[Federal Register Volume 85, Number 16 (Friday, January 24, 2020)]
[Rules and Regulations]
[Pages 4236-4242]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00551]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of the Secretary

45 CFR Part 162

[CMS-0055-F]
RIN 0938-AT52


Administrative Simplification: Modification of the Requirements 
for the Use of Health Insurance Portability and Accountability Act of 
1996 (HIPAA) National Council for Prescription Drug Programs (NCPDP) 
D.0 Standard

AGENCY: Office of the Secretary, HHS.

ACTION: Final rule.

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SUMMARY: This final rule adopts a modification of the requirements for 
the use of the Telecommunication Standard Implementation Guide, Version 
D, Release 0 (Version D.0), August 2007, National Council for 
Prescription Drug Programs, by requiring covered entities to use the 
Quantity Prescribed (460-ET) field for retail pharmacy transactions for 
Schedule II drugs. The modification enables covered entities to 
distinguish whether a prescription is a ``partial fill,'' where less 
than the full amount prescribed is dispensed, or a refill, where the 
full amount prescribed is dispensed, in the HIPAA retail pharmacy 
transactions. This modification is important to ensure the availability 
of a greater quantum of data that may help prevent impermissible 
refills of Schedule II drugs, which will help to address the public 
health concerns associated with prescription drug abuse in the United 
States.

DATES: Effective Date: This final rule is effective on March 24, 2020.
    Incorporation by reference: The incorporation by reference of 
certain publications listed in the rule was approved by the Director of 
the Federal Register as of March 17, 2009.
    Compliance Date: Compliance with these regulations is required by 
September 21, 2020.

FOR FURTHER INFORMATION CONTACT: Michael Cabral, (410) 786-6168. 
Geanelle G. Herring, (410) 786-4466. Daniel Kalwa, (410) 786-1352. 
Christopher S. Wilson, (410) 786-3178.

SUPPLEMENTARY INFORMATION:

I. Background

    The Health Insurance Portability and Accountability Act of 1996 
(HIPAA) requires the Secretary of Health and Human Services (HHS) to 
adopt standards for the electronic transmission of certain health care 
administrative transactions conducted between health care providers, 
health plans, health care clearinghouses, and others. In January 2009 
(74 FR 3295), the Secretary adopted the National Council for 
Prescription Drug Programs (NCPDP) Telecommunication Standard 
Implementation Guide, Version D, Release 0, August 2007 (hereinafter 
referred to as Version D.0) for the following retail pharmacy 
transactions: Health care claims or equivalent encounter information, 
referral certification and authorization, and coordination of benefits.

A. Inappropriate Medicare Part D Payments for Schedule II Drugs Billed 
as Refills

    Schedule II drugs are defined, in part, by the Controlled 
Substances Act (CSA) as those with a high potential for abuse which may 
lead to severe psychological or physical dependence (21 U.S.C. 
812(b)(2)). Regulators take particular interest in Schedule II drugs 
because of public health concerns associated with their potential for 
misuse. The CSA prohibits the refilling of Schedule II drugs, but 
permits partial fills of

[[Page 4237]]

