proposed that MA plans would be required to 
have a lookback period of 108 days to determine if the enrollee is 
actively taking a Part B medication, we explained in the proposed rule 
how the purpose of the look back period was to determine if an enrollee 
were actively taking a Part B drug. We stated our belief that 
consistency with the Part D lookback period, which was created with 
clinical and pharmaceutical input, would be appropriate. As commenters 
have pointed out that the FDA-approved dosage periods for some Part B 
drugs exceeds 108 days, we now believe that in order to fully ensure 
that an MA enrollee is not already taking a Part B drug, a longer 
lookback period is appropriate and necessary. Therefore, in order to 
ensure continuity of care, we are finalizing Sec.  422.136(a)(1) with a 
lookback period of 365 days as recommended by commenters. Based on this 
information about the dosage periods for Part B drugs, the 
justification for the 108-day lookback period used for Part D drugs is 
not applicable to Part B drugs. In Part D, 108 days is a considered 
sufficient because PDPs are allowed to provide 90-day supplies. The 108 
day period allows for some flexibility beyond 90 days (18 days or 20% 
of 90 days) if the beneficiary does not refill a prescription exactly 
90 days after the first fill. This scenario is not applicable to Part B 
drugs because Part B drugs are not administered based on a 90-day 
supply and, as the commenters indicated, may have dosage periods of up 
to a year. As discussed in the proposed rule, CMS believes new step 
therapy requirements must not disrupt ongoing Part B drug therapies for 
enrollees. In order to ensure that step therapy requirements do not 
disrupt ongoing Part B drug therapies, we proposed, and are finalizing 
at Sec.  422.136(a)(1), that step therapy may not disrupt enrollees' 
ongoing Part B drug therapies. The regulation, at Sec.  422.136(a)(1), 
permits MA plans to apply a step therapy program only to new 
administrations of Part B drugs, using a minimum lookback period. We 
believe a 365 day look back period will mean that MA plans identify 
enrollees who may be using a drug with a longer dosage period and thus 
better ensure uninterrupted care. Therefore, the final regulation text 
specifies a 365 day lookback period.
    Comment: Commenters also stated that new start protections must be 
allowed for new MA enrollees as well as enrollees who switch MA plans.
    Response: We agree that step therapy programs should be limited to 
new administrations for all enrollees. We proposed that step therapy 
should not be permitted to disrupt enrollees' ongoing Part B drug 
therapies and noted in the proposed rule how we intended the 
restriction to new starts and the use of the look back period to apply 
to current enrollees and when an enrollee elects a new MA plan. We 
clarify here that an enrollee's ongoing Part B drug therapy may not be 
disrupted even when an enrollee switches plans. MA plans must use the 
lookback period when an enrollee elects a new MA plan (regardless of 
whether previously enrolled in a MA plan, traditional FFS Medicare, or 
new to Medicare) to determine whether the enrollee has taken the Part B 
drug (that will otherwise be subject to step therapy) within the past 
365 days. We are finalizing the requirement in Sec.  422.136(a)(1) that 
step therapy only be applied to new prescriptions or administrations of 
Part B drugs, using a 365 day lookback period. This limitation must be 
applied to all enrollees and means step therapy for a Part B drug may 
be used only for an enrollee who is not receiving the

[[Page 23860]]

medication currently or has not previously received the medication 
within the lookback period. MA plans must therefore take steps to 
request and review information as necessary to identify whether an 
enrollee has used the applicable Part B drug during the lookback 
period.
    Comment: Several commenters urged CMS to include in the final rule 
an exemption or waiver policy for individuals subject to Part B step 
therapy. Commenters argued that some beneficiaries have conditions that 
are too sensitive to be subject to the increased restrictions that step 
therapy would impose. Commenters reasoned that in some cases a patient 
being required to first ``fail'' on a plan preferred medication or to 
wait through a delay due to an appeal can to lead to adverse health 
outcomes, especially if the patient's condition is stable due to the 
enrollees' use of prescription drugs already selected by the 
prescribing health provider. Commenters stated that step therapy 
requirements prevent patients from adhering to their treatment plans 
and, therefore, are not in their best interests. Commenters also 
suggested CMS develop a more expansive exemption or waiver policy for 
individuals that should not be subject to Part B drug step therapy 
requirements.
    Response: We reiterate that plans cannot deny medically necessary 
care and enrollees and/or providers may request a pre-service 
organization determination in order to receive plan approval to bypass 
the step therapy requirement, but we are not adopting specific 
regulation text to create additional exemptions from step therapy other 
than the limits we proposed (meaning, the limits regarding new 
administrations of a Part B drug, use of only covered drugs, and use of 
off-label indications). We believe that a request for a pre-service 
determination, particularly in light of the amendments to the deadlines 
for responding to requests for organization determinations about 
coverage of Part B drugs, is an adequate safeguard to ensure enrollee 
access to medically necessary care. In addition, an enrollee may 
request an expedited organization determination and reconsideration if 
necessary. We are also requiring that step therapy be limited to new 
starts with a 365 day look back period so continuing treatments are not 
affected. CMS limited step therapy to new starts because a disruption 
in successful MA enrollee therapy could result in poorer disease 
control, relapse of symptoms and other bad outcomes including 
hospitalization and death, depending on the drug and condition.
    This final rule includes a number of safeguards that ensure timely 
access to all medically necessary Part B medications, including the 
following: (1) Requiring that step therapy only be applied to new 
prescriptions or administrations of Part B drugs for enrollees who are 
not actively receiving the affected medication with a lookback period 
of 365 days to determine if the enrollee is actively or during the 
lookback period was taking a Part B medication; (2) requiring that MA 
plans issue organization determinations and decisions on appeals under 
timeframes similar to those used in the Part D program when the issue 
is about coverage of a Part B drug; and (3) requiring that plans use a 
P&T committee to review and approve step therapy programs to ensure 
medically appropriate implementation of step therapy for Part B drugs.
    Comment: Some commenters urged CMS to require that step therapy 
protocols be aligned with clinical practice guidelines and adhere to 
recognized standards of care. Other commenters urged CMS to require MA 
plans to establish processes to evaluate the clinical appropriateness 
of their step therapy protocols. Some commenters suggested that plan 
step therapy policies should be supported by evidence-based clinical 
guidelines and best practices that are based on robust research and 
publicly available overutilization data.
    Response: CMS appreciates commenters' feedback about requiring P&T 
committees to establish processes to evaluate the step therapy policies 
developed by MA plans and that these policies be supported by evidence-
based clinical guidelines and best practices. We believe that our 
proposal for P&T committees and the standards they would be required to 
use in reviewing and approving step therapy programs for Part B drugs 
are consistent with the commenters' recommendations. CMS is finalizing 
its proposal at Sec.  423.136(b)(5), that requires P&T committees base 
clinical decisions on the strength of scientific evidence and standards 
of practice, including assessing peer-reviewed medical literature, 
pharmacoeconomic studies, outcomes research data, and other information 
as is determines appropriate. This regulation will allow P&T committees 
discretion to determine the scientific evidence and standards of 
practice on which their clinical decisions are based, although CMS can 
monitor this process through review of P&T committee records. CMS is 
also finalizing regulation text at Sec.  423.135(b)(9) that each P&T 
committees must document in writing its decisions regarding the 
development and revision of and utilization management activities and 
make this document available to CMS upon request. Accordingly, CMS may 
monitor compliance with (and, as necessary take enforcement and/or 
compliance action regarding) the P&T committee requirements in Sec.  
422.136(b) through requesting written documentation regarding Part B 
step therapy programs and evaluating whether clinical decisions and 
criteria are evidence-based and appropriate in terms of safety and 
efficacy. We may also release subregulatory guidance concerning the 
application of the P&T committee requirements in the context of Part B 
drugs.
    Comment: A few commenters requested that CMS carefully consider the 
development of further guidance on how step therapy should align with 
existing care coordination programs.
    Response: We evaluated existing requirements in Sec. Sec.  422.112 
and 422.152 that require care coordination activities and determined 
that changes to these rules are not needed to include care coordination 
activities related to Part B step therapy. We may consider further 
requirements in the future, as needed, and note that CMS is not 
finalizing a requirement in Sec.  422.136 that an MA plan must offer a 
drug management care coordination program in conjunction with Part B 
step therapy. We believe full disclosure to enrollees regarding a 
plan's Part B step therapy program and good communication between 
providers and enrollees undergoing step therapy are important features 
of care coordination. We expect this disclosure to include informing 
enrollees of their appeal rights and confirming whether enrollees have 
used the stepped medication within the last year. While all of the care 
coordination requirements are important, we emphasize that plans should 
ensure that treating providers consider beneficiary input into the 
provider's proposed treatment plan, as described at 42 CFR 
422.112(a)(6)(iii). We also expect MA plans to ensure that providers 
closely monitor patients undergoing step therapy to ensure that the 
prescribed medication is meeting clinical expectations.
    Comment: Some commenters expressed concern that the additional 
education and information responsibilities in this proposal are 
insufficient and do not adequately inform enrollees and providers of 
plan step therapy policies. These commenters encouraged CMS to provide 
greater transparency to enrollees and

[[Page 23861]]

providers of step therapy policies by requiring that plans disclose the 
name of each Part B drug subject to step therapy in the annual notice 
of changes (ANOC) and explanation of benefits (EOC).
    Response: With regard to the comments on the sufficiency of our 
proposal regarding education and information provided to providers and 
enrollees, CMS believes transparency and informed beneficiaries and 
providers are critical to a well-coordinated and efficient utilization 
management program. We are finalizing the requirement that MA plans 
establish policies and procedures to educate and inform health care 
providers and enrollees concerning step therapy policies at Sec.  
422.136(a)(2). In addition, we note that existing disclosure 
requirements in Sec.  422.111 will apply to step therapy programs. We 
are still considering how to apply and interpret the requirements in 
Sec.  422.111 regarding the ANOC and EOC to step therapy programs in 
light of the new requirement we are finalizing here at Sec.  
422.136(a)(2), that MA plans establish policies and procedures to 
educate and inform providers and enrollees about step therapy programs. 
Subregulatory guidance will be provided Sec. Sec.  422.111 and 
422.136(a)(2) and CMS intends to seek comment in its development of 
such guidance about whether step therapy requirements should be 
displayed in a drug-specific manner in the ANOC/EOC documents provided 
to beneficiaries.
    Comment: Some commenters expressed concern that the requirements 
under this proposal are burdensome and not necessary to administer a 
drug benefit.
    Response: CMS appreciates commenters concerns regarding the 
administrative burden imposed on network providers by MA plans. CMS 
encourages MA plans to work closely with providers to adopt best 
practices that streamline operations and minimize burden. We also 
encourage continued development and advancement of electronic prior 
authorization processes to more efficiently administer Part B step 
therapy programs and potentially minimize burden on health care 
providers. CMS believes that Part B step therapy programs can reduce 
medical costs by replacing more expensive drugs with less costly drugs 
when it is medically appropriate to do so.
    Comment: Several commenters expressed concern about the disclosure 
requirements and argued that beneficiaries should receive more detailed 
information about drugs subject to Part B step therapy. Commenters 
suggested that beneficiaries should be able to review step therapy 
protocols and medications subject to step therapy prior to enrolling in 
the plan. Commenters recommended increased transparency of plan step 
therapy requirements, including having plans explain why step therapy 
is required for a specific medication, how the process works, and what 
recourse the beneficiary has to appeal. Furthermore, several commenters 
urged CMS to prohibit mid-year additions to step therapy programs or 
mid-year implementation of step therapy, noting that such restrictions 
should only be established in advance of a plan year so that 
beneficiaries will have access to all plan information prior to making 
enrollment decisions.
    Response: As previously discussed, CMS believes transparency and 
informed beneficiaries and providers are critical to a well-coordinated 
and efficient utilization management program. The regulation at Sec.  
422.111 requires that MA plans disclose information covered by the 
plan, including applicable conditions and limitations, premiums, cost-
sharing, and any other conditions associated with receipt or use of 
benefits in the plan's ANOC (when initially adopted or subsequently 
changed) and EOC documents, which are provided annually to plan 
enrollees. In the past, we interpreted the regulation to mean that 
plans must identify that covered services may be subject to utilization 
management tools, like prior authorization. In light of the comments 
regarding transparency and the need for enrollees to have detailed 
information about step therapy programs, we are considering whether 
Sec.  422.111 should be interpreted to require more detailed 
disclosure, particularly as we are finalizing a requirement at Sec.  
422.136(a)(2) that MA plans establish policies and procedures to 
educate and inform providers and enrollees about step therapy programs. 
We intend to seek comment through sub-regulatory guidance as to whether 
step therapy requirements should be displayed in a drug-specific manner 
in the ANOC/EOC documents and how MA plans should be required to 
display this information so that enrollee elections can be made based 
on all necessary information.
    With respect to mid-year changes to implementation of step therapy 
programs, we note that under Sec.  422.111(d)(3), MA plans must inform 
all enrollees at least 30 days before the intended effective date of 
changes in plan rules. Utilization management tools like prior 
authorization and step therapy are plan rules within the scope of this 
provision so MA plans must inform enrollees of changes to rules 
described in the ANOC/EOC consistent with Sec.  422.111(d).
    Comment: Some commenters supported the use of P&T committees as an 
effective mechanism to ensure that step therapy and other utilization 
policies are clinically appropriate. Other commenters noted that MA 
plans utilize a Medical Policy committee, which reviews and evaluates 
drugs covered under the medical, rather than the pharmacy benefit. The 
commenters suggested CMS should allow MA plans to utilize these 
committees to develop and review plan step therapy policies instead of 
a P&T committee, which reviews and approves the Part D drug benefit.
    Response: CMS appreciates commenters who shared both opposition and 
support of the P&T committee requirement. CMS will require MA plans 
that elect to use Part B step therapy programs to have a P&T committee 
review and approve such step therapy programs. This regulation affirms 
our reinterpretation of section 1852 of the Act, and the MA regulations 
governing benefit coverage and utilization management policies (for 
example, Sec.  422.4(a)(1)(ii)) to allow MA plans to use utilization 
management tools such as step therapy for Part B drugs to prevent 
overutilization of medically unnecessary health services and control 
costs, subject to limitations finalized in Sec.  422.136. We are 
finalizing the paragraph (b) provisions requiring use of P&T 
committees, but are limiting the P&T committee responsibilities to 
review and approval of Part B step therapy programs only. Our proposed 
regulation text in paragraphs (b)(6), (b)(7), and (b)(9) referred to 
utilization management policies and programs and proposed paragraph 
(b)(10) referred to ``clinical prior authorization criteria;'' we are 
not finalizing these references, but are limiting the regulation text 
to step therapy programs. The final rule does not require P&T committee 
review and approval of Part B utilization management policy other than 
step therapy programs; MA plans are permitted to use P&T committees 
more broadly to review and approve other utilization management 
programs and protocols, but are not required to by Sec.  422.136 as 
finalized here. Limiting P&T committee responsibilities to step therapy 
programs is in line with our proposal. As explained in the proposed 
rule, Sec.  422.136 is specific to step therapy programs applicable to 
Part B drugs, our reinterpretation permitting such programs, and the 
appropriate limits on MA plans using such

[[Page 23862]]

programs. Our proposal was not explicitly to impose new limits on 
existing utilization management programs. Although we solicited 
comments, we did not receive any comments recommending that P&T 
committee requirements be extended to other programs.
    We believe the P&T committee requirements being finalized in this 
rule are necessary to ensure medically appropriate implementation of 
step therapy for Part B drugs. P&T committees will promote safe, 
effective, and cost-effective Part B drug therapy by reviewing and 
approving the policies and procedures for step therapy. CMS is not 
adopting any requirements for use of Medical Policy committees because, 
as discussed in the proposed rule, we believe it is appropriate to 
substantially align the requirements of a P&T committee reviewing Part 
B drugs with Part D requirements for administrative efficiency between 
Part C and Part D programs. P&T committee membership and regulatory 
requirements are specifically designed to ensure that adequate 
standards and considerations be used in reviewing step therapy programs 
for drugs. A medical policy committee's scope would not necessarily be 
limited to Part B drug review and, therefore, impose unnecessary burden 
to MA plans. Additionally, Part D requirements for P&T committees have 
proven sufficient in ensuring that plans implement medically 
appropriate step therapy and utilization management protocols in Part 
D.
    Comment: Some commenters expressed concern about CMS's requirements 
regarding the sufficiency of the P&T committee's composition. These 
commenters believe MA plans should require, rather than encourage, P&T 
committees to include more specialists, nurse practitioners, and 
beneficiary representation.
    Response: CMS appreciates commenters concerns regarding P&T 
committee composition. In response to commenters' suggestions that P&T 
committee composition include more specialists, practitioners, and 
beneficiary representation, CMS notes that this final rule requires P&T 
committees include a majority of members who are practicing physicians 
or pharmacists. Although P&T committees must include a majority of 
members who are physicians and pharmacists, plans have the discretion 
to include specialists, nurse practitioners, and beneficiaries as 
members. We do not believe that adopting different or revised 
composition requirements will necessarily further our goals for the use 
of the P&T committee while they could impose additional burden on MA 
plans, which would not be able to immediately implement use of an 
existing P&T committee established for the Part D program, if 
additional members must be added to the committee. As noted in the 
proposed rule, we believe that using the same rules as apply in the 
Part D program are appropriate because of the demonstrated success in 
that context.
    Comment: A few commenters expressed concern that this proposal 
would lead to higher out-of-pocket (OOP) costs for beneficiaries. Some 
expressed concern that allowing plans to step a Part D drug before a 
Part B drug would lead to increased OOP costs for beneficiaries due to 
the differences in cost sharing rules between Part B and Part D drugs. 
A few commenters urged CMS to allow plans to cross-manage Part B and 
Part D drugs to enable plans to better manage Part B and Part D drug 
costs.
    Response: CMS acknowledges that in some narrow instances 
beneficiaries may be financially disadvantaged and experience higher 
cost sharing if for example, a Part B step therapy program uses a Part 
D drug as a step to the Part B drug for an enrollee who had reached 
their MA plans maximum out-of-pocket limit (MOOP). MA enrollee out-of-
pocket costs for Part D drugs are not included in the MOOP limit 
imposed on enrollee out of pocket costs under Sec. Sec.  422.100(f) and 
422.101(d), but enrollee costs for Part B drugs are; therefore, an 
enrollee who has reached the catastrophic limit would not have any cost 
sharing charged for a Part B drug, but would have to pay cost sharing 
for a Part D drug. However, we believe the majority of MA enrollees 
will realize reduced cost sharing as a result of the step therapy 
policy finalized in this rule because the enrollees will be directed to 
a clinically appropriate and more cost effective drug treatment. We 
expect that the implementation of step therapy will result in lower 
plan bids, because the cost of furnishing Part A and Part B benefits 
will be lower. If a plan reduces its bid relative to the benchmark, the 
plan should be able to charge a lower premium or provide supplemental 
benefits at a lower (or potentially no) premium.
    Comment: Some commenters recommended that CMS permit plans to 
provide a two-tiered Part B preferred drug list with differential cost-
sharing and requested that CMS use its authority through the Annual 
Rate Notice and Call Letter to permit MA plans to establish non-
preferred Part B drug cost sharing greater than 20 percent.
    Response: We thank commenters for their suggestions. We note that 
CMS does not have the authority to make such changes through the annual 
Call Letter. Section 3202 of the Affordable Care Act amended section 
1852 of the Act to establish new standards for MA plans' cost sharing. 
Specifically, section 1852(a)(1)(B) of the Act was amended by the 
addition of new clause (iii) that limits cost sharing under MA plans so 
that it cannot exceed the cost sharing imposed under Original Medicare 
for specific services identified in new clause (iv). New section 
1852(a) (1)(B)(iv) of the Act lists the three service categories for 
which cost sharing in MA plans may not exceed that required in Original 
Medicare (chemotherapy administration services, renal dialysis 
services, skilled nursing care) and section 1852(a)(1)(B)(iv)(IV) of 
the Act specifies that this limit on cost sharing also applies to such 
other services that the Secretary determines appropriate. CMS must use 
rulemaking to identify additional services to which this provision 
would apply to limit how much cost sharing is charged to an MA 
enrollee.
    As stated in the CY 2012 Call Letter, MA plans and 1876 Cost Plans 
may not charge enrollees higher cost sharing than is charged under 
Original Medicare for chemotherapy administration including 
chemotherapy drugs and radiation therapy integral to the treatment 
regimen, skilled nursing care, and renal dialysis services (Sec. Sec.  
417.454(e) and 422.100(j)). In addition, in order to ensure that cost 
sharing is consistent with both Sec. Sec.  422.254(b)(4) and 
422.100(f)(2) and (6), CMS evaluates actuarial equivalent cost sharing 
limits separately for all Part B drugs. Therefore, the 20 percent limit 
applies to both Part B drugs-Chemo and Part B Drugs-Other.
    Comment: Some commenters also suggested CMS allow plans' 
utilization management protocols to supersede national coverage 
determinations (NCDs) and local coverage determinations (LCDs). 
Specifically, it was suggested that CMS provide guidance that grants 
plans flexibility in implementing step therapy on Part B drugs with 
LCDs or NCDs. We also received a comment that encouraged CMS to review 
NCDs and revise those policies that impose barriers on the utilization 
of biosimilars.
    Response: MA organizations have been and remain subject to Sec.  
422.101(b), which requires compliance with national and in some cases, 
local, coverage determinations. Part B step

