Medicare Program; E-Prescribing and the Prescription Drug Program, 67568-67595 [05-22026]

Agencies

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

[Federal Register Volume 70, Number 214 (Monday, November 7, 2005)]
[Rules and Regulations]
[Pages 67568-67595]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-22026]



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Part III





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; 
Final Rule

Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / 
Rules and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 423

[CMS-0011-F]
RIN 0938-AN49


Medicare Program; E-Prescribing and the Prescription Drug Program

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

ACTION: Final rule.

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SUMMARY: This final rule adopts standards for an electronic 
prescription drug program under Title I of the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (MMA). These standards 
will 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 foundation 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: These regulations are effective on January 1, 2006. The 
incorporation by reference of certain publications listed in this final 
rule is approved by the Director of the Federal Register as of January 
1, 2006.

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

SUPPLEMENTARY INFORMATION:

I. Background

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 the electronic 
transmission of prescriptions and certain other information for covered 
Part D drugs prescribed for Part D eligible individuals comply with 
final uniform standards adopted by the Secretary.
    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 (CY) 2006, must be developed, adopted, recognized, or 
modified by the Secretary not later than September 1, 2005. These were 
publicized in a Request for Application for the pilot project announced 
on September 14, 2005 (Available through grants.nih.gov/grants/guide/
rfa-files/RFA-HS-06-001.html). Not later than April 1, 2008, the 
Secretary must promulgate final uniform standards, which must become 
effective not later than 1 year after the date of their promulgation. 
In addition, the Secretary is required to provide a report to the 
Congress by April 1, 2007 on his evaluation of the pilot project.
    On January 28, 2005, we published the Medicare Prescription Drug 
Benefit final rule (70 FR 4193-4585) that established 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 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, providers that prescribe or dispense Part D drugs would 
be required to comply with any applicable final standards that are in 
effect when they conduct electronic prescription transactions, or seek 
or transmit prescription information or certain other related 
information electronically.
    For a complete discussion of the statutory basis for this final 
rule and the statutory requirements at section 1860D-4 of the Act, 
please refer to section I. (Background) of the E-Prescribing and the 
Prescription Drug Program proposed rule, published February 4, 2005 (70 
FR 6256-6264). We requested and received comments on the statutory 
requirement for industry consultation, adequate industry experience for 
certain standards, and pilot testing, among other things. Those 
comments and our responses are addressed in section III. of this final 
rule.
1. Initial Standards Versus Final Standards
    In the proposed rule, we discussed the provisions of section 1860D-
4(e) of the Act that distinguish initial standards from final 
standards. Final standards must be adopted by the Secretary based upon 
the evaluation of pilot testing or without pilot testing if the 
Secretary determines there is adequate industry experience for the 
final standards. The final standards adopted in this rule have not been 
subject to pilot testing under MMA, due to the determination by the 
Secretary that there is adequate industry experience with these 
standards. We refer to them as ``foundation standards'' because they 
provide a foundation for e-prescribing implementation. Based on 
industry consensus and recommendations from the National Committee on 
Vital and Health Statistics (NCVHS), these standards were likely 
candidates for establishing a foundation for future standards and 
interoperability. A more detailed discussion of this distinction is 
available in the E-Prescribing and Prescription Drug Program proposed 
rule, published February 4, 2005 proposed rule (70 FR 6259).
2. State Preemption
    In section I of the proposed rule, we discussed State preemption 
and the meaning of the statutory language in section 1860D-4(e)(5) of 
the Act. A more detailed discussion is available in the proposed rule 
at 70 FR 6258-6259. We solicited and received comments on our proposed 
interpretation. Those comments and our responses are addressed in 
section III. of this final rule.
3. Anti-Kickback Statute Safe Harbor and Stark Exception
    In the proposed rule, we indicated that we would be proposing a new 
electronic prescribing (e-prescribing) exception under the physician 
self-referral law (also known as the Stark law) and a new e-prescribing 
safe harbor under the anti-kickback statute. We also indicated that, in 
the meantime, compliance with existing State and Federal laws is 
required. We solicited comments on the nature and extent of incentives 
being offered to encourage prescribers to conduct e-prescribing or 
incentives likely to be offered after rulemaking for the Stark 
exception and anti-kickback statute. For a more detailed discussion of 
the Stark exceptions and violation of the anti-kickback statute for e-
prescribing please refer to 70 FR 6259.