Schedule II drugs in limited circumstances where a pharmacist has less 
than the prescribed amount of a medication in stock, the prescription 
is for a patient in a long-term care (LTC) facility, or a patient has a 
terminal illness.\1\
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    \1\ The Drug Enforcement Agency (DEA) indicated in a July 2017 
letter to NCPDP that it was currently promulgating proposed 
rulemaking to address the changes to 21 CFR 1306.13 (which concerns 
partial fills of prescriptions for Schedule II controlled 
substances) made by the Comprehensive Addiction and Recovery Act 
(CARA).
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    In September 2012, the HHS Office of the Inspector General (OIG) 
issued a report titled ``Inappropriate Medicare Part D Payments for 
Schedule II Drugs Billed as Refills'' that analyzed all of the 2009 
program year prescription drug event (PDE) records for refills of 
Schedule II drugs.\2\ PDE records are claim summary records that 
contain data elements from prescription drug claims, submitted by 
prescription drug plan sponsors to the Centers for Medicare & Medicaid 
Services (CMS) for every prescription a provider fills for a Medicare 
Part D beneficiary. One of those data element fields is titled ``Fill 
Number (403-D3),'' \3\ which identifies refills. The Version D.0 
implementation specifications require that a ``0'' be entered in the 
Fill Number (403-D3) field for a new prescription and that the number 
be sequentially increased by ``1'' for each refill. The OIG analyzed 
20.1 million records for Schedule II drugs and, focusing on the Fill 
Number (403-D3) field, identified what it concluded were refills. The 
OIG concluded that the Medicare Part D program had inappropriately paid 
$25 million for 397,203 Schedule II drug refills and that LTC facility 
pharmacies billed for 75 percent of such refills. The OIG stated that 
the Medicare Part D plan sponsors should not have paid for those drugs 
because Federal law prohibits Schedule II drug refills, and concluded 
that ``[p]aying for such drugs raises public health concerns and may 
contribute to the diverting of controlled substances and their being 
resold on the street.'' \4\
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    \2\ Inappropriate Medicare Part D Payments for Schedule II Drugs 
Billed as Refills, https://oig.hhs.gov/oei/reports/oei-02-09-00605.asp.
    \3\ National Council for Prescription Drug Programs (NCPDP) 
Telecommunication Standard Implementation Guide, Version D, Release 
0, August 2007, defines the Fill Number Field as ``403-D3.''
    \4\ Inappropriate Medicare Part D Payments for Schedule II Drugs 
Billed as Refills, page 13, https://oig.hhs.gov/oei/reports/oei-02-09-00605.asp.
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    CMS took a different interpretation of the OIG's findings. In its 
written response to the OIG report,\5\ CMS expressed concern that the 
OIG's strict interpretation of PDE data did not support the OIG's 
findings. CMS believed the OIG's findings were based, in part, on a 
misinterpretation of Schedule II drug partial fills dispensed to LTC 
facility residents as refills. This prompted CMS to make an inquiry to 
an NCPDP work group, the WG9 Government Programs Medicare Part D FAQ 
Task Group (``Task Group''), which is designed to guide Federal 
pharmacy programs on NCPDP standards. CMS noted to the Task Group that, 
while the OIG report appeared to misinterpret partial fills as refills 
dispensed to patients in LTC facility pharmacies, it was not aware of 
any means by which a pharmacy could distinguish partial fills of a 
controlled substance prescription for billing purposes without using 
the Fill Number (403-D3) field. The Task Group replied to CMS that the 
Version D.0 implementation specification did not support the OIG's 
findings regarding the use of the Fill Number (403-D3) field,\6\ and 
that the industry used the Fill Number (403-D3) field to represent the 
fill number--the amount actually dispensed--and not necessarily the 
refill number.
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    \5\ Inappropriate Medicare Part D Payments for Schedule II Drugs 
Billed as Refills, page 17, https://oig.hhs.gov/oei/reports/oei-02-09-00605.asp.
    \6\ https://www.ncpdp.org/NCPDP/media/pdf/OESS_request_20121115.pdf.
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    As a result, the Task Group initiated Designated Standard 
Maintenance Organization (DSMO) change request #1182 \7\ to update the 
pharmacy standard to effect a clarification and avoid further 
misinterpretation. The Task Group advised CMS that NCPDP would 
recommend changes to the standard to allow Version D.0 to specify the 
conditional use of a field not then used in the claim billing 
transaction, the Quantity Prescribed (460-ET) field, to indicate the 
actual quantity prescribed in the transmission of the claim, which 
would make data available to validate whether there are inappropriate 
fills in excess of the quantity prescribed. NCPDP noted this change in 
its November 2012 publication of Version D.0, which required the use of 
the Quantity Prescribed (460-ET) field when claims for Schedule II 
drugs are submitted to Medicare Part D. However, HHS has not adopted 
the November 2012 publication of Version D.0, thus HIPAA covered 
entities may not use it for HIPAA transactions.
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    \7\ https://www.ncpdp.org/NCPDP/media/pdf/OESS_request_20121115.pdf.
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B. National Committee on Vital and Health Statistics (NCVHS) 
Recommendation

    On June 21, 2013, the NCVHS wrote to the Secretary that it agreed 
with NCPDP's recommendation to allow Version D.0 to specify the 
conditional use of the Quantity Prescribed (460-ET) field in a 
republished Version D.0 with an explanation in the Editorial 
Corrections section, and a change to the Version D.0 Editorial 
Document.\8\ The NCVHS indicated that, with this change, ``data will be 
available to validate whether or not there are inappropriate fills in 
excess of the quantity prescribed, a concern raised in a September 2012 
report from the HHS Office of the Inspector General.''
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    \8\ To review the recommendation, see http://www.ncvhs.hhs.gov/wp-content/uploads/2014/05/130621lt1.pdf.
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C. Congressional and Administration Actions in Response to the Opioid 
Crisis

