[Federal Register: April 15, 2008 (Volume 73, Number 73)] [Rules and Regulations] [Page 20485-20509] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr15ap08-17] [[Page 20485]] ----------------------------------------------------------------------- Part III Department of Health and Human Services ----------------------------------------------------------------------- Centers for Medicare & Medicaid Services ----------------------------------------------------------------------- 42 CFR Part 423 Medicare Program; Policy and Technical Changes to the Medicare Prescription Drug Benefit; Final Rule [[Page 20486]] ----------------------------------------------------------------------- DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Part 423 [CMS-4130-F] RIN 0938-AO74 Medicare Program; Policy and Technical Changes to the Medicare Prescription Drug Benefit AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: This final rule codifies clarifications of existing policies associated with the Medicare Prescription Drug Benefit (also known as Medicare Part D), including the following: guidance that certain supplies associated with the administration of insulin are included in the definition of a Part D drug; guidance regarding the statutory exclusion from the definition of a Part D drug of any drug when used for the treatment of sexual or erectile dysfunction, unless that drug is used for an FDA-approved purpose other than sexual or erectile dysfunction; a recent statutory change that allows for the payment of vaccine administration under Part D for Part D covered vaccines; and guidance on plan-to-plan reconciliation and reconciliation with a payer other than the Part D plan of record. This final rule also codifies clarifications of existing policies associated with the Retiree Drug Subsidy (RDS) program, including guidance on aggregating plan options for purposes of meeting the net test for actuarial equivalence and guidance on applying the Medicare supplemental adjustment when calculating actuarial equivalence. In addition, new clarifications and modifications in this final rule include establishing standards with respect to the timely delivery of infusible drugs covered under Part D and modifications to the retiree drug subsidy regulations. This final rule also codifies certain technical corrections to our regulations and clarifies our intent with respect to certain preamble discussions in a prior final rule implementing the Medicare prescription drug benefit. Effective Dates: These regulations are effective on June 9, 2008. FOR FURTHER INFORMATION CONTACT: ------------------------------------------------------------------------ ------------------------------------------------------------------------ Alissa DeBoy (410) 786-6041.. General questions regarding the final rule. Vanessa Duran (410) 786-8697. Subpart B--approval of marketing and materials and enrollment forms; procedures to determine and document creditable status of prescription drug coverage; Subpart C--the definition of a long-term care facility; the definition of a contracted pharmacy network; the waiver or reduction of Part D cost- sharing by pharmacies; access to covered Part D drugs, including adequate access to home infusion pharmacies; Subpart E-- organization compliance with State law and preemption by Federal law; and Subpart K--application procedures and contracts with Part D plan sponsors. Gregory Dill (312) 353-1754.. Subpart C--definition of a Part D drug, including the exclusion of drugs used to treat erectile dysfunction, the exclusion of drugs related to morbid obesity, supplies associated with the delivery of insulin into the body, and vaccine administration fees. Meghan Elrington (410) 786- Subpart F--timing of payments. 8675. Deondra Moseley (410) 786- Subpart G--payment appeals; and Subpart 4577. P--low-income benchmark premium amount, and premium subsidy for late enrollment penalty. Deborah Larwood (410) 786- Subpart J--coordination of Part D plans 9500. with other prescription drug coverage. John Scott (410) 786-3636.... Subpart M--grievances, coverage determinations, and appeals. Christine Hinds (410) 786- Subpart P--premiums and cost-sharing 4578. subsidies for low-income individuals. David Mlawsky (410) 786-6851. Subpart R--payments to sponsors of retiree prescription drug plans. Christine Hinds (410) 786- Subpart S--special rules for States. 4578. ------------------------------------------------------------------------ SUPPLEMENTARY INFORMATION: Copies: To order copies of the Federal Register containing this document, send your request to: New Orders, Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date of the issue requested and enclose a check or money order payable to the Superintendent of Documents, or enclose your Visa or Master Card number and expiration date. Credit card orders can also be placed by calling the order desk at (202) 512-1800 (or toll free at 1-888-293- 6498) or by faxing to (202) 512-2250. The cost for each copy is $10. As an alternative, you can view and photocopy the Federal Register document at most libraries designated as Federal Depository Libraries and at many other public and academic libraries throughout the country that receive the Federal Register. This Federal Register document is also available from the Federal Register online database through GPO Access, a service of the U.S. Government Printing Office. The Web site address is http://www.access.gpo.gov/fr/. Table of Contents I. Background A. Requirements for Issuance of Regulations B. General Overview II. Provisions of the Proposed Rule With an Analysis and Response to Public Comments A. Subpart B--Eligibility and Enrollment 1. Approval of Marketing Materials and Enrollment Forms (Sec. 423.50) 2. Procedures To Determine Creditable Status of Prescription Drug Coverage (Sec. 423.56) B. Subpart C--Benefits and Beneficiary Protections 1. Definitions (Sec. 423.100) a. Part D Drug (1) Erectile Dysfunction (ED) (2) Morbid Obesity (3) Insulin Inhalation Drugs and Supplies (4) Vaccine Administration Fee b. Long-Term Care Facilities c. Contracted Pharmacy Network 2. Requirements Related to Qualified Prescription Drug Coverage (Sec. 423.104)--Waiver or Reduction of Part D Cost-sharing by Pharmacies 3. Access to Covered Part D Drugs (Sec. 423.120) a. Applicability of Some Non-Retail Pharmacies to Standards for Convenient Access b. Adequate Access to Home Infusion Pharmacies C. Subpart F--Submission of Bids and Monthly Beneficiary Premiums: Plan Approval--Timing of Payments (Sec. 423.293(a)) D. Subpart G--Payments to Part D Plan Sponsors for Qualified Prescription Drug Coverage: Payment Appeals (Sec. 423.350(b)) E. Subpart I--Organization Compliance With State Law and Preemption by Federal Law--Waiver of Certain Requirements to Expand Choice (Sec. 423.410) F. Subpart J--Coordination of Part D With Other Prescription Drug Coverage 1. Application of Part D Rules to Certain Part D Plans on and After January 1, 2006 (Sec. 423.458) [[Page 20487]] 2. Coordination of Benefits With Other Providers of Prescription Drug Coverage Sec. (Sec. 423.464) a. Coordination of Benefits With Rural Health Clinics b. Coordination of Benefits With Part D Plans and Other Payers G. Subpart K--Application of Procedures and Contracts with Part D Plan Sponsors 1. General Provisions (Sec. 423.504)--Submission of Bids 2. Contract Provisions (Sec. 423.505) 3. Failure To Comply With the Dissemination of Information Requirements Grounds for Contract Termination (Sec. 423.509(a)(9)) H. Subpart M--Grievances, Coverage Determinations, and Appeals 1. Definitions (Sec. 423.560) 2. Expediting Certain Coverage Determinations (Sec. 423.570) 3. Expediting Certain Redeterminations (Sec. 423.584) 4. Right to an ALJ Hearing (Sec. 423.610) I. Subpart P--Premiums and Cost-Sharing Subsidies for Low-Income Individuals 1. Premium Subsidy Amount (Sec. 423.780) a. Low-Income Benchmark Premium Amount b. Premium Subsidy for Late Enrollment Penalty J. Subpart R--Payments to Sponsors of Retiree Prescription Drug Plans 1. Requirements for Qualified Retiree Prescription Drug Plans (Sec. 423.884) a. Application Timing