[[Page 23863]]

therapy protocols for a given drug cannot be stricter than the step 
therapy provisions specified in an NCD or LCD. For example, if the NCD 
or LCD has specified Part B step therapy requirements for that 
particular drug, then the Part B step therapy protocols of an MA plan 
cannot be stricter than those protocols. We would further note that 
when NCDs or LCDs do not preclude MA step therapy, we believe that Part 
B step therapy can be an effective utilization management tool. Where 
an LCD or NCD addressing coverage of a Part B drug does not address or 
include a step therapy protocol, this regulation will permit the MA 
plan to adopt a step therapy for that Part B drug. As we have discussed 
elsewhere in this final rule, one significant policy goal in allowing 
Part B step therapy is to enable MA plans to reduce unnecessary drug 
spending and, in turn, reduce costs for beneficiaries and the Medicare 
program. MA plans must provide coverage of all Part A and Part B 
benefits, therefore, MA plans must provide coverage of all Part B 
drugs. If an NCD specifies that a biosimilar is not covered under Part 
B, it cannot be used under the Part B drug step therapy program.
    Comment: Some commenters requested CMS clarify whether all of the 
projected savings resulting from step therapy may be incorporated in 
the bid amount, instead of offering incentives only to those enrollees 
subject to step therapy who completed specified care management 
activities, beginning in 2020.
    Response: Effective January 1, 2020, MA plans must incorporate 
anticipated savings in the plan's bid amount; therefore, coupling step 
therapy with rewards and incentives will not be a requirement in 2020 
or future years for MA plans (as it is in 2019) that use a step therapy 
program for one or more Part B drugs. Pursuant to Sec.  422.254(b), MA 
bids for the basic benefit are required to reflect the revenue 
requirements for an MA plan to cover all Part A and Part B benefits; 
when use of a step therapy program means that the MA plan projects 
lower utilization or lower pricing (such as due to pricing negotiation 
with drug manufacturers), that will necessarily result in lower revenue 
needs to provide the Part B drugs that are subject to the step therapy 
program. CMS reminds plans that additional Part C rebate dollars 
associated with the lower bid, as with all Part C rebate dollars, must 
be used to provide supplemental benefits and/or lower premiums for the 
plans' enrollees.
    We explained in the proposed rule how preferred provider 
organization plans (PPOs), because of the requirement in Sec.  
422.4(a)(1)(v)(B) to reimburse or cover benefits provided out of 
network without use of restrictions on coverage, would not be able to 
impose prior authorization or step therapy requirements on out-of-
network provision of Part B drugs. We solicited comment on whether the 
final rule should include a specific regulatory provision clarifying 
whether preferred provider organization plans (PPOs) can apply step 
therapy out of network.
    Comment: Some commenters requested that CMS allow PPOs to apply 
step therapy out of network.
    Response: We clarify that PPOs are required, as part of the 
definition of a PPO at section 1852(e)(3)(A)(iv)(II) of the Act and 
under the MA regulations at Sec.  422.4(a)(1)(v)(B), to reimburse or 
cover benefits provided out of network; while higher cost sharing is 
permitted, PPOs are prohibited from using prior authorization or 
preferred items restrictions in connection with out of network 
coverage. (70 FR 4616 through 4617). As such, PPOs must provide 
reimbursement for all plan-covered medically necessary services 
received from non-contracted providers without prior authorization or 
step therapy requirements. Therefore, PPO plans may only use step 
therapy or prior authorization when a Part B drug is provided by an in-
network provider.
    Comment: Some commenters requested that all step therapy policy, 
including CMS operational guidance, be subject to advance public notice 
and an opportunity to provide comment.
    Response: CMS thanks commenters for the suggestion and will 
consider soliciting comment on draft operational guidance related to 
Sec.  422.136 and its requirements for Part B step therapy in the 
future. However, we do not believe that we are required to do so. 
Because of timing factors, as well as other policy considerations, we 
may release guidance without first soliciting comment.
    Comment: Some commenters urged CMS to evaluate and revise existing 
subregulatory guidance and update relevant Medicare manual chapters to 
maximize the time plans have to design and implement step therapy 
programs and incorporate them in their bid applications for CY 2020.
    Response: CMS will continue to evaluate and update Part B and Part 
D subregulatory guidance to ensure accuracy and consistency with new 
regulations. CMS appreciates that plans need to prepare bid submission 
and will work to provide additional Part B subregulatory guidance in a 
timely manner. This final rule provides significant discussion of Sec.  
422.136 and the requirements for Part B step therapy. Additional 
guidance before the bid deadline for CY2020 may not be possible.
    Comment: Some commenters supported the proposal to permit MA plans 
to use off-label drugs in a step therapy program only when such drugs 
are supported by widely used treatment guidelines or clinical 
literature that CMS considers to represent best practices. Some 
commenters requested that CMS clarify what it considers to be ``best 
practices'' or ``widely used treatment and clinical literature'' in 
this regard. Others expressed caution that the use of off-label drugs 
as proposed could limit further investment in developing therapies and 
could provide disincentives to seeking FDA approval of additional 
indications. Some commenters expressed concern that the proposed 
regulation text does not explicitly require that an off-label use meet 
the definition of a medically accepted indication. Commenters also 
expressed concern that reliance upon compendia standards as the 
criteria for off-label coverage is insufficient to determine clinical 
appropriateness and could undermine the FDA and its role to review and 
approve investigational uses of approved drugs. Other commenters 
recommended CMS prohibit step therapy through an off-label medicine, 
particularly if there is an on-label medicine available.
    Response: We thank commenters for their feedback. In order to 
ensure the medically appropriate use of off-label drugs, CMS's 
finalized rule prohibits an MA plan from including in step therapy 
protocols a drug supported only by an off-label indication unless the 
off-label indication is supported by widely used treatment guidelines 
or clinical literature. For example, an example of widely used 
treatment guidelines that would be relevant for Part B drugs would be 
the National Cancer Center Network (NCCN), which has separate 
guidelines for different types of cancer, as well as a compendium for 
cancer drugs.
    Comment: A commenter asked whether the policies in our proposed 
rule allow a MA plan to require the use of a Part D protected class 
drug prior to the use of a Part B drug (that is., as a step to a Part B 
drug on a Part B step therapy program). The commenter also asked how 
the Part B step therapy program would impact enrollees' access to Part 
D protected class drugs.
    Response: This final rule, at Sec.  422.136(d), provides that only 
Medicare covered Part B drugs (and, for MA-PD plans, also Part D drugs) 
may be

[[Page 23864]]

used in a step therapy program for a Part B drug. A Part B step therapy 
program used by an MA plan must not include as a step or other 
component of the program any drugs not covered by the MA plan as a Part 
B drug, or, in the case of an MA-PD plan, a Part D drug. In addition to 
requiring one Part B drug be used before a different Part B drug, MA 
plans that also offer prescription drug coverage (MA-PD plans) may use 
step therapy to require a Part B drug or a Part D drug therapy, 
including a protected class Part D drug, prior to allowing a Part B 
drug therapy because the Part D drug will also be covered by the plan. 
MA-PD plans may also apply step therapy to require a Part B drug 
therapy prior to allowing a Part D drug therapy, including, for new 
starts only, a protected class Part D drug (other than an 
antiretroviral), as part of a Part D step therapy program or 
utilization management program; however, MA-PD plans must ensure that 
these requirements are clearly outlined in the Part D prior 
authorization criteria for the affected Part D drugs and are otherwise 
consistent with Part D requirements, including the requirements for the 
use of prior authorization and step therapy for protected class Part D 
drugs that we are finalizing elsewhere in this rule.
    As discussed previously, after careful consideration of all 
comments received, and for the reasons set forth in the final rule and 
in our responses to the related comments, we are adopting a new 
regulation at Sec.  422.136, substantially as proposed but with some 
modifications. Specifically, we are making the following changes from 
the proposal:
     In the proposed regulation text Sec.  422.136(a) (1), we 
are finalizing a lookback period of 365 days instead of 108 days.'' 
Thus, Sec.  422.136(a) (1) reads as follows: ``Apply step therapy only 
to new administrations of Part B drugs, using at least a 365 day 
lookback period.''
     In the introductory text in Sec.  422.136(b), we are 
correcting a typographic error in the proposed regulation text to use 
``an existing Part D P&T committee'' in place of ``an existing Part D 
P&T committees.''
    We are also amending the P&T committee requirements at Sec.  
422.136(b) to clarify that P&T committee responsibilities apply to 
review and approval of Part B drug step therapy programs, and do not 
extend to all utilization management policies for Part B items or 
services. Therefore, we are making the following modifications:
     In the regulation text Sec.  422.136(b)(6), we are 
replacing ``a utilization management programs, such as'' with 
``program''. Thus, we are finalizing Sec.  422.136(b)(6) to read as 
follows: ``Consider whether the inclusion of a particular Part B drug 
in a step therapy program has any therapeutic advantages in terms of 
safety and efficacy.''
     In the regulation text Sec.  422.136(b)(7), we are not 
finalizing the language ``utilization management processes, including 
drug utilization review, quantity limits, generic substitution, and 
therapeutic interchange'' and are finalizing language that refers to 
step therapy. Thus, we are finalizing Sec.  422.136(b)(7) as follows: 
``Review policies that guide exceptions and other step therapy 
processes.''
     In the regulation text Sec.  422.136(b)(9), we are not 
finalizing ``and'' and ``utilization management.'' Thus, we are 
finalizing Sec.  422.136(b)(9), to read as follows: ``Document in 
writing its decisions regarding the development and revision of step 
therapy activities and make this documentation available to CMS upon 
request.''
     In the regulation text Sec.  422.136(b)(10), we are 
removing ``clinical prior authorization criteria'' and ``protocols and 
quantity limit restrictions.'' Thus we are revising Sec.  
422.136(b)(10), to read as follows: ``Review and approve all step 
therapy criteria applied to each covered Part B drug.''
2. Medicare Advantage and Step Therapy for Part B Drugs: Adjudication 
Timeframes
    We proposed to amend a number of regulations related to the 
timeframe for an MA plan to make expedited and standard organization 
determinations and reconsiderations regarding coverage of Part B drugs. 
We also received comments on our proposal that requests for Part B 
drugs, including Part B drugs subject to step therapy, be processed 
under the same adjudication timeframes as used in the Part D drug 
program. As we stated in the proposed rule, we believe the clinical 
circumstances that typically accompany requests for Part B drugs 
warrant application to coverage decisions regarding Part B drugs of the 
shorter adjudication timeframes that apply in Part D. In keeping with 
this rationale, we did not propose to permit MA plans to extend 
adjudication timeframes for organization determinations and appeals 
related to Part B drug requests. We explained that our proposal to 
change the adjudication timeframes applies through the Part C IRE level 
of review. We did not propose to change how Part C appeals, whether for 
Part A, Part B or supplemental benefits, are processed by the Office of 
Medicare Hearings and Appeals (OMHA) and the Medicare Appeals Council 
(Council) which is housed within the Departmental Appeals Board (DAB).
    Specifically, we proposed the following amendments regarding the 
organization determination and appeal procedures for Part B drugs:
     Add adjudication timeframes at Sec. Sec.  422.568, 
422.572(a), and 422.590(c) and (e)(2) for, respectively, standard 
organization determinations, expedited organization determinations, 
standard reconsiderations, and expedited reconsiderations related to 
coverage of Part B drugs that are the same as the timeframes for these 
appeal stages for Part D drugs under Sec. Sec.  423.568, 423.572, and 
423.590.
     Add references to determinations regarding Part B drugs to 
Sec. Sec.  422.568(d) and (e)(4), 422.584(d), 422. 618(a) and (b), and 
422.619(a), (b) and (c).
     Specify in Sec. Sec.  422.568(b)(2), 422.572(a), and 
422.590(c) and (e)(2) that the rules related to extending the 
adjudication timeframe related to requests for medical services and 
items (at Sec. Sec.  422.568(b)(1)(i), 422.572(b) and redesignated 
Sec.  422.590(f)) do not apply to the timeframes for resolving standard 
organization determinations, expedited organization determinations, 
standard reconsiderations, and expedited reconsiderations for Part B 
drugs.
     Make conforming changes that reference the applicable 
proposed timeframes and deadlines for determinations regarding Part B 
drugs and update cross-references in Sec. Sec.  422.570(d)(1), 
422.584(d)(1), and 422.618(a).
     Add a reference to an ``item'' to regulation text to 
clarify that the scope covers services and items at Sec. Sec.  
422.568(b), (d), and (e); 422.572(a) and (b), 422.590(a), (e), and (f); 
and 422.619(a) and (b).
     Redesignate existing regulatory paragraphs at Sec.  
422.568(b)(1) and (2) to Sec.  422.568(b)(1)(i) and (ii), at Sec.  
422.590(c)-(f) to Sec.  422.590(d)-(f), and at Sec.  422.619(c)(2) to 
Sec.  422.619(c)(3), without substantive change.
    We explained in the proposed rule our intent to balance goals of 
cost savings and efficiencies with enrollee access, enhanced quality of 
care, and due process protections. We also solicited comments on our 
proposals related to organization determination and appeals timelines 
and processes that will be applicable to Part B drugs. Specifically, we 
solicited comments on our proposal to not permit MA organizations to 
extend the proposed timeframes for requests for Part B drugs and 
whether we overlooked an appeal