B. The NCVHS Process

    In the proposed rule, we discussed HHS's requirement to consider 
recommendations of the NCVHS according to section 1860D-4(e)(4)(A) of 
the Act, and the role of the NCVHS in recommending standards relating 
to the requirements for an electronic prescription drug program, as 
outlined in section 1860D-4(e)(4)(B) of the Act.
    Section 1860D-4(e)(4)(A) of the Act requires the Secretary to 
develop, adopt,

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recognize or modify initial uniform standards relating to the 
requirements for an electronic prescription drug program, taking into 
consideration the recommendations from the NCVHS. 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 order to fulfill its responsibilities, the NCVHS's 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, 29, and 30, 2004; and August 17, 18, and 19, 2004. These hearings 
included testimony from e-prescribing networks, providers, software 
vendors, and industry experts on patient safety, drug knowledge data 
bases, 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 adopting 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.
    For a more complete discussion of the NCVHS Process for e-
prescribing standards, please refer to the proposed rule (70 FR 6259-
6260).

C. Standards Design Criteria

    In the proposed rule, we discussed the design criteria for 
electronic prescription drug program standards specified in section 
1860D-4(e)(3)(C) of the Act. 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

    The proposed rule described the processes currently used for 
writing prescriptions based upon statistical data that is available and 
information presented in testimony to the NCVHS. For a more detailed 
discussion of the current process and the reported workflow and 
administrative inefficiencies that affect costs and quality of care, 
please refer to section I. of the proposed rule at 70 FR 6260.

E. Current E-Prescribing Environment

    In the proposed rule, we discussed the values of e-prescribing in 
preventing medication errors, statistics concerning certain usage of e-
prescribing, and barriers to expanded use of e-prescribing.
    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; and
     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.
    E-prescribing rates vary somewhere between 5 percent and 18 percent 
for physicians, 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. For 
more details of this discussion, please refer to the proposed rule (70 
FR 6260-6261).

F. Evolution and Implementation of an Electronic Prescription Drug 
Program

    In the proposed rule, we discussed our proposal to adopt foundation 
standards, which are standards that do not need pilot testing because 
adequate industry experience already exists for these standards. We 
also proposed criteria that standards must meet to be considered as 
having ``adequate industry experience.'' For a more detailed 
discussion, please refer to the proposed rule (70 FR 6261). We invited 
and received public comments on ``adequate industry experience'', the 
roles of Standards Development Organizations (SDOs) and the NCVHS in 
the adoption of e-prescribing standards, and a process for updating 
existing standards and adopting new standards. Those comments and our 
responses are addressed in section III. of this final rule.

G. Electronic Prescription Drug Program

    In the proposed rule, we discussed the standards that are required 
for an electronic prescription drug program as required by section 
1860D-4(e)(2) of the Act and the standards that we were proposing. We 
also discussed which standards would be subject to pilot testing, and 
which standards would be proposed as future standards. For a more 
detailed discussion of those standards and the table that summarizes 
the NCVHS recommendations, please refer to the proposed rule (70 FR 
6261-6262). We invited and received public comments on the proposed 
standards as well as on standards that are currently being used in the 
industry. Those comments and our responses to those comments are 
addressed in section III. of this final rule.

H. Summary of Status of Standards for an Electronic Prescription Drug 
Program

    In the proposed rule, we acknowledged that the foundation standards 
we proposed did not address all of the functions required under section 
1860D-4(e)(2) of the Act. For a more detailed discussion, please refer 
to section I. of the proposed rule (70 FR 6264). We requested comments 
on the proposed standards, as well as our

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proposed phased implementation for electronic prescription drug program 
requirements. We also requested comments on considerations for 
interoperability and industry-adopted standards for electronic health 
records (EHRs). The comments, on both these issues, and our responses 
to those comments are addressed in section III. of this final rule.