b. Data Match c. Actuarial Equivalence (1) Medicare Supplemental Adjustment (2) Noncalendar Year Plans (3) Benefit Options (4) Submission of Actuarial Attestations Upon Material Change K. Subpart S--Special Rules for States Eligibility 1. General Payment Provisions--Coordination With Medicare Prescription Drug Benefits (Sec. 423.906) 2. States' Contribution to Drug Benefit Costs Assumed by Medicare (Sec. 423.910) L. Out-of-Scope Comments III. Collection of Information Requirements IV. Regulatory Impact Analysis A. Overall Impact B. Anticipated Effects on Health Plans and Pharmacy Benefit Managers (PBMs) C. Alternatives Considered D. Accounting Statement E. Conclusion Regulations Text I. Background A. Requirements for Issuance of Regulations Section 902 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173) amended section 1871(a)(3) of the Social Security Act (the Act) and requires the Secretary, in consultation with the Director of the Office of Management and Budget, to establish and publish timelines for the publication of Medicare final regulations based on the previous publication of a Medicare proposed or interim final regulation. Section 1871(a)(3)(B) of the Act also states that the timelines for these regulations may vary, but shall not exceed 3 years after publication of the preceding proposed or interim final regulation, except under exceptional circumstances. This final rule finalizes provisions set forth in the May 25, 2007 proposed rule (72 FR 29403), hereinafter referred to as the May 2007 proposed rule. In addition, this final rule has been published within the 3-year time limit imposed by section 1871(a)(3)(B) of the Act. Therefore, we believe our final rule is in accordance with the Congress' intent to ensure timely publication of final regulations. B. General Overview The Medicare Prescription Drug Benefit (also known as Part D) is a voluntary prescription drug benefit program enacted into law on December 8, 2003 in section 101 of title I of the MMA. The Retiree Drug Subsidy (RDS) program, which provides payments to employer and union sponsors of qualified retiree prescription drug plans for Part D drug costs within certain limits, was also enacted as part of MMA. The final rule implementing the provisions of Part D appeared in the Federal Register on January 28, 2005, and these provisions became effective March 22, 2005. We hereinafter refer to this rule as the January 2005 final rule. Since publication of the January 2005 final rule, we have issued several clarifications or interpretations of the final rule by way of interpretive guidance documents. In addition, we have issued guidance explaining how we will interpret a change to the Act that excludes drugs used in the treatment of erectile dysfunction from Part D, with a certain exception. In order to ensure public awareness of our policies, as well as to avoid potential confusion regarding them, we explained many of the respective clarifications or interpretations in the May 2007 proposed rule. We also proposed to codify some of these clarifications in regulation, as well as to make certain technical corrections. Finally, due to our experience to date in implementing the Part D program, we proposed several new clarifications of our policy for Part D plans on which we specifically invited public comment. II. Provisions of the Proposed Rule With an Analysis of and Response to Public Comments We received approximately 60 items of timely correspondence containing comments on the May 2007 proposed rule. Commenters included health plans and health plan associations, pharmacies and pharmacist associations, prescription benefit managers (PBMs), physicians and other health care professionals, beneficiary advocacy groups, representatives of hospitals, Part D beneficiaries, and others. In this final rule, we address all relevant comments we received regarding the provisions of our proposed rule with the exception of the provisions on what may be included in the drug costs Part D sponsors use as the basis for calculating beneficiary cost sharing and reporting drug costs to CMS for the purposes of reinsurance reconciliation and risk sharing, as well as submitting bids to CMS. We are not finalizing these provisions at this time. We intend to revisit this issue in future rulemaking and will address the comments at that time. We appreciate the comments and will take them under consideration as we continue to assess the underlying policy and its associated impact. Most of the comments addressed multiple issues. The areas of our proposed rule that we are finalizing that received the most comment include the provisions on ensuring adequate access to home infusion pharmacies and the provisions addressing the coordination of Part D plans with other prescription drug coverage. Generally, the vast majority of commenters expressed strong support for the provisions of our proposed rule, declaring them essential to the success and continued operation of the Medicare Part D program. This was especially true with regard to our proposal to establish a standard for the timely delivery of home infusion drugs. A significant subset of the comments regarding home infusion access suggested even more rigorous standards for ensuring the timely delivery of Part D infusible drugs. We also received a significant number of comments that addressed our proposed clarifications on permissible activities vis-[agrave]-vis provider marketing and the coverage of drugs when used to treat morbid obesity. In general, commenters supported our clarifications or technical corrections. However, on some issues, commenters asked for reinterpretations of the statute. In this final rule, we address comments received on the May 2007 proposed rule largely in the numerical order of the related regulation sections. [[Page 20488]] A. Subpart B--Eligibility and Enrollment 1. Approval of Marketing Materials and Enrollment Forms (Sec. 423.50) In our May 2007 proposed rule (70 FR 4223), we clarified that when we used the term ``market'' in the preamble to the January 2005 final rule in the context of our discussion of the approval process for marketing materials and enrollment forms, we used it in a more general sense to mean assisting in enrollment or education directed at beneficiaries, and not marketing per se as the term is understood to mean in the commercial context. This clarification was necessary to distinguish our preamble discussion and our narrower definition of the term ``marketing'' in the Medicare Marketing Guidelines, which were issued subsequent to our publication of that final rule. (See Centers for Medicare & Medicaid Services, Medicare Marketing Guidelines for Medicare Advantage Plans (MAs); Medicare Advantage Prescription Drug Plans (MA-PDs); Prescription Drug Plans (PDPs); 1876 Cost Plans http:// www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/ FinalMarketingGuidelines.pdf (last updated July 25, 2006).) The Guidelines define ``marketing'' as ``[s]teering, or attempting to steer, an undecided potential enrollee towards a plan, or limited number of plans, and for which the individual or entity performing marketing activities expects compensation directly or indirectly from the plan for such marketing activities.'' (Medicare Marketing Guidelines, page 8.) This definition further clarifies that neither ``[a]ssisting in enrollment'' nor ``education'' constitute ``marketing'' as those terms are defined in The Guidelines (Medicare Marketing Guidelines, page 8). The Medicare Marketing Guidelines specify that ``assisting in enrollment'' consists of assisting a potential enrollee with the completion of an application and objectively discussing characteristics of different plans to assist a potential enrollee with appraising the relative merits of all available individual plans, based solely on the potential enrollee's needs; further, the individual or entity performing these activities may not receive compensation directly or indirectly from a plan for such assistance in enrollment (Medicare Marketing Guidelines, page 6). ``Education'' is defined in the Medicare Marketing Guidelines as