    During the last decade, the nation has experienced worsening issues 
with opioid addiction and overdose deaths, prompting various 
Congressional and Administration actions. For example, the 
Comprehensive Addiction and Recovery Act (CARA) (Pub. L. 114-198) was 
enacted on July 22, 2016. CARA amended the CSA to allow a pharmacist to 
partially fill a prescription for a Schedule II controlled substance if 
(1) such partial fills are not prohibited by state law; (2) a partial 
fill is requested by the patient or prescribing practitioner; and (3) 
the total quantity dispensed in a partial fill does not exceed the 
quantity prescribed. We believe CARA's implementation will yield an 
upsurge in partial fills. That view is echoed in a May 31, 2017 letter 
NCPDP sent to the DEA, which stated ``[w]ith implementation of the CARA 
partial Fill Provision, the potential exists for a significant increase 
in the number of occurrences of a prescription for a Schedule II 
controlled substance being partially filled.''
    Pursuant to the President's direction to consider the declaration 
of the public health emergency, consistent with the requirements of the 
Public Health Service Act, the Acting Secretary declared a nationwide 
public health emergency to address the opioid crisis on October 26, 
2017.\9\ The President also directed the heads of executive departments 
and agencies to use all lawful means to exercise all appropriate 
emergency and other relevant authorities to reduce the number of deaths 
and minimize the devastation the

[[Page 4238]]

drug demand and opioid crisis inflicts upon American communities. Even 
prior to the President's direction, HHS had been responsive to the 
opioid crisis. In April 2017, the Secretary announced a 5-Point 
Strategy to--
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    \9\ https://www.hhs.gov/sites/default/files/opioid%20PHE%20Declaration-no-sig.pdf.
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     Improve access to prevention, treatment, and recovery 
support services;
     Target the availability and distribution of overdose-
reversing drugs;
     Strengthen public health data reporting and collection;
     Support cutting-edge research on addiction and pain; and
     Advance the practice of pain management.\10\
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    \10\ https://www.hhs.gov/opioids/about-the-epidemic/index.html.
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    The requirements finalized in this rule support one of our top 
opioid strategic priorities calling for better data, which may 
ultimately help in reducing the drug supply.

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

    In the January 31, 2019 Federal Register (84 FR 633), we published 
the proposed rule titled ``Administrative Simplification: Modification 
of the Requirements for the Use of Health Insurance Portability and 
Accountability Act of 1996 (HIPAA) National Council for Prescription 
Drug Programs (NCPDP) D.0 Standard'' (hereafter referred to as the 
January 2019 proposed rule). In response to the January 2019 proposed 
rule, we received 15 timely pieces of correspondence from a variety of 
commenters, including a pharmacy standards development organization, 
data content committees, health plans, health care companies, 
professional associations, technology companies, and individuals.
    In this section of this final rule, we present our proposals, 
summation of the comments received, and our responses to the comments. 
Some of the public comments received in response to the January 2019 
proposed rule were outside of the scope of the proposed rule, and are 
not addressed in this final rule.

A. Modification of the Requirements for Use of the Telecommunication 
Standard Implementation Guide Version D, Release 0 (Version D.0), 
August 2007, NCPDP