[[Page 23865]]

procedure or timeframe that should also be addressed in order to meet 
our goal of aligning organization determinations and appeals related to 
Part B drugs with the procedures and timeframes currently applicable to 
coverage determinations and appeals for Part D drugs under part 423. 
For more detail about the proposal, we direct readers to the proposed 
rule, 83 FR 62171 through 62174.
    We explained in our proposal that, in a separate proposed rule, 
CMS-4185-P, entitled ``Medicare and Medicaid Programs; Policy and 
Technical Changes to the Medicare Advantage, Medicare Prescription Drug 
Benefit, Program of All-inclusive Care for the Elderly (PACE), Medicaid 
Fee-For-Service, and Medicaid Managed Care Programs for Years 2020 and 
2021'' and appeared in the Federal Register on November 1, 2018 (83 FR 
54982), we proposed integrated grievance and appeal provisions for 
certain D-SNPs with aligned enrollment with Medicaid managed care 
plans. We also solicited comment on whether the proposed timeframes for 
organization determinations and appeals of coverage of Part B drugs 
should be incorporated into the integrated appeals procedures for 
certain D-SNPs.
    We received 13 comments on our proposal related to organization 
determination and appeals timeframes for Part B drug requests:
    Comment: Several commenters expressed support for the proposal to 
mirror Part D adjudication timeframes for Part B drug requests. 
Commenters stated that they appreciate CMS' efforts to clarify the 
appeals process and to establish greater consistency in how Part B and 
Part D drug requests are adjudicated. In expressing support for the 
adjudication timeframes for Part B drugs, one commenter stated that 
delays in treatment can have devastating health implications and noted 
that requiring plans to meet the Part D timeframe of 72 hours for 
standard organization determinations and 24 hours for expedited 
organization determinations will help ensure that these adverse 
outcomes are avoided.
    Response: We thank the commenters for their support for this 
proposal. CMS believes that applying Part D adjudication timeframes to 
requests for Part B drugs establishes greater clarity and consistency 
in the coverage determination and appeals processes across the two 
programs. We believe the approach of applying shorter adjudication 
timeframes affords the most protection for beneficiaries. In addition, 
utilizing the timeframes that already exist in the Part D program 
minimizes changes to program operations for many plans since MA-PD 
plans are already familiar with and use the Part D timeframes.
    Comment: Several commenters supported the proposed changes to the 
adjudication timeframes, but expressed concern that these beneficiary 
safeguards may not be strong enough to counter the negative effects of 
the proposed use of step therapy and utilization management tools. 
These commenters believe use of utilization management tools undermine 
patient access to clinically necessary and critical drugs, treatments, 
and therapies.
    Response: We thank the commenters for sharing these concerns. CMS 
believes that mirroring the Part B adjudication timeframes with those 
shorter timeframes in Part D provides the best protection for enrollees 
who need a Part B drug. In all cases, the MA organization must notify 
the enrollee, and the physician or other prescriber involved, of its 
decision as expeditiously as the enrollee's health condition requires, 
but no later than the applicable adjudication timeframe. As we stated 
in the proposed rule, the rules on disclosure of utilization management 
requirements and individualized medical necessity determinations, 
coupled with the right to request an organization determination, ensure 
that an enrollee is informed about applicable step therapy requirements 
and has an opportunity for an individualized medical necessity 
determination related to a Part B drug step therapy requirement. 
Further, an MA organization has the discretion to establish an 
evaluation process for the appropriateness of enforcing its step 
therapy protocols on an enrollee when the enrollee's healthcare 
provider's assessment of medical necessity for the Part B drug 
indicates that the lower or earlier steps in the step therapy protocol 
are not clinically appropriate for that enrollee; this final rule does 
not prohibit MA organizations from working with their network providers 
to develop processes that eliminate the necessity for an enrollee to 
file a request for an organization determination in such cases. 
However, to the extent an MA organization develops an evaluation 
process for the appropriateness of enforcing its Part B step therapy 
protocols as described previously, the MA organization must ensure that 
the right of the enrollee to request an organization determination is 
not circumvented by such a process and that organization determination 
requests are processed in accordance with the requirements in Part 422, 
Subpart M.
    Comment: Some commenters stated that they do not believe the 
appeals process is adequately responsive to patients with urgent 
treatment needs as it can be burdensome and slow for patients and their 
providers attempting to obtain drugs that are not on formulary. Other 
commenters noted concern about the complexity of the MA appeals process 
and how the process may be difficult for some beneficiaries to 
navigate. One commenter stated that the Part D appeals process is too 
deeply flawed to serve as a model for adopting changes to the MA 
appeals process for the purpose of providing protections to enrollees 
affected by plans' use of step therapy programs for Part B drugs. 
Another commenter stressed that, unlike Part D drugs, Part B drugs are 
almost exclusively administered to the sickest patients and require a 
patient to go to their doctor to receive treatment. This commenter 
indicated that it is critical that any request for direct access to a 
Part B drug that would otherwise only be available after trying an 
alternative drug be addressed as promptly as possible, and suggested 
that MA plans be required to make all decisions about Part B drugs 
within a 24-hour timeframe rather than a 72 hour timeframe as proposed.
    Response: We thank commenters for their concerns and suggestions. 
We believe that application of shorter adjudication timeframes to 
requests for Part B drugs compared to the adjudication deadlines for 
other MA-covered services affords the best protection to enrollees who 
have an urgent need for the requested drug. As finalized in this rule, 
the MA organization must notify the enrollee, and the physician or 
other prescriber involved, of its decision regarding coverage of a Part 
B drug as expeditiously as the enrollee's health condition requires, 
but no later than 24 hours for expedited organization determination 
requests and 72 hours for standard organization determination requests 
for a Part B drug. We believe this medical exigency standard, coupled 
with the shorter timeframes, constitute meaningful beneficiary 
protections for those with urgent treatment needs. We believe that 
applying the same adjudication timeframes to all drug requests will 
increase consistency in the Part C and Part D coverage decision 
processes.
    We disagree with the comment that every Part B drug request be 
adjudicated in a 24-hour period. We believe it is important to provide 
some flexibility in how MA plans allocate resources so that truly 
urgent requests are given the requisite level of consideration. As

[[Page 23866]]

noted in the proposed rule, we believe applying the 72-hour timeframe 
to standard Part B drug requests affords appropriate protection for 
enrollees and we reiterate that, in all cases, the plan must notify the 
enrollee of its decision as expeditiously as the enrollee's health 
condition requires. In other words, the plan must notify an enrollee of 
a decision even more quickly in a case where there is a medical need to 
do so and we expect plans to triage requests in a manner that ensures 
that this medical exigency standard is satisfied. In addition, under 
existing rules, an enrollee or a physician may request that an MA 
organization expedite an organization determination if an enrollee is 
waiting to receive a drug. For a request made by an enrollee, the MA 
organization must provide an expedited decision if it determines that 
applying the standard timeframe could seriously jeopardize the life or 
health of the enrollee or the enrollee's ability to regain maximum 
function. For a request made or supported by a physician, the MA 
organization must provide an expedited decision if the physician 
indicates that applying the standard timeframe could seriously 
jeopardize the life or health of the enrollee or the enrollee's ability 
to regain maximum function.
    Comment: One commenter stated that they believed that the current 
review time for Part B drugs is appropriate and allows for adequate 
physician coordination of services and drugs concurrently, and that 
expediting the Part B determinations would pose no advantage. In a 
similar vein, another commenter was opposed to the proposed changes to 
the adjudication timeframes and noted a preference to keep timeframes 
for Part B and Part D distinct and separate to maintain consistency 
with current processes; this commenter also indicated that restricting 
the ability to extend the timeframes would severely constrain their 
capacity to obtain the necessary and appropriate information to make 
informed determinations, exacerbating denial rates and adding costs to 
plans through increased administrative burdens.
    Response: We thank the commenters for sharing their perspectives, 
but believe that the clinical circumstances that typically accompany 
requests for Part B drugs warrant application of the shorter 
adjudication timeframes that apply in Part D. As stated in the proposed 
rule, applying the shorter Part D adjudication timeframes to requests 
for Part B drugs establishes greater clarity and consistency in the 
coverage determination and appeals processes across the two programs 
and affords appropriate protections for enrollees requesting Part B 
drugs, including those subject to step therapy or other utilization 
management requirements. In keeping with the rationale that the 
clinical circumstances that typically accompany requests for Part B 
drugs warrant application of shorter adjudication timeframes, this 
final rule does not permit extension of the adjudication timeframes for 
Part B drug requests, as is allowed for other Part B organization 
determinations and appeals. With respect to the comment on increased 
administrative burdens, we believe utilizing the timeframes that 
already exist in the Part D program will minimize administrative 
burdens and changes to program operations for many plans since MA-PD 
plans are already familiar with and use the Part D timeframes.
    We did not receive comments specific to our solicitation regarding 
whether to finalize different timeframes for Part B drug coverage 
decisions made as part of the integrated grievance and appeal 
provisions for certain D-SNPs with aligned enrollment with Medicaid 
managed care plans. As explained below, we are finalizing provisions to 
require applicable integrated plans to use the same Part B organization 
determination and appeals timeframes set forth in this rule. CMS 
finalized integrated appeals procedures for certain D-SNPs with aligned 
enrollment with Medicaid managed care plans in the final rule CMS-4185-
F, Policy and Technical Changes to the Medicare Advantage, Medicare 
Prescription Drug Benefit, Programs of All-Inclusive Care for the 
Elderly (PACE), Medicaid Fee-For-Service, and Medicaid Managed Care 
Programs for Years 2020 and 2021. This final rule appeared in the April 
16, 2019 Federal Register (84 FR 15680). A significant part of the 
rationale for finalizing certain timeframes for the unified appeals 
processes for certain applicable integrated plans in that final rule 
was to provide consistency with existing timeframes in MA appeals 
procedures. In order to ensure that D-SNPs using the integrated appeals 
procedures operate consistently with other MA plans and provide 
protection of shorter timeframes for decisions regarding coverage of 
Part B drugs, we are finalizing here regulation text to require 
applicable integrated plans to use the same Part B organization 
determination and appeals timeframes finalized in this rule. 
Specifically, we are finalizing here the following amendments to the 
noted regulations:
     In Sec.  422.629(a), text to require applicable integrated 
plans to use the Part B drug rules;
     In Sec.  422.631(a), text to specify the applicability of 
Part B drug rules to integrated organization determinations; and
     In Sec.  422.633(f), text to specify the applicability of 
Part B drug reconsideration timelines to the integrated reconsideration 
process.
    We note that Sec.  422.634(d) requires that when an applicable 
integrated plan completely reverses its integrated organization 
determination involving a Part B drug, the applicable integrated plan 
authorize or furnish the Part B drug within 72 hours. Because the 72-
hour timeframe established in Sec.  422.634(d) applies to all 
integrated reconsiderations involving benefit, including Part B drugs, 
that were not furnished while an appeal was pending, we do not believe 
that any amendment or revision is appropriate to make it consistent 
with the amendment finalized here at Sec.  422.618(a)(3). Therefore, we 
are not amending Sec.  422.634(d).
    Based on the comments we received on the proposal that requests for 
Part B drugs be processed under the same adjudication timeframes as 
used in the Part D drug program and for the reasons provided in the 
proposed rule and our responses to comments, we are finalizing without 
substantive modification the following proposed changes to the 
regulatory provisions at Part 422, Subpart M:
     Add adjudication timeframes at Sec. Sec.  422.568, 
422.572(a), and 422.590(c) and (e)(2) for, respectively, standard 
organization determinations, expedited organization determinations, 
standard reconsiderations, and expedited reconsiderations related to 
coverage of Part B drugs.
     Specify in Sec. Sec.  422.568(b)(2), 422.572(a), and 
422.590(c) and (e)(2) that the rules related to extending the 
adjudication timeframe for requests for medical services and items (at 
Sec. Sec.  422.568(b)(1)(i) and 422.572(b), and at redesignated Sec.  
422.590(f), respectively) do not apply to the timeframes for resolving 
standard and expedited organization determinations and reconsiderations 
for Part B drugs.
     Make conforming changes that reference the applicable 
proposed timeframes and deadlines for determinations regarding Part B 
drugs and update cross-references in Sec. Sec.  422.570(d)(1), 
422.584(d)(1), and 422.618(a).
     Add a reference to an ``item'' to regulation text to 
clarify that the scope covers services and items at

[[Page 23867]]

Sec. Sec.  422.568(b), (d), and (e); 422.572(a) and (b), 422.590(a), 
(e), and (f); and 422.619(a) and (b).
     Add references to determinations regarding Part B drugs to 
Sec. Sec.  422.568(d) and (e)(4), 422.584(d), 422. 618(a) and (b), and 
422.619(a), (b) and (c).
     Redesignate existing regulatory paragraphs at Sec.  
422.568(b)(1) and (2) to Sec.  422.568(b)(1)(i) and (ii), at Sec.  
422.590(c)-(f) to Sec.  422.590(d)-(f), and at Sec.  422.619(c)(2) to 
Sec.  422.619(c)(3), without substantive change.
    We are finalizing Sec.  422.572(b)(1) with a slight modification to 
clarify that the rule for extending the timeframe for an MA plan to 
make its decision only applies if an extension to the timeframe is 
otherwise permitted; this clarification is necessary because we are 
finalizing, at Sec.  422.572(a)(2), regulation text to prohibit the 
extension of the 24 hour timeframe for an MA plan to decide an 
expedited organization determination regarding coverage of a Part B 
drug. In addition, we are amending Sec. Sec.  422.629, 422.631(a) and 
422.633(f) to adopt the same timeframes for decisions related to 
coverage of Part B drugs made by integrated applicable plans.
    Finally, as we previously noted, CMS will incorporate the shorter 
adjudication timeframes for Part B drug requests into the deadlines 
specified in the Part C IRE's contract per Sec.  422.592(b).

F. Pharmacy Price Concessions in the Negotiated Price (Sec.  423.100)

    In the proposed rule, we sought comment on a potential policy 
approach for requiring that all pharmacy price concessions be applied 
to drug prices at the point of sale under Part D. We received over 
4,000 comments on this potential policy approach. We thank the 
commenters for their detailed responses. We will carefully review all 
input received from stakeholders on this issue as we continue our 
efforts to meaningfully address rising prescription drug costs for 
seniors.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et 
seq.), we are required to provide 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. For the purposes of the PRA and this section 
of the preamble, collection of information is defined under 5 CFR 
1320.3 of the PRA's implementing regulations. 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:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our 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.
    In our November 30, 2018 (83 FR 62152) rule, we solicited public 
comment on our proposed information collection requirements, burden, 
and assumptions. As discussed in section III.B.4. of this final rule, 
we received comments related to our EOB burden estimates and revised 
our estimates as a result of those comments. We have also revised our 
business operations specialist-related cost estimates based on internal 
review (see sections III.A and III.B.5.).

A. Wage Data

    To derive average costs we used data from the U.S. Bureau of Labor 
Statistics' (BLS's) May 2017 National Occupational Employment and Wage 
Estimates for all salary estimates (http://www.bls.gov/oes/2017/may/oes_nat.htm). In this regard, Table 2 presents the mean hourly wage, 
the upward adjustment to wages to account for the cost of benefits and 
overhead (calculated at 100 percent of salary), and the resulting 
adjusted hourly wage.

                          Table 2--National Occupational Employment and Wage Estimates
----------------------------------------------------------------------------------------------------------------
                                                                                   Benefits and      Adjusted
                Occupation title                    Occupation      Mean hourly    overhead ($/   hourly wage ($/
                                                       code        wage ($/hr.)        hr.)            hr.)
----------------------------------------------------------------------------------------------------------------
Business Operation Specialist...................         13-1199          $36.42          $36.42          $72.84
Pharmacist......................................         29-1051           58.52           58.52          117.04
Software Developers and Programmers.............         15-1130           49.27           49.27           98.54
----------------------------------------------------------------------------------------------------------------

    As indicated, we are adjusting our employee hourly wage estimates 
by a factor of 100 percent. This is necessarily a rough adjustment, 
both because benefits and overhead costs vary significantly from 
employer to employer, and because methods of estimating these costs 
vary widely from study to study. We believe that doubling the hourly 
wage to estimate the total cost is a reasonably accurate estimation 
method.
    As previously mentioned, we have corrected the occupation code for 
business operations specialists from 13-0000 to 13-1199. The correction 
adds $1.88/hr. (mean) to our proposed business operations specialist-
specific cost estimates and $3.76/hr. (adjusted). The cost under 
section III.B.5. of this final rule is affected by this change.
    We are not making any changes to our Pharmacist (BLS occupation 
code 29-1051 at $117.04/hr.) or Software Developers and Programmers 
(BLS occupation code 15-1130 at $98.54/hr.) respondent types.

B. Information Collection Requirements (ICRs)

1. ICRs Regarding the Provision of Plan Flexibility To Manage Protected 
Classes (Sec.  423.120(b)(2)(vi)(C))
    As described in section II.A. of this rule, the new paragraph at 
Sec.  423.120(b)(2)(vi)(C) implements the authority granted to CMS by 
section 1860D-4(b)(3)(G) of the Act to establish exceptions that permit 
a Part D sponsor to exclude from its formulary (or to otherwise limit 
access to such a drug, including through prior authorization or 
utilization management) a particular Part D drug that is otherwise 
required to be included in the formulary. For the exception that 
addresses the use of prior authorization and step therapy for protected 
class drugs, the burden consists of the time and effort for Part D 
sponsors to submit their formularies to CMS under the active (or 
currently approved) annual submission process. The aforementioned 
provisions are active under OMB control number 0938-0763 (CMS-R-262) 
and will not impose any new or revised information collection 
requirements or burden.

[[Page 23868]]

Consequently, the provisions are not subject to the PRA.
    We received no comments on our proposed information collection 
requirements, burden estimates, and assumptions associated with these 
exceptions and are finalizing them for the PA and ST exception without 
modification. We are not finalizing the proposed pricing threshold 
exception, or the proposed collection of information requirements 
associated with that exception.
2. ICRs Regarding the Prohibition Against Gag Clauses in Pharmacy 
Contracts (Sec.  423.120(a)(8)(iii))
    This final rule codifies a ban on contract provisions that prohibit 
network pharmacies from informing Part D enrollees about instances 
where the pharmacy has a cash price for a prescribed drug that is lower 
than the out-of-pocket cost that would be charged to the enrollee. 
Since the codification will not change any existing practice and the 
provisions do not have any information collection implications, the 
provisions are not subject to the PRA. We received no comments on this 
assumption. As a result, we are finalizing this provision as proposed.
3. ICRs Regarding E-Prescribing and the Part D Prescription Drug 
Program; Updating Part D E-Prescribing Standards (Sec.  423.160)
    We proposed that each Part D plan sponsor adopt one or more Real 
Time Benefit Tools (RTBTs) that are capable of integrating with at 
least one e-prescribing (eRx) and electronic medical record (EMR) 
system(s) (the latter of which will hereinafter be referred to as an 
electronic health record or EHR for consistency with current 
Departmental terminology) for use in Part D eRx transactions beginning 
on or before January 1, 2020. As discussed earlier in this preamble, we 
understand that some PBMs and a few prescription drug plans have 
already begun to use RTBT tools capable of meeting the specifications 
listed in our preamble discussion, which includes providing 
beneficiary-specific drug coverage and out-of-pocket cost information 
at the point-of-prescribing.
    After giving a high-level description of the impact of this 
provision (83 FR 62185 through 621877), we solicited comment on the 
burden for implementing this provision since we had advanced the 
provision with unclear costs and impacts (83 FR 62185 through 62187).
    While we received a few comments relative to the collection of 
information requirements as initially proposed, the input was not 
sufficient to help us reliably quantify the burden associated with the 
RTBT provisions. Consequently, we continue to maintain our inability to 
reliably score the RTBT burden as it pertains to the PRA. In this 
regard we are in the process of publishing stand-alone 60- and 30-day 
Federal Register notices that will be subject to the regular non-rule 
PRA process. Because of the uncertainty, the purpose would be to 
revisit the burden issues, solicit public comment, quantify the burden, 
and obtain OMB approval. The RTBT requirements and burden will be 
submitted to OMB for approval under control number 0938-0763 (CMS-R-
262). Subject to renewal, it was last approved on November 28, 2018, 
and remains active.
    A summary of the public comments and our responses are as follows:
    Comment: Some commenters stated that a growing number of plans are 
already using RTBT due to the savings gained from enrollees switching 
to cheaper drugs as a result of information provided by the RTBT.
    Response: We are pleased to see that the industry is moving in this 
direction and appreciate the feedback confirming that our understanding 
was correct.
    Comment: Commenters provided various estimates of the prevalence of 
RTBT. The range was 70 percent to 90 percent of current plans are using 
RTBT or could easily transition to the technology with relative ease.
    Response: We thank commenters for their responses, but point out 
that the range in estimate makes it difficult to estimate the total 
plan burden for RTBT use. Additionally, prior to publication of the 
proposed rule, one stakeholder suggested that only 30 percent were 
using RTBT. This range, 30 percent to 90 percent, which includes 
conversations prior to publication of the NPRM as well as comments on 
the NPRM received during the public comment period is one part of our 
justification for why no impact is provided.
    Comment: Several commenters and without dissenting commenters 
commented that existing third party software was sufficient to meet the 
needs of RTBT.
    Response: We thank these commenters for pointing this out. Based on 
this comment, we are dropping our estimate of software burden since we 
do not expect plans to develop their own software.
    We are not quantitatively scoring this provision for the following 
reasons: (i) As just indicated the estimates of how many plans are 
using RTBT is 30 percent to 90 percent, implying that between 10 
percent to 70 percent will need to implement RTBT. (ii) Based on the 
previously presented comments, we are not assuming any plans will 
develop their own software. (iii-iv) Based on internal CMS data there 
are 1.4 billion PDEs per year. Based on conversations with industry, 
for large volume, the cost of transactions for RTBT would be $0.01 per 
transaction. (iii) However, we have no basis to ascertain how many of 
the 1.4 billion PDE will have RTBT applied to them. (iv) Similarly, we 
have no way of estimating the volume of transactions for each type of 
drug. Consequently, we have no reliable way of quantifying impact.
4. ICRs Regarding Part D Explanation of Benefits (Sec.  423.128)
    The requirements and burden related to the explanation of benefits 
(EOB) will be submitted to OMB for approval under control number 0938-
0964 (CMS-10141). Subject to renewal, the control number is currently 
set to expire on November 30, 2021. It was last approved on November 
28, 2018, and remains active.
    In accordance with Sec.  423.128(e)(5) of this rule, sponsors will 
be required to include the cumulative percentage change in the 
negotiated price since the first day of the current benefit year for 
each prescription drug claim in the EOB. Sponsors will also be required 
to include information about drugs that are therapeutic alternatives 
with lower cost-sharing. The intent is to provide enrollees with 
greater transparency with respect to drug prices, leading to lower 
costs. Since plans use formularies, they already have the negotiated 
drug price and the lower cost alternatives in an existing information 
system. The cost of this provision consists of: Programming systems to 
calculate and connect information to the Part D EOB production, and the 
cost of paper, toner, and postage.
    In the proposed rule, we assumed it would take 4 hours per contract 
at $98.54/hr. for a software programmer to link alternative prices to 
the EOB Model. However, commenters pointed out that there might be 
numerous systems to update. As a result, we are revising our 4 hour 
estimate to 160 hours. The change now estimates it will take two 
software programmers 8 hours (16 hours total) to revise 10 systems at 
the same hourly wage.
    In the proposed rule we considered separate work for each contract. 
Upon internal review we now believe it is more appropriate to estimate 
burden by each parent organization since it is typically more efficient 
for major system