II. General Overview of the Provisions of the Proposed Rule

    As stated earlier, on February 4, 2005, we published the E-
Prescribing and the Prescription Drug Program proposed rule (70 FR 
6256-6274), which discussed our proposal to adopt the first set of 
final uniform standards (or foundation standards) for an electronic 
prescription drug program under the MMA. In the proposed rule, we 
stated that these proposed foundation standards would not be subject to 
pilot testing because they meet the criteria for adequate industry 
experience. These standards included the National Council for 
Prescription Drug Programs (NCPDP) SCRIPT version 5.0 for transactions 
for new prescriptions, prescription renewals, cancellations, changes 
between prescribers and dispensers, ancillary messages and 
administrative transactions; the Accredited Standards Committee (ASC) 
X12N 270/271, version 4010 and version 4010 A1, for eligibility queries 
between prescribers and Part D sponsors; and the NCPDP 
Telecommunications Standard, version 5.1, and the NCPDP Batch Standard 
Batch Implementation Guide version 1.1 supporting the 
telecommunications standard implementation guide for eligibility 
inquiries between dispensers and Part D sponsors.
    Also, in the proposed rule, we discussed the need for formulary and 
medication history standards, and that we were not aware of any 
standards for these transactions that clearly met the criteria for 
adequate industry experience. Standards for formulary and medication 
history will be tested in the 2006 pilot project.
    In the proposed rule, we proposed to broaden the scope of 42 CFR 
Part 423, Subpart D for requirements that relate to electronic 
prescription drug programs for prescribers, dispensers, and Part D 
sponsors. We also proposed a number of definitions that are pertinent 
to the e-prescribing process. We also proposed a compliance date of 
January 1, 2006 for the foundation standards.

III. Analysis of, and Responses to, Public Comments on the Proposed 
Rule

    We received approximately 84 timely items of correspondence 
containing multiple comments on the proposed rule. Some of the major 
issues we received comments on included preemption of State laws, the 
foundation standards, the appropriateness of the implementation date 
for the foundation standards, and a process for modifying and updating 
the foundation standards. We also received unsolicited comments, 
comments not submitted timely, and comments outside the scope of the 
proposed rule. The relevant and timely comments within the scope of the 
proposed rule that we received are discussed in the following sections.

Comments and Responses on Provisions of Proposed Rule

    As we state in section II. of this final rule, in the February 4, 
2005 proposed rule, we discussed--
     Our proposal to adopt foundation standards for an 
electronic prescription drug program under the MMA;
     Our proposal to broaden the scope of Subpart D, part 423 
of the MMA to set forth requirements relating to electronic 
prescription drug programs for prescribers, dispensers, and Part D 
sponsors; and
     Our proposal to adopt a number of definitions that are 
pertinent to the e-prescribing process.
    The comments that we received on those proposed provisions and our 
responses to those comments are outlined in the following sections.

A. Proposed Modification of the Title to Subpart D in 42 CFR Part 423

    In the February 4, 2005 proposed rule, we proposed modifying the 
title of subpart D in 42 CFR Part 423 to read ``Cost Control and 
Quality Improvement Requirements'' and revising the description of the 
scope at Sec.  423.150(c).
    We received no comments on this proposed modification and, 
therefore, are changing the title of Subpart D of part 423 to read, 
``Cost Control and Quality Improvement Requirements'' in this final 
rule.

B. Proposed Revision to Sec.  423.150 (Scope)

    In the February 4, 2005 proposed rule, we also discussed our 
proposed revision to the description of the scope at Sec.  423.150(c) 
to state expressly that this subpart sets forth requirements relating 
to electronic prescription drug programs for prescribers, dispensers, 
and Part D sponsors. We did not receive any comments regarding this 
proposed change and, therefore, we are making this revision in this 
final rule.

