Medicare Program; E-Prescribing and the Prescription Drug Program, 6256-6274 [05-1773]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 70, Number 23 (Friday, February 4, 2005)]
[Proposed Rules]
[Pages 6256-6274]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-1773]



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Part V





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Part 423



Medicare Program; E-Prescribing and the Prescription Drug Program; 
Proposed Rule

Federal Register / Vol. 70, No. 23 / Friday, February 4, 2005 / 
Proposed Rules

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 423

[CMS-0011-P]
RIN 0938-AN49


Medicare Program; E-Prescribing and the Prescription Drug Program

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

ACTION: Proposed rule.

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SUMMARY: This rule proposes to adopt standards for an electronic 
prescription drug program under Title I of the Medicare Prescription 
Drug, Improvement and Modernization Act of 2003 (MMA). These proposed 
standards would be the foundation standards or the first set of final 
uniform standards for an electronic prescription drug program under the 
MMA, and represent the first step in our incremental approach to 
adopting final uniform standards that are consistent with the MMA 
objectives of patient safety, quality of care, and efficiencies and 
cost savings in the delivery of care.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on April 5, 2005.

ADDRESSES: In commenting, please refer to file code CMS-0011-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of three ways (no duplicates, 
please):
    1. Electronically. You may submit electronic comments to https://
www.cms.hhs.gov/regulations/ecomments (attachments should be in 
Microsoft Word, WordPerfect, or Excel; however, we prefer Microsoft 
Word).
    2. By mail. You may mail written comments (one original and two 
copies) to the following address only: Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Attention: CMS-0011-
P, PO Box 8014, Baltimore, MD 21244-8014.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to one of the following addresses. If you 
intend to deliver your comments to the Baltimore address, please call 
telephone number (800) 743-3951 in advance to schedule your arrival 
with one of our staff members. Room 445-G, Hubert H. Humphrey Building, 
200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security 
Boulevard, Baltimore, MD 21244-1850.

(Because access to the interior of the HHH Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available for persons wishing to retain a proof of filing by stamping 
in and retaining an extra copy of the comments being filed.)
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the close of the 
comment period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by mailing your 
comments to the addresses provided at the end of the ``Collection of 
Information Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Gladys Wheeler, (410) 786-0273.

SUPPLEMENTARY INFORMATION:
    Submitting Comments: We welcome comments from the public on all 
issues set forth in this rule to assist us in fully considering issues 
and developing policies. Comments will be most useful if they are 
organized by the section of the proposed rule to which they apply. You 
can assist us by referencing the file code [CMS-0011-P] and the 
specific ``issue identifier'' that precedes the section on which you 
choose to comment.
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. After the close of the 
comment period, CMS posts all electronic comments received before the 
close of the comment period on its public website. Comments received 
timely will be available for public inspection as they are received, 
generally beginning approximately 3 weeks after publication of a 
document, at the headquarters of the Centers for Medicare & Medicaid 
Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday 
through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an 
appointment to view public comments, please call (800) 743-3951.
    Copies: To order copies of the Federal Register containing this 
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view and photocopy the Federal Register document at most libraries 
designated as Federal Depository Libraries and at many other public and 
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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: https://
www.access.gpo.gov/fr/.

I. Background

[If you choose to comment on issues in this section, please include the 
caption ``BACKGROUND'' at the beginning of your comments.]

A. Statutory Basis

    Section 101 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) (Pub. L. 108-173) amended Title XVIII 
of the Social Security Act (the Act) to establish the Voluntary 
Prescription Drug Benefit Program. Included in the provisions at 
section 1860D-4(e) of the Act is the requirement that prescriptions and 
certain other information for covered Part D drugs prescribed for Part 
D eligible individuals that are transmitted electronically comply with 
final uniform standards adopted by the Secretary under an electronic 
prescription drug program.
    On January 28, 2005, we published the Medicare Prescription Drug 
Benefit final rule that establishes the Prescription Drug Benefit 
Program and cost control and quality improvement requirements for 
prescription drug benefit plans. One of the provisions in that final 
rule requires Prescription Drug Plan (PDP) sponsors, Medicare Advantage 
(MA) Organizations offering Medicare Advantage-Prescription Drug (MA-
PD) plans, and other Part D sponsors to support and comply with 
electronic prescribing standards once

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final standards are in effect, including any standards that are in 
effect before the drug benefit begins in 2006.
    Although there is no requirement that providers write prescriptions 
electronically, in the Medicare Prescription Drug Benefit final rule, 
we stated that Part D sponsors that participate in the Part D program 
are required to support and comply with electronic prescribing. 
Providers that prescribe or dispense Part D drugs would be required to 
comply with the final standards only when prescription information or 
certain other related information is electronically transmitted once 
the final standards for those transactions are effective, which we 
anticipate will be in 2006, for this first set of final standards.
    Section 1860D-4(e) of the Act specifies that initial standards, 
which are to be used in a pilot project that is to be conducted in 
calendar year 2006, must be adopted not later than September 1, 2005. 
This section of the Act also provides, however, that pilot testing is 
not required for those standards for which the Secretary, after 
consultation with affected standard setting organizations and industry 
users, determines there is ``adequate industry experience.'' Subsequent 
to the pilot project, the Secretary must promulgate final uniform 
standards not later than April 1, 2008. Those final uniform standards 
must become effective not later than 1 year after the date of 
promulgation of those final uniform standards. In addition, the 
Secretary is required to provide a report to the Congress by April 1, 
2007 on his evaluation of the pilot project.
    In the context of the Health Insurance Portability and 
Accountability Act of 1996 (HIPAA) transactions and code sets (TCS) 
requirements, a covered entity that conducts a covered transaction 
using electronic media must comply with the applicable transaction 
standard. Electronic media is defined under HIPAA to include both 
electronic storage media and transmission media, including the 
``internet (wide-open), extranet (using internet technology to link a 
business with information accessible only to collaborating parties), 
leased lines, dial-up lines, private networks, and the physical 
movement of removable/transportable electronic storage media.'' (45 CFR 
160.103). However, given the development of new technologies, we invite 
public comment on applying this definition to determine when 
prescribers and dispensers are electronically transmitting prescription 
and certain other information, and therefore, should be required to 
comply with the e-prescribing standards.
    Section 1860D-4(e)(1) of the Act states that the final e-
prescribing standards will govern ``prescriptions and other information 
described in paragraph (2)(A) for covered part D drugs prescribed for 
part D eligible individuals that are transmitted electronically. * * 
*'' We believe the best reading of this language, as well of the intent 
of the Congress, is that the e-prescribing standards apply only to 
information regarding Part D eligible individuals enrolled in Part D 
plans--that is, enrollees of prescription drug plans (PDPs) (including 
employer-sponsored PDPs); fallback PDPs; Medicare Advantage 
Prescription Drug plans (MA-PD plans); and private fee for service 
plans, Medicare cost reimbursement plans, or PACE programs receiving 
Part D reimbursement. We believe this interpretation realizes the 
intent of the Congress, which in the Conference Report for the MMA, 
stated that e-prescribing standards are standards that apply to 
information, transmitted ``under an electronic prescription drug 
program conducted by a PDP or MA plan.'' (H.R. Conf. Rep. 108-391, 
108th Cong., 1st Sess. at 455 (2003)) This statement contemplates that 
the e-prescribing standards would apply solely to information regarding 
Part D enrolled individuals, not simply to information regarding Part D 
eligible individuals who are not enrolled in a Part D plan. We have 
attempted to clarify the scope of these standards in the proposed 
definition of ``electronic prescription drug program'' in proposed 
Sec.  423.159, and the ``General Rules'' in proposed Sec.  423.160.
    The requirements of the statute are as follows:

    ``(2) Program Requirements.--Consistent with uniform standards 
established under paragraph (3)--
    ``(A) Provision of Information to Prescribing Health Care 
Professional and Dispensing Pharmacies and Pharmacists.--An 
electronic prescription drug program shall provide for the 
electronic transmittal to the prescribing health care professional 
and to the dispensing pharmacy and pharmacist of the prescription 
and information on eligibility and benefits (including the drugs 
included in the applicable formulary, any tiered formulary 
structure, and any requirements for prior authorization) and of the 
following information with respect to the prescribing and dispensing 
of a covered Part D drug:
    ``(i) Information on the drug being prescribed or dispensed and 
other drugs listed on the medication history, including information 
on drug-drug interactions, warnings or cautions, and, when 
indicated, dosage adjustments.
    ``(ii) Information on the availability of lower cost, 
therapeutically appropriate alternatives (if any) for the drug 
prescribed.
    ``(B) Application to Medical History Information.--Effective on 
and after such date as the Secretary specifies and after the 
establishment of appropriate standards to carry out this 
subparagraph, the program shall provide for the electronic 
transmittal in a manner similar to the manner under subparagraph (A) 
of information that relates to the medical history concerning the 
individual and related to a covered Part D drug being prescribed or 
dispensed, upon request of the professional or pharmacist involved.
    ``(C) Limitations.--Information shall only be disclosed under 
subparagraph (A) or (B) if the disclosure of such information is 
permitted under the Federal regulations (concerning the privacy of 
individually identifiable health information) promulgated under 
section 264(c) of the Health Insurance Portability and 
Accountability Act of 1996.
    ``(D) Timing.--To the extent feasible, the information exchanged 
under this paragraph shall be on an interactive, real-time basis.

    Section 1860D-4(e)(4)(B) of the Act also requires the National 
Committee on Vital and Health Statistics (NCVHS) to develop 
recommendations for standards, in consultation with specific groups of 
organizations and entities. Section 1860D-4(e)(4)(A) of the Act 
requires the Secretary to take these recommendations into consideration 
when developing, adopting, recognizing, or modifying initial uniform 
standards according to the schedule set forth above. The NCVHS process 
for developing and providing recommendations to the Secretary is 
detailed below at section B of this proposed rule.
    In order to provide for efficient implementation of the 
requirements, section 1860D-4(e)(4)(C) of the Act requires the 
Secretary to conduct a pilot project to test initial standards 
developed under section 1860D-4(e)(4)(A) of the Act, prior to issuing 
the final standards that are promulgated in accordance with section 
1860D-4(e)(4)(D) of the Act. Section 1860D-4(e)(4)(C)(ii) of the Act 
also permits an exception to the pilot testing requirement for 
standards for which there already is adequate industry experience, as 
determined by the Secretary after consultation with affected standard 
setting organizations and industry users. Under this exception, 
standards can be proposed and adopted through rulemaking as final 
standards without pilot testing, and would then become final standards 
under MMA.
    In the preamble of the Medicare Prescription Drug Benefit proposed 
rule, published in the Federal Register August 3, 2004 (69 FR 46632-
46863),