[[Page 23869]]

changes to be performed once at the parent organizational level with 
the contracts of that parent organization sharing the updated system.
    Based on bid information and trends we expect 295 Part D Sponsors 
and PDP parent organizations for 2020. In aggregate, our revised one-
time burden estimate for updating systems is 47,200 hours (160 hr per 
response x 295 responses) at a cost of $4,651,088 (47,200 hr x $98.54/
hr) or $15,766 per respondent ($4,651,088/295 sponsors and 
organizations). Over the course of OMB's anticipated 3-year approval 
period, we estimate an annual burden of 15,733 hours (47,200 hr/3 
years) at a cost of $1,550,363 ($4,651,088/3 years). We are annualizing 
the one-time labor estimate since we do not anticipate any additional 
burden after the 3-year approval period expires.
    As discussed, commenters pointed out that there would be an added 
ongoing burden since EOBs would contain additional information about 
alternatives possibly requiring more printed pages per EOB. Based on 
internal bid information and projection we expect 47.6 million Part D 
enrollees in 2020. For our estimates of paper, toner, and postage we 
are adopting the same estimates that we used on April 16, 2018 (83 FR 
16440) for our CY 2019 MA (Part C)/Prescription Drug Benefit (Part D) 
final rule (CMS-4182-F, RIN 0938-AT08) found on page 16695. However, we 
are revising the postage rate to the updated 2019 bulk mailing rates. 
Although our regulations allow electronic submission of Part D EOBs 
upon request, informal communication from stakeholders indicates small 
usage. We are therefore assuming mailings to all enrollees. Since we do 
not require first class postage for Part D EOBs, we are assuming that 
Part D sponsors will use the least expensive option, namely, the use of 
bulk mailing rates. We also assume that the added information about 
alternatives is not started on a separate page as that could be costly; 
accordingly we assume the current Part D EOB on average ends mid-page 
and that adding 1-2 pages would on average add 1.5 pages of print 
requiring at most 1 page of paper (since the other half page of print 
would go on an already printed page). Furthermore, we assume that the 
Part D EOB is double-sided. In some cases the extra 1.5 pages may fit 
on the last printed page and on its other side not necessitating more 
paper. Bulk mailing rates vary by vendor; an informal survey on the web 
suggests $0.19 for 2019 rates for 50 pounds (envelope weight is 
normally considered negligible when citing these rates). Other 
assumptions are possible but the main drivers of our added cost are 
paper and toner as opposed to postage. The following breaks down those 
costs:
     Paper costs $0.005 per sheet ($2.50 for a ream of paper 
with 500 sheets).
     Toner costs $0.005 per sheet ($50 for a toner cartridge 
lasting 10,000 sheets).
     Postage costs are $0.000038 per page since--
    ++ A sheet of paper weights 0.16 ounces (5 pounds/500 sheets x 16 
ounces/pound).
    ++ Commercial bulk postage rates for 2019 are $0.19 for 200 pieces 
(50 pounds).
    ++ There are 16 ounces in one pound.
    ++ Postage cost per page is therefore $0.000038 ([$0.19 x 0.16 
ounces per page]/[50 pounds x 16 ounces/pound]).
    Thus, the total cost per page is $0.010038 ($0.005 for paper + 
$0.005 for toner + $0.000038 for postage). Finally, we note that Part D 
EOBs are sent out once per month to each enrollee summarizing drug 
transactions for the previous month. Thus we estimate an annual cost of 
$5,733,706 (47.6 million enrollees x 12 months x 1 page x $0.010038 per 
page). We believe that after appropriate programming (as discussed 
previously) the 47.6 million mailings will be performed automatically 
and will not require extra staff time.
    Combining the estimates for system updates and mailing we obtain an 
annual estimated cost of $7,284,069 ($1,550,363 for updating systems + 
$5,733,706 for paper, printing, and mailing)
    A summary of the public comments and our response follow:
    Comment: Commenters disagreed with our burden analysis. They 
pointed out that multiple systems would have to be updated and 
disagreed with our estimates regarding template creation. Finally, one 
sponsor provided a $4.5 million estimate for set-up costs and a $6 
million dollar estimate for mailing.
    Response: We thank the commenters for this insight. Based on these 
comments, we revised our estimated time for sponsors to update their 
systems. Also, we note that our revised estimate assumes Part D 
sponsors will update their systems to obtain information for the 
template. Finally, our estimates for initial costs are $4.7 million for 
system updates $5.7 million for mailing costs. Our estimates, which 
were independently developed, are very close to the proposed impacts 
provided by the commenter.
5. ICRs Regarding Medicare Advantage and Step Therapy for Part B Drugs 
(Sec. Sec.  422.136, 422.568, 422.570, 422.572, 422.584, 422.590, 
422.618, and 422.619)
    The requirements and burden related to the establishment and use of 
a P&T Committee will be submitted to OMB for approval under control 
number 0938-0964 (CMS-10141). Subject to renewal, the control number is 
currently set to expire on November 30, 2021. It was last approved on 
November 28, 2018, and remains active.
    This rule provides protections to help ensure that beneficiaries 
maintain access to medically necessary Part B drugs while permitting MA 
plans to implement step therapy protocols that support stronger price 
negotiation and cost and utilization controls. In order to implement a 
step therapy program for one or more Part B drugs, this rule requires 
that an MA plan establish and use a P&T Committee to review and approve 
step therapy programs used in connection with Part B drugs. The P&T 
Committee requirements are similar to the requirements applicable to 
Part D plans under Sec.  423.120(b). This rule allows MA-PD plans to 
use the Part D P&T Committee to satisfy the new requirements related to 
MA plans and Part B drugs. For MA plans that do not cover Part D 
benefits already, they may use the Part D P&T Committee of an MA-P&D 
plan under the same contract. Under Sec.  422.4(c), every MA contract 
must have at least one plan offering Part D. Because of the small 
amount of work needed annually, we believe it is reasonable to assume 
that no new committees will be formed and that the added work will be 
performed by the existing P&T Committees.
    The finalized Sec.  422.136(b)(4) and (9) requires that the P&T 
Committee ``clearly articulate and document processes,'' We estimate it 
would take 1 hour at $72.84/hr. for a P&T Committee business specialist 
to perform certain tasks and review and retain documentation and 
information. This 1 hour estimate reflects half of the Part D P&T 
Committee burden (or 2 hours) that is currently approved by OMB under 
control number 0938-0964 (CMS-10141). We are estimating 1 hour since 
the MA P&T committee work for Part B step therapy programs is 
significantly less than the Part D P&T committee work; more 
specifically; per Section 30.1 of Chapter 6 of the Prescription Drug 
Benefit Manual,\16\ the Part D P&T committee work has seven tasks, two 
of which, namely, formulary management

[[Page 23870]]

and formulary exceptions, do not apply to the mandatory MA P&T 
committee work. The MA P&T committee work, under finalized Sec.  
422.136, is limited to review and approval of step therapy programs for 
Part B drugs (and not other types of utilization management programs). 
We lack quantitative data on the amount of work attributed to each of 
the seven tasks of the Part D P&T committee work. Therefore, we assumed 
a 50 percent reduction in the amount of work since two of the seven 
Part D P&T committee tasks are not required under Part B. In aggregate, 
we estimate an annual burden of 634 hours (1 hr. x [697 plans - 63 
Prescription Drug plans which do not offer Part B]) at a cost of 
$46,181 (634 hr. x $72.84/hr.).
---------------------------------------------------------------------------

    \16\ https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Part-D-Benefits-Manual-Chapter-6.pdf.
---------------------------------------------------------------------------

    We received no comments on our proposed requirements and burden 
analysis and are finalizing this provision without modification.
    We are also finalizing, without modification, our proposed 
beneficiary protection measure related to shorter adjudication 
timeframes for organization determinations and reconsiderations for 
requests for Part B drugs. Under this final rule, the adjudication 
timeframes applicable to requests for Part B drugs will, as proposed, 
be shorter than the timeframes that apply to requests for other covered 
medical items and services. At the time of the proposed rule's 
publication date (November 30, 2018) we did not finalize the necessary 
revisions to our Notice of Denial of Medical Coverage form and 
instructions (approved by OMB under control number 0938-0892; CMS-
10003). Therefore, we did not set out such burden or solicit comment. 
Since that time, however, we have published a stand-alone 60-day 
Federal Register notice (April 10, 2019; 84 FR 14383) that sets out the 
revised form and form instructions. In compliance with the standard PRA 
process, we will also be publishing a stand-alone 30-day Federal 
Register notice (when ready). Please note that the revised form and 
instructions have no impact on this rule's burden estimates. Instead, 
the revision would include the Part B drug adjudication timeframes 
within the form and update the CFR citations within the instructions.

C. Summary of Information Collection Requirements and Burden

                                                Table 3--Annual Recordkeeping and Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                Total
    Regulatory reference        Provision brief title      Control No. (CMS    Respondents     Total      Hours per     Total    Labor cost  annual cost
                                                                ID No.)                      responses   respondent     hours      ($/hr)        ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   423.128.............  Part D Explanation of        0938-0964 (CMS-              295          295         160      15,733      $98.54   $1,550,363
                              Benefits (Updating           10141).
                              Systems).
Sec.   423.128.............  Part D Explanation of        0938-0964 (CMS-              295  571,200,000         n/a         n/a         n/a  * 5,733,706
                              Benefits (Extra mailings)    10141).
                              *.
Sec.  Sec.   422.136,        Part B Step Therapy (use of  0938-0964 (CMS-              634          634           1         634       72.84       46,181
 422.568, 422.570, 422.572,   PT Committee).               10141).
 422.584, 422.590, 422.618,
 and 422.619.
                                                                             ---------------------------------------------------------------------------
    Total..................  ...........................  ..................           634  571,200,929      Varies      16,367      Varies    7,330,250
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Non-labor requirements and costs.

IV. Regulatory Impact Analysis

A. Statement of Need

    This final rule supports Medicare health and drug plans' 
negotiation for lower drug prices and reduce out-of-pocket costs for 
Part C and D enrollees. Although satisfaction with the MA and Part D 
programs remains high, these proposals are responsive to input we 
received from stakeholders while administering the programs, as well as 
through our requests for comment.
    HHS Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs 
(May 16, 2018, 83 FR 22692) sought to find out more information about 
lowering drug pricing using these four strategies: Improved 
competition, better negotiation, incentives for lower list prices, and 
lowering out-of-pocket costs. We proposed a number of provisions that 
implement these four strategies in an attempt to lower out-of-pocket 
costs with a particular focus on strengthening negotiation for Part D 
plans and increasing competition in the market for prescription drugs. 
We proposed to offer more tools to MA and Part D plans that negotiate 
with drug companies on behalf of beneficiaries, so these plans are 
equipped with similar negotiation capabilities as group health plans 
and issuers have in the commercial market. We sought to drive robust 
competition among health plans and pharmacies, so consumers can shop 
based on quality and value. These provisions align with the 
Administration's focus on the interests and needs of beneficiaries, 
providers, MA plans, and Part D sponsors.

B. Overall Impact

    We examined the impact of this final rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Social Security Act (the 
Act), section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
(March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism 
(August 4, 1999), the Congressional Review Act (5 U.S.C. 804(2)), and 
Executive Order 13771 on Reducing Regulation and Controlling Regulatory 
Costs (January 30, 2017).
    The RFA, as amended, requires agencies to analyze options for 
regulatory relief of small businesses, if a rule has a significant 
impact on a substantial number of small entities. For purposes of the 
RFA, small entities include small businesses, nonprofit organizations, 
and small governmental jurisdictions.
    This final rule affects MA plans and Part D sponsors (NAICS 
category 524114) with a minimum threshold for small business size of 
$38.5 million (http://www.sba.gov/content/small-business-size-standards). This final rule additionally affects hospitals (NAICS 
subsector 622) and a variety of provider categories, including 
physicians, specialists, and laboratories (subsector 621).
    To clarify the flow of payments between these entities and the 
federal government, note that MA organizations submit bids (that is, 
proposed plan designs and projections of the revenue

[[Page 23871]]

needed to provide those benefits, divided into three categories--basic 
benefits, supplemental benefits, and Part D drug benefits) in June 2019 
for operation in contract year 2020. These bids project payments to 
hospitals, providers, and staff as well as the cost of administration 
and profits. These bids in turn determine the payments from the 
Medicare Trust Fund to the MA organizations that pay providers and 
other stakeholders for their provision of covered benefits to 
enrollees. Consequently, our analysis will focus on MA organizations.
    There are various types of Medicare health plans, including MA 
plans, Part D sponsors, demonstrations, section 1876 cost plans, 
prescription drug plans (PDPs), and Program of All-Inclusive Care for 
the Elderly (PACE) plans. Forty-three percent of all Medicare health 
plan organizations are not-for-profit, and 31 percent of all MA plans 
and Part D sponsors are not-for-profit. (These figures were determined 
by examining records from the most recent year for which we have 
complete data, 2016.)
    There are varieties of ways to assess whether MA organizations meet 
the $38.5 million threshold for small businesses. The assessment can be 
done by examining net worth, net income, cash flow from operations, and 
projected claims as indicated in their bids. Using projected monetary 
requirements and projected enrollment for 2018 from submitted bids, 32 
percent of the MA organizations fell below the $38.5 million threshold 
for small businesses. Additionally, an analysis of 2016 data--the most 
recent year for which we have actual data on MA organization net 
worth--shows that 32 percent of all MA organizations fall below the 
minimum threshold for small businesses.
    If a final rule may have a significant impact on a substantial 
number of small entities, the final rule must discuss steps taken, 
including alternatives, to minimize burden on small entities. While a 
significant number (more than 5 percent) of not-for-profit 
organizations and small businesses are affected by this final rule, the 
impact is not significant. To assess impact, we use the data in Table 
11C, which show that the raw (not discounted) net effect of this final 
rule over 10 years is $73.19 million. Comparing this number to the 
total monetary amounts projected to be needed just for 2020, based on 
plan submitted bids, we find that the impact of this final rule is 
significantly below the 3 to 5 percent threshold for significant 
impact. Had we compared the 2020 impact of the final rule to projected 
2020 monetary need, the impact will be still less.
    Consequently, the Secretary has determined that this final rule 
will not have a significant economic impact on a substantial number of 
small entities, and we have met the requirements of the RFA. In 
addition, section 1102(b) of the Act requires us to prepare a 
regulatory analysis for any final rule under title XVIII, title XIX, or 
Part B of Title XI of the Act that may have significant impact on the 
operations of a substantial number of small rural hospitals. We are not 
preparing an analysis for section 1102(b) of the Act because the 
Secretary certifies that this final rule will not have a significant 
impact on the operations of a substantial number of small rural 
hospitals.
    Section 202 of 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 2019, that threshold is approximately $154 
million. This final rule is not anticipated to have an effect on state, 
local, or tribal governments, in the aggregate, or on the private 
sector of $150 million or more.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a final rule that imposes 
substantial direct requirement costs on state and local governments, 
preempts state law, or otherwise has federalism implications. Since 
this final rule does not impose any substantial costs on state or local 
governments, the requirements of Executive Order 13132 are not 
applicable.
    If regulations impose administrative costs on reviewers, such as 
the time needed to read and interpret this final rule, then we should 
estimate the cost associated with regulatory review. There are 
currently 750 MA contracts (which also includes PDPs), 50 State 
Medicaid Agencies, and 200 Medicaid Managed Care Organizations (1,000 
reviewers total). We assume each entity will have one designated staff 
member who will review the entire rule. Other assumptions are possible 
and will be reviewed after the calculations.
    Using the wage information from the Bureau of Labor Statistics 
(BLS) for medical and health service managers (code 11-9111), we 
estimate that the cost of reviewing this rule is $107.38 per hour, 
including an upward adjustment to wages to account for overhead and 
benefits. (http://www.bls.gov/oes/current/oes_nat.htm). Assuming an 
average reading speed, we estimate that it will take approximately 7.6 
hours for each person to review this final rule. For each entity that 
reviews the rule, the estimated cost is therefore, $816 (7.6 hours * 
$107.38). Therefore, we estimate that the total cost of reviewing this 
regulation is $816,000 ($816 * 1000 reviewers).
    Note that this analysis assumed one reader per contract. Some 
alternatives include assuming one reader per parent entity or assuming 
(major) pharmacy benefit managers (PBMs) will read this rule. Using 
parent organizations instead of contracts will reduce the number of 
reviewers to approximately 500 (assuming approximately 250 parent 
organizations), and this will cut the total cost of reviewing in half. 
However, we believe it is likely that reviewing will be performed by 
contract. The argument for this is that a parent organization might 
have local reviewers; even if that parent organization has several 
contracts that might have a reader for each distinct geographic region, 
to be on the lookout for effects of provisions specific to that region.
    As for PBMs, it is reasonable that only the major PBMs will review 
this rule. There are 30-50 major PBMs, and this will increase the 
estimate by 0.3 to 0.5 percent. Reviewing the source of comments on the 
proposed rule, we find about 300 distinct organizations commenting 
including health plans, universities and colleges, congressional-
related entities, patient-centered associations, medical associations, 
pharmaceutical companies and manufacturers. Considering the wide source 
of comments and the wide use of drugs it is very reasonable that the 
total number of associations reading this is comparable to the number 
of health plans. This would double our estimate. Using these alternate 
considerations, we can safely say that the cost of reviewing is between 
half a million (50 percent * $816,000) and two million (2 * $816,000). 
Thus, we consider the $1 million a reasonable midpoint figure to 
estimate review cost.
    In accordance with the provisions of Executive Order 12866, this 
rule was reviewed by the Office of Management and Budget (OMB).
    We received no comments on our estimates of impact on small 
businesses and other items mentioned in the overall impact section.