informing a potential enrollee about Medicare Advantage or other Medicare programs, generally or specifically, but not steering, or attempting to steer, a potential enrollee towards a specific plan or limited number of plans (Medicare Marketing Guidelines, page 6). Thus, our intent in the preamble of the January 2005 final rule was to acknowledge that providers and pharmacies are free to engage in either ``assisting in enrollment'' or ``education,'' including provider promotional activities as permitted under the Medicare Marketing Guidelines, but not to ``market'' to beneficiaries, as the term is defined in the Medicare Marketing Guidelines. We maintain this clarification in the final rule, as noted in our response to comment. Additionally, we proposed to clarify the provision that currently states that in conducting marketing activities, a Part D plan may not ``[u]se providers, provider groups, or pharmacies to distribute printed information comparing the benefits of different Part D plans unless the providers, provider groups or pharmacies accept and display materials from all Part D plan sponsors (70 FR 4532).'' We believed it was necessary to clarify this provision because it was possible to infer from it that when a Part D plan used providers, provider groups, or pharmacies to distribute printed information comparing the benefits of the Part D plans with which they contracted, they would also have to accept and display printed information comparing the benefits of different plans with which they did not contract. Our concern was that this interpretation could lead to situations in which a beneficiary made a plan selection and realized too late that the provider or pharmacist from whom they obtained printed information about a particular plan was not in fact contracted with that plan. Therefore, in the proposed rule, we clarified that a Part D plan could use providers, provider groups, or pharmacies to distribute printed information comparing the benefits of different Part D plans, provided those providers, provider groups, or pharmacies accepted and displayed printed information comparing the benefits of all the different Part D plans with which they contract. However, the providers, provider groups, or pharmacies were not obliged to accept and display any comparative information regarding those Part D plans with which they did not contract. We stipulated that this clarification would apply to comparative marketing materials and was in accord with the Medicare Marketing Guidelines (Medicare Marketing Guidelines, page 125). In this final rule, we codify this policy by revising Sec. 423.50(f)(1)(v). Comment: A large number of commenters supported our clarification that providers and pharmacies that are contracted with plan sponsors may not market to beneficiaries but may assist in enrollment, including participating in provider promotion activities within the parameters established in the Marketing Guidelines, and educate enrollees. However, two commenters believed that CMS should withdraw this clarification given that it is based on a term we use in the Medicare Marketing Guidelines, which is not a regulatory document. Further, these commenters questioned the validity and utility of the Medicare Marketing Guidelines in the long-term care setting. Response: The two commenters who asked us to withdraw this clarification did so based on arguments about the validity of the Medicare Marketing Guidelines, which we believe are outside the scope of this regulation. In the proposed rule and in this final rule, we are merely clarifying our policy so as to avoid any confusion arising from the broader use of the term ``market'' in a response to comment in the January 2005 final rule. Comment: Several commenters supported our proposed revision to Sec. 423.50(f)(1) allowing Part D plans to use providers, provider groups and pharmacies to distribute printed information comparing the benefits of different plans only if those providers, provider groups or pharmacies accept and display materials from all Part D plan sponsors with which they contract. Two of these commenters were especially pleased with our clarification that providers, provider groups, or pharmacies are not obliged to accept and display any comparative information regarding those Part D plans with which they do not contract. However, another commenter believed that instead of requiring providers to accept and display information for every plan with which they have contracted, we should allow them to accept and display materials from a reasonable cross-section of contracted plans, as long as the provider posts a notice informing beneficiaries that the displayed material describes the benefits of only a subset of contracted plans and explains where beneficiaries may obtain information on the full array of benefits available to them. Response: Our goal is to ensure that beneficiaries receive the information they need to make a plan selection that is based on their particular needs. We disagree with the commenter who believes that we should allow Part D [[Page 20489]] plan contracted providers, provider groups, and pharmacies to accept and display materials from only a subset of plans with which they contract--even if they direct beneficiaries to resources for obtaining information on all plans. We believe the proposed requirement strikes a balance between allowing providers and pharmacies contracted with Part D plans to provide enrollment assistance and education, while ensuring that beneficiaries are provided with information about the full array of plans with which that provider or pharmacy contracts--not on a limited subset that may reflect the provider's financial interest--and can make a plan selection that best meets their needs. Accordingly, we have adopted the revision to Sec. 423.50(f)(1) as set forth in the proposed rule. However, we note that plans must provide contracted pharmacies with materials in order for pharmacies to display their plan information along with any other materials received from other contracted plans. 2. Procedures To Determine and Document Creditable Status of Prescription Drug Coverage (Sec. 423.56) The regulation text of the January 2005 final rule (70 FR 4532) contained a typographical error in Sec. 423.56(b)(6) that referenced Sec. 423.205 for a definition of the term ``Medicare supplemental policy.'' However, the proper reference for the definition of the term ``Medicare supplemental policy'' is Sec. 403.205. Therefore, we proposed revising the regulation text accordingly to state the correct reference--that is, Sec. 403.205. We received no comments with regard to our proposed revision. Therefore, this final rule adopts this revision without change. B. Subpart C--Benefits and Beneficiary Protections 1. Definitions (Sec. 423.100) a. Part D Drug (1) Erectile Dysfunction (ED) On October 20, 2005, Congress amended section 1860D-2(e)(2)(A) of the Act to exclude erectile dysfunction (ED) drugs from the statutory definition of a Part D drug. Section 1860D(2)(e)(2)(A) of the Act excludes from the definition of Part D drugs those drugs or classes of drugs, or their medical uses, set forth under section 1927(d)(2) of the Act (other than subparagraph (E)). The ED drug exclusion is cited in section 1927(d)(2)(K) of the Act. In the May 2007 proposed rule, we reiterated that beginning January 1, 2007, ED drugs would not be classified as Part D drugs under Sec. 423.100 when they are used for the treatment of sexual or erectile dysfunction, unless they are used to treat a condition, other than sexual or erectile dysfunction, for which the drug has been approved by the Food and Drug Administration (FDA). We noted that ED drugs would also not meet the definition of a Part D drug for off-label uses that by definition are not approved by the FDA. This includes non-FDA- approved uses--including the treatment of a condition other than sexual or erectile dysfunction contained in one of the compendia listed in section 1927(g)(1)(B)(i) of the Act: American Hospital Formulary Service Drug Information, United States Pharmacopeia-Drug Information (or its successor