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we solicited comments to help us identify consensus on e-prescribing 
standards ahead of the statutory timeframe and to help us identify and 
evaluate whether there is adequate industry experience with those 
standards. Concurrently, the NCVHS held hearings with various groups of 
constituencies on e-prescribing standards while identifying and 
examining standards for possible adoption by the Secretary. We attended 
each of these hearings as an active participant.
    Under the MMA, proposed standards can be adopted as final standards 
prior to the dates specified in the statute because section 1860D-
4(e)(1) of the Act provides for adoption ``as of such date as the 
Secretary may specify.'' The statute, moreover, only requires pilot 
testing for initial standards for which adequate industry experience is 
lacking and calls for final standards ``no later than April 1, 2008.'' 
Some comments submitted in response to the Medicare Prescription Drug 
Benefit proposed rule supported an accelerated timetable based on 
adequate industry experience with certain standards, while others 
advocated pilot testing of all standards because they felt adequate 
industry experience did not exist with any standard. We considered all 
public comments on this issue submitted in response to the Medicare 
Prescription Drug Benefit proposed rule, along with the NCVHS 
observations and associated recommended actions. Despite comments to 
the contrary, we believe that there is adequate industry experience for 
certain standards and have proposed those standards in this rule. The 
rationale for our preliminary conclusion that adequate industry 
experience exists is discussed later in this preamble. Finally, we 
believe that we have met the statutory requirement for industry 
consultation because we actively participated in the NCVHS process, and 
we requested and received industry comments on adequate industry 
experience with existing standards through the Medicare Prescription 
Drug Benefit proposed rule. We are also requesting comments in this 
proposed rule. The need for pilot testing of future standards will be 
determined when additional standards are recommended.
1. Initial Standards Versus Final Standards
    It is important to emphasize that in section 1860D-4(e) of the Act 
there are distinct provisions for initial standards and final 
standards. Initial standards are standards for an electronic 
prescription drug program that the Secretary would adopt, develop, 
recognize, or modify before September 1, 2005, taking into 
consideration recommendations from the NCVHS. These standards will be 
subject to pilot testing that would occur during the 2006 calendar 
year. The results of the pilot project will be evaluated and, based 
upon those results, final standards would be published not later than 
April 1, 2008. In order to conduct the pilot project, the Secretary 
will enter into agreements with physicians, physician groups, 
pharmacies, hospitals, PDP sponsors, MA organizations, and other 
appropriate entities under which health care professionals will 
electronically transmit prescriptions to dispensing pharmacies and 
pharmacists in accordance with these standards. The Secretary will 
conduct an evaluation of the pilot project, and will submit a report to 
the Congress on the evaluation, not later than April 1, 2007.
    Final standards are standards that would be adopted in regulations 
through the rulemaking process. Compliance with those final standards 
will be required when prescription information or certain other related 
information is electronically transmitted among Part D sponsors (as 
this term is defined in the Medicare Prescription Drug Benefit final 
rule) and prescribing health care professionals and dispensing 
pharmacies and pharmacists as specified at section 1860 D-4(e)(1) of 
the Act for covered Part D drugs prescribed for Part D enrolled 
individuals.
    Final standards may be adopted by the Secretary as a result of the 
pilot project. However, if the Secretary, after consultation with 
affected standard setting organizations and industry users, determines 
that pilot testing is not required because there is adequate industry 
experience with the standards, those standards may be adopted as final 
without pilot testing.
    We refer to the final standards proposed in this rule as foundation 
standards because they would be the first set of final standards 
adopted for an electronic prescription drug program. As mentioned above 
and discussed further below, we believe that adequate industry 
experience exists with respect to the standards proposed in this rule 
which allows us to propose and adopt these foundation standards as 
final standards without pilot testing.
2. State Preemption
    Nearly every State allows for the electronic transmission of 
prescriptions. In recent years, many States have more actively 
legislated in this area. The scope and substance of this State 
activity, however, varies widely among the States.\1\ The MMA addresses 
preemption of State laws at section 1860D-4(e)(5) of the Act as 
follows:
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    \1\ Catizone, Carmen A. National Association of Boards of 
Pharmacy. Testimony before the NCVHS, July 29, 2004.

    (5) Relation to State Laws. The standards promulgated under this 
subsection shall supercede any State law or regulation that--
    (A) Is contrary to the standards or restricts the ability to 
carry out this part; and
    (B) Pertains to the electronic transmission of medication 
history and of information on eligibility, benefits, and 
prescriptions with respect to covered part D drugs under this part.

    We propose to interpret this section of the Act as preempting State 
law provisions that conflict with Federal electronic prescription 
program drug requirements that are adopted under Part D. We view it as 
mandating Federal preemption of State laws and regulations that are 
either contrary to the Federal standards, or that restrict the ability 
to carry out (that is, stand as an obstacle to) the electronic 
prescription drug program requirements, and that also pertain to the 
electronic transmission of prescriptions or certain information 
regarding covered Part D drugs for Part D enrolled individuals. 
Consequently, for a State law or regulation to be preempted under this 
express preemption provision, the State law or regulation would have to 
meet the requirements of both paragraphs (A) and (B). Furthermore, 
there would have to be a Federal standard adopted through rulemaking 
that creates a conflict for a State law to be preempted. This 
interpretation closely reflects the language of the statute, and it is 
consistent with the presumption against Federal preemption of State law 
\2\ and with the fundamental Federalism principles set forth in section 
2 of Executive Order 13132. It is also consistent with the Department 
of Health and Human Service's (HHS) general position of deferring to 
State laws regulating the practice of pharmacy and the practice of 
medicine.
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    \2\ See Davies Warehouse Co. v. Bowles, 321 U.S. 144, 153, 64 
S.Ct. 474, 88 L.Ed. 635 (1944), Pharmaceutical Research and 
Manufacturers of America v. Walsh, 538 U.S. 644, 661, 123 S.Ct. 
1855, 1867, 155 L.Ed.2d 889 (2003).
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    We understand that some industry representatives believe that the 
Congress intended this preemption provision to be much broader. For 
instance, some expressed the position that this statutory provision 
preempts all State laws that would in any way restrict the development 
of e-prescribing for all providers and payors. This position is based 
on the belief that the Congress

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intended to preempt the field of e-prescribing through this provision 
in the MMA. It would require an interpretation that the word ``and'' 
between paragraphs (A) and (B) is disjunctive, that is, that ``and'' 
means ``or'' in this context. Under this interpretation, the operative 
language would be ``restricts the ability to carry out this part'' in 
paragraph (A), which arguably would enable the standards and 
requirements adopted for the Federal electronic prescription drug 
program to preempt all State laws and regulations that restrict the 
Secretary's ability to carry out the goals of an electronic 
prescription drug program, even if they are not related to covered Part 
D drugs, or Part D covered individuals. They contend that some States 
have existing statutory or regulatory barriers that could impede the 
success of e-prescribing; for example, laws and regulations that were 
drafted with only paper prescriptions in mind, which may not be well-
suited to e-prescribing applications.
    This interpretation, however, does not appear to comport with the 
use of the word ``contrary'' in the statutory language which generally 
establishes ``conflict preemption.'' This interpretation would seem to 
render paragraph (B) virtually meaningless and serve to establish 
``field preemption.''
    We invite public comment on our proposed interpretation of the 
scope of preemption, particularly with respect to relevant State 
statutes and regulations which commenters believe should be preempted, 
but would not under our proposed interpretation. We specifically ask 
for comment on whether this preemption provision applies only to 
transactions and entities that are part of an electronic prescription 
drug program under Part D or to a broader set of transactions and 
entities. We also ask for comment on whether this preemption provision 
applies to only electronic prescription transactions or to paper 
transactions as well.
3. Anti-kickback Statute Safe Harbor and Stark Exception
    Section 1860D-4(e)(6) of the Act requires the Secretary to 
promulgate regulations that provide for a ``safe harbor'' under the 
anti-kickback statute (section 1128B(b) of the Act) and an 
``exception'' under the physician self-referral statute (section 1877 
of the Act) for certain nonmonetary remuneration related to e-
prescribing information technology items and services. The statute 
states that--