C. Anticipated Effects

1. Providing Plan Flexibility To Manage Protected Classes (Sec.  
423.120(b)(2)(vi))
    In this rule, we are finalizing an exception to the protected class 
policy to allow Part D sponsors to apply PA and ST requirements for 
protected class

[[Page 23872]]

Part D drugs, except antiretrovirals, only for new starts to confirm 
intended use is for a protected class indication, and to ensure 
clinically appropriate use, promote utilization of preferred formulary 
alternatives, or a combination thereof, subject to CMS review and 
approval. We also are finalizing a technical change to permit exclusion 
of interchangeable biological products.
    Since under this exception, these utilization management tools 
(that is, PA and ST for new starts only, except for antiretrovirals) 
are already permitted today under similar circumstances for the 
protected classes for new treatment regimens, we do not anticipate any 
material impacts from the use of these tools for the five classes where 
it will be allowed. For antiretroviral drugs, we do not believe that 
utilization management would generate returns for plan sponsors' 
increased administrative burden, as these drug have narrower 
indications, clinical criteria, and range of products that curtail 
inappropriate use. As a result, we estimate no material impact from 
this provision as well.
    Formally recognizing Part D sponsors' utilization management 
flexibility provides them with negotiating power. Additionally, 
utilization management will promote substitution when appropriate and 
reduce wasteful or inappropriate prescriptions. For example, if an 
antipsychotic drug is prescribed to a beneficiary and the beneficiary 
does not have a protected class indication that requires such a drug, 
these additional tools will allow Part D sponsors to better manage 
utilization of that drug. We did not assume any interactions with Part 
D sponsors' ability to use indication-based coverage, as no experience 
on that coverage is currently available.
    At this time, we do not anticipate any adverse effects upon 
enrollee access to drugs in the protected classes. The reasons for this 
are two-fold. First, we did not propose to change or remove any of the 
protected classes identified in section 1860D-4(3)(G)(iv) of the Act. 
Second, in considering whether exceptions to the added protections 
afforded by the protected class policy are appropriate, we took into 
account the many other enrollee protections in the Part D program, 
which are mature and have proven workable. These protections include: 
Formulary transparency, formulary requirements, reassignment formulary 
coverage notices, transition supplies and notices, and the expedited 
exception, coverage determination, and appeals processes.
    Comment: Commenters generally agreed with our assessment of the 
impact of this provision. One commenter questioned why the impact 
analysis in this final rule sees more generic opportunity in the 
protected classes than MedPAC.
    Response: While MedPAC has cited that the overall level of generic 
use in the antidepressant, antipsychotic, and anticonvulsant categories 
was similar to the overall generic use within Part D, our analysis of 
the drug level data using internal CMS files, on which MedPAC has not 
specifically commented, indicated that there was significant brand 
usage with the potential to shift to generic drugs under new 
utilization management practices. Comparing class-level generic use 
against overall generic use can also be misleading, as the availability 
of generics differs widely from class to class and over time.
    Comment: Several commenters suggested that the estimated savings 
from these proposals were too limited to justify modifications to the 
protected classes policy.
    Response: We disagree. While we are not finalizing modifications to 
the existing policy (but codifying existing policy), we continue to 
believe that it is possible that certain Part D sponsors may be able to 
use additional flexibility to improve their negotiating position and/or 
the effectiveness of their utilization management actions, thereby 
producing savings that we will not be able to quantify until after the 
policy takes effect. Additionally, we believe it is incumbent upon us 
to be a good steward of taxpayer dollars, no matter how modest the 
savings.
    Comment: Some commenters encouraged us to consider manufacturer 
rebates across other Federal programs, including Medicaid, the VA and 
the 340B Drug Pricing Program (340B) before implementing our 
exceptions.
    Response: While we appreciate the commenters' concerns, we are 
unable to quantify savings to the Part D program taking other Federal 
programs into account. Additionally, specific to 340B, with the 
exception of claims split-billed through AIDS Drug Assistance Programs 
(ADAPs), CMS does not collect information on which claims were 
processed under 340B.
    Comment: A number of commenters expressed concern that PA and ST 
policies can lead to patients' not filling their prescriptions or 
underutilizing medications, which leads to non-adherence. Commenters 
expressed concern that non-adherence, in turn, can lead to 
interruptions in therapy across the six classes, and in the case of 
HIV, would endanger public health because it is a communicable disease 
which can rapidly mutate and become resistant to therapy.
    Response: CMS acknowledges that PA and ST could potentially cause 
the issues cited when they are not implemented properly. However, we 
believe that based upon our more than 12 years of experience with the 
Part D program, including our existing policy, which allows for PA and 
ST for new starts of protected class Part D drugs (except 
antiretrovirals), and the unique protections we have in place, which 
are more robust than in other comparable programs, demonstrate that 
such concerns have been mitigated in Part D. For example, in the 
categories and classes of drugs not covered by the protected class 
policy, that is, all other Part D drug categories and classes, where 
wide use of PA and ST have been allowed since the beginning of the Part 
D program, subject to our other formulary requirements, we have no 
evidence to suggest that Part D enrollees routinely experience 
interruptions in therapy as a result of PA and ST requirements. 
Moreover, CMS is advancing improvements in price transparency, 
interoperability, and e-prescribing improvements, such as a real-time 
benefit tool (RTBTs) and Part D electronic prior authorization as 
required by section 6062 of the SUPPORT for Patients and Communities 
Act (Pub. L. 115-271), that could help mitigate the kinds of 
administrative burdens sometimes associated with PA and ST that 
commenters claim could lead to underutilization. As such, we did not 
account for any decreases in utilization in our estimate.
2. Prohibition Against Gag Clauses in Pharmacy Contracts (Sec.  
423.120(a)(8)(iii))
    This provision proposed to codify existing practice and therefore 
is expected to produce neither savings nor cost.
3. E-Prescribing and the Part D Prescription Drug Program; Updating 
Part D E-Prescribing Standards (Sec.  423.160)
    This provision proposed that each Part D plan sponsor adopt one or 
more Real Time Benefit Tool (RTBT) tools that are capable of 
integrating with at least one e-prescribing (eRx) and electronic health 
record (EHR) systems (the latter of which will hereinafter be referred 
to as an electronic health record or EHR for consistency with current 
Departmental terminology) for use in Part D E-Prescribing (eRx) 
transactions beginning on or before January 1, 2020. As discussed 
earlier in this preamble, we understand that some PBMs and a few 
prescription drug plans have already begun to use RTBT tools capable of 
meeting the specifications listed in

[[Page 23873]]

our preamble discussion, which includes providing beneficiary-specific 
drug coverage and out-of-pocket cost information at the point-of-
prescribing. CMS sought to accelerate the use of such real time 
solutions in the Part D program so as to realize their potential to 
improve adherence, lower prescription drug costs, and minimize 
beneficiary out-of-pocket cost sharing. These tools have the capability 
to inform prescribers when lower-cost alternative therapies are 
available under the beneficiary's prescription drug benefit. We are 
interested in fostering the use of these real-time solutions in the 
Part D program, given their potential to lower prescription drug 
spending and minimize beneficiary out-of-pocket costs. Not only can 
program spending and beneficiary out-of-pocket costs be reduced, but 
(as discussed above) evidence suggests that reducing medication cost 
also yields benefits in patients' medication adherence.
    We first give a high-level description of impact. The major savings 
of this provision will be use of RTBT to encourage prescribing of lower 
tier cost sharing drugs. This will result in a dollar savings to the 
Medicare Trust Fund. However, because of both lack of data and 
complexity of data, we are qualitatively scoring this provision and are 
therefore scoring this provision as a qualitative savings. In the NPRM 
we solicited comments from stakeholders on certain data. In response to 
our solicitation, the following assumptions and complications were 
pointed out:
     Current usage: Commenters confirmed our belief that some 
plans are already using RTBT. Commenter estimates ranged from 70 
percent to 90 percent. Informal conversations with plans prior to 
publication of the NPRM provided an estimate of 30 percent. This 
combined wide range, 30 percent to 90 percent, shows both that RTBT is 
being adopted, that there is uncertainty on the extent of adoption.
     Cost if this Provision is Finalized:
    Software costs: Commenters seem to reject the idea that any plans 
would create their own RTBT software. They believe that the existing 
opportunities from intermediaries was sufficient to satisfy new 
regulatory requirements. As a result of these comments, we are 
withdrawing in the Final Rule the estimates made in the NPRM on 
software costs.
    Developing substitution logic. Many commenters cautioned that 
development of the logic to determine which formulary alternatives 
should be presented to a prescriber in a given situation will impose 
new burdens on plans. While IT programming can be leveraged across 
plans variable formularies require that each plan develop its own 
individual logic about which alternative drugs are available for use in 
RTBT scenarios. Plans must decide how many potential formulary 
substitutions should be presented to prescribers and must ensure that 
the prescriber is not overly burdened with choices.
    Lower tier cost sharing substitution: CMS believes the primary 
source of RTBT savings to arise from the ability of providers to 
prescribe lower tier cost sharing drugs. While there are also savings 
from substitutions of generics for brands, many of these substitutions 
already are currently already being done by pharmacy benefit 
administrators. The commenters generally agreed with this assessment.
     Implementation date and Standardization:
    We received numerous comments relating to the proposed January 1, 
2020 implementation date. Although several commenters stated that the 
2020 deadline was achievable, the majority of comments expressed 
concern. Most commenters, believe that it would be prudent to delay the 
implementation date until an industry standard was available with some 
commenters characterizing the proposed time frame as overly aggressive 
or unrealistic given the level of effort required to implement RTBT.
    We understand that implementing RTBT requires time and resources 
for those plans that have not yet begun to implement a real time 
solution As a result, we are delaying the implementation date until 
January 1, 2021. However, given the potential benefits of RTBT, we 
strongly encourage plans to start implementing this requirement prior 
to January 1, 2021.
     Cost to providers: Some commenters were concerned about 
the cost of implementing multiple RTBT systems within EHRs. However, 
other commenters made it clear that plans who have implemented RTBT 
make the technology available to prescribers at no cost. Some 
commenters cautioned that RTBT may add time to a medical office visit 
but did not specify the potential cost impact of the additional time 
involved. Others commenters stated that while RTBT may add time to a 
medical office visit, it may provide enhanced benefits in terms of 
patient adherence to medication therapies which may save time in the 
long run. These divergent views left us unable to gain a definitive 
picture whether providers are negatively affected by the finalized 
provision. As a result, we lack data with which to reliably estimate 
and include provider costs in our analysis of the impact of this 
proposal.
    CMS further notes that most plans are already making sure that 
prescribers are not bearing the cost of implementing RTBT tools. Indeed 
RTBT systems are being implemented by some plans because of the 
resulting cost savings.
     Savings vs Cost: Nearly all commenters were very 
enthusiastic about the concept of the proposed provision. They largely 
believed that any implementation costs incurred would be offset by 
costs savings. One commenter who has been using RTBT for about a year 
and noted that when presented with a lower cost, clinically appropriate 
alternatives, enrollees are receiving a lower cost medication 45 
percent of the time, and saving an average of $130 per fill in out of 
pocket costs compared to the drug originally requested. CMS is unable 
to confirm these savings but these reported results suggest that RTBT 
can be instrumental in reducing drug costs. We recognize that it may 
take plans time to develop an RTBT infrastructure such as developing 
formulary alternatives and relationships with RTBT vendors.
    We are finalizing the proposal for each Part D plan to support an 
RTBT of its choosing, effective January 1, 2021. We are removing the 
proposed requirement that covered health care providers get explicit 
beneficiary consent prior to using the RTBT.
    We point out that any savings arising from this provision if 
finalized would be classified as a transfer since there is (at least as 
a primary impact) no reduction in consumption of goods (prescription 
drugs) but rather a transfer of expense from one drug to another. 
However, this transfer (between manufacturers of drugs) would result in 
reduced dollar spending by Part D Sponsors and enrollees and would 
result in reduced spending by the Medicare Trust Fund.
4. Part D Explanation of Benefits (Sec.  423.128)
    In section III. of this final rule, we have detailed the cost to 
Part D sponsors to update their EOB templates. Additionally, CMS 
Central Office staff will have to develop the model language to be used 
by the Part D sponsors.
    Significant effort goes into developing a model, including 
developing instructions and obtaining clearance. Therefore, we estimate 
that it would take two GS-13-Step 5 employees a month, each working a 
half a day, or 160 hours (2 employees * 4 hours a day * 5 days a week * 
4 weeks) to develop the templates. It would additionally take a 
supervisory GS-15 staff, 5 hours to give approval.

[[Page 23874]]

    Wages for 2018 for CMS staff may be obtained from the OPM website 
at https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/salary-tables/pdf/2018/DCB_h.pdf. We estimate a total burden of $17,583 
(160 hours * $52.66/hr for GS-13, Step 5 staff * 2 ((for an upward 
adjustment to wages to account for overhead and benefits)).) + 5 hours 
* $73.20/hr for GS-15, Step 5 staff * 2 (for an upward adjustment to 
wages to account for overhead and benefits)).
    As estimated in the Collection of Information Section of this Final 
Rule, the Part D EOB incurs a first year cost of $4.65 million for 
updating systems and ongoing costs in all years, including the first, 
of $5.73 million for additional mailings. Thus the total first year 
cost is $10.40 million (4.65+5.73+0.18 (the $17,583 cost for CMS staff 
to create a template)) and cost in subsequent years is $5.73 million.
5. Medicare Advantage and Step Therapy for Part B Drugs (Sec. Sec.  
422.136, 422.568, 422.570, 422.572, 422.584, 422.590, 422.618, 422.619, 
422.629, 422.633 and 422.634)
    Step therapy is a type of utilization management (for example, 
prior authorization) for drugs that begin medication for a medical 
condition with the most preferred drug therapy and progress to other 
therapies only if necessary, promoting more cost effective therapies, 
potentially better clinical decisions, and lower costs for treatment. 
The lower costs of treatment primarily benefit MA enrollees and plans 
and are transferred to the government as savings.
    A further source of savings is negotiations. If an MA plan offers 
all Part B drugs, then it typically will purchase drugs at market 
price. If the MA plan is allowed to use step therapy, then when there 
is more than one drug that has the same effect on a medical condition 
but the drugs differ significantly in price, drug manufacturers in 
their negotiations with MA plans, have an incentive to lower the cost 
of their drug so that their drug is selected by the MA plan as the 
first drug in the plan's step therapy protocol.
    However, it is difficult to numerically estimate the savings from 
increased negotiations because, unlike other impact events, 
negotiations vary. Furthermore, we do not have access to negotiation 
data as this is proprietary information between MA plans and 
manufacturers and is not submitted in the MA bid. For these two reasons 
(lack of data and volatility) we are leaving the negotiation of 
increased savings as a qualitative, rather than a quantitative event. 
We believe that the potential savings from negotiations is significant, 
but have no way of quantifying the effect.
    We note that although we are not estimating the savings from front-
end negotiations, we do estimate the savings from back-end 
negotiations, more specifically, from the rebates manufacturers give 
plans with favorable drug management practices. Such rebates also occur 
on the Part D side and we have the data to estimate their effect. This 
is done in this section of this final rule when discussing the impact 
on the Medicare Trust Fund and beneficiary cost sharing due to step 
therapy.
    Although CMS believes that step therapy can promote more cost 
effective therapies, potentially better clinical decisions, and lower 
costs for treatment for the reasons earlier discussed, we acknowledge 
that there are various studies suggesting that step therapy may be 
costly either economically or health-wise. There are two primary 
reasons for this.\17\
---------------------------------------------------------------------------

    \17\ Article 1: Patrick P Gleason, PharmD, FCCP, BCPS, 
``Assessing Step Therapy Programs: A step in the right direction,'' 
Journal of Managed Care Pharmacy, 13(3), 2007. Article 2: Adams AS, 
Zhang F, LeCates RF, et al. Prior authorization for antidepressants 
in Medicaid: Effects among disabled dual enrollees. Arch Intern Med. 
2009; 169(8):750-756. Article 3: Zhang Y, Adams AS, Ross-Degnan D, 
Zhang F, Soumerai SB. Effects of prior authorization on medication 
discontinuation among Medicaid beneficiaries with bipolar disorder. 
Psychiatr Serv. 2009; 60(4):520-527.
---------------------------------------------------------------------------

     Discontinuation: Several studies show that there is the 
potential for enrollees to become discouraged when step therapy is 
used. This is called discontinuation. Discontinuation means a portion 
of members with a claim rejection at the point of service go on to not 
have claims in that class of medications. In other words, an unwanted 
effect of step therapy is ``giving up'' and not seeking medical 
treatment. There are several studies of discontinuation.\18\ 
Consequently, when discussing step therapy, it is important to address 
possible unwanted side effects such as discontinuation.
---------------------------------------------------------------------------

    \18\ S. Shoemaker, R. Subramanian, D. Mauch, (Abt Associates). 
``Effect of 6 Managed Care Pharmacy Tools: A Review of the 
Literature,'' Journal of Managed Care Pharmacy, Supplement, July 
2010, Vol 16(6a), page s7.
---------------------------------------------------------------------------