    We proposed to adopt a modification of the requirements for the use 
of the Quantity Prescribed (460-ET) field of the August 2007 
publication of Version D.0, which is the currently adopted version. We 
indicated that the modification would require that covered entities 
treat that field as required where a transmission uses Version D.0, 
August 2007, for a Schedule II drug for these transactions: (1) Health 
care claims or equivalent encounter information; (2) referral 
certification and authorization; and (3) coordination of benefits. HHS 
believes that, by modifying the requirements for the use of the NCPDP 
Telecommunication Standard Implementation Guide, Version D, Release 0 
(Version D.0), August 2007, covered entities will be able to clearly 
distinguish whether a prescription is a ``partial fill,'' or a refill, 
in the HIPAA retail pharmacy transactions.
    Comment: A number of commenters supported HHS's proposal, noting 
that its narrow approach would not increase administrative burden and 
would let all covered entities accurately reflect partial fills of 
Schedule II drugs. A commenter stated that, while the proposal would 
not itself solve the opioid crisis, it would represent a step in the 
right direction by yielding better data to allow researchers to 
understand opioid prescribing trends.
    Response: We thank the commenters for their support.
    Comment: Some commenters did not agree with the proposal and urged 
HHS to adopt the November 2012 publication of Version D.0, which 
commenters stated was balloted and approved by the NCPDP membership and 
subsequently approved by the American National Standards Institute. 
Some of these commenters noted that NCPDP's only modification in that 
November 2012 version was to alter use of the Quantity Prescribed (460-
ET) field from ``not used'' to ``situational.''
    Response: We note that, regardless of whether NCPDP's only change 
in its November 2012 version of D.0 was with respect to the Quantity 
Prescribed (460-ET) field, NCPDP had made other changes in previous D.0 
releases before that time, and that all of the modifications NCPDP made 
to Version D.0 subsequent to the currently adopted 2007 version are 
included in its November 2012 publication. Thus, were we to adopt the 
November 2012 version here, covered entities would be required to 
implement a number of changes in addition to the one associated with 
the Quantity Prescribed (460-ET) field. Moreover, as we noted in the 
January 2019 proposed rule (84 FR 635), the alterations NCPDP made with 
respect to the Quantity Prescribed (460-ET) field in its November 2012 
publication applied only to Medicare Part D claims, which would not 
cover a huge swath of HIPAA covered entities. We continue to believe 
that the narrow, targeted approach we proposed best addresses the 
immediate need to yield better data and information regarding partial 
fills of Schedule II drugs, and is the least burdensome to the 
industry.
    Comment: Some commenters stated that HHS's proposal to modify the 
requirements for the use of the Quantity Prescribed (460-ET) field in 
Version D.0 failed to follow the process for adopting a modification to 
an existing HIPAA standard as established in the Transactions and Code 
Sets Rule and codified at Sec.  162.910.
    Response: As we explained in the January 2019 proposed rule (84 FR 
635), the proposal would not modify the currently adopted Version D.0. 
Rather, it would require covered entities to treat a field in Version 
D.0 differently than is required by the Version D.0 implementation 
specifications. While commenters rightly note that modifications to 
HIPAA standards would require HHS to use the standards modification 
process established through rulemaking, because we are not modifying a 
HIPAA standard, we are not required to follow that process.
    Specifically, our regulations at Sec.  162.923(a) require covered 
entities to comply with the adopted HIPAA standards, except as 
otherwise provided. Here, we are providing that in a narrow instance, 
covered entities must use the adopted HIPAA standard Version D.0 in a 
way other than that specified by Version D.0. This constitutes a 
modification to the use of the adopted standard, not a modification to 
the standard itself. The term ``implementation specification'' is 
defined broadly at 45 CFR 160.103 as ``specific requirements or 
instructions for implementing a standard.'' Under the HIPAA 
regulations, implementation specifications are not limited to just 
those developed by standard setting organizations, which we adopt as 
HIPAA standards and incorporate by reference in the CFR. Implementation 
specifications are also requirements we establish for covered entities 
to comply with a standard. Under Sec.  162.923(a), which specifies that 
we may require covered entities to comply with the adopted HIPAA 
standards except as otherwise provided, we are providing an exception.
    Comment: Some commenters, recognizing that NCPDP's November 2012 
Version of D.0 was limited to just Medicare Part D, recommended, as a 
work-around, that HHS adopt the November 2012 publication of Version 
D.0 and include language in the final rule stating that ``covered 
entities must designate the situational field, Quantity

[[Page 4239]]