    The Secretary, in consultation with the Attorney General, shall 
promulgate regulations that provide for a safe harbor from sanctions 
under paragraphs (1) and (2) of section 1128(b) [of the Social 
Security Act] and an exception to the prohibition under sub-section 
(a)(1) of section 1877 [of the Social Security Act] with respect to 
the provision of nonmonetary remuneration (in the form of hardware, 
software, or information technology and training services) necessary 
and used solely to receive and transmit electronic prescription 
information in accordance with the standards promulgated under this 
subsection--
    (A) In the case of a hospital, by the hospital to members of its 
medical staff;
    (B) In the case of a group practice (as defined in section 
1877(h)(4), by the practice to prescribing health care professionals 
who are members of such practice; and
    (C) In the case of a PDP sponsor or MA organization, by the 
sponsor or organization to pharmacists and pharmacies participating 
in the network of such sponsor or organization and to prescribing 
health care professionals.

    We will propose the new Stark exception for electronic prescribing 
in a separate rulemaking to be published in the near future. The new 
safe harbor under the anti-kickback statute will be proposed by the 
Office of the Inspector General. In the meantime, where relevant, 
arrangements involving nonmonetary remuneration related to electronic 
prescription hardware, software, information technology and training 
must comply with an existing Stark exception (such as the exception for 
non-monetary compensation, 42 CFR 411.357(k), or the new community-wide 
health information technology exception, 42 CFR 411.357(u)) and must 
not violate the anti-kickback statute. They must also comply with 
similar state laws.

B. The NCVHS Process

    Section 1860D-4(e)(4)(A) of the Act requires the Secretary to 
develop, adopt, recognize or modify initial uniform standards relating 
to the requirements for an electronic prescription drug program, not 
later than September 1, 2005, taking into consideration the 
recommendations from the NCVHS (as established under section 306(k) of 
the Public Health Service Act (43 U.S.C. 242k (k)) under subparagraph 
(B)). In particular, the role of the NCVHS in recommending uniform 
standards relating to the requirements for an electronic prescription 
drug program is outlined in section 1860D-4(e)(4)(B)(i) through (x) of 
the Act. It requires that in developing the recommendations, the NCVHS 
consult with the following:
     Standard setting organizations (as defined in section 
1171(8) of the Act).
     Practicing physicians.
     Hospitals.
     Pharmacies.
     Practicing Pharmacists.
     Pharmacy Benefit Managers.
     State Boards of Pharmacy.
     State Boards of Medicine.
     Experts on e-prescribing.
     Other appropriate Federal agencies.
    In response to the requirements of the Act for electronic 
prescription drug program standards, the NCVHS increased its number of 
meetings and held public hearings at which representatives of 
physicians, pharmacists, and experts on e-prescribing, among others, 
testified. The NCVHS also consulted with standard-setting organizations 
and accelerated the process for developing recommendations for the 
Secretary well in advance of the statutory requirement. At the July 21, 
2004 Health Information Technology Summit, we announced our intent to 
accelerate the implementation of e-prescribing by proposing a first set 
of well-established standards for implementation by January 2006, when 
the Medicare Part D benefit begins.
    To fulfill its responsibilities under the MMA's amendments to the 
Act, the NCVHS' Subcommittee on Standards and Security held public 
hearings on issues related to e-prescribing on March 30 and 31, 2004; 
May 25, 26, and 27, 2004; July 28-30, 2004; and August 17-19, 2004. 
These hearings included testimony from e-prescribing networks, 
providers, software vendors, and industry experts on patient safety, 
drug knowledge databases, and standards currently in use by the 
industry. Industry experts involved in e-prescribing studies and 
initiatives also presented information on the progress and findings of 
these studies. Following the hearings by the NCVHS Subcommittee on 
Standards and Security, the Subcommittee developed observations and 
associated recommended actions and presented them to the full NCVHS 
Committee for consideration. On September 2, 2004, the NCVHS sent a 
letter to the Secretary containing the observations and associated 
recommended actions for an electronic prescription drug program. The 
document included recommendations for the foundation standards that we 
are proposing and other long-term recommendations regarding pilot 
testing of other standards. For specific details, refer to the letter, 
available at https://www.ncvhs.hhs.gov/040902lt2.htm.
    In order to develop and provide future recommendations to the 
Secretary, the NCVHS Subcommittee on Standards and Security plans to 
hold additional hearings on the state-of-the-art in e-prescribing, 
including testimony from a broad range of stakeholders. The NCVHS will 
be developing

[[Page 6260]]

recommendations for additional standards for consideration by the 
Secretary for testing and ultimate adoption through the rulemaking 
process. Readers interested in the NCVHS' hearing schedule, testimony 
presented at the hearings, and standards recommendations should consult 
the NCVHS Web site at https://www.ncvhs.hhs.gov.

C. Standards Design Criteria

    Section 1860D-4(e)(3)(C) of the Act, specifies that the design 
criteria for electronic prescription drug program standards require 
that--
     The standards be designed so that, to the extent 
practicable, they do not impose an undue administrative burden on 
prescribing healthcare professionals and dispensing pharmacies and 
pharmacists;
     The standards be compatible with standards established 
under Part C of Title XI, standards established under section 1860D-
4(b)(2)(B)(i) of the Act, and with general health information 
technology standards; and
     The standards be designed so that they permit the 
electronic exchange of drug labeling and drug listing information 
maintained by the Food and Drug Administration (FDA) and the National 
Library of Medicine (NLM).