publications), and the DRUGDEX Information System. Because our definition of a Part D drug in Sec. 423.100(2)(ii) excludes drugs which may be excluded under section 1927(d)(2) of the Act, we also noted that no regulation text change is required to implement this new statutory exclusion. Comment: One commenter asked that we share our interpretation of the statutory ED drug exclusion with our independent review entity (IRE). Response: Since October 20, 2005, we have provided information about the ED drug exclusion in our outreach efforts to beneficiaries, advocates, and our own contractors. Our guidance to Part D sponsors on the ED drug exclusion was included in Chapter 6 (``Part D Drugs and Formulary Requirements'') of our Prescription Drug Benefit Manual, which is posted on the CMS Web site at http://www.cms.hhs.gov/ PrescriptionDrugCovContra/Downloads/PDBMChap6FormularyReqrmts_ 03.09.07.pdf. As a result of our efforts, we believe stakeholders are now well aware of this statutory change. (2) Morbid Obesity Section 423.100 defines the term ``Part D drug'' and excludes from that definition ``[d]rugs or classes of drugs, or their medical uses, which may be excluded from coverage or otherwise restricted under Medicaid under sections 1927(d)(2) or (d)(3) of the Act, except for smoking cessation agents (70 FR 4534).'' In the corresponding preamble of the January 2005 final rule (70 FR 4228), we explained that this list of excluded drugs included agents when used for anorexia, weight loss, or weight gain and agents when used for cosmetic purposes or hair growth. However, in response to comment, we had erroneously asserted that to the extent that a drug was dispensed for a ``medically accepted indication'' as described in section 1860D-2(e)(1) of the Act, the drug could be covered for the treatment of morbid obesity (70 FR 4230). Both in the May 2007 proposed rule and in this final rule, we clarify that agents, when used for anorexia, weight loss, or weight gain, are specifically excluded from the definition of Part D drugs. A weight loss agent, even when not used for cosmetic purposes, is still ``an agent used for anorexia, weight loss, or weight gain'' for purposes of the exclusion from the definition of Part D drug. Comment: We received several comments asserting that the clarification we made in the proposed rule regarding Part D coverage of drugs used to treat a medically accepted indication of obesity was a reversal of current Part D coverage policy. Response: We disagree with these commenters. The clarification in our proposed rule did not expand or change our current policy regarding the exclusion from the definition of Part D drugs or agents used for anorexia, weight loss, or weight gain. Our policy with regard to coverage of these drugs has remained consistent since well before the Part D benefit was implemented on January 1, 2006 and is in accord with the statutory exclusion of such drugs from the definition of Part D drug as provided in section 1860D-2(e)(2) of the Act. In the May 2007 proposed rule, we simply clarified that we had made an error in the preamble of the January 2005 final rule by asserting that weight loss drugs could be potentially covered under the Part D program as part of a Part D basic prescription drug benefit. As discussed in the May 2007 proposed rule, we corrected this error via guidance to Part D sponsors and other stakeholders in July 2005. Comment: A number of commenters asserted that our interpretation of the statutory exclusion of weight loss drugs was too narrow and that CMS was not appropriately distinguishing ``cosmetic'' weight loss from those clinical circumstances in which drugs are being specifically prescribed for an indication of obesity or significant weight management. Other commenters maintained that Congress intended for reimbursement of weight loss drugs when they were used in the treatment of defined disease states; that given the potential impact of obesity on American health care, as well as Medicare Part A coverage of obesity treatments, drugs when used to treat obesity should also be covered under Part D; and that Part D coverage of drugs used to treat obesity would be consistent with guidance and decision-making about these drugs by other DHHS agencies (for example, the [[Page 20490]] National Institute of Health's (NIH) treatment guidelines regarding obesity drugs and the Food and Drug Administration's (FDA) approval of drugs indicated for the treatment of obesity). Response: Section 1860D-2(e)(2) of the Act specifically excludes from the definition of a Part D drug agents when used to treat anorexia, weight loss, or weight gain. Therefore, drugs when used to treat a medical indication of morbid obesity are not considered Part D drugs. While this statutory exclusion may create an inconsistency with regard to treatment approaches for morbid obesity under different parts of the Medicare program, Part D coverage policy is based on completely distinct statutory authority than Parts A and B. We note that similar to other drugs contained in section 1927(d)(2) of the Act that are excluded from the definition of Part D drugs (other than over-the- counter drugs), those Part D plans wishing to provide coverage of weight loss agents may do so as a supplemental benefit under enhanced alternative coverage, consistent with Sec. 423.104(f). Comment: A number of commenters asked that CMS clearly state that the Part D exclusion of weight loss drugs will not affect Part D coverage of drugs that may cause weight loss, but whose primary indication is not for obesity. A few other commenters noted that our exclusion of obesity drugs is inconsistent with CMS policy regarding Part D coverage of weight loss drugs under certain clinical situations (for example, Part D and Medicaid coverage for drugs when used to treat cachexia or AIDS wasting). Response: Drugs that are excluded from coverage under Part D when used as agents for certain conditions may be considered covered when used to treat other conditions not specifically excluded by section 1927(d)(2) of the Act, provided they otherwise meet the requirements of section 1860D-2(e)(1) of the Act and are not otherwise excluded under section 1860D-2(e)(2)(B) of the Act. A Part D drug's clinical side effect of weight loss would not permit its exclusion via section 1927(d)(2) of the Act since the drug's use was not prescribed for that purpose. We have previously stated that we do not consider prescription drug products being used to treat AIDS wasting and cachexia as either agents used for weight gain or agents used for cosmetic purposes. Given the clinical complexities associated with AIDS wasting and cachexia, and the documented therapeutic action of these drugs to work beyond weight gain and prevent associated morbidity and mortality, the use of these products cannot be excluded from Part D by reference to section 1927(d)(2) of the Act. A summary of similar potential exclusions and their associated explanations can be found in Appendix B of Chapter 6 (Part D Drugs and Formulary Requirements of our Prescription Drug Benefit Manual), which is posted on the CMS Web Site at http:// www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/ PDBMChap6FormularyReqrmts_03.09.07.pdf. (3) Insulin Inhalation Drugs and Supplies With the passage of the MMA, Congress included within the definition of ``Part D drug'' found in section 1860D-2(e) of the Act ``medical supplies associated with the injection of insulin (as defined in regulations of the Secretary).'' In the January 2005 final rule, we interpreted the term ``medical supplies associated with the injection of insulin'' as comprising syringes, needles, alcohol swabs, gauze, and insulin delivery devices not otherwise covered by Part B, such as insulin pens, pen supplies, and needle-free syringes. On January 27, 2006, the FDA approved the first-ever inhaled insulin product. This inhaled medication is a dry powder inhaler (``DPI'') that requires a patient to place a small amount of powdered insulin into a hand-held chamber that permits inhalation of the insulin into the lungs. Subsequent to the FDA