Prescribed (460-ET) field as required for Schedule II Drugs, within 
applicable trading partner materials.'' To that end, the commenters 
suggested that NCPDP payer sheets, which are used to define required 
field submission, could be used as part of trading partner materials 
where payers could require the submission of the Quantity Prescribed 
(460-ET) field for all claims or equivalent encounter information, 
prior authorization, and coordination of benefits transactions where 
the drug dispensed is a Schedule II drug.
    Response: We considered the commenters' suggestion, but continue to 
believe that our proposal to modify the requirements for the use of 
Version D.0 is the least burdensome approach for covered entities. As 
noted earlier in this final rule, that November 2012 publication 
includes modifications NCPDP made subsequent to the version we adopted 
as the HIPAA standard; if we were to adopt the November 2012 
publication, covered entities would be required to implement a number 
of changes in addition to the one associated with the Quantity 
Prescribed (460-ET) field.
    Comment: A commenter noted that the proposed change would make 
apparent the discrepancies between the prescribed and dispensed 
quantities, but would not help explain the discrepancies. The commenter 
illustrated this point with the following example. ``[I]f the physician 
wrote the prescription for #60 and the pharmacy only dispenses #30, 
this does not mean it is a `partial fill,' the discrepancy could 
instead be due to insurance restricting the drug supply, or other 
insurance requirements. The Quantity Prescribed (460-ET) field does not 
specifically indicate if a partial fill happens. This could lead to 
erroneous conclusions about the fill event in certain instances, such 
as when the insurance plan may have limited how much was allowed for 
coverage, or if there was not enough quantity in stock, which would not 
provide the intended data surrounding actual partial fills.'' The 
commenter recommended that HHS instead utilize the following 
combination of fields, which the commenter asserted would clarify a 
discrepancy between prescribed and dispensed quantities--Dispensing 
Status (343-HD) field; Quantity Intended To Be Dispensed (344-HF) 
field; and Day Supply Intended To Be Dispensed (345-HG) field. The 
commenter noted that these fields are not required, but are available 
and supported by Version D.0.
    Response: The fields to which the commenter refers are presently 
and purposefully only intended for use in the case of a pharmacy 
inventory shortage. We believe the approach we proposed, and adopt 
here, is superior to the commenter's recommended approach, which would 
be significantly more burdensome to covered entities by requiring them 
to comply with different requirements for each type of partial fill and 
to implement more software systems updates.
    Comment: A commenter suggested that it would be easier for many 
pharmacies to implement systems changes to effectuate HHS's proposal so 
that the modification to the requirements for the use of the Quantity 
Prescribed (460-ET) field could cover more than just Schedule II drugs. 
Therefore, the commenter suggested that HHS expand this proposal to 
include Schedule III through V drugs as well. Conversely, several 
commenters supported HHS's proposed approach, which limits the 
modification to just Schedule II drugs.
    Response: As discussed earlier in this final rule, the need for 
regulatory action to modify the requirements for the use of the August 
2007 version of the NCPDP D.0 standard and the concerns motivating our 
proposed modification stem partly from CARA's change to the partial 
fill requirements for Schedule II drugs. We believe that requiring the 
Quantity Prescribed (460-ET) field to apply to all drugs, not just 
Schedule II drugs, would increase the burden on pharmacies, nor would 
it further the goals discussed herein. Therefore, we are finalizing our 
proposal without modification, but appreciate the commenters' varied 
perspectives, and may in the future consider expanding this requirement 
to include prescribed drugs in Schedules III through V.
    Comment: A commenter encouraged the Secretary to expedite a 
proposed rule seeking the adoption of the NCPDP Telecommunication 
Standard Implementation Guide Version F2, which the commenter asserts 
provides enhanced transparency and improves patient safety measures for 
all controlled substances. By contrast, another commenter was pleased 
that we did not propose to adopt Version F2 because the commenter 
believes the language of the relevant field to be ``chilling'' as it 
suggests penalties may apply when the field is misused.
    Response: We appreciate that there are arguments for and against 
expedited rulemaking for the adoption of NCPDP Telecommunication 
Standard Implementation Guide Version F2. Were we to adopt Version F2, 
covered entities would need to make significant changes. While we 
continue to carefully evaluate the NCVHS's May 17, 2018 recommendation 
encouraging HHS to adopt the updated NCPDP pharmacy standards, we 
believe the public health emergency caused by the opioid crisis, and 
the urgent need for better data and information to help combat it, 
dictate that we now take this narrow, targeted approach as proposed.
    Comment: A number of commenters supported HHS's proposal that the 
term ``Schedule II drugs,'' be included in the modifications to 
Sec. Sec.  162.1102, 162.1302, and 162.1802, to mirror the Drug 
Enforcement Administration's definition of the term at 21 CFR 1308.12. 
Some of these commenters agreed with HHS that Schedule III through V 
drugs should not be included in this rule.
    Response: We thank the commenters for their support. We note that 
in this final rule, we are making a technical change to the regulation 
text to remove the phrase ``as updated'' from each of the three 
provisions that define Schedule II drugs, that is, Sec. Sec.  
162.1102(d)(1), 162.1302(d)(1), and 162.1802(d)(1), because the phrase 
is superfluous.
    After reviewing the public comments received, we are finalizing the 
modification of the requirements for the use of the Quantity Prescribed 
(460-ET) field for retail pharmacy transactions, which will be 
reflected in the regulations at Sec. Sec.  162.1102, 162.1302, and 
162.1802.

B. Effective and Compliance Dates

    We proposed that the final rule would be effective 60 days after 
publication in the Federal Register and that the compliance date would 
be 180 days after the effective date, in accordance with section 
1175(b)(2) of the Social Security Act.
    Comment: A number of commenters supported HHS's proposed effective 
and compliance dates for the modification.
    Response: We thank the commenters for their support.
    Comment: Some commenters urged HHS to revise the implementation 
timeline of the proposed modification. These commenters suggested that 
HHS should not adopt a compliance date that would interfere with end-
of-year industry processing requirements. Commenters explained that 
they estimated the compliance date for this final rule would be January 
2020, which coincides with the 2020 Medicare Part D rule's 
implementation timeframe for the NCPDP SCRIPT Standard Version 2017071 
as well as the normal annual benefit plan changes. Another commenter 
stated that a short compliance timeframe would cause beneficiaries to 
be unable to access their

[[Page 4240]]

medications because payers would not have sufficient time to make the 
necessary systems changes. A commenter recommended that HHS implement a 
transitional period for this modification whereby payers may begin 
using the Quantity Prescribed (460-ET) field on the effective date of 
the final rule, but mandatory use of the field for all entities be no 
earlier than June 2020. Finally, some commenters stated their belief 
that the compliance date and effective date are the same, which they 
believed would result in a hard cut-over that could engender risks in 
patient access to care as well as burdensome administrative and 
operational challenges.
    Response: In considering these comments, we recognize commenters' 
confusion with respect to the distinct concepts of compliance and 
effective dates, and we have clarified the regulation text in this 
final rule to be clear that the compliance date is 180 days after the 
effective date of the rule. As we noted previously in this document, 
this final rule will be effective 60 days after publication in the 
Federal Register. The compliance date, or the date on which covered 
entities must comply with the modification, follows that by 180 days. 
In the spring 2019 Unified Regulatory Agenda, we noted that, this final 
rule would be published in December 2019. Based on that, we anticipate 
that the effective date of this rule will be in February 2020 and the 
compliance date will be in August 2020. We believe this explanation 
ameliorates commenters' concerns. After consideration of the public 
comments received and the clarification offered here, we are finalizing 
the effective and compliance dates of this final rule without 
modification.