C. Proposed Amendment of Sec.  423.159(a) (Definitions)

    In the February 4, 2005 proposed rule, we proposed to amend Sec.  
423.159 to add definitions pertinent to the e-prescribing process and 
to amend the title of the section to be consistent with the term 
``Electronic Prescription Drug Program'' which we proposed to define 
below. The proposed definitions and the comments we received are as 
follows:
     Dispenser Definition Proposal--In the proposed rule, we 
defined a ``dispenser'' as a person, or other legal entity, licensed, 
registered, or otherwise permitted by the jurisdiction in which the 
person practices or the entity is located, to provide drug products for 
human use by prescription in the course of professional practice.
    Comment: Most of the commenters supported our proposed definition 
of ``dispenser,'' but some wanted it modified to address explicitly 
non-dispensing pharmacy activities involved in providing services, such 
as medication therapy management services required by MMA.
    Response: We believe that our definition of ``dispenser'' 
adequately encompasses dispensing and non-dispensing activities and 
that it is not necessary to add language to distinguish pharmacist 
roles within the scope of an e-prescribing environment. Therefore, in 
this final rule, we are adopting the proposed definition as final.
     Electronic Media Definition Proposal--In the proposed 
rule, we defined ``electronic media'' as having the same meaning as 
this term is defined for purposes of the Health Insurance Portability 
and Accountability Act of 1996 (HIPAA). In 45 CFR 160.103, electronic 
media means--
     Electronic storage media including memory devices in 
computers (hard drives), and any removable/transportable digital memory 
medium, such as magnetic tape or disk, optical disk, or digital memory 
card; or
     Transmission media used to exchange information already in 
electronic storage media. Transmission media include, for example, the 
internet (wide open), extranet (using internet technology to link a 
business with information only accessible to collaborating parties), 
leased lines, dial-up lines, private networks, and the physical 
movement of removable/transportable electronic storage media. Certain 
transmissions, including of paper, via facsimile, and of voice, via 
telephone, are not considered to be transmissions via electronic media, 
because the information being

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exchanged did not exist in electronic form before the transmission.
    Comment: The majority of commenters supported the proposed 
definition of ``electronic media''. Some of the commenters recommended 
that the definition be broadened to include secure wireless 
communications technologies and other technologies implementing current 
best practices.
    Response: We believe that the term ``electronic media,'' as defined 
in 45 CFR 160.103, is sufficiently broad to encompass a range of 
technology advances, including secure wireless technologies. Moreover, 
our definition is not intended to establish a comprehensive list of, 
nor intended to identify best practices for, transmission media. 
Therefore, we do not intend to change our definition to reflect these 
additions.
    Comment: One commenter requested clarification as to whether the 
term electronic media, for purposes of the proposed rule, includes 
prescriptions sent by ``electronic facsimile'' to a pharmacy. The 
commenter believed that including them in the definition would 
establish uniformity and would make electronic facsimiles subject to 
the same standards as other electronic prescription transmissions. In 
addition, several commenters proposed adding a new definition of ``non-
EDI message,'' which they defined as being a message that leaves or 
enters a system (including long-term care facilities and/or pharmacies) 
as an image, either via fax or e-mail, that is not included in the 
electronic prescribing standards.
    Response: The proposed definition of electronic media for an e-
prescribing program is the same definition set forth in 45 CFR 160.103 
for HIPAA's transactions and code sets. We have already clarified, by 
means of HIPAA guidance in a Frequently Asked Question (FAQ) on the CMS 
Web site (https://www.cms.hhs.gov/hipaa/hipaa2), that paper faxes are 
not considered ``electronic media,'' while computer-generated faxes 
constitute use of ``electronic media.'' As a result, faxes that are 
generated by one computer and electronically transmitted to another 
computer (commonly referred to as computer-generated faxes) would be 
included under the definition of electronic media for e-prescribing 
that we proposed.
    While we have determined that the NCPDP SCRIPT standard meets the 
test of adequate industry experience in many e-prescribing 
applications, in light of the comments received, we now recognize that 
prescribers using computer-generated faxes to transmit prescriptions to 
a dispenser's fax machine that prints a hard copy of the original 