D. Current Prescribing Environment

    According to 2002 data from the National Center for Health 
Statistics, Americans made more than 823 million visits to physicians' 
offices in 2000 and, according to the National Association of Chain 
Drug Stores (NACDS), four out of five patients leave a doctor visit 
with at least one prescription. More than 3 billion prescriptions are 
written in the United States (U.S.), and prescription medications are 
used by 65 per cent of the U.S. public in a given year, according to an 
Agency for Healthcare Research and Quality (AHRQ) 1999 report. Given 
this volume, even small improvements in quality that are attributable 
to e-prescribing may translate into significant cost benefits.
    Today, physicians and other health care providers make their drug-
prescribing decisions using whatever medical, medication, and 
eligibility information that is known or available to them. Then they 
give a handwritten prescription to the patient or fax it to the 
patient's pharmacy of choice. At the pharmacy, tasks are somewhat more 
automated. Through electronic claims, eligibility, and benefits 
submission, the dispensing pharmacist may learn about drug 
interactions, disease management concerns, the need for prior 
authorization, or lower cost alternatives. The pharmacist may then 
contact the prescriber by phone for approval of changes, refills, or 
renewals. This process can be very repetitive and time consuming for 
both the pharmacist's and the prescriber's office staff. According to 
some estimates, almost 30 percent of prescriptions require pharmacy 
call backs, resulting in 900 million prescription-related telephone 
calls that are placed annually.\3\
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    \3\ Hutchison, Kevin, SureScripts. Testimony before the NCVHS 
Subcommittee on Standards and Security, May 25, 2004.
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    Many witnesses before the NCVHS have stated that the current 
prescribing process is prone to errors. Prescribers may not have access 
to the latest drug knowledge. They often do not have a completely 
accurate medication list or even medical history for their patient, 
and, as a result, may be unaware of potential drug-drug or drug-disease 
interactions or duplicate therapies. Pharmacists often have difficulty 
reading handwritten prescriptions and frequently have little or no 
information about the patient's condition for which the prescription is 
written. Contacting the prescriber by phone to clarify what is ordered 
and to make changes often results in delays for the patient and is time 
consuming for the prescriber and the pharmacist. There are disconnects 
between the prescriber and patient in the medication process, and 
little or no feedback is given to the prescriber on whether a 
prescription was filled or refilled. These disconnects can lead to 
preventable adverse drug events (ADEs) that are common and can be 
serious. According to the Center for Information Technology Leadership, 
more than 8.8 million ADEs occur each year in ambulatory care, of which 
over three million are preventable.\4\ Medication errors account for 
one out of 131 ambulatory deaths.\5\ In addition, the current system 
results in numerous and pervasive administrative and workflow 
inefficiencies, which affect costs and quality of care.
---------------------------------------------------------------------------

    \4\ Center for Information Technology (CITL, a research 
organization chartered in 2002) https://www.citl.org, Wellesley, MA 
(781-416-9200) 2003 report: ``The Value of Computerized Order Entry 
in ambulatory Care.''
    \5\ Institute of Medicine, Committee on Quality in Healthcare in 
America. To Err is Human: Building a Safer Health System. 
Washington, DC, National Academy Press: 1999.
---------------------------------------------------------------------------

E. Current E-Prescribing Environment

    E-prescribing is a complex process that usually involves a number 
of stakeholders, including prescribers, pharmacists and associated 
staff, vendors, hospitals and health systems, patients, health plans, 
and Pharmacy Benefit Managers (PBMs), among others. In a basic e-
prescribing system, clinicians review, enter, manage, and sign 
prescriptions using a computerized system, instead of writing them on 
paper. The prescription is then electronically transmitted to a 
pharmacy. Currently, e-prescribing systems are available in a variety 
of graduated levels of technology with associated benefits for each 
level. The levels range in sophistication from a basic electronic drug 
information reference with dosing calculators and formulary information 
to medication ordering that is automatically linked to an electronic 
health record.
    The value of e-prescribing in preventing medication errors is that 
each prescription can be electronically checked at the time of 
prescribing for dosage, interactions with other medications, and 
therapeutic duplication. E-prescribing could potentially improve 
quality, efficiency, and reduce costs by--
     Actively promoting appropriate drug usage, such as 
following a medication regimen for a specific condition;
     Providing information about formulary-based drug coverage, 
including formulary alternatives and co-pay information;
     Speeding up the process of renewing medications. An 
article reported that in a large primary care practice in Kokomo, 
Indiana, of 206 daily prescription-related calls, 97 calls were renewal 
requests; \6\ and
---------------------------------------------------------------------------

    \6\ Ennis K., Maus R. Kokomo Family Care: Automating the 
Clinical Practice. MGM Journal, 2001 (July/August): p. 8-11.
---------------------------------------------------------------------------

     Providing instant connectivity between the health care 
provider, the pharmacy, health plans/PBMs, and other entities, 
improving the speed and accuracy of prescription dispensing, pharmacy 
callbacks, renewal requests, eligibility checks, and medication 
history.
    The use of e-prescribing shows promise for improving Medicare 
operations by creating efficiencies in the administration of the Part D 
drug benefit, by decreasing costs in facilitating patient eligibility 
checks, promoting generic drug use, and creating timely interface with 
formularies. This also allows enhanced patient safety benefits through 
the prevention of medication errors resulting from illegible 
handwriting on paper prescriptions.
    According to industry surveys, usage rates for e-prescribing vary 
in number and in the level of sophistication of the electronic 
prescription system used. Somewhere between 5 percent and 18

[[Page 6261]]

percent of physicians are estimated to be using e-prescribing of one 
sort or another, although usage is slowly increasing. Some of the 
barriers to increased usage of e-prescribing by physicians are the 
costs of buying and installing a system, the training involved, time 
and workflow impact, lack of reimbursement for costs and resources, and 
lack of knowledge about the benefits related to quality of care.