     Effects of delay: The idea of step therapy is that if the 
initial drug ``fails first'' then a provider will prescribe the drug 
they had originally wanted to prescribe. However, when the initially 
given drug does not work, this creates a delay in the patient receiving 
the necessary drug and consequently the delay may cause both a 
worsening of conditions and increased medical costs. Several studies on 
Part B drugs show this. For example, a study comparing spending in 
Georgia's Medicaid program found that while there were savings in the 
cost of medications when step therapy was used, the program spent more 
money on outpatient services because less-effective medications often 
led to higher health costs later.\19\ Similar studies have been done 
on-- legislation to protect people from certain harms of step 
therapy.\20\ However, the MA program has many beneficiary protections 
and a robust appeals process to ensure that beneficiaries have access 
to the medications and health services they need. For example, we 
expect providers and enrollees who are concerned about the adverse 
effects of delay or that a drug on the initial step may not be the best 
or proper course of treatment, to seek pre-service organization 
determinations that permit use of the ultimate Part B drug and to 
appeal any denials by the MA plan. Since plan appeal rates are 
monitored by CMS, this creates a strong incentive for plans to use step 
therapy wisely and not exacerbating illness.
---------------------------------------------------------------------------

    \19\ Retrospective assessment of Medicaid step therapy prior 
authorization antipsychotic medications. Clin Ther. 2008; 
30(8):1524-39; discussion 1506-7. doi: 10.1016/
j.clinthera.2008.08.009.
    \20\ Iowa passed a rule restricting the use of Step Therapy in 
Medicaid after patients encountered medical complications such as 
stomach ulcers and increased pain in cases where past efforts to 
find more cost-effective drugs or to try lower priced drugs were not 
considered by the plans. See https://www.thegazette.com/subject/news/health/iowa-bill-would-allow-exemptions-from-fail-first-insurance-drug-practices-20170318. In the absence of safeguards, 
such as requiring consideration of what works for patients, a 
grandfathering policy on existing therapies is advisable.
---------------------------------------------------------------------------

    Summary: Step therapy can result in both savings and costs. While 
at the time of initiation of the step therapy there is initial savings 
arising from reduced drug costs, this savings may end up costing in the 
long run because of worsening conditions arising from the delay in 
receiving the proper drug resulting in increased medical costs. 
However, we believe the MA beneficiary protections and appeals process 
coupled with periodic CMS review and monitoring of MA plans is robust 
enough to ameliorate or eliminate the possible adverse effects of step 
therapy.
    In addition to the complications in estimating the health savings 
from step therapy, some step therapy savings arise from negotiations, 
which are difficult to quantify. We can however, estimate the effect on 
the Medicare Trust Fund and on enrollee cost sharing.
    The estimate of the impact on the Medicare Trust Fund includes 
the--(1) backend negotiations, rebates from manufacturers to plans; (2) 
use of less

[[Page 23875]]

expensive biological products approved under section 351(k) of the 
Public Health Service Act (for example, biosimilars); and, (3) the 
choice of less expensive drugs with therapeutically equivalent effect. 
However, we do not discuss other quantitative effects of step therapy. 
The articles cited previously lay out many pros and cons of step 
therapy as well as the need for more studies to ascertain the true 
impact of step therapy.
    CMS acknowledges that step therapy is a widely accepted tool for 
utilization management. Sixty percent of commercial insurers were using 
step therapy in 2010; in 2014, 75 percent of large employers offered 
enrollees plans with step therapy. Furthermore, the concerns expressed 
in this RIA section are not unique to Federal insurance programs such 
as Medicare Parts C and D. Eighteen states have enacted laws on the use 
of step therapy.\21\ These laws vary widely and typically provide 
protections to beneficiaries against the misuse of step therapy.
---------------------------------------------------------------------------

    \21\ https://www.aad.org/advocacy/state-policy/step-therapy-legislation.

                                                      Table 4--Estimated Savings to Medicare Trust Fund and Beneficaries From Step Therapy
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Part B Rx
                                                            allowed pmpm   Number of  Adjustment for    Assumed     Backing out     Savings to         Cost     Adjustment for
                    Year                      Enrollment   with growth by    months      plans for       rebate      of Part B    medicare trust     sharing     enrollees for     Savings to
                                              (thousands)      medical      per year   proposed step   percentage   premium (%)        funds        percentage   proposed step    beneficiaries
                                                              inflation                 therapy (%)                                                               therapy (%)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      (A)             (B)        (C)             (D)          (E)           (F)  (G) ($ millions)          (H)             (I)  (J) ($ millions)
                                            ----------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                  (G) = (A) * (B)                                (J) = (A) * (B)
                                                                                                                                            * (C)                                          * (C)
                                                                                                                                    * (D) * (E) *                                    * (H) * (I)
                                                                                                                                              (F)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2020.......................................        23,181          $58.72         12             1.6           66            86              $145           13             0.2                $5
2021.......................................        24,062           60.21         12             1.6           66            86               154           13             0.2                 5
2022.......................................        24,972           61.73         12             1.6           66            86               164           13             0.2                 5
2023.......................................        25,858           63.30         12             1.6           66            86               174           13             0.2                 6
2024.......................................        26,708           64.90         12             1.6           66            86               185           13             0.2                 6
2025.......................................        27,549           66.55         12             1.6           66            86               195           13             0.2                 6
2026.......................................        28,375           68.23         12             1.6           67            85               207           13             0.2                 7
2027.......................................        29,161           69.96         12             1.6           67            85               218           13             0.2                 7
2028.......................................        29,913           71.74         12             1.6           67            85               229           13             0.2                 7
2029.......................................        30,590           73.55         12             1.6           67            85               240           13             0.2                 8
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    The provision at Sec.  422.136 will allow MA plans to use this 
utilization management tool for Part B drugs subject to some limits in 
the regulation. MA plans may explore the most effective ways to use 
step therapy to achieve savings while also ensuring access to medically 
necessary treatment options.
    In the remainder of this section we estimate the impact on the 
Medicare Trust Fund and enrollee cost sharing, and explain the 
calculations which are summarized in Table 4.
    We obtained projected MA enrollment from the 2018 Medicare Trust 
Fund report. This is presented in Column (A) of Table 4.
     2016 is the most recent year for which we have Part B drug 
spending and utilization from the CMS data systems. Column (B) presents 
the average amount that MA enrollees pay per month on Part B drugs. 
This amount is trended (from 2016) to reflect medical inflation (5.2 
percent a year) with ordinary inflation (2.6 percent) carved out. The 
inflation factors are obtained from the Medicare Trust Fund report. The 
product of MA enrollment and average Part B spending per month provides 
the aggregate MA Part B spending per month.
     The Part B spending per month is multiplied by 12 (Column 
(C)) to obtain the aggregate spending on Part B drugs annually.
     We estimate that, because of this step therapy provision, 
plans will save 1.6 percent (Column (D)) on the aggregate annual cost 
of Part B drugs. There are several points about this 1.6 percent. 
First, it represents the effect of the proposed provision (proposed 
Sec.  422.136) in this final rule. As discussed earlier in this rule's 
preamble, an HPMS memo was issued by CMS in August 2018 rescinding an 
earlier memo prohibiting step therapy.\22\ However, because this memo 
was published in late 2018, we do not have enough data to analyze the 
impact to 2019 claims at this point, so our estimate of 1.6 percent is 
based on prior experience. The 1.6 percent savings is independent, and 
not impacted, by the provisions in the August 2018 HPMS memo; rather, 
the 1.6 percent savings represents the estimated effects of the 
finalized provision versus a baseline (zero percent savings) which does 
not include the proposed provision nor the effects of the HPMS memo.
---------------------------------------------------------------------------

    \22\ Available online at: https://www.cms.gov/Medicare/Health-Plans/HealthPlansGenInfo/Downloads/MA_Step_Therapy_HPMS_Memo_8_7_2018.pdf.
---------------------------------------------------------------------------

    This finalized proposal surpasses the HPMS memo for periods 
beginning January 1, 2020 and it is the effects of this provision that 
the 1.6 percent captures. The 1.6 percent represents three factors 
contributing to savings from Step Therapy:
     Drugs for which there will be a less expensive biological 
product approved under section 351(k) of the Public Health Service Act 
in 2020, such as Remicade or Herceptin.
     Pairs of drugs which are clinically comparable but differ 
significantly in price. For example, Avastin[supreg], Eylea[supreg], 
and Lucentis[supreg] for the treatment of macular degeneration.
     Drugs for which the manufacturer gives a rebate to MA 
plans with favorable management patterns. This happens in drugs with 
sufficient competition, particularly in the treatment of rheumatoid 
arthritis. Using our experience on manufacturers providing rebates on 
Part D drugs, we are able to estimate the savings effects of similar 
rebates on Part B drugs. As mentioned previously, this corresponds to a 
savings in step-therapy from back-end negotiations.
     The multiplication of enrollment, average Part B cost per 
member per month, number of months per year and 1.6 percent represents 
the total dollar savings from this provision.
     We use this total dollar savings to estimate separately 
savings to the Medicare Trust Fund and savings to enrollees in cost 
sharing.
     To obtain savings to the Medicare Trust Fund we multiply 
the aggregate savings from step therapy by the average rebate 
percentage and the average backing out of part B premium representing 
the expected percentage reduction to Part B premium arising from 
savings. These percentages are found in Columns (E) and (F). The 
numbers in these columns are obtained by trending our experience with 
plan

[[Page 23876]]

submitted bids over the next 10 years. Column (G), the product of all 
previous columns, represents the dollar savings to the Medicare Trust 
Fund.
     To obtain savings to beneficiaries, we used the 2019 
projected bid data submitted by MA plans to CMS in June 2018. These 
data show that on average 13 cents of every dollar paying for Part B 
drugs goes to cost sharing. We obtained this number by dividing the 
cost sharing for Part B drugs by the total cost of Part B drugs. This 
percentage is found in Column (H).
     We next have to adjust the savings due to step therapy. 
Recall that Column (D) indicates that step therapy will save 1.6 
percent, the 1.6 percent arising from three factors listed previously. 
Of those three factors, enrollees do not benefit from manufacturer 
rebates. To illustrate this, consider a $20 drug for which the 
beneficiary pays a 20 percent copay ($4). At the end of the year, 
manufacturers and pharmacists give a rebate to plans that have used 
their products. Let us suppose (for purposes of illustration) that the 
rebate is $3. Theoretically the enrollee should get 60 cents of this $3 
(20 percent copay * $3). However, the enrollee does not get a portion 
of the rebate. We estimate that 1.6 percent savings has a 1.4 percent 
component from manufacturer rebates and a 0.2 percent rebate from the 
other factors listed previously. It follows that for the enrollee, the 
savings from step therapy are 0.2 percent, not 1.6 percent. This is 
listed in Column (I).
     To obtain aggregate annual beneficiary savings we multiply 
MA enrollment (Column (A)), average cost of prescription drugs per 
month (Column (B)), number of months per year (Column (C)) and the 0.2 
percent, the savings to enrollees from this step therapy provision 
(Column (I)). This gives the total dollar savings, of which enrollees 
pay 13 percent (Column (H)). The result is presented in Column (J).
    The results of our calculations are summarized for 2020-2029 in 
Columns (G) and (J) of Table 4. The savings to enrollees are between $5 
and $8 million; the savings to the Medicare Trust Fund are between $145 
and $240 million.
    These projected dollar savings to the Medicare Trust Fund are 
classified as transfers because the money on brand drugs would instead 
be spent on generic drugs. While brand drugs are more expensive, the 
primary driver of this expense is the research and development (R&D) 
that went into them, and for drugs that are already on the market R&D 
has already been done and would not change. In other words, although 
this regulatory provision would reduce the return on drug development 
because enrollees who are expected to purchase the brand and thus pay 
for the initial R&D would instead purchase generics, this reduced 
return would be experienced after the initial R&D has been completed; 
consequently, any immediate reduction in R&D services would not impact 
the availability of new drugs until later. There would also be no 
reduction in production of drugs, since generic manufacturers rather 
than brand manufacturers would produce the drugs consumed by enrollees. 
However, the cost to the enrollee and the Medicare Trust Fund would be 
significantly less because the enrollee and Medicare Trust Fund would 
no longer pay for the initial R&D. In conclusion, this provision would 
not reduce activities of production but rather transfers the 
performance of those services from brand manufacturers to generic 
manufacturers; however, as a consequence, the enrollees and Medicare 
Trust Fund would experience reduced dollars spent.
    The allowance of step therapy for Part B drugs in MA could result 
in a higher appeal rate. We estimate the aggregate increase in cost in 
2016 due to expected increased appeals as $0.8 million. Details are 
presented in Table 5. The following narrative explains this table.

                      Table 5--Estimated Increase in Appeals All Levels Due to Step Therapy
----------------------------------------------------------------------------------------------------------------
                                                  Estimated
                                Total number      number of
                                of appeals in      appeals        Hours per     Hourly wages       Total cost
                                    2016       involving step      appeal       of physicians
                                                   therapy
                                                          (1)             (2)             (3)    (1) x (2) x (3)
----------------------------------------------------------------------------------------------------------------
Reconsiderations.............         328,857            3913             0.8         $203.26           $636,350
IRE..........................          58,023             690             0.8          203.26            112,277
Administrative Law Judge                3,481              41             0.8          203.26              6,737
 (ALJ).......................
                              ----------------------------------------------------------------------------------
    Estimated Cost for 2016..  ..............  ..............  ..............  ..............            755,363
----------------------------------------------------------------------------------------------------------------

    Data for appeals are reported by MA plans. It typically takes 2 
years for CMS to validate these data. Hence the latest year for which 
we have complete data is 2016. Appeals can happen at various levels. 
The first level is reconsiderations where an appeal is made for a plan 
to reconsider a decision. If this is denied, the case goes on to the 
IRE (a CMS contractor) to be reviewed. If this is also denied, the case 
can be appealed to an administrative law judge (ALJ) if the amount in 
controversy is met.
    For 2016, there were 328,857 and 58,023 reconsiderations and IRE 
cases respectively in the MA program. We estimate that in general 6 
percent of cases reaching the IRE go on to an ALJ.
    Based on data pulled from the Medicare Appeals System for part D 
appeals, 1.19 percent of plan level appeals involving step therapy were 
denied. We use this as a proxy for the percent of cases involving part 
B drugs subject to step therapy that we expect to be appealed since we 
have no other basis. We believe it is reasonable to consider Part D 
appeals data related to cases that involve drugs subject to step 
therapy in developing these estimates. We also use the 1.19 percent as 
a proxy for the percent of reconsiderations and ALJ cases that involve 
step therapy. We acknowledge that percentages might be different at 
different appeal levels but the 1.19 percent is the only proportion we 
have.
    Having derived the expected number of appeals involving step 
therapy we note that section 1852(g)(2) of the Act requires a 
reconsideration by a MA plan to deny coverage on the basis of medical 
necessity to be reviewed by a physician with the appropriate expertise; 
CMS has adopted two MA regulations (Sec. Sec.  422.566(d) and 
422.590(g)(2)) that implement this requirement for denials based on 
medical necessity determinations. We believe it is reasonable to assume 
that a decision to

[[Page 23877]]

deny coverage for a drug subject to step therapy will typically involve 
a medical determination whether the drug would be ineffective or cause 
adverse effects for the enrollee. A decision on a drug subject to step 
therapy is also likely to involve evaluation of a healthcare provider's 
assessment of medical necessity for the Part B drug; for example, the 
health care provider may indicate that the lower or earlier steps in 
the step therapy protocol are not clinically appropriate for that 
enrollee (such as in cases of allergy or a prior unsuccessful use of 
the preferred drug). Therefore, this estimate accounts for physician 
review of reconsiderations. Based on the BLS website at https://www.bls.gov/oes/current/oes_nat.htm, the mean hourly wage of physicians 
is $203.26. Our contractor experience with appeals suggests that the 
average time to process an appeal is 48 minutes, or, 0.8 hour.
    Multiplying the number of appeals * 0.8 hour per appeal * $203.26 
cost per hour we arrive at total cost for each appeal level. Adding 
these together we obtain the $0.8 million estimate, based on 2016 data.
    Factors that enter into appeal rates include enrollment rates and 
changes in plan benefit packages. Appeal rates change from year to 
year. One major factor in appeal rates is enrollment. If enrollment 
increases by 10 or 20 percent then it is very reasonable that the 
number of appeals will approximately increase by that amount.
    Thus to obtain estimates of cost for 2018 we will multiply the $0.8 
million by the ratio of enrollment in 2018 to 2016. Similarly to obtain 
estimates for 2020 to 2024 we multiply by ratios of enrollment.
    The ratio of 2018 to 2016 is 1.1585 based on enrollment figures 
from the CMS website. Projected enrollment for 2020 through 2029 may be 
obtained from Table IV.C1 in the 2018 Trustee report. Using these 
numbers we obtain the estimated cost of increased appeals for 2020 
through 2029, presented in Table 6, as $1.0-$1.3 million.

                                             Table 6--Expected Increase in Appeal Costs Due to Step Therapy
--------------------------------------------------------------------------------------------------------------------------------------------------------
                             Year                                 2020     2021     2022     2023     2024     2025     2026     2027     2028     2029
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cost of appeals (in millions).................................     1.0      1.0      1.0      1.1      1.1      1.1      1.2      1.2      1.2      1.3
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We received no comments on impact estimates of the proposed rule.

D. Expected Benefits

    Any relevant expected benefits for enrollees, stakeholders, and the 
government have been fully discussed in section II. of this final rule.

E. Alternatives Considered

1. Providing Plan Flexibility To Manage Protected Classes (Sec.  
423.120(b)(2)(vi))
    Previous proposals to address the protected classes were aimed at 
changing both the protected classes and exceptions to the requirement 
that formularies include all drugs in the protected class. However, we 
remain concerned that previous criteria, as established either by 
statute under the MIPPA authority, or by CMS under the Patient 
Protection and Affordable Care Act authority, did not strike the 
appropriate balance among enrollee access, quality assurance, cost-
containment, and patient welfare that we were striving to achieve. 
Consequently, we elected not to propose any changes to the drug 
categories or classes that are the protected classes. As a result, the 
critical policy decision was how broadly or narrowly to establish 
exceptions to the requirement that all protected class drugs be 
included on the formulary. Overly broad exceptions might 
inappropriately limit the products within the protected classes, 
thereby creating access issues for Part D enrollees. Only narrow 
exceptions afford enrollee protections such as adequate access and 
improved quality assurance while also providing an incentive for 
manufacturers to aggressively rebate their products for formulary 
placement in an operationally feasible manner for Part D sponsors.
2. E-Prescribing and the Part D Prescription Drug Program; Updating 
Part D E-Prescribing Standards (Sec.  423.160)
    We proposed to require that each Part D plan select a real time 
benefit tool (RTBT) of its choosing by January 1, 2020. We had 
considered delaying regulatory action around real time requirements 
until the industry has developed a real time standard that could be 
used by all Part D plans. However, we believe that the benefits that 
would come with a real time standard in the form of cost transparency 
are substantial and should not be further delayed. We also considered 
requiring that plans use the optional fields in the NCPDP Formulary and 
Benefit standards (F&B) to provide much of the cost data that we 
believe would be important for prescribers to know. However, by 
definition, the F&B standards are batch standards so that the 
information provided is, by definition, not contemporaneous and are not 
specific to each beneficiary. For these reasons we opted in favor of 
proposing RTBT rather than proposing to require that plans use enhanced 
F&B standards.
3. Medicare Advantage and Step Therapy for Part B Drugs (Sec. Sec.  
422.136, 422.568, 422.570, 422.572, 422.584, 422.590, 422.618, 422.619, 
422.629, 422.633 and 422.634)
    We finalized proposed requirements under which MA plans may apply 
step therapy as a utilization management tool for Part B drugs. We 
finalized our proposal to confirm authority for MA plans to implement 
appropriate utilization management and prior authorization tools for 
managing Part B drugs and proposed parameters on using step therapy to 
ensure it is implemented in a manner to reduce costs for both enrollees 
and the Medicare program. Our finalized policy includes specific 
parameters for how step therapy may be implemented for Part B drugs, 
including requiring review and approval from a P&T Committee that meets 
specific standards and permitting step therapy only for new 
administrations of the drug (subject to at least a 365 day lookback 
period). We also finalized our proposal to require new appeal 
timeframes and deadlines for MA plans to adjudicate and respond to 
requests concerning Part B drug coverage. An additional alternative 
considered during development of the proposed regulation was allowing 
step therapy for ongoing prescriptions or administrations of Part B 
drugs for enrollees who are actively receiving the affected medication 
at the time the step therapy program is adopted as well as for new 
administrations of a Part B drug. However, allowing MA plans to 
implement step therapy on ongoing prescriptions and administrations of 
Part B drugs would require the development of a transition process for 
affected enrollees and might result in negative health outcomes as on-
going treatment would be disrupted. We lack a basis to quantify the 
impact of these expected negative health outcomes.