computer-generated fax merits separate consideration. Because this 
computer-generated transmission started as an electronic version, it 
would constitute a transmission using electronic media as defined in 
the proposed rule, and, as a result, would be required to comply with 
adopted e-prescribing standards.
    In some cases, the prescriber's software can generate SCRIPT 
transactions, but the ability is ``turned off'' because electronic 
communication with the pharmacy has not yet been established. In other 
cases, the prescriber uses software (such as a word processing program) 
that creates and faxes the prescription document, but does not have 
true e-prescribing capabilities.
    In the first case, the prescriber is already conducting e-
prescribing, and should do so after the compliance date using the 
foundation standards. We would expect that the prescriber will 
establish electronic communication and begin to use the SCRIPT standard 
with little difficulty.
    However, the prescriber in the second case is not actually capable 
of conducting e-prescribing using the standards being adopted by this 
rule. That prescriber is merely using word processing software and the 
computer's fax capabilities in lieu of faxing paper. Requiring these 
prescribers to convert to e-prescribing using the foundation standards 
would likely result in their simply reverting to faxing paper. 
Consequently, requiring these entities to comply with the NCPDP SCRIPT 
Standard would force the vast majority of them to revert to paper 
faxes, and, thus, it would impose a significant burden on those 
entities presently using computer-generated faxing, and would be 
counterproductive to achieving standardized use of non-fax electronic 
data interchange for prescribing. Moreover, we believe prescribers 
using computer fax capabilities will migrate to e-prescribing in time, 
possibly at the same time as they implement electronic health record 
systems. Therefore, we adopt an exemption which exempts those using 
computer-generated faxes from using the NCPDP SCRIPT Standard for 
transmitting prescriptions and prescription-related information.
    We believe this approach is consistent with the statutory direction 
that the Secretary has to issue uniform standards with the specific 
objective of improving efficiencies, including cost savings, in the 
delivery of care, and designed so that the standards, to the extent 
practicable, do not impose an undue administrative burden on 
prescribing health care professionals and dispensing pharmacies and 
pharmacists. We interpret these statutory objectives as enabling us to 
ensure that existing functionalities and workflow are not disrupted for 
a large number of prescribers and dispensers. We believe this 
interpretation is appropriate given the burden that adherence to the 
statutory requirements would create and based on the requests in 
comments received in response to the proposed e-prescribing rule. As 
indicated above, we anticipate that many prescribers and dispensers 
would revert to handwritten paper prescriptions or computer-generated 
prescriptions that are printed in hard copy and manually faxed to the 
dispenser. This practice would stand as a significant obstacle to the 
broader statutory goals of the electronic prescription drug program 
provisions, as well as limit the ability of Medicare beneficiaries and 
the Medicare program to benefit from the patient safety and cost 
savings anticipated from e-prescribing drugs under Part D of Title 
XVIII of the Act. However, we encourage all prescribers using fax 
technology to move as quickly as possible to the use of electronic data 
interchange via the SCRIPT standard.
     E-prescribing Definition Proposal--In the proposed rule, 
we defined ``e-prescribing'' to mean the transmission, using electronic 
media, of prescription or prescription-related information, between a 
prescriber, dispenser, PBM, or health plan, either directly or through 
an intermediary, including an e-prescribing network.
    Comment: Most commenters supported the proposed ``e-prescribing'' 
definition. One commenter recommended that the definition of e-
prescribing specifically cite ``nursing facility.'' Some commenters 
recommended the definition be amended to distinguish between the direct 
entry of prescribers and the direct entry of non-prescribers, such as 
clerical staff. Concerns were expressed that the definition does not 
include activities related to electronic claims adjudication. One 
commenter suggested that the definition for e-prescribing also be 
clarified to include two-way transmissions between the point-of-care 
(POC) and the dispenser.
    Response: We believe that the term ``e-prescribing'' is broad 
enough in its scope to effectively encompass multiple transaction 
processes and participants, which exchange prescription or 
prescription-related transmissions, whether or not the transmission is 
conducted directly or through an intermediary. We realize that the 
business model that is typical in the