III. Incorporation by Reference

    The incorporation by reference of the standards referenced in this 
rule (Telecommunication Standard Implementation Guide, Version D, 
Release 0 (Version D.0), August 2007 and equivalent Batch Standard 
Implementation Guide, Version 1, Release 2 (Version 1.2), National 
Council for Prescription Drug Programs) was previously approved for the 
amended sections. We are making no changes to the incorporation.

IV. Collection of Information Requirements

    The Office of Management and Budget (OMB) has determined that the 
establishment of standards for electronic transactions under HIPAA 
(which mandate that the private sector disclose information and do so 
in a particular format) constitutes an agency-sponsored third-party 
disclosure as defined under the Paperwork Reduction Act of 1995 (PRA) 
(44 U.S.C. 3501 et seq.). (See 65 FR 50350 (August 17, 2000).) With 
respect to the scope of its review under the PRA, however, OMB has 
concluded that its review would be limited to the review and approval 
of initial standards, and to changes in industry standards which would 
substantially reduce administrative costs. (See 65 FR 50350 (August 17, 
2000).) This document, which requires the use of a data element that 
was not previously used and the disclosure of additional information in 
a particular location in the transaction, would usually constitute an 
information collection requirement because it requires third-party 
disclosures. However, because of OMB's determination, noted above, 
there is no need for OMB review under the PRA. But see 5 CFR 
1320.3(b)(2) (time, effort, and financial resources necessary to comply 
with an information collection that would otherwise be incurred in the 
normal course of business can be excluded from PRA ``burden'' if the 
agency demonstrates that such activities needed to comply with the 
information collection are usual and customary).

V. Regulatory Impact Statement

    We have examined the impacts of this 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, 
section 202 of the Unfunded Mandates Reform Act of 1995 (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).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A 
Regulatory Impact Analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any 1 year). 
This rule does not reach the economic threshold and thus is not 
considered a major rule. We did not receive any comments on the 
regulatory impact statement from the January 2019 proposed rule. 
Therefore, we are finalizing it in this rule with no modifications.
    Covered entities inconsistently reflect partial fills and fill 
numbers for Schedule II drugs in retail pharmacy transactions that 
utilize Version D.0 because Version D.0 does not permit covered 
entities to use the Quantity Prescribed (460-ET) field. As a result, 
stakeholders cannot reliably discern from transactions data when a 
Schedule II drug has been partially filled or refilled. To help 
understand the economic burden of this issue, in the January 2019 
proposed rule, HHS referred back to the previously mentioned 2012 OIG 
report, which estimated that pharmacies inaccurately billed $25 million 
worth of partial fills as refills in 2009 paid by the Medicare Part D 
program. The OIG also expressed concerns about the possibility of these 
inappropriately dispensed Schedule II drugs being resold on the 
street.\11\ As previously stated, and discussed in the January 2019 
proposed rule, CMS noted its concern that the OIG's strict 
interpretation of PDE data did not support the OIG's findings, instead 
believing that the OIG's findings were based in part on a 
misinterpretation that Schedule II drug partial fills dispensed to LTC 
facility residents were refills. However, these findings represent a 
helpful starting point for this estimate. The White House Council of 
Economic Advisers estimates that opioid abuse exacted a cost of $504 
billion in 2015 and contributed to a significant number of prescription 
and illicit drug overdose deaths.\12\ Furthermore, in the January 2019 
proposed rule and in this final rule, HHS discussed that the Secretary 
declared a public health emergency to combat the opioid crisis.
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    \11\ Inappropriate Medicare Part D Payments for Schedule II 
Drugs Billed as Refills, https://oig.hhs.gov/oei/reports/oei-02-09-00605.asp.
    \12\ https://www.whitehouse.gov/opioids/.
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    For this analysis, HHS continues to leverage the historical cost 
and benefit data from the study conducted to support the Modifications 
to the Health Insurance Portability and Accountability Act (HIPAA) 
Electronic Transaction Standards August 2008 proposed rule and the 
January 2009 final rule (73 FR 49742 and 74 FR 3295 and 3296, 
respectively) (hereinafter referenced as the study). The impact 
analysis for this final rule utilizes the historical cost estimates 
derived from the study across covered entities. The final estimate 
provided an overall cost of $38 million to fully implement the then-new 
requirements of the 2007