approval, we reviewed the issues surrounding inhaled insulin and concluded it would be appropriate to revise the definition of Part D drug to include certain supplies associated with the delivery of inhaled insulin. We proposed revising the definition of a Part D drug under Sec. 423.100 to include ``[s]upplies that are directly associated with delivering insulin into the body through inhalation, such as the inhalation chamber used to deliver the insulin.'' We also indicated that our proposed change to the definition of a Part D drug was crafted consistent with our intention to narrowly construe what constitutes medical supplies associated with the delivery of insulin into the body in order to avoid an inappropriate expansion of the Part D benefit. Thus, we stated in the preamble to our proposed rule that we would expect Part D sponsors to apply drug utilization management tools to ensure the appropriate use of these supplies. While we have learned since the publication of our May 2007 proposed rule that marketing of the first inhaled insulin product may be discontinued, the fact remains that this product is still approved for the U.S. market. Additionally, we received comments indicating that there are insulin products administered through routes other than injection in various stages of research and FDA approval. As a result, we believe our policy on inhaled insulin is still necessary and sound. Comment: Most commenters on this issue supported our proposal to expand the definition of a Part D drug to cover those supplies directly associated with inhaled insulin. However, other commenters opined that the proposed definition was too narrow and CMS should broaden the definition of a Part D drug to encompass other potential mechanisms or supplies used for delivery of insulin into the body, such as novel insulin dosage forms and delivery systems that are currently under review by the FDA. Some commenters noted developments in diabetes treatment including new transdermal, intranasal and aerosolized insulin delivery methods. These commenters held that by not broadening the Part D drug definition to include insulin delivery supplies that are currently in the research and development pipeline, but which might someday be FDA-approved, CMS would be burdened with future rulemaking to modify the definition of a Part D drug when new FDA-approved products came to market. As a result, CMS might provide a competitive advantage to manufacturers whose insulin-related supplies are currently encompassed within the definition of a Part D drug over other manufacturers whose insulin supplies are also related to the direct delivery of insulin into the body but would not be covered under Part D in the absence of a further broadening of the definition of a Part D drug under Sec. 423.100. Response: We agree that our proposed rule too narrowly construed what constitutes medical supplies associated with delivery of insulin into the body for purposes of the definition of a Part D drug under Sec. 423.100. Moreover, we believe that Congress intended to ensure diabetics' access to insulin by providing for coverage of the medical supplies directly associated with delivering insulin into the body. In light of continuing medical research and development of alternative mechanisms for insulin delivery, we believe it is consistent with Congressional intent that our definition of these supplies encompass all products that are directly associated with the delivery of insulin into the body, including future potential delivery mechanisms, and not limit coverage to supplies associated with the only two mechanisms of insulin [[Page 20491]] delivery (injection and inhalation) available to diabetics today. Consequently, we have removed our reference to the specific route of administration, ``through inhalation,'' in the definition of a Part D drug at Sec. 423.100(i)(iv). Instead, our definition of a Part D drug will encompass supplies that are directly associated with delivering insulin into the body, such as the inhalation chamber used to deliver the insulin. We believe this modification will obviate the need for continued future rulemaking to ensure coverage of supplies that are directly associated with delivery of insulin into the body. In addition, we believe that our revised definition of the term Part D drug will level the playing field for the manufacturers of novel administration insulin supplies while avoiding an inappropriate expansion of the Part D benefit to insulin-related supplies in which the relationship to delivery into the body is more indirect. We have retained the example of the inhalation chamber in the definition of a Part D drug under Sec. 423.100 only as an example of a product that is directly associated with the delivery of insulin into the body. Comment: A few commenters suggested that we clarify that our proposed modification of the definition of a Part D drug excludes any insulin delivery device covered under the Part B durable medical equipment benefit. Response: Paragraph (2)(i) of our existing definition of a Part D drug already excludes from Part D coverage those drugs for which payment as so prescribed and dispensed or administered to an individual is available for that individual under Part A or Part B. We believe that further clarification of this exclusion is unnecessary. Comment: We received comments asking that CMS issue separate guidance indicating whether any novel insulin-related product will be covered under Part D. Response: We disagree that we should issue product-specific Part D coverage guidance for all new FDA approvals. Part D sponsors and their Pharmacy and Therapeutics (P&T) Committees are required to evaluate new FDA-approved products and make timely coverage determinations that are consistent with the definition of a Part D drug under Sec. 423.100. While we provide Part D sponsors with tools to assist sponsors with their reviews of new products, coverage determinations are ultimately a Part D sponsor's responsibility. Comment: A number of commenters asked that we retract the statement we made in our proposed rule that we would expect Part D sponsors to apply drug utilization management tools to inhaled insulin supplies. These commenters stated that the application of such pharmacy based edits would impede access to these inhaled insulin supplies for beneficiaries who are appropriately qualified for this insulin delivery mechanism. Many of these same commenters stated that inhaled insulin supplies should be provided free of any utilization management tools to maximize use of this new therapy. Response: We remind these commenters that all Part D sponsors, with the exception of Medicare Advantage private fee-for-service (PFFS) plans, are required under Sec. 423.153(b) to establish reasonable and appropriate drug utilization management programs. As we stated in the May 2007 proposed rule, sponsors should ensure the appropriate and prudent use of all Part D drugs, including supplies associated with the direct delivery of insulin into the body and the use of drug utilization management tools, is appropriate to prevent inappropriate coverage and utilization of insulin-related supplies. In general, inhaled insulin supplies have either a specific life span based on the number of doses or actuations they deliver or, for more durable items, a manufacturer's recommended life span ranging from a few months to a year or more with proper cleaning and maintenance. It is therefore appropriate for a sponsor to evaluate claims for inhaled insulin supplies that are submitted for a period less than their recommended life span or period of use. (4) Vaccine Administration Fee On December 20, 2006, the Tax Relief and Health Care Act of 2006 was signed into law. Section 202(b) of that legislation amended the definition of a Part D drug at section 1860D-2(e)(1)(B) of the Act to include a reference to vaccine administration on or after January 1, 2008. In the May 2007 proposed rule (72 FR 29406) we indicated that we would amend the definition of Part D drug to conform to the statutory change. Accordingly, in this final rule, we have amended the