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Long-Term Care (LTC) environment, where both the prescriber and the 
facility personnel are customarily involved in the prescribing process, 
is atypical of e-prescribing in the ambulatory setting. During the 
pilot project, we are planning to review the business process for e-
prescribing in the LTC setting. For further discussion about e-
prescribing and LTC and the comments we received, please refer to 
section F.1. of this final rule.
    Electronic claims adjudication and other related administrative 
functions are outside the scope of e-prescribing as specified in 
section 1860D-4(e) of the Act. Moreover, a number of transactions 
standards for these administrative functions have already been adopted 
in the August 17, 2000 HIPAA Standards for Electronic Transactions and 
Code Sets Final Rule (HIPAA final rule) (65 FR 50312-50372) and 
modified in the February 20, 2003 Health Insurance Reform: 
Modifications to Electronic Data Transactions Standards and Code Sets 
(68 FR 8381-8399).
     Electronic Prescription Drug Program Definition Proposal--
In the proposed rule, we defined ``electronic prescription drug 
program'' to mean a program that provides for e-prescribing for covered 
Part D drugs prescribed for Part D eligible individuals who are 
enrolled in Part D plans.
    Comment: The commenters generally supported the proposed electronic 
prescription drug program definition, but recommended the definition be 
written in more generic terms without the reference to Part D.
    Response: Based on these comments and our interpretation of our 
statutory authority, we have decided to expand the scope of our 
definition of electronic prescription drug program to include all Part 
D eligible individuals, whether or not they are enrolled in a Part D 
plan. This group is identical to the universe of persons who 
participate in Medicare (Parts A or B or both). We revised the 
definition for the electronic prescription drug program at Sec.  
423.159 to broaden the scope of an electronic prescription drug program 
to include Part D eligible individuals, not just Part D enrolled 
individuals. This is consistent with our interpretation of the statute 
to expand the scope of preemption of State laws to include, at a 
minimum, all Part D eligible individuals, as described in section E.1. 
of this final rule. Therefore, we are adopting the revised definition 
in this final rule.
     Prescriber Definition Proposal--In the proposed rule, we 
defined ``prescriber'' to mean a physician, dentist, or other person 
licensed, registered, or otherwise permitted by the U.S. or the 
jurisdiction in which he or she practices, to issue prescriptions for 
drugs for human use.
    Comment: Commenters generally supported the proposed definition. 
One commenter recommended the definition of prescriber remain as 
defined in the proposed rule so long as the final definition 
encompasses providers, including Certified Registered Nurse 
Anesthetists (CRNAs) and others who are not physician providers, but 
who are granted prescriptive authority through the State in which he/
she practices. One commenter recommended that the definition of 
``prescriber'' specifically require prescriber order entry, including 
electronic signature by the actual prescriber. Several commenters 
recommended that the definition of ``prescriber'' be expanded to 
include those who prescribe drugs for animal use.
    Response: The proposed definition does encompass individuals who 
are non-physicians, but who are permitted to issue prescriptions for 
drugs for human use. These non-physician providers could include CRNAs, 
nurse practitioners, and others. We also believe that it is 
inappropriate to include specific references to prescribing functions, 
such as electronic signatures, within this basic definition. We do not 
believe that there is statutory basis in the MMA to include prescribers 
of drugs for animal use, as the requirements specified section 1860D-
4(e) of the Act, as amended by section 101 of the MMA, expressly 
provide for e-prescribing for covered Part D drugs for Part D eligible 
beneficiaries. We are not aware of any authority under which a 
prescriber of drugs for animal use would be writing prescriptions for 
part D drugs for Part D eligible beneficiaries, or under which animals 
were Part D eligible beneficiaries. Therefore, in this final rule, we 
are adopting the proposed definition as final.
     Prescription-related information Definition Proposal--We 
proposed that ``prescription-related information'' would mean 
information regarding eligibility for drug benefits, medication 
history, or related health or drug information for a Part D eligible 
individual enrolled in a Part D plan.
    Comment: Several commenters recommended amendments to the proposed 
definition. One commenter recommended that non-dispensing pharmacists 
(for example, those providing medication therapy management program 
services) be identified in the e-prescribing program. Several 
commenters recommended that the definition be written in more generic 
terms without the reference to Part D, which they felt could be 
addressed in the definition for electronic prescription drug program. 
According to these commenters, the additional language would capture 
Medicaid and other plans that would voluntarily implement e-prescribing 
efforts based on the proposed regulations. One commenter recommended 
the ``prescription-related information'' definition be expanded to 
include drug allergies and personal allergies.
    Response: We believe that the proposed definition of 
``prescription-related information'' adequately defines different types 
of information within the scope of the e-prescribing environment 
intended by the MMA statute. We also believe that the e-prescribing 
provisions of section 1860D-4(e) of the Act, as amended by section 101 
of the MMA apply to pharmacists, both dispensing and non-dispensing, 
who electronically transmit prescription and certain other information 
for covered drugs prescribed for Medicare Part D eligible individuals. 
The statute broadly includes medication history, eligibility, related 
health or drug information. Furthermore, we believe that ``medication 
history or related health or drug information'' is sufficient to 
include drug allergies and personal allergies.
    Comment: Some commenters suggested expanding the definition of 
prescription-related information as discussed in our proposed rule, 
which limits the scope of prescription information regarding 
eligibility for drug benefits, medication history or related health or 
drug information to a Part D eligible individual enrolled in a Part D 
plan. Some commenters proposed expanding the definition to include all 
Medicare beneficiaries. Other commenters suggested dropping the 
reference to Part D to expand the definition to all e-prescribing.
    Response: As indicated previously in this final rule, based on the 
comments we received and our interpretation of our statutory authority, 
we have decided to expand the scope of our definition to include all 
Part D eligible individuals, whether or not they are enrolled in a Part 
D plan. Accordingly, we are revising our definition of prescription-
related information to mean information regarding eligibility for drug 
benefits, medication history or related health or drug information for 
Part D eligible individuals.