[[Page 23878]]

Furthermore, the estimated costs of developing a transition process, 
including providing enrollees with appropriate notice regarding their 
transition process and providing a temporary supply of affected drugs 
likely outweighs any savings. Moreover, we recognized the health 
significance of many Part B drug regimens (for example, cancer 
treatments) and are working to ensure enrollees will not encounter 
unnecessary barriers to medically necessary drugs or have disruptions 
in care. Therefore, under the finalized regulations at Sec.  
422.136(a)(1), step therapy programs are not permitted to disrupt 
enrollees' ongoing Part B drug therapies as our finalized regulations 
require that step therapy only be applied to new prescriptions or 
administrations of Part B drugs for enrollees who are not actively 
receiving the affected medication. More specifically, MA plans must 
have a look back period of 365 days instead of the proposed 108 days, 
to determine if the enrollee is actively taking a Part B drug and, 
thus, not subject to step therapy for that Part B drug. Further, when 
an enrollee elects a new plan, the plan would still be required to 
determine whether the enrollee has taken the Part B drug (that would 
otherwise be subject to step therapy) within the past 365 days. If the 
enrollee is actively taking the Part B drug, such enrollee would be 
exempted from the plan's step therapy requirement concerning that drug.

F. Accounting Statement and Table

    The following table summarizes costs, savings, and transfers by 
provision.
    As required by OMB Circular A-4 (available at https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/), in Table 7, we 
have prepared an accounting statement showing the savings and transfers 
associated with the provisions of this final rule for contract years 
2020 through 2029. Table 7 is based on Table 8 which lists savings, 
costs, and transfers by provision.

   Table 7--Accounting Statement--Classifications of Estimated Savings, Costs, and Transfers Negative Numbers
                                                Indicate Savings
----------------------------------------------------------------------------------------------------------------
                                                            Savings
                                  ----------------------------------------------------------
 From calendar years 2020 to 2029           Discount Rate                                    Whom is spending or
         [$ in millions]          --------------------------------      Period Covered           transferring
                                         7%              3%
----------------------------------------------------------------------------------------------------------------
Net Annualized Monetized Cost....            7.46            7.38  CYs 2020-2029             MA Organizations,
                                                                                              Part D Sponsors,
                                                                                              Contractors for
                                                                                              the Federal
                                                                                              Government.
Annualized Monetized Savings.....  ..............  ..............  CYs 2020-2029             ...................
Annualized Monetized Cost........            7.46            7.38  CYs 2020-2029             MA Organizations,
                                                                                              Part D Sponsors,
                                                                                              Beneficiaries.
Annualized Transfers.............        (191.23)        (194.63)  CYs 2020-2029             Federal government,
                                                                                              MA organizations
                                                                                              and Part D
                                                                                              Sponsors,
                                                                                              Beneficiaries.
----------------------------------------------------------------------------------------------------------------

    The following Table 8 summarizes savings, costs, and transfers by 
provision and formed a basis for the accounting table. For reasons of 
space, Table 8 is broken into Table 8A (2020 through 2023), Table 8B 
(2024 through 2027) and Table 8C (2028 through 2029). In these tables 
savings are indicated as negative numbers in columns marked savings 
while costs are indicated as positive numbers in columns marked costs. 
Transfers result in reduced dollar spending by enrollees and the 
government and are indicated by negative numbers. All numbers are in 
millions. The row ``aggregate total by year'' gives the total of costs 
and savings for that year but does not include transfers. Table 8 forms 
the basis for Table 7 and for the calculation to the infinite horizon 
discounted to 2016, mentioned in the conclusion.

                                                       Table 8A--Aggregate Savings, Costs, and Transfers in Millions by Provision and Year
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    2020      2020       2020       2021      2021       2021       2022      2022       2022       2023      2023       2023
                                                                   Savings    Cost     Transfers   Savings    Cost     Transfers   Savings    Cost     Transfers   Savings    Cost     Transfers
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Savings...................................................  ........  ........  ..........  ........  ........  ..........  ........  ........  ..........  ........  ........  ..........
Total Costs.....................................................  ........     11.40  ..........  ........      6.73  ..........  ........      6.73  ..........  ........      6.83  ..........
Aggregate Total.................................................  ........     11.40  ..........  ........      6.73  ..........  ........      6.73  ..........  ........      6.83  ..........
Total Transfers.................................................  ........  ........    (150.00)  ........  ........    (159.00)  ........  ........    (169.00)  ........  ........    (180.00)
Protected Classes, Government...................................  ........  ........  ..........  ........  ........  ..........  ........  ........  ..........  ........  ........  ..........
Protected Classes, Enrollees....................................  ........  ........  ..........  ........  ........  ..........  ........  ........  ..........  ........  ........  ..........
Gag Clauses.....................................................  ........  ........  ..........  ........  ........  ..........  ........  ........  ..........  ........  ........  ..........
E-Prescribing...................................................  ........  ........  ..........  ........  ........  ..........  ........  ........  ..........  ........  ........  ..........
Part D EOB......................................................  ........     10.40  ..........  ........      5.73  ..........  ........      5.73  ..........  ........      5.73  ..........
Step Therapy, Government........................................  ........  ........    (145.00)  ........  ........    (154.00)  ........  ........    (164.00)  ........  ........    (174.00)
Step Therapy, Enrollees.........................................  ........  ........      (5.00)  ........  ........      (5.00)  ........  ........      (5.00)  ........  ........      (6.00)
Step Therapy Appeals............................................  ........      1.00  ..........  ........      1.00  ..........  ........      1.00  ..........  ........      1.10  ..........
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


                                                       Table 8B--Aggregate Savings, Costs, and Transfers in Millions by Provision and Year
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    2024      2024       2024       2025      2025       2025       2026      2026       2026       2027      2027       2027
                                                                   Savings    Cost     Transfers   Savings    Cost     Transfers   Savings    Cost     Transfers   Savings    Cost     Transfers
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Savings...................................................  ........  ........  ..........  ........  ........  ..........  ........  ........  ..........  ........  ........  ..........
Total Costs.....................................................  ........      6.83  ..........  ........      6.83  ..........  ........      6.93  ..........  ........      6.93  ..........

[[Page 23879]]

 
Aggregate Total.................................................  ........      6.83  ..........  ........      6.83  ..........  ........      6.93  ..........  ........      6.93  ..........
Total Transfers.................................................  ........  ........    (191.00)  ........  ........    (201.00)  ........  ........    (214.00)  ........  ........    (225.00)
Protected Classes, Government...................................  ........  ........  ..........  ........  ........  ..........  ........  ........  ..........  ........  ........  ..........
Protected Classes, Enrollees....................................  ........  ........  ..........  ........  ........  ..........  ........  ........  ..........  ........  ........  ..........
Gag Clauses.....................................................  ........  ........  ..........  ........  ........  ..........  ........  ........  ..........  ........  ........  ..........
E-Prescribing...................................................  ........  ........  ..........  ........  ........  ..........  ........  ........  ..........  ........  ........  ..........
Part D EOB......................................................  ........      5.73  ..........  ........      5.73  ..........  ........      5.73  ..........  ........      5.73  ..........
Step Therapy, Government........................................  ........  ........    (185.00)  ........  ........    (195.00)  ........  ........    (207.00)  ........  ........    (218.00)
Step Therapy, Enrollees.........................................  ........  ........      (6.00)  ........  ........      (6.00)  ........  ........      (7.00)  ........  ........      (7.00)
Step Therapy Appeals............................................  ........      1.10  ..........  ........      1.10  ..........  ........      1.20  ..........  ........      1.20  ..........
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


               Table 8C--Aggregate Savings, Costs, and Transfers in Million by Provision and Year
----------------------------------------------------------------------------------------------------------------
                                    2028      2028       2028       2029      2029       2029       Raw 10 year
                                   Savings    Cost     Transfers   Savings    Cost     Transfers      totals
----------------------------------------------------------------------------------------------------------------
Total Savings...................  ........  ........  ..........  ........  ........  ..........  ..............
Total Costs.....................  ........      6.93  ..........  ........      7.03  ..........           73.19
Aggregate Total.................  ........      6.93  ..........  ........      7.03  ..........           73.19
Total Transfers.................  ........  ........    (236.00)  ........  ........    (248.00)      (1,973.00)
Protected Classes, Government...  ........  ........  ..........  ........  ........  ..........  ..............
Protected Classes, Enrollees....  ........  ........  ..........  ........  ........  ..........  ..............
Gag Clauses.....................  ........  ........  ..........  ........  ........  ..........  ..............
E-Prescribing...................  ........  ........  ..........  ........  ........  ..........  ..............
Part D EOB......................  ........      5.73  ..........  ........      5.73  ..........           61.99
Step Therapy, Government........  ........  ........    (229.00)  ........  ........    (240.00)      (1,911.00)
Step Therapy, Enrollees.........  ........  ........      (7.00)  ........  ........      (8.00)         (62.00)
Step Therapy Appeals............  ........      1.20  ..........  ........      1.30  ..........           11.20
----------------------------------------------------------------------------------------------------------------

G. Conclusion

    As indicated in the ``Aggregate Total'' row of Table 8, we estimate 
that this final rule generates for each year in 2021 through 2029, net 
costs of approximately $7 million, with a first year cost of 
approximately $11.4 million. These annual costs primarily reflect 
mailing and programming costs arising from descriptions of alternatives 
in the Part D EOB as well as increased appeals arising from the Step 
Therapy provision. This final rule has no provisions which save.
    Although other impacts in this rule are classified as transfers as 
discussed in each provision, the aggregate effect of these transfers 
reduce dollar spending by MA enrollees and the Medicare Trust Fund:
     Enrollees: Enrollees are estimated to reduce their 
spending on cost sharing by $62 million over 10 years from reduced cost 
sharing from Step Therapy.
     Government: The Medicare Trust Fund in aggregate reduces 
their dollar spending by $1.91 billion over 10 years from the Step 
Therapy provisions.

H. Reducing Regulation and Controlling Regulatory Costs

    In line with Executive Order 13771, in Table 9, we estimate present 
and annualized values of costs and cost savings over an infinite time 
horizon. Costs are indicated by positive numbers. Based on these costs, 
this Final Rule would be considered a regulatory action under Executive 
Order 13771. As shown, this final rule generates level annual costs of 
$5.9 million over an infinite horizon in 2016 dollars discounted at 7 
percent.

                    Table 9--E.O. 13771 Summary Table
             [In 2016 dollars over a perpetual time horizon]
------------------------------------------------------------------------
                                                       Primary   Primary
                        Item                            (7%)      (3%)
------------------------------------------------------------------------
Present Value of Costs..............................      84.4     217.2
Present Value of Cost Savings.......................       0.0       0.0
Present Value of Net Costs..........................      84.4     217.2
Annualized Cost.....................................       5.9       6.5
Annualized Cost Savings.............................       0.0       0.0
Annualized Net Costs................................       5.9       6.5
------------------------------------------------------------------------

List of Subjects

42 CFR Part 422

    Administrative practice and procedure, Health facilities, Health 
maintenance organizations (HMO), Medicare, Penalties, Privacy, and 
Reporting and recordkeeping requirements.

42 CFR Part 423

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

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 422--MEDICARE ADVANTAGE PROGRAM

0
1. The authority citation for part 422 is revised to read as follows:

    Authority:  42 U.S.C. 1302 and 1395hh.


0
2. Section 422.2 is amended by adding a definition for ``Step therapy'' 
in alphabetical order to read as follows:


Sec.  422.2   Definitions.

* * * * *
    Step therapy means a utilization management policy for coverage of 
drugs that begins medication for a medical condition with the most 
preferred or cost effective drug therapy and progresses to other drug 
therapies if medically necessary.

[[Page 23880]]


0
3. Section 422.136 is added to subpart C to read as follows:


Sec.  422.136   Medicare Advantage (MA) and step therapy for Part B 
drugs.

    (a) General. If an MA plan implements a step therapy program to 
control the utilization of Part B-covered drugs, the MA organization 
must--
    (1) Apply step therapy only to new administrations of Part B drugs, 
using at least a 365 day lookback period;
    (2) Establish policies and procedures to educate and inform health 
care providers and enrollees concerning its step therapy policies.
    (3) Prior to implementation of a step therapy program, ensure that 
the step therapy program has been reviewed and approved by the MA 
organization's pharmacy and therapeutic (P&T) committee.
    (b) Step therapy and pharmacy and therapeutic committee 
requirements. An MA plan must establish a P&T committee prior to 
implementing any step therapy program. An MA plan must use a P&T 
committee to review and approve step therapy programs used in 
connection with Part B drugs. To meet this requirement, a MA-PD plan 
may utilize an existing Part D P&T committee established for purposes 
of administration of the Part D benefit under part 423 of this chapter 
and an MA plan may utilize an existing Part D P&T committee established 
by an MA-PD plan operated under the same contract as the MA plan. The 
P&T committee must--
    (1) Include a majority of members who are practicing physicians or 
practicing pharmacists.
    (2) Include at least one practicing physician and at least one 
practicing pharmacist who are independent and free of conflict relative 
to--
    (i) The MA organization and MA plan; and
    (ii) Pharmaceutical manufacturers.
    (3) Include at least one practicing physician and one practicing 
pharmacist who are experts regarding care of elderly or disabled 
individuals.
    (4) Clearly articulate and document processes to determine that the 
requirements under paragraphs (b)(1) through (3) of this section have 
been met, including the determination by an objective party of whether 
disclosed financial interests are conflicts of interest and the 
management of any recusals due to such conflicts.
    (5) Base clinical decisions on the strength of scientific evidence 
and standards of practice, including assessing peer-reviewed medical 
literature, pharmacoeconomic studies, outcomes research data, and other 
such information as it determines appropriate.
    (6) Consider whether the inclusion of a particular Part B drug in a 
step therapy program has any therapeutic advantages in terms of safety 
and efficacy.
    (7) Review policies that guide exceptions and other step therapy 
processes.
    (8) Evaluate and analyze treatment protocols and procedures related 
to the plan's step therapy policies at least annually consistent with 
written policy guidelines and other CMS instructions.
    (9) Document in writing its decisions regarding the development and 
revision of step therapy activities and make this documentation 
available to CMS upon request.
    (10) Review and approve all step therapy criteria applied to each 
covered Part B drug.
    (11) Meet other requirements consistent with written policy 
guidelines and other CMS instructions.
    (c) Off-label drug requirement. An MA plan may include a drug 
supported only by an off-label indication in step therapy protocols 
only if the off-label indication is supported by widely used treatment 
guidelines or clinical literature that CMS considers to represent best 
practices.
    (d) Non-covered drugs. A step therapy program must not include as a 
component of a step therapy protocol or other condition or requirement 
any drugs not covered by the applicable MA plan as a Part B drug or, in 
the case of an MA-PD plan, a Part D drug.

0
4. Section 422.568 is amended by revising paragraphs (b), (d), (e) 
introductory text, and (e)(4)(i) to read as follows:


Sec.  422.568  Standard timeframes and notice requirements for 
organization determinations.

* * * * *
    (b) Timeframes--(1) Requests for service or item. Except as 
provided in paragraph (b)(1)(i) of this section, when a party has made 
a request for a service or an item, the MA organization must notify the 
enrollee of its determination as expeditiously as the enrollee's health 
condition requires, but no later than 14 calendar days after the date 
the organization receives the request for a standard organization 
determination.
    (i) Extensions; requests for service or item. The MA organization 
may extend the timeframe by up to 14 calendar days if--
    (A) The enrollee requests the extension;
    (B) The extension is justified and in the enrollee's interest due 
to the need for additional medical evidence from a noncontract provider 
that may change an MA organization's decision to deny an item or 
service; or
    (C) The extension is justified due to extraordinary, exigent, or 
other non-routine circumstances and is in the enrollee's interest.
    (ii) Notice of extension. When the MA organization extends the 
timeframe, it must notify the enrollee in writing of the reasons for 
the delay, and inform the enrollee of the right to file an expedited 
grievance if he or she disagrees with the MA organization's decision to 
grant an extension. The MA organization must notify the enrollee of its 
determination as expeditiously as the enrollee's health condition 
requires, but no later than upon expiration of the extension.
    (2) Requests for a Part B drug. An MA organization must notify the 
enrollee (and the prescribing physician or other prescriber involved, 
as appropriate) of its determination as expeditiously as the enrollee's 
health condition requires, but no later than 72 hours after receipt of 
the request. This 72-hour period may not be extended under the 
provisions in paragraph (b)(1)(i) of this section.
* * * * *
    (d) Written notice for MA organization denials. The MA organization 
must give the enrollee a written notice if--
    (1) An MA organization decides to deny a service or an item, Part B 
drug, or payment in whole or in part, or reduce or prematurely 
discontinue the level of care for a previously authorized ongoing 
course of treatment.
    (2) An enrollee requests an MA organization to provide an 
explanation of a practitioner's denial of an item, service or Part B 
drug, in whole or in part.
    (e) Form and content of the MA organization notice. The notice of 
any denial under paragraph (d) of this section must--
* * * * *
    (4)(i) For service, item, and Part B drug denials, describe both 
the standard and expedited reconsideration processes, including the 
enrollee's right to, and conditions for, obtaining an expedited 
reconsideration and the rest of the appeal process; and
* * * * *

0
5. Section 422.570 is amended by revising paragraph (d)(1) to read as 
follows:


Sec.  422.570   Expediting certain organization determinations.