F. Evolution and Implementation of an Electronic Prescription Drug 
Program

    In this regulation, we propose to adopt foundation standards (that 
is, standards that do not need to be pilot tested because adequate 
industry experience with those standards already exists). While the 
statute includes an exception to the pilot testing requirement for 
standards with adequate industry experience, it does not define the 
term. The concept was discussed throughout the NCVHS hearings, as 
industry participants debated whether specific standards should be 
recommended as foundation standards. We propose to use the following 
criteria to assess adequate industry experience, based on testimony 
presented to the NCVHS and on some of the NCVHS discussions, and we 
solicit comments on these criteria:
     The standard is American National Standards Institute 
(ANSI) accredited. We propose this criterion because the ANSI 
accreditation process is open and based upon consensus, so accredited 
standards are more likely to adequately address, and effectively 
respond to, industry needs.
     The standard generally has been implemented by entities to 
which the final standard will be applied in multiple e-prescribing 
programs with more than one external health care partner. We propose 
this criterion because it demonstrates that the standard can be 
successfully implemented, the experience can be replicated, and the 
standard is interoperable between organizations as well as within an 
organization.
     The standard is recognized by key industry stakeholders as 
the industry standard. We propose this criterion so that we do not 
adopt a standard in a situation where there are competing industry 
standards and the industry is divided over which one should be 
selected.
    The Secretary has determined that pilot testing is not required for 
the standards proposed in this regulation because they meet the 
criteria for adequate industry experience. The need for pilot testing 
of future standards will be determined when additional standards are 
recommended.
    Standards for e-prescribing must not only meet the specific 
requirements in section 1860D-4(e)(2) of the Act, but must also be 
compatible with standards adopted under Part C of Title XI (the 
Administrative Simplification provisions of HIPAA), and technology and 
general standards adopted under section 1860D-4(b)(2)(B)(i) of the Act. 
The standards should be vendor neutral and technology independent, and 
developed by Standards Development Organizations (SDOs) that are 
accredited by the ANSI.
    The standards proposed in this regulation are important foundation 
standards, but do not represent the full set of standards that will be 
necessary to implement effectively an electronic prescription drug 
program. Further, at least one of the standards with which we are 
proposing to address basic e-prescribing functionality could be refined 
in the future ultimately to support more advanced functions. For 
example, the National Council for Prescription Drug Programs (NCPDP) 
SCRIPT Standard contains a segment that supports free text patient 
dosage instruction which could be enhanced to structure the patient 
instructions.
    These proposed foundation standards are a first step toward a more 
complete set of standards required for an electronic prescription drug 
program under the MMA. Additional final standards will be identified, 
pilot tested, and proposed through separate processes in accordance 
with the time frames set forth in the statute and will build on these 
foundation standards.
    In its September 2, 2004 letter to the Secretary, the NCVHS 
recommended that HHS work with the industry through the rulemaking 
process to determine how best to afford flexibility in keeping current 
the adopted standards and those adopted in the future. We invite public 
comment on how to establish a process that will be used to evolve 
currently adopted and additional standards and to determine an 
appropriate implementation sequence, consistent with the Administrative 
Procedures Act and other applicable legal requirements. We specifically 
invite comment regarding the role of industry standard setting 
organizations and the NCVHS.

G. Electronic Prescription Drug Program

    Section 1860D-4(e)(2) of the Act specifies that an electronic 
prescription drug program for covered Part D drugs for Part D enrolled 
individuals shall provide for the electronic transmittal to the 
prescribing health care professional and to the dispensing pharmacy and 
pharmacist of the--
     Prescription;
     Information on eligibility and benefits (including the 
drugs included in the applicable formulary, any tiered formulary 
structure, and any requirements for prior authorization);
     Information on the drug being prescribed or dispensed and 
other drugs listed on the medication history;
     Information on drug-drug interactions, warnings or 
cautions, and, when indicated, dosage adjustments;
     Information on the availability of lower cost, 
therapeutically appropriate alternatives (if any) for the drug 
prescribed; and
     Information that relates to the medical history concerning 
the individual and related to a covered Part D drug being prescribed or 
dispensed, upon request of the professional or pharmacist involved.
    While it is important to note that, to the extent Part D sponsors, 
prescribers, and dispensers are covered entities under HIPAA, they must 
continue to abide by the applicable HIPAA standards, including those 
for privacy and security. All Part D Plans are covered entities under 
HIPAA, and we assume that many of the providers participating in Part D 
will likewise be covered entities. Providers are HIPAA covered entities 
if they engage in electronic transactions for which there are HIPAA 
standards. In general terms, under HIPAA, a covered entity is a health 
plan, a health care clearinghouse, and a health care provider who 
transmits any health information in electronic form in connection with 
a standard transaction. A standard transaction is defined as a 
transaction that complies with the applicable standards at Sec.  
162.1101 through Sec.  162.1802. Two of the eight Administrative 
Simplification Standard Transactions conducted between providers and 
health plans at Sec.  162.1101 through Sec.  162.1802 (the NCPDP 
Telecommunication Standard for Health Care Claims, and the ASC X12N 
270/271 Eligibility Inquiry and Response Standard for eligibility for a 
health plan queries), are proposed in this rule for e-prescribing 
foundation standards. The NCPDP Telecommunication Standard is proposed 
for eligibility inquiries and responses between pharmacies and health 
plans, and the ASC X12N 270/271 is proposed for eligibility inquiries 
between prescribers and health plans. Complete definitions for HIPAA 
covered entities and standard transactions are available at 45 CFR 
160.103 and 45 CFR 162.103.