definition of a Part D drug to include a reference to vaccine administration on or after January 1, 2008, consistent with the statute. Comment: One commenter suggested we increase our outreach efforts regarding the availability of vaccine administration under Part D. Response: We agree with this comment and have employed a number of methods to ensure that beneficiaries and providers are aware of this statutory change. We have updated our beneficiary outreach materials with specific information on Part D vaccine administration reimbursement, including the addition of a section to the annual evidence of coverage (EOC) notice that was mailed to all currently enrolled beneficiaries in advance of the 2008 Part D contract year. We have also incorporated information regarding Part D vaccine administration into our provider programs and have conducted a number of national level outreach programs addressing the availability of reimbursement under Part D for this new benefit in 2008. We have generated MedLearn Matters Articles on Part D vaccines and vaccine administration for display on the CMS Web site (http://www.cms.hhs.gov/ MLNMattersArticles/downloads/SE0727.pdf). We have also issued guidance to Part D sponsors on vaccine administration so they can prepare for covering these services and address beneficiary questions. We plan on continuing various tiers of communication on Part D vaccine administration into 2008 and subsequent years. Comment: One commenter asked that we monitor billing and payment for Part D vaccine administration over the next several months to identify and resolve issues that may arise with implementation of this new benefit under Part D. Response: We agree with this comment. We intend to work very closely with our Part D sponsors on resolving any issues that arise with covering Part D vaccine administration in 2008 and subsequent years. We have developed a number of communication channels to solicit feedback from various stakeholders regarding the ongoing implementation of this new benefit, and we will take appropriate actions to address any issues with our Part D sponsors as they occur. Comment: One commenter specifically suggested that we amend Sec. 423.100 to add the following language to the definition of a Part D drug under paragraph (1)(v) of that definition: ``and for vaccine administration on or after January 1, 2008, its administration.'' Response: We agree with this comment. We are changing the definition of a Part D drug at Sec. 423.100 to conform to the statutory change made by the Tax Relief and Health Care Act of 2006 to section 1860D-2(e)(1)(b) of the Act. Accordingly, we are modifying Sec. 423.100 to include vaccine administration for Part D-covered vaccines on or after January 1, 2008. b. Long-Term Care Facilities In the January 2005 final rule (70 FR 4534), the term ``long-term care facility'' [[Page 20492]] is defined in Sec. 423.100 as a ``skilled nursing facility as defined in section 1819(a) of the Act, or a medical institution or a nursing facility for which payment is made for an institutionalized individual under section 1902(q)(1)(B) of the Act.'' However, in our corollary discussion of that term in the preamble of the January 2005 final rule (70 FR 4236), we inadvertently omitted institutions for mental disease (IMDs) from the list of facilities that meet the definition of a long term care (LTC) facility. In the May 2007 proposed rule, we clarified that the definition of an LTC facility would include an IMD that is a nursing facility or other medical institution (which is a term defined at 42 CFR 4435.1009) and receives Medicaid payment for its services to an institutionalized individual under section 1902(q)(1)(B) of the Act. In other words, to the extent that a nursing facility or medical institution that is an IMD has as an inpatient any institutionalized individual (which means any full benefit dual-eligible individual for whom payment is made for IMD services under Medicaid throughout a month, as provided in section 1902(q)(1)(B) of the Act), that IMD will fall within the definition of a LTC facility in Sec. 423.100. We also clarified that as medical institutions, hospitals (including long-term care hospitals) that receive payments under section 1902(q)(1)(B) of the Act can meet the definition of an LTC facility. To the extent that inpatients in these hospitals exhaust their Part A inpatient days benefit, and payment is no longer available under Part A or Part B for drugs that would otherwise meet the definition of a Part D drug, such drugs are Part D drugs. Consequently, we indicated that Part D sponsors must ensure that they provide convenient access to network LTC pharmacies (which, in the case of a hospital, is typically the hospital's in-house pharmacy) for all of their enrollees who: (1) Need drugs for which payment is no longer available under Part A or Part B and otherwise meet the definition of a Part D drug; and (2) are inpatients in a hospital where the hospital is a ``medical institution'' under section 1902(q)(1)(B) of the Act and therefore would meet the Part D definition of an LTC facility. Comment: Several commenters supported our clarification that an IMD may meet our definition of a long-term care facility and that, consequently, Part D plans must provide convenient access to a network long-term care pharmacy to the residents of such facilities. One commenter supported our proposed policy clarification but noted that there were significant practical implications. For example, plans might not receive notice that their members are IMD patients until after prescriptions have been filled and claims are submitted. Both this and the fact that most of these facilities use only in-house, State-run pharmacies to fill prescriptions often prevent plans from anticipating the need for contracts with these institutional LTC pharmacies. Another commenter echoed this statement, noting that Part D sponsors have experienced difficulty contracting with certain LTC pharmacies. One commenter asked us to clarify that we would determine a Part D plan to be in compliance with our convenient access requirements if it limited itself to pursuing contracts only with institutional LTC pharmacies that proactively sought inclusion in a plan's pharmacy network, consistent with the ``any willing pharmacy'' requirement. Another commenter asked us to clarify that plans would be considered compliant with the convenient access requirements even if they did not come to terms with an institutional LTC pharmacy, provided they made a good faith effort to contract. Response: The fact that a Part D plan has met our LTC pharmacy network submission requirements as part of the application approval process does not preclude it from continuing its contracting efforts with LTC pharmacies as needed. In fact, continued contracting likely will be necessary in order for plans to meet the convenient access standard articulated at Sec. 423.120(a)(5). This is particularly true as plans continue to identify LTC facilities and LTC pharmacies, and as they examine their auto-enrollment assignments and incoming enrollments. To the extent that a beneficiary is enrolled in a plan that does not have a contract with a LTC pharmacy that can serve the LTC facility in which he or she resides, the appropriate action for a plan to take is to contract with the facility's contracted LTC pharmacy or--if that pharmacy will not sign a contract--with another LTC pharmacy that can serve that facility. In some cases, a retroactive contract may be necessary to ensure coverage for enrollees in a particular facility. For example, if a Part D sponsor becomes aware that one or more of its enrollees resides in a LTC facility that is not serviced by one of its network LTC pharmacies and cannot immediately either identify a network LTC pharmacy that can serve this particular facility or negotiate a contract with the facility's contracted LTC pharmacy, a retroactive contract might be necessary to ensure convenient access for the enrollees in question. This would particularly be the case if the facility's contracted pharmacy makes a good