D. Revision to Sec.  423.160 (Standards)

1. General Rules
    In the February 4, 2005 proposed rule, we proposed that Part D 
sponsors would

[[Page 67573]]

be required to establish and maintain an electronic prescription drug 
program that complies with the applicable standards in Sec.  423.160(b) 
when transmitting, directly or through an intermediary, prescriptions 
and prescription-related information using electronic media for covered 
Part D drugs for Part D eligible individuals enrolled in a Part D Plan.
    Although we did not receive specific comments on this general rule 
for Part D sponsors, we did receive many comments related to its scope. 
In particular, many commenters wanted to expand the scope of e-
prescribing in this final rule to include all Medicare beneficiaries 
and all payers. As indicated previously in this final rule, based on 
the comments we received and our interpretation of our statutory 
authority, we have decided to expand the scope of e-prescribing in this 
final rule to include all Part D eligible individuals, whether or not 
they are enrolled in a Part D plan. Accordingly, we are revising our 
general rule for Part D sponsors to state that Part D sponsors must 
establish and maintain an electronic prescription drug program that 
complies with the applicable standards in Sec.  423.160(b) when 
transmitting, directly or through an intermediary, prescriptions and 
prescription-related information using electronic media for covered 
Part D drugs for Part D eligible individuals.
    In the February 4, 2005 proposed rule, we also proposed a general 
rule for prescribers and dispensers. We proposed that prescribers and 
dispensers that transmit, directly or through an intermediary, 
prescriptions and prescription-related information using electronic 
media must comply with the applicable standards in Sec.  423.160(b) 
when e-prescribing for covered Part D drugs for Part D eligible 
individuals enrolled in a Part D plan. Although we did not receive 
specific comments on this general rule for prescribers and dispensers, 
we did receive many comments related to its scope. In particular, many 
commenters wanted to expand the scope of e-prescribing in this final 
rule to all Medicare beneficiaries and beyond the Part D program. As 
indicated previously in this final rule, based on the comments we 
received and our interpretation of our statutory authority, we have 
decided to expand the scope of e-prescribing in this final rule to 
include all Part D eligible individuals, whether or not they are 
enrolled in a Part D plan. Accordingly, we are revising our general 
rule for prescribers and dispensers to state that prescribers and 
dispensers that transmit, directly or through an intermediary, 
prescriptions and prescription-related information using electronic 
media must comply with the applicable standards in paragraph (b) of 
this section when e-prescribing for covered Part D drugs for Part D 
eligible individuals.
2. Standards
    As stated in the February 4, 2005 proposed rule, the Secretary had 
tentatively concluded that the proposed foundation standards are not 
subject to pilot testing because adequate industry experience with 
those proposed foundation standards already exists. We received 
numerous comments on the proposed foundation standards. Those comments 
and our responses are discussed below.
a. Prescription Proposal
    In the proposed rule, we proposed to adopt, as a foundation 
standard, the transactions and administrative messages included in the 
National Council for Prescription Drug Programs (NCPDP) SCRIPT 
Standard, Version 5, Release 0 (except for the Prescription Fill Status 
Notification Transaction), to provide for communication of a 
prescription or prescription-related information between prescribers 
and dispensers.
    Comment: Many commenters supported the adoption of NCPDP SCRIPT as 
a foundation standard in 2006. NCPDP SCRIPT is the current industry 
standard for electronically transmitting prescription information from 
the prescriber to the dispenser.
    Although the majority of commenters supported adoption of the NCPDP 
SCRIPT Standard, some commenters suggested that the foundation 
standards be included in the pilot project and some recommended a delay 
in implementation until pilot testing was completed.
    Response: We agree that the following transactions of the NCPDP 
SCRIPT should be one of the foundation standards:
     Get message transaction.
     Status response transaction.
     Error response transaction.
     New prescription transaction.
     Prescription change request and response transactions.
     Prescription refill request and response transactions.
     Verification transaction.
     Password change transaction.
     Cancel prescription request and response transactions.
    We are adopting this standard for these specified transactions to 
be effective on January 1, 2006. We also plan to include it in the 
pilot project in order to ensure interoperability with the standards 
being pilot tested.
b. Eligibility Proposal (ASC X12N 270/271 Transaction Version 4010, 
4010A1)
    In the February 4, 2005 proposed rule, we proposed to adopt, as 
part of the proposed foundation standards, the ASC X12N 270/271 
Transaction Version 4010, 4010A1 (the 270/271 standards) for conducting 
eligibility and benefits inquiries between prescribers and Part D 
sponsors.
    Comment: The majority of commenters supported the adoption of the 
ASC X12N 270/271 transaction standard for eligibility inquiries where 
appropriate. Commenters agreed that the version adopted should be 
consistent with the version adopted under HIPAA.
    A number of commenters suggested pilot testing this standard and 
delaying implementation of the 270/271 standards to evaluate and test 
the impact of this transaction on the e-prescribing environment. 
Comments that supported adoption of the 270/271 standards also stressed 
the need to provide complete responses on the 271 response.
    A few of the commenters opposed adoption of the 270/271 standards 
because they believe it currently does not accommodate enough of the 
kinds of information that would be necessary to complete the 
transaction, such as patient enrollment information that may be 
required for Part D beneficiaries.
    Response: We agree that the 270/271 standards should be one of the 
foundation standards and we are adopting it in this final rule to be 
effective on January 1, 2006. We considered the potential shortcomings 
of the 270/271 standards that a few commenters identified, such as the 
standards not being sufficiently robust for returning pharmacy-related 
eligibility information. However, the majority of commenters indicated 
that the 270/271 standards are adequate and have been successfully 
implemented in e-prescribing programs. In addition, the 270/271 
standards are HIPAA standards and are already in widespread industry 
use, including in e-prescribing programs. We also will work with Part D 
plans to assure appropriate implementation of the 270/271 standards.
c. Eligibility Proposal (NCPDP Telecommunication Standard, Version 5.1)
    In the February 4, 2005 proposed rule, we also proposed to adopt 
the NCPDP Telecommunication Standard, version 5.1, for conducting 
eligibility