[[Page 6262]]

    If a provider is not otherwise a covered entity under HIPAA, it 
would become a covered entity if it conducts an e-prescribing 
transaction that is also a HIPAA transaction, such as the 270/271 
eligibility and response transactions. It should also be noted that 
disclosures of protected health information (PHI) in connection with an 
e-prescribing transaction that is not a HIPAA transaction would have to 
meet the minimum necessary requirements of the Privacy Rule if the 
entity is a covered entity. The Privacy Rule excludes from the minimum 
necessary requirements those disclosures that are required to comply 
with a HIPAA transaction standard. However, this exclusion would not 
apply to e-prescribing standards that are not also HIPAA standards, 
making compliance with minimum necessary a requirement, unless another 
exception applies.
    The MMA requires the Secretary to develop, adopt, recognize or 
modify initial uniform standards related to the requirements of an 
electronic prescription drug program taking into consideration any 
recommendations from the NCVHS. The standards must be designated to 
enable transmission of basic prescription data to and from prescribers 
and dispensers, as well as the transmission of information about the 
patient's drug utilization history, possible drug interactions, the 
drug plan, and cost information. The design of the standards for an 
electronic prescription drug program must be consistent with the 
objectives of improving patient safety, quality of care, efficiencies 
and cost savings in the delivery of care, and meet the standards design 
criteria outlined in this section. The standards also must permit the 
use of appropriate messaging, according to section 1860D-4(e)(2)(d) of 
the Act, as it relates to the prescribing of drugs and permit patients 
to designate a dispensing pharmacy.
    In its September 2, 2004 letter, the NCVHS provided its 
observations and associated recommended actions related to the 
standards needed for the interoperable electronic exchange of 
information for most of the categories of information enumerated in 
section 1860D-4(e)(2) of the Act. The key NCVHS recommendations 
concerning these functions and whether they are included in the NPRM 
are summarized in the table below:

----------------------------------------------------------------------------------------------------------------
                                         NCVHS Standards
              Function                Recommendations--  HHS                   Standard in NPRM
                                             Should:
----------------------------------------------------------------------------------------------------------------
Provider and Dispenser Identifiers.  Adopt NPI when it        No.
                                      becomes available.
Prescription (Clinical drug).......  Include in the 2006      No.
                                      pilot tests the RxNorm
                                      terminology in the
                                      NCPDP SCRIPT Standard.
Drug order for new, renewals,        Recognize, as a          Yes.
 cancellations, and change orders.    foundation standard,
                                      the most current
                                      version of NCPDP
                                      SCRIPT for new
                                      prescriptions,
                                      prescription renewals,
                                      cancellations, and
                                      changes between
                                      prescribers and
                                      dispensers.
Drug orders for fill status          Should include the fill  No.
 notification.                        status notification
                                      function of the NCPDP
                                      SCRIPT Standard in the
                                      2006 pilot tests.
Patient instructions (SIG).........  Support NCPDP, HL7, and  No.
                                      others (especially
                                      including the
                                      prescriber community)
                                      in addressing SIG
                                      (patient instruction)
                                      components in their
                                      standards.
Medication history.................  Participate in and       Standard functionality identified.
                                      support rapid
                                      development of an
                                      NCPDP standard for a
                                      medication history
                                      message for
                                      communication from a
                                      payer/PBM to a
                                      prescriber.
Formulary and benefit coverage       Participate in and       Standard functionality identified.
 information.                         support the rapid
                                      development of an
                                      NCPDP standard for
                                      formulary and benefit
                                      information file
                                      transfer.
Eligibility inquiry and response...  Recognize, as a          Yes.
                                      foundation standard,
                                      the NCPDP
                                      Telecommunication
                                      Standard and the ASC
                                      X12N 270/271-Health
                                      Care Eligibility
                                      Benefit Inquiry and
                                      Response.
Prior authorization................  Support ASC X12N in      No.
                                      their efforts to
                                      incorporate
                                      functionality for real-
                                      time prior
                                      authorization messages
                                      for drugs in the ASC
                                      X12N 278 Health Care
                                      Services Review.
Drug-drug Interaction..............  No recommendations       No.
                                      advanced. Subject to
                                      future NCVHS hearings.
Medical History....................  No recommendations       No.
                                      advanced. Subject to
                                      future NCVHS hearings.
Exchange of medication history, and  No recommendations       No.
 medical history for e-prescribing    advanced. Subject to
 program.                             future NCVHS hearings.
Electronic signature...............  No recommendations       No.
                                      advanced. Subject to
                                      future NCVHS hearings.
----------------------------------------------------------------------------------------------------------------

    In section II of this proposed rule (Provisions of the Proposed 
Regulation), we describe the proposed requirements related to the use 
of the most current version of NCPDP SCRIPT for new prescriptions, 
prescription renewals, cancellations, changes between prescribers and 
dispensers, and ancillary messaging and administrative transactions, 
the NCPDP Telecommunication Standard, and the ASC X12N 270/271 
transaction, for transmitting eligibility data between dispensers and 
Part D sponsors and between prescribers and Part D sponsors, 
respectively.
    The NCVHS also observed that ``there are several areas in the 
foundation standards that do not support all the MMA requirements.'' As 
can be seen from the Table above, additional standards will be required 
to implement many of the functions of an electronic prescription drug 
program as envisioned by the MMA. Examples of some of the needed 
standards and associated issues are as follows:
     Provider and Dispenser Identifiers. The MMA does not 
expressly direct the Secretary to require the use of unique identifiers 
for prescribers and dispensers in e-prescribing transactions. However, 
the NCVHS found that it was important to address the issue of provider 
identifiers for various e-

[[Page 6263]]