faith effort to negotiate but the sponsor does not quickly finalize a contract. We emphasize that plans will not be compliant with our LTC convenient access standard if they do not provide access to covered Part D drugs via a LTC pharmacy in their network for all of their enrollees who reside in LTC facilities. We understand that there sometimes may be issues associated with contracting with the in-house, and often State-run and operated, pharmacies that many ICFs/MR, IMDs, and LTC hospitals use to provide drugs and pharmacy services to their patients--for example, multiple claim formats, post-consumption billing, and potential delays in billing due to systems and other start-up issues--that could delay or complicate contracting negotiations. In some States, licensing laws preclude facilities from obtaining prescription drugs and LTC services for their residents from anywhere but the facility's in-house pharmacy. Further, States may not be able to agree to certain standard clauses in some LTC standard contracts because of constitutional and legal restraints on States. For example, contractual provisions that require arbitration may be problematic for States that are legally precluded from going to arbitration. In these situations, Part D plans should be prepared to readily negotiate with States to address these issues. To the extent that plan contracting efforts involve communication with State-run and operated pharmacies, we have consistently encouraged sponsors to coordinate their efforts through a single point of contact at the State level. We provide lists of State contacts for IMDs and ICFs/MR on the CMS Web site at http://www.cms.hhs.gov/ PrescriptionDrugCovContra/11_PartDContacts.asp#TopOfPage. Comment: Several commenters supported our clarification that plans must provide convenient access to a LTC pharmacy to inpatients in hospitals who have exhausted their Part A inpatient days benefit and whose drugs qualify as Part D drugs given that coverage is not available under Part A or Part B. One commenter expressed concern that our policy clarification was confusing and could create an unintended expansion of the Part D benefit. This commenter urged CMS to provide more specific guidance, consistent with the Part D statutory and regulatory framework, regarding the [[Page 20493]] circumstances under which Part D coverage would be available to patients who have exhausted their Part A inpatient days and for whom Part B coverage is not available. Response: Section 1860D-2(e)(2)(B) of the Act requires the exclusion of coverage under Part D of any drug for which, as prescribed and dispensed or administered to an individual, payment would be available under Parts A or B of Medicare for that individual. In the preamble to January 2005 final rule, we clarified that this requirement meant that if payment could be available under Part A or Part B to that individual for such drug, then it would not be covered under Part D. This means that if an individual could sign up for Parts A or B, payment could be available under Part A or Part B, regardless of whether they actually enrolled. All individuals who are entitled to premium-free Part A are eligible to enroll in Part B. All individuals who are entitled to Part B only are almost never eligible for premium- free Part A but are eligible to buy into Part A for a premium. Consequently, for all Part D eligible individuals, drugs covered under Parts A and B are available if they choose to pay the appropriate premiums. However, drugs provided in an inpatient setting to an individual who has exhausted his or her lifetime inpatient hospital benefit under Part A are not drugs that could be covered under Part A for that individual. Unlike a beneficiary who, for example, chooses not to buy into Part B, there is no way for an individual who has exhausted his or her Part A inpatient stay benefit to obtain coverage under Part A for his or her drugs. Thus, once a Part D enrollee exhausts his or her Part A inpatient days benefit, any drugs that cannot be covered under Part B are Part D drugs provided they otherwise meet the definition of a Part D drug at Sec. 423.100. The LTC convenient access standard is implicated when these individuals reside in hospitals that meet our definition of a LTC facility. However, because we envision it will be rare (and typically unforeseen) that an individual exhausts his or her inpatient Part A hospital benefit and remains hospitalized--and that the hospital meets the definition of a LTC facility--we expect that the need to contract with hospital pharmacies to provide Part D drugs to these individuals will be quite rare, and that contracting will be undertaken only on an as-needed basis. As discussed elsewhere in this preamble, to the extent that a beneficiary is enrolled in a plan that does not have a contract with a LTC pharmacy that can serve the LTC facility in which he or she resides, the appropriate action for a plan to take is to contract with the facility's contracted pharmacy or--if that pharmacy will not sign a contract--with another network LTC pharmacy that can serve that facility. In some cases, a retroactive contract may be necessary to ensure coverage for enrollees in a particular facility. Part D plans will not be compliant with our LTC convenient access standard if they do not provide access to covered Part D drugs via a LTC pharmacy in their network for all of their enrollees who reside in LTC facilities. We will take appropriate compliance action if LTC enrollees' access to covered Part D drugs is compromised due to the unavailability of a network LTC pharmacy. c. Contracted Pharmacy Network Section 423.100 defines the ``contracted pharmacy network'' as ``pharmacies,'' including retail, mail-order, and institutional pharmacies, under contract with a Part D sponsor to provide covered Part D drugs at negotiated prices to Part D enrollees. In the January 2005 final rule (70 FR 4535), we made a technical error by inadvertently omitting clarifying language indicating that a pharmacy in a contracted pharmacy network must be licensed. We view this change as necessary in order to bring it in line with our term ``retail pharmacy'' which requires that a retail pharmacy be ``licensed.'' We proposed revising the definition of ``contracted pharmacy network'' to state that a pharmacy participating in a contracted pharmacy network must be licensed. We received only one comment on this clarification, which supported our proposed revision. Accordingly, we are adopting the revised definition of ``contracted pharmacy network'' as set forth in the proposed rule without change. 2. Requirements Related to Qualified Prescription Drug Coverage (Sec. 423.104)--Waiver or Reduction of Part D Cost-Sharing by Pharmacies In the January 2005 final rule (70 FR 4240), we stated that we would allow waivers or reductions of cost-sharing by pharmacies to count as incurred costs. However, our statement was limited to pharmacies that are not also acting as other wrap-around coverage that generally would not count toward incurred costs (or true-out-of-pocket, (TrOOP) costs). We did not intend to allow pharmacy waivers to count as incurred costs in cases where a pharmacy also meets the definition of a group health plan, insurance or otherwise, or a third party payment arrangement, as those terms are defined in Sec. 423.100. In response to numerous requests for clarification of our policy with regard to waiver or reduction of Part D cost-sharing by network pharmacies, particularly by safety-net pharmacies, we clarified in the proposed rule that although we will generally allow waivers or reductions of Part D cost-sharing by pharmacies to count as incurred costs, this will not be the case for pharmacies affiliated with entities whose wrap-around coverage does not count as an incurred cost. This includes pharmacies operated by entities that are group health plans, insurance, government-funded health programs, or third party payment arrangements with an obligation to pay for covered Part D drugs. As noted in our response to comments below, we maintain our position in this final rule. Comment: One commenter disagreed with our proposed clarification regarding the applicability to TrOOP of pharmacy waivers or reductions of Part D cost-sharing made by certain entities. This commenter believes that our clarification penalizes Part D sponsors that, as non- profit organizations, have historically and responsibly provided financial assistance (and now pharmacy waivers) to financially needy members as part of their mission. The commenter recommended that CMS either allow all or no pharmacy waived cost-sharing to count toward TrOOP, since every pharmacy is affiliated with one or more Part D sponsors and any pharmacy waiver can serve the economic interests of both the pharmacy and the sponsor. The commenter believes it is preferable for CMS to develop standards under which Part D sponsors could--through cost-sharing waivers granted by affiliated network pharmacies--assist non-LIS eligible enrollees with a demonstrated financial need and have that waived cost-sharing count toward TrOOP. Response: We disagree with this commenter's recommendation. While we appreciate the fact that some Part D sponsors are non-profit entities with charitable missions, we note that a pharmacy owned and operated by an insurer is acting on behalf of an insurer. Because a Part D drug costs paid or reimbursed by an insurer, as that term is defined in Sec. 423.100, cannot count as an incurred cost, per the definition of the term ``incurred cost'' in Sec. 423.100, allowing pharmacy waivers funded by an insurer to count toward an enrollee's TrOOP balance would essentially be an [[Page 20494]] end run around our rules regarding incurred costs. Comment: Two commenters did not support our policy clarification regarding the applicability to TrOOP of pharmacy waivers or reductions of Part D cost-sharing made by safety-net pharmacies, including Federally-qualified health centers (FQHCs). Given that many safety-net providers are fully or partially funded through government grants, their waivers or reductions of cost-sharing may leave many low-income individuals unable to reach the catastrophic coverage portion of their Part D benefits. These commenters assert that although safety-net providers rely on a variety of revenue sources--both public and private--to provide health care services, unlike other programs identified as ``government-funded health programs'' in the preamble to the January 2005 final rule, FQHCs do not necessarily use government funds to pay the cost of Part D drugs and should not necessarily be categorized as government-funded health programs. One of these commenters believes that recent operational guidance released by CMS indicating that DSH funds could count toward TrOOP further supports its position that health center-subsidized cost-sharing should count toward TrOOP. The commenter asserts that the receipt of any source of Federal funding should not automatically result in excluding health center cost-sharing from TrOOP expenditures. Response: Payments made for Part D enrollees' Part D cost-sharing by any entity--including an FQHC or other safety-net pharmacy--that has an obligation to pay for covered Part D drugs on behalf of Part D enrollees, or which voluntarily elects to use public funds, in whole or in part, for that purpose, will not count toward that beneficiary's TrOOP expenditures. We understand that safety-net providers use a mix of private and public revenue sources to provide health care services and prescription drugs. As we stated in the January 2005 final rule, to the extent that an entity pays for the cost of drugs using a mix of private and public funds, the entity is considered a government-funded health program, and all of its Part D drug spending is excluded from TrOOP. However, if an entity can demonstrate to a Part D sponsor that it uses only non-public funds to pay for the cost of Part D drugs, that sponsor may allow for cost-sharing waivers or reductions in cost- sharing paid for by that entity's pharmacies to count toward TrOOP. Part D sponsors remain ultimately accountable for correctly tracking their enrollees' TrOOP expenditures. We view Medicare and Medicaid DSH funds essentially as adjustments to the Medicare and Medicaid reimbursements these facilities already receive for covered services. In other words, receipt of Medicaid or Medicare DSH payments by a hospital does not, in and of itself, render a DSH facility (and any Part D network pharmacy it owns or operates) a ``government-funded health program.'' Even though DSH funds are not considered government funding streams that would render an entity a government-funded health program, DSH hospitals may be government- funded health programs given other government funding streams they receive. An entity that receives DSH funds but uses non-DSH government funding streams to provide to or pay on behalf of an individual the costs of Part D drugs will still meet our definition of a government- funded health program, and any reduction or waiver of Part D cost- sharing that it offers will not count toward a Part D enrollee's TrOOP balance. The same logic applies to FQHC pharmacies, meaning that cost- sharing waivers or reductions applied by an FQHC or other safety-net provider pharmacy that uses government funding streams to provide or pay on behalf of an individual the costs of Part D drugs, the costs of these drugs will not count toward a beneficiary's TrOOP balance. Comment: One commenter asked us to clarify that only cost-sharing reductions that are in fact paid for by group health plans, government- funded health programs, or other third party payment arrangements will not count toward ``incurred costs'' and that cost-sharing waivers by a pharmacy, even if the pharmacy is affiliated with a payer, will count toward incurred costs. This commenter is particularly concerned that this language could be misconstrued to disallow waivers by pharmacies that are affiliated with Part D sponsors providing supplemental benefits under enhanced alternative coverage. The commenter also stated that this prohibition should apply only if the reduction or waiver is part of the coverage provided by a health plan or other third party payment arrangement, and not a waiver funded by the affiliated pharmacy itself. Response: As we have previously stated, pharmacy waivers or reductions of Part D cost-sharing will count toward TrOOP when the pharmacy waiving or reducing the Part D cost-sharing does not meet the definition of a group health plan, insurance, government-funded health program, or party to a third party payment. A pharmacy is not subject to this prohibition simply because it is contracted with a Part D sponsor as a network pharmacy. We note that any cost-sharing associated with non-Part D drugs covered under a supplemental benefit does not meet the definition of an incurred cost per the definition of that term in Sec. 423.100 and, therefore, any pharmacy waiver or reduction of such cost-sharing would have no impact on a beneficiary's TrOOP balance in any case. 3. Access to Covered Part D Drugs (Sec. 423.120) a. Applicability of Some Non-Retail Pharmacies to Standards for Convenient Access (Sec. 423.120(a)(2)) In the January 2005 final rule (70 FR 4537), we made a technical error in Sec. 423.120(a)(2) by inadvertently referring to ``rural health clinics'' as ``rural health centers.'' The correct terminology for those facilities is ``rural health clinics.'' Accordingly, we proposed to revise the regulatory text to correctly reference these entities in Sec. 423.120(a)(2) by removing the phrase ``rural health centers'' and adding in its place ``rural health clinics.'' We received no comments with regard to this proposed revision. Therefore, this final rule adopts the proposed revision to Sec. 423.120(a)(2) without change. b. Adequate Access to Home Infusion Pharmacies (Sec. 423.120(a)(4)) We proposed to codify in regulation, at Sec. 423.120(a)(4) (70 FR 4537), guidance that we issued with regard to access to home infusion pharmacies by Part D sponsors subsequent to our publication of the January 2005 final rule. This codification would ensure that our regulations provide s