* * * * *
    (d) * * *
    (1) Automatically transfer a request to the standard timeframe and 
make the determination within the 72-hour or 14-

[[Page 23881]]

day timeframe, as applicable, established in Sec.  422.568 for a 
standard determination. The timeframe begins when the MA organization 
receives the request for expedited determination.
* * * * *

0
6. Section 422.572 is amended by revising paragraphs (a), the heading 
to paragraph (b), and (b)(1) to read as follows:


Sec.  422.572   Timeframes and notice requirements for expedited 
organization determinations.

    (a) Timeframes--(1) Requests for service or item. Except as 
provided in paragraph (b) of this section, an MA organization that 
approves a request for expedited determination must make its 
determination and notify the enrollee (and the physician involved, as 
appropriate) of its decision, whether adverse or favorable, as 
expeditiously as the enrollee's health condition requires, but no later 
than 72 hours after receiving the request.
    (2) Requests for a Part B drug. An MA organization that approves a 
request for expedited determination must make its determination and 
notify the enrollee (and the physician or prescriber involved, as 
appropriate) of its decision as expeditiously as the enrollee's health 
condition requires, but no later than 24 hours after receiving the 
request. This 24-hour period may not be extended under the provisions 
in paragraph (b) of this section.
    (b) Extensions; requests for service or item. (1) When timeframe 
may be extended. The MA organization may extend the 72-hour deadline 
for expedited organization determinations for requests for services or 
items by up to 14 calendar days if--
    (i) The enrollee requests the extension;
    (ii) The extension is justified and in the enrollee's interest due 
to the need for additional medical evidence from a noncontract provider 
that may change an MA organization's decision to deny an item or 
service; or
    (iii) The extension is justified due to extraordinary, exigent, or 
other nonroutine circumstances and is in the enrollee's interest.
* * * * *

0
7. Section 422.584 is amended by revising paragraph (d)(1) to read as 
follows:


Sec.  422.584  Expediting certain reconsiderations.

* * * * *
    (d) * * *
    (1) Automatically transfer a request to the standard timeframe and 
make the determination within the 30 calendar day or 7 calendar day, as 
applicable, timeframe established in Sec.  422.590(a) and (c). The 
timeframe begins the day the MA organization receives the request for 
expedited reconsideration.
* * * * *

0
8. Section 422.590 is revised to read as follows:


Sec.  422.590  Timeframes and responsibility for reconsiderations.

    (a) Standard reconsideration: Requests for service or item. (1) 
Except as provided in paragraph (f) of this section, if the MA 
organization makes a reconsidered determination that is completely 
favorable to the enrollee, the MA organization must issue the 
determination (and effectuate it in accordance with Sec.  422.618(a)) 
as expeditiously as the enrollee's health condition requires, but no 
later than 30 calendar days from the date it receives the request for a 
standard reconsideration.
    (2) If the MA organization makes a reconsidered determination that 
affirms, in whole or in part, its adverse organization determination, 
it must prepare a written explanation and send the case file to the 
independent entity contracted by CMS as expeditiously as the enrollee's 
health condition requires, but no later than 30 calendar days from the 
date it receives the request for a standard reconsideration (or no 
later than the expiration of an extension described in paragraph (a)(1) 
of this section). The organization must make reasonable and diligent 
efforts to assist in gathering and forwarding information to the 
independent entity.
    (b) Standard reconsideration: Requests for payment. (1) If the MA 
organization makes a reconsidered determination that is completely 
favorable to the enrollee, the MA organization must issue its 
reconsidered determination to the enrollee (and effectuate it in 
accordance with Sec.  422.618(a)(1)) no later than 60 calendar days 
from the date it receives the request for a standard reconsideration.
    (2) If the MA organization affirms, in whole or in part, its 
adverse organization determination, it must prepare a written 
explanation and send the case file to the independent entity contracted 
by CMS no later than 60 calendar days from the date it receives the 
request for a standard reconsideration. The organization must make 
reasonable and diligent efforts to assist in gathering and forwarding 
information to the independent entity.
    (c) Standard reconsideration: Requests for a Part B drug. (1) If 
the MA organization makes a reconsidered determination that is 
completely favorable to the enrollee, the MA organization must issue 
the determination (and effectuate it in accordance with Sec.  
422.618(a)(3)) as expeditiously as the enrollee's health condition 
requires, but no later than 7 calendar days from the date it receives 
the request for a standard reconsideration. This 7 calendar-day period 
may not be extended under the provisions in paragraph (f) of this 
section.
    (2) If the MA organization makes a reconsidered determination that 
affirms, in whole or in part, its adverse organization determination, 
it must prepare a written explanation and send the case file to the 
independent entity contracted with CMS no later than 7 calendar days 
from the date it receives the request for a standard reconsideration. 
The organization must make reasonable and diligent efforts to assist in 
gathering and forwarding the information to the independent entity.
    (d) Effect of failure to meet timeframe for standard 
reconsideration. If the MA organization fails to provide the enrollee 
with a reconsidered determination within the timeframes specified in 
paragraph (a), (b), or (c) of this section, this failure constitutes an 
affirmation of its adverse organization determination, and the MA 
organization must submit the file to the independent entity in the same 
manner as described under paragraphs (a)(2), (b)(2), and (c)(2) of this 
section.
    (e) Expedited reconsideration--(1) Timeframe for services or items. 
Except as provided in paragraph (f) of this section, an MA organization 
that approves a request for expedited reconsideration must complete its 
reconsideration and give the enrollee (and the physician involved, as 
appropriate) notice of its decision as expeditiously as the enrollee's 
health condition requires but no later than 72 hours after receiving 
the request.
    (2) Timeframe for Part B drugs. An MA organization that approves a 
request for expedited reconsideration must complete its reconsideration 
and give the enrollee (and the physician or other prescriber involved, 
as appropriate) notice of its decision as expeditiously as the 
enrollee's health condition requires but no later than 72 hours after 
receiving the request. This 72-hour period may not be extended under 
the provisions in paragraph (f) of this section.
    (3) Confirmation of oral notice. If the MA organization first 
notifies an enrollee of a completely favorable expedited 
reconsideration orally, it

[[Page 23882]]

must mail written confirmation to the enrollee within 3 calendar days.
    (4) How the MA organization must request information from 
noncontract providers. If the MA organization must receive medical 
information from noncontract providers, the MA organization must 
request the necessary information from the noncontract provider within 
24 hours of the initial request for an expedited reconsideration. 
Noncontract providers must make reasonable and diligent efforts to 
expeditiously gather and forward all necessary information to assist 
the MA organization in meeting the required timeframe. Regardless of 
whether the MA organization must request information from noncontract 
providers, the MA organization is responsible for meeting the timeframe 
and notice requirements.
    (5) Affirmation of an adverse expedited organization determination. 
If, as a result of its reconsideration, the MA organization affirms, in 
whole or in part, its adverse expedited organization determination, the 
MA organization must submit a written explanation and the case file to 
the independent entity contracted by CMS as expeditiously as the 
enrollee's health condition requires, but not later than within 24 
hours of its affirmation. The organization must make reasonable and 
diligent efforts to assist in gathering and forwarding information to 
the independent entity.
    (f) Extensions; requests for service or item. (1) As described in 
paragraphs (f)(1)(i) through (iii) of this section, the MA organization 
may extend the standard or expedited reconsideration deadline for 
services by up to 14 calendar days if--
    (i) The enrollee requests the extension; or
    (ii) The extension is justified and in the enrollee's interest due 
to the need for additional medical evidence from a noncontract provider 
that may change an MA organization's decision to deny an item or 
service; or
    (iii) The extension is justified due to extraordinary, exigent or 
other non-routine circumstances and is in the enrollee's interest.
    (2) When the MA organization extends the deadline, it must notify 
the enrollee in writing of the reasons for the delay and inform the 
enrollee of the right to file an expedited grievance if he or she 
disagrees with the MA organization's decision to grant an extension. 
The MA organization must notify the enrollee of its determination as 
expeditiously as the enrollee's health condition requires, but no later 
than upon expiration of the extension.
    (g) Failure to meet timeframe for expedited reconsideration. If the 
MA organization fails to provide the enrollee with the results of its 
reconsideration within the timeframe described in paragraph (e)(1) or 
(2) of this section, as applicable, this failure constitutes an adverse 
reconsidered determination, and the MA organization must submit the 
file to the independent entity within 24 hours of expiration of the 
timeframe set forth in paragraph (e)(1) or (2) of this section.
    (h) Who must reconsider an adverse organization determination. (1) 
A person or persons who were not involved in making the organization 
determination must conduct the reconsideration.
    (2) When the issue is the MA organization's denial of coverage 
based on a lack of medical necessity (or any substantively equivalent 
term used to describe the concept of medical necessity), the 
reconsidered determination must be made by a physician with expertise 
in the field of medicine that is appropriate for the services at issue. 
The physician making the reconsidered determination need not, in all 
cases, be of the same specialty or subspecialty as the treating 
physician.

0
9. Section 422.618 is amended by revising paragraph (a) and adding 
paragraph (b)(3) to read as follows:


Sec.  422.618   How an MA organization must effectuate standard 
reconsidered determinations or decisions.

    (a) Reversals by the MA organization--(1) Requests for service. If, 
on reconsideration of a request for service, the MA organization 
completely reverses its organization determination, the organization 
must authorize or provide the service under dispute as expeditiously as 
the enrollee's health condition requires, but no later than 30 calendar 
days after the date the MA organization receives the request for 
reconsideration (or no later than upon expiration of an extension 
described in Sec.  422.590(f)).
    (2) Requests for payment. If, on reconsideration of a request for 
payment, the MA organization completely reverses its organization 
determination, the organization must pay for the service no later than 
60 calendar days after the date the MA organization receives the 
request for reconsideration.
    (3) Requests for a Part B drug. If, on reconsideration of a request 
for a Part B drug, the MA organization completely reverses its 
organization determination, the MA organization must authorize or 
provide the Part B drug under dispute as expeditiously as the 
enrollee's health condition requires, but no later than 7 calendar days 
after the date the MA organization receives the request for 
reconsideration.
    (b) * * *
    (3) Requests for a Part B drug. If, on reconsideration of a request 
for a Part B drug, the MA organization's determination is reversed in 
whole or in part by the independent outside entity, the MA organization 
must authorize or provide the Part B drug under dispute within 72 hours 
from the date it receives notice reversing the determination. The MA 
organization must inform the independent outside entity that the 
organization has effectuated the decision.
* * * * *

0
10. Section 422.619 is amended by--
0
a. Revising paragraphs (a) and (b);
0
b. Redesignating paragraph (c)(2) as paragraph (c)(3); and
0
c. Adding a new paragraph (c)(2).
    The revisions and addition read as follows:


Sec.  422.619   How an MA organization must effectuate expedited 
reconsidered determinations.

    (a) Reversals by the MA organization--(1) Requests for service or 
item. If, on reconsideration of an expedited request for service, the 
MA organization completely reverses its organization determination, the 
MA organization must authorize or provide the service or item under 
dispute as expeditiously as the enrollee's health condition requires, 
but no later than 72 hours after the date the MA organization receives 
the request for reconsideration (or no later than upon expiration of an 
extension described in Sec.  422.590(f)).
    (2) Requests for a Part B drug. If, on reconsideration of a request 
for a Part B drug, the MA organization completely reverses its 
organization determination, the MA organization must authorize or 
provide the Part B drug under dispute as expeditiously as the 
enrollee's health condition requires, but no later than 72 hours after 
the date the MA organization receives the request for reconsideration.
    (b) Reversals by the independent outside entity--(1) Requests for 
service or item. If the MA organization's determination is reversed in 
whole or in part by the independent outside entity, the MA organization 
must authorize or provide the service under dispute as expeditiously as 
the enrollee's health condition requires but no later than 72 hours 
from the date it receives notice reversing the determination. The MA 
organization must inform the independent outside entity that the

[[Page 23883]]

organization has effectuated the decision.
    (2) Requests for a Part B drug. If, on reconsideration of a request 
for a Part B drug, the MA organization's determination is reversed in 
whole or in part by the independent outside entity, the MA organization 
must authorize or provide the Part B drug under dispute as 
expeditiously as the enrollee's health condition requires but no later 
than 24 hours from the date it receives notice reversing the 
determination. The MA organization must inform the outside entity that 
the organization has effectuated the decision.
    (c) * * *
    (2) Reversals of decisions related to Part B drugs. If the 
independent outside entity's determination is reversed in whole or in 
part by an ALJ/attorney adjudicator or at a higher level of appeal, the 
MA organization must authorize or provide the Part B drug under dispute 
as expeditiously as the enrollee's health condition requires but no 
later than 24 hours from the date it receives notice reversing the 
determination. The MA organization must inform the outside entity that 
the organization has effectuated the decision.
* * * * *

0
11. Effective January 1, 2021, Sec.  422.629 is amended by revising 
paragraph (a) to read as follows:


Sec.  422.629   General requirements for applicable integrated plans.

    (a) Scope. The provisions in this section and in Sec. Sec.  422.630 
through 422.634 set forth requirements for unified appeals and 
grievance processes with which applicable integrated plans must comply. 
Beginning January 1, 2021, these provisions apply to an applicable 
integrated plan in lieu of Sec. Sec.  422.564, 422.566(c) and (d), and 
422.568 through 422.590, and 422.618(a) and Sec. Sec.  438.404 through 
438.424 of this chapter; provisions governing Part B drugs in 
Sec. Sec.  422.568(b)(2), 422.570(d)(2), 422.572(a)(2), 422.584(d)(1), 
422.590(c), and 422.590(e)(2) apply to an applicable integrated plan.
* * * * *

0
12. Effective January 1, 2021, Sec.  422.631 is amended by revising 
paragraph (a) to read as follows:


Sec.  422.631   Integrated organization determinations.

    (a) General rule. An applicable integrated plan must adopt and 
implement a process for enrollees to request that the plan make an 
integrated organization determination. The process for requesting that 
the applicable integrated plan make an integrated organization 
determination must be the same for all covered benefits. Timeframes and 
notice requirements for integrated organization determinations for Part 
B drugs are governed by the provisions for Part B drugs in Sec. Sec.  
422.568(b)(2), 422.570(d)(2), and 422.572(a)(2).
* * * * *

0
13. Effective January 1, 2021, Sec.  422.633 is amended by revising 
paragraph (f) introductory text to read as follows:


Sec.  422.633   Integrated reconsideration.

* * * * *
    (f) Resolution and notification. The applicable integrated plan 
must make integrated reconsidered determinations as expeditiously as 
the enrollee's health condition requires but no later than the 
timeframes established in this section. Integrated reconsidered 
determinations regarding Part B drugs must comply with the timelines 
governing Part B drugs established in Sec. Sec.  422.584(d)(1) and 
422.590(c) and (e)(2).
* * * * *

PART 423--MEDICARE PROGRAM; MEDICARE PRESCRIPTION DRUG PROGRAM

0
14. The authority citation for part 423 is revised to read as follows:

    Authority:  42 U.S.C. 1302, 1395w-101 through 1395w-152, and 
1395hh.

0
15. Section 423.120 is amended--
0
a. In paragraph (a)(8)(i) by removing ``and'' from the end;
0
b. In paragraph (a)(8)(ii) by removing the ``.'' and adding in its 
place ``; and'';
0
c. Adding new paragraph (a)(8)(iii);
0
d. Revising paragraph (b)(2)(vi)(A);
0
e. Redesignating paragraph (b)(2)(vi)(C) as (b)(2)(vi)(D); and
0
f. Adding new paragraphs (b)(2)(vi)(C).
    The additions and revisions read as follows:


Sec.  423.120   Access to covered Part D drugs.

    (a) * * *
    (8) * * *
    (iii) May not prohibit a pharmacy from, nor penalize a pharmacy 
for, informing a Part D plan enrollee of the availability at that 
pharmacy of a prescribed medication at a cash price that is below the 
amount that the enrollee would be charged to obtain the same medication 
through the enrollee's Part D plan.
* * * * *
    (b) * * *
    (2) * * *
    (vi) * * *
    (A) Drug or biological products that are rated as either of the 
following:
    (1) Therapeutically equivalent (under the Food and Drug 
Administration's most recent publication of ``Approved Drug Products 
with Therapeutic Equivalence Evaluations,'' also known as the Orange 
Book).
    (2) Interchangeable (under the Food and Drug Administration's most 
recent publication of the Purple Book: Lists of Licensed Biological 
Products with Reference Product Exclusivity and Biosimilarity or 
Interchangeability Evaluations).
* * * * *
    (C) Subject to CMS review and approval, for enrollees that are not 
on existing therapy on the protected class Part D drug, and except for 
antiretroviral medications, prior authorization and step therapy 
requirements to confirm intended use is for a protected class 
indication, to ensure clinically appropriate use, to promote 
utilization of preferred formulary alternatives, or a combination 
thereof.
* * * * *

0
16. Effective January 1, 2021, Sec.  423.128 is amended by--
0
a. Redesignating paragraphs (e)(5) and (6) as paragraphs (e)(6) and 
(7); and
0
b. Adding a new paragraph (e)(5).
    The addition reads as follows:


Sec.  423.128   Dissemination of Part D plan information.

* * * * *
    (e) * * *
    (5) For each prescription drug claim, must include the cumulative 
percentage increase (if any) in the negotiated price since the first 
claim of the current benefit year and therapeutic alternatives with 
lower cost-sharing, when available as determined by the plan, from the 
applicable approved plan formulary.
* * * * *

0
17. Effective January 1, 2021, Sec.  423.160 is amended by adding 
paragraph (b)(7) to read as follows:


Sec.  423.160  Standards for electronic prescribing.

* * * * *
    (b) * * *
    (7) Real time benefit tools. No later than January 1, 2021, 
implement one or more electronic real-time benefit tools (RTBT) that 
are capable of integrating with at least one prescriber's e-Prescribing 
(eRx) system or electronic health record (EHR) to provide complete, 
accurate, timely, clinically appropriate, patient-specific formulary 
and benefit information to the prescriber in real time for assessing 
coverage under

[[Page 23884]]

the Part D plan. Such information must include enrollee cost-sharing 
information, clinically appropriate formulary alternatives, when 
available, and the formulary status of each drug presented including 
any utilization management requirements applicable to each alternative 
drug.
* * * * *

    Dated: April 25, 2019.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: May 8, 2019.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2019-10521 Filed 5-16-19; 4:15 pm]
 BILLING CODE 4120-01-P