[[Page 4241]]

Version D.0 for chain pharmacies (73 FR 49772). Since this is a very 
narrow, targeted modification that is limited to requiring covered 
entities to use the Quantity Prescribed (460-ET) field of the currently 
adopted Version D.0 in certain specified situations, we anticipate the 
aggregate costs will be minimal. HHS expects minor system and 
implementation expenses, which consist of modifying software 
configurations, updating business processes, and minimal personnel 
training. We continue to believe the investments to adopt this 
modification and update existing systems have the same cost variables 
as the adoption of the current Version D.0. As discussed in the January 
2019 proposed rule (84 FR 636), we used these same considerations from 
the January 16, 2009 final rule (74 FR 3296) to formulate our 
assumptions on implementing system upgrades, and staff training costs. 
While it is difficult to determine aggregate costs across the industry, 
we believe system costs for this modification to the requirements for 
use of Version D.0 to be limited IT resources, training, and business 
processes, and that this modification would cost between 1 to 5 percent 
of the original estimated cost, or between $380,000 and $1,900,000. The 
study also estimated a maximum upgrade fee cost of $1.08 million per 
year for independent pharmacies (73 FR 49772). This results in an 
estimated cost for this modification of $10,800 to $54,000 per year in 
service fees across all independent pharmacies.
    Pharmacies will benefit from using the Quantity Prescribed (460-ET) 
field because it will facilitate better monitoring of Schedule II drugs 
for over- or inappropriate prescribing. By virtue of the more robust 
data that we believe can be used to help avoid audits and incorrect 
payments, HHS believes that large pharmacy chains can save up to 
$500,000 per year, while smaller chains can save approximately $100,000 
per chain. Therefore, this can yield a total 10-year benefit of up to 
$10 million, and that does not account for the value of the time 
pharmacists and pharmacy technician staff who process these claims can 
save.
    We believe health plans and their associated pharmacy benefit 
managers (PBMs) will also incur minimal cost since most have existing 
hardware and software platforms capable of using this field with their 
current technology and networks. Thus, we expect this change will have 
a similarly minimal cost impact of between 1 and 5 percent of the 
original implementation costs. The study originally estimated the total 
cost to implement the 2007 Version D.0 for plans and PBMs to be a 
maximum of $10.6 million for the industry (73 FR 49773). Thus, we 
continue to believe that the total cost for this change for health 
plans and PBMs to be between $106,000 and $530,000.
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). An RIA 
must be prepared for major rules with economically significant effects 
($100 million or more in any 1 year). This rule does not reach the 
economic threshold and thus is not considered a major rule. We 
anticipate that the modification to the requirements for the use of the 
Quantity Prescribed (460-ET) field will yield more data and information 
with respect to the dispensing, facilitate better monitoring of 
Schedule II drugs, and reinforce the Administration's commitment to 
lowering overall health care costs by reducing administrative burden 
and improving the quality of health care.
    The RFA requires agencies to analyze options for regulatory relief 
of small entities if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, we estimate the 
great majority of independent retail pharmacies are small businesses as 
defined by the Small Business Administration's (SBA) definition of 
having revenues of less than $7.5 million up to $38.5 million in any 1 
year. The SBA defines a size threshold in terms of annual revenues for 
pharmacies as $27.5 million. Our proposed estimate stated that 95 
percent of independent retail pharmacies have revenues below $27.5 
million or are nonprofit organizations and are considered small 
entities. Individuals and states are not included in the definition of 
a small entity. As stated earlier, for this analysis HHS used the same 
considerations from the January 16, 2009 final rule to formulate our 
assumptions for this RFA, we the reader to refer to that analysis for 
additional information. We continue to believe that the modification to 
the requirements for the use of the Quantity Prescribed (460-ET) field 
will have a de minimis effect on that analysis; therefore, the 
Secretary has determined that this final rule will not have a 
significant economic impact on independent retail pharmacies and is not 
preparing an analysis under the RFA.
    In addition, section 1102(b) of the Act requires us to prepare an 
RIA if a rule may have a significant impact on the operations of a 
substantial number of small rural hospitals. This analysis must conform 
to the provisions of section 604 of the RFA. For purposes of section 
1102(b) of the Act, we continue to define a small rural hospital as a 
hospital that is located outside of a Metropolitan Statistical Area for 
Medicare payment regulations and has fewer than 100 beds. This final 
rule will affect the operations of a substantial number of small rural 
hospitals because they are covered entities under HIPAA and must comply 
with the regulations; however, we do not believe the rule will have a 
significant impact on those entities, for the reasons stated above in 
reference to small businesses. Therefore, the Secretary has determined 
that this final rule will not have a significant impact on the 
operations of a substantial number of small rural hospitals and is not 
preparing an analysis under section 1102(b) of the Act.
    Based on the information contained herein, including the 2009 
analysis referenced above, the Secretary has determined and certifies 
that this final rule will not have a significant economic impact on a 
substantial number of small entities. Accordingly, HHS is not required 
to, and does not, prepare a regulatory impact analysis under the RFA.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2019, that 
threshold is approximately $154 million. We believe that this final 
rule will have no consequential effect on state, local, or tribal 
governments or on the private sector in excess of that threshold.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on state 
and local governments, preempts state law, or otherwise has federalism 
implications. We believe that since this final rule does not impose 
substantial costs on state or local governments, the requirements of 
Executive Order 13132 are not applicable.
    Executive Order 13771, titled Reducing Regulation and Controlling 
Regulatory Costs, was issued on January 30, 2017 and requires that the 
costs associated with significant new regulations ``shall, to the 
extent