prescribing standards it reviewed and, more generally, for an 
electronic prescription drug program. We agree. After assessing a 
number of candidate identifiers, the NCVHS further recommended the use 
of the National Provider Identifier (NPI) as the primary identifier for 
dispensers and prescribers, once it becomes available.
    HHS is considering requiring the use of the NPI as the provider 
identifier for an electronic prescription program under Medicare Part 
D. We believe that it is necessary to have a unique identifier for 
these transactions. The NPI is the preferred option, because it is a 
standard that many entities will be required to use under HIPAA. If use 
of the NPI is required for e-prescribing transactions involving 
Medicare Part D drugs at the time the benefit is available in January 
2006, prescribers, pharmacies, pharmacists, Part D sponsors and 
potentially other entities would be required to implement the NPI for 
e-prescribing transactions earlier than the current compliance date for 
the HIPAA covered transactions.
    The NCVHS also urged HHS to accelerate the enumeration of all 
providers to support transition to the NPI for e-prescribing. We have 
been planning to enumerate HIPAA covered providers over the course of 
several years.
    Accelerated NPI usage for e-prescribing, therefore, may not be 
possible, as HHS may not have the capacity to issue NPIs to all covered 
providers by January 1, 2006. Furthermore, there is a possibility that 
unforeseen system or budget concerns could delay provider enumeration, 
and, therefore, the date by which the NPI would be available for use in 
e-prescribing under Medicare Part D.
    We invite public comments on the possible use of the NPI for 
Medicare Part D e-prescribing transactions; the earliest time when the 
NPI should be required for use in an electronic prescription drug 
program; the effect on industry of accelerating use of NPI in an 
electronic prescription drug program ahead of the HIPAA compliance 
dates; alternatives to the NPI, particularly in the short term; and 
options for phasing in use of the NPI in e-prescribing transactions or 
prioritizing budget concerns that could delay the enumeration process.
    NCVHS recommended that HHS permit the use of the NCPDP Provider 
Identifier Number for identifying dispensers and the NCPDP HCIdea[reg] 
for identifying prescribers in the event that the National Provider 
System (NPS) cannot enumerate these providers in time for Medicare Part 
D electronic prescription drug program implementation. We are looking 
at various options for an alternate identifier(s), including using 
provider identifiers currently in use in the Medicare program, in the 
event the NPI is not available for use, and we invite public comment on 
this, as well.
     Formulary and Medication History Standards. Adoption of 
standards for formulary representation and medication history would 
clearly enhance e-prescribing capabilities under Part D. Such standards 
would make it possible for the prescriber to obtain information on the 
patient's benefits, including the formulary status of drugs that the 
physician is considering prescribing, as well as information on 
medications the patient is already taking including those prescribed by 
other providers. Significant quality improvement and cost savings could 
result from the use of formulary and medication history standards.
    The NCVHS noted that formulary and medication history information 
are currently communicated between payers and prescribers using 
proprietary messages, frequently the Information File Transfer 
protocols established by RxHub, a national formulary and benefits 
information exchange. In response to industry testimony, RxHub 
communicated to the NCVHS its intent to submit its protocols to NCPDP 
to be considered for adoption as an ANSI-accredited standard. NCVHS 
considered ANSI accreditation to be a criterion in their 
recommendations process, and HHS proposes to adopt this as a criterion 
for determining adequate industry experience.
    The NCVHS recommended that HHS actively participate in and support 
the rapid development of an NCPDP standard for formulary and medication 
history using the RxHub protocol as a basis, and indicated its belief 
that this appeared possible in time to adopt the standard as a 
foundation standard.
    We propose to adopt, as foundation standards in the final rule, 
formulary representation and medication history standards, if certain 
characteristics are met and there is adequate industry experience with 
the standards. We would consider adopting an NCPDP standard for 
formulary and medication history that are based on the RxHub protocol.
    We set out the characteristics we consider to be critical for 
formulary, benefit, and medication history messaging at the end of this 
section, and solicit comments on those characteristics. We further 
solicit comment on the extent to which any candidate standards, 
including the RxHub protocols, meet those characteristics and should be 
considered for adoption as foundation standards. We propose the 
following critical characteristics for formulary and benefit data 
standards:
     The standards are accredited by an ANSI-accredited 
standards development organization.
     The standards permit interface with multiple product, 
router, and point-of-care (POC) vendors.
     The standards provide a uniform means for--
    + Pharmacy benefit payers (including health plans and PBMs) to 
communicate a range of formulary and benefit information to prescribers 
via POC systems; and
    + POC vendors to receive a range of formulary and benefit 
information through these services.
     The standards cover a range of formulary and benefit data, 
including information on the--
    + Formulary (for example, therapeutic classes and subclasses);
    + Formulary status (for example, drugs that the benefit plan 
considers to be ``on formulary'');
    + Preferred alternatives (including, but not limited to 
restrictions that may impact whether the plan will cover a drug being 
considered, such as quantity limits and need for prior authorization); 
and
    + Copayment (that is, not just the single copayment amount for the 
drug being considered, but the copayments for one drug option versus 
another).
    We propose the following critical characteristics for medication 
history standards:
     The standards are accredited by an ANSI-accredited 
standards development organization.
     The standards permit interface with multiple product, 
router, and POC vendors.
     The standards provide a uniform means for a prescriber, 
dispenser, or payer to request from a payer, dispenser, or prescriber, 
a listing of drugs that have been prescribed or claimed for a patient 
within a certain timeframe.
     The standards provide a uniform means for a Part D plan, 
dispenser, or prescriber to request from a prescriber, dispenser, or 
Part D plan, information to describe the patient's medication history. 
This includes, for example, the drugs that were dispensed within a 
certain timeframe, and may include the pharmacy that filled the 
prescription and the physician that wrote the prescription.
     Drug Information. Section 1860D-4(e)(2) of the Act 
specifies that an electronic prescription drug program

[[Page 6264]]

will include information on drug-drug interactions, warnings or 
cautions, and when indicated, dosage adjustments. Given that relevant 
e-prescribing standards must permit electronic exchange of drug 
labeling and drug listing information maintained by the FDA and the 
NLM, medication history standards should be compatible with those 
standards when they are adopted by the Secretary. While drug 
information standards will not be foundation standards, they will be 
supported in the future by the structured product label. While 
standards for providing this type of information on drugs have not yet 
been considered by the NCVHS and are not yet proposed, we anticipate 
proposing standards in the future through rulemaking because they are 
required by MMA and we believe that providing this information is 
essential to improving the safety and quality of medication management. 
We invite public comment on standards that should be required to 
support an electronic prescription drug program required under the Part 
D benefit.
     Medical History. Section 1860D-4(e)(2)(B) of the Act 
specifies that an electronic prescription drug program includes the 
electronic transmittal of information that relates to the medical 
history concerning the individual and related to a covered Part D drug 
being prescribed or dispensed. ``Medical history'' differs from 
``medication history.'' ``Medication history'' refers to drugs that 
have been prescribed to the individual, while ``medical history'' 
relates more broadly to information about the patient's health care and 
health status (for example, allergies, laboratory test results, and 
chronic conditions).
    The statute treats the electronic transmission of medical history 
differently from the electronic transmission of other information in an 
electronic prescription drug program. Section 1860D-4(e)(2)(B) of the 
Act specifies that the medical history provision is only effective ``on 
and after such date as the Secretary specifies and after the 
establishment of appropriate standards.'' We intend to propose 
standards for communicating medical history at a future