[[Page 4242]]

permitted by law, be offset by the elimination of existing costs 
associated with at least two prior regulations.'' OMB's interim 
guidance, issued on April 5, 2017, https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2017/M-17-21-OMB.pdf, explains that 
the requirements (as previously discussed) only apply to each new 
``significant regulatory action that imposes costs.'' We have 
determined that this final rule is not a ``significant regulatory 
action'' and thus does not trigger the previously discussed 
requirements of Executive Order 13771.
    We have assessed the anticipated costs and benefits of this final 
rule and continue to believe that it will yield more data and 
information with respect to the dispensing of Schedule II drugs.
    In accordance with the provisions of Executive Order 12866, this 
final rule was not reviewed by the Office of Management and Budget.

List of Subjects in 45 CFR Part 162

    Administrative practice and procedures, Electronic transactions, 
Health facilities, Health insurance, Hospitals, Incorporation by 
reference, Medicaid, Medicare, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, the Department of Health 
and Human Services amends 45 CFR part 162 as set forth below:

PART 162--ADMINISTRATIVE REQUIREMENTS

0
1. The authority citation for part 162 continues to read as follows:

    Authority:  42 U.S.C. 1320d--1320d-9 and secs. 1104 and 10109 of 
Pub. L. 111-148, 124 Stat. 146-154 and 915-917.


0
2. Section 162.1102 is amended by adding paragraph (d) to read as 
follows:


Sec.  162.1102  Standards for health care claims or equivalent 
encounter information transaction.

* * * * *
    (d) For the period on and after September 21, 2020, the Quantity 
Prescribed (460-ET) field, as set forth in the Telecommunication 
Standard Implementation Guide, Version D, Release 0 (Version D.0), 
August 2007 and equivalent Batch Standard Implementation Guide, Version 
1, Release 2 (Version 1.2), National Council for Prescription Drug 
Programs, must be treated as required where the transmission meets both 
of the following:
    (1) Is for a Schedule II drug, as defined in 21 CFR 1308.12.
    (2) Uses the standard identified in paragraph (b)(2)(i) of this 
section.

0
3. Section 162.1302 is amended by adding paragraph (d) to read as 
follows:


Sec.  162.1302  Standards for referral certification and authorization 
transaction.

* * * * *
    (d) For the period on and after September 21, 2020, the Quantity 
Prescribed (460-ET) field, as set forth in the Telecommunication 
Standard Implementation Guide, Version D, Release 0 (Version D.0), 
August 2007 and equivalent Batch Standard Implementation Guide, Version 
1, Release 2 (Version 1.2), National Council for Prescription Drug 
Programs, must be treated as required where the transmission meets both 
of the following:
    (1) Is for a Schedule II drug, as defined in 21 CFR 1308.12.
    (2) Uses the standard identified in paragraph (b)(2)(i) of this 
section.

0
4. Section 162.1802 is amended by adding paragraph (d) to read as 
follows:


Sec.  162.1802  Standards for coordination of benefits information 
transaction.

* * * * *
    (d) For the period on and after September 21, 2020, the Quantity 
Prescribed (460-ET) field, as set forth in the Telecommunication 
Standard Implementation Guide, Version D, Release 0 (Version D.0), 
August 2007 and equivalent Batch Standard Implementation Guide, Version 
1, Release 2 (Version 1.2), National Council for Prescription Drug 
Programs, must be treated as required where the transmission meets both 
of the following:
    (1) Is for a Schedule II drug, as defined in 21 CFR 1308.12.
    (2) Uses the standard identified in paragraph (b)(2)(i) of this 
section.

    Dated: December 19, 2019.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2020-00551 Filed 1-23-20; 8:45 am]
BILLING CODE 4120-01-P