[[Page 67574]]

transactions between dispensers and Part D sponsors.
    Comment: Many commenters agreed that the NCPDP Telecommunications 
Standard, Version 5.1 should be adopted as a foundation standard. Some 
stipulated that this version should be adopted as a foundation standard 
as long as newer versions may be utilized. Other commenters suggested 
that the implementation of this standard be made voluntary until pilot 
tested. A few commenters alleged that the standard is not in widespread 
use within the e-prescribing industry.
    Response: The majority of commenters supported the adoption of the 
NCPDP Telecommunications Standard, Version 5.1. as a foundation 
standard because it had been successfully implemented in e-prescribing 
programs. We agree that the standard should be one of the foundation 
standards, and we are adopting it in this final rule to be effective on 
January 1, 2006. In addition, the NCPDP Telecommunications Standard v 
5.1 is a HIPAA standard that must be used for the relevant electronic 
transactions and already has adequate industry experience. The use of 
later versions will be addressed with the comments on version updating 
and maintenance.
3. Formulary and Medication History
    In the February 4, 2005 proposed rule, we discussed how the 
adoption of formulary representation and medication history would 
enhance e-prescribing capabilities under Part D by making 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. We also discussed the potential for cost savings and quality 
improvements that could result from the use of formulary and medication 
history standards. Proprietary file transfer protocols developed by 
RxHub are currently being used to communicate this information in many 
e-prescribing programs. The RxHub protocols have been submitted to 
NCPCP for accreditation, and this process is ongoing. We did not 
specifically propose adoption of these formats as foundation standards 
because they did not meet the accreditation criteria. However, we 
proposed characteristics for formulary and medication history 
standards, and noted that, if those characteristics were met and there 
was adequate industry experience with them, we would consider adopting 
foundation standards for formulary and medication history.
    In the interim, the RxHub protocols have taken different routes in 
terms of accreditation. The medication history protocol is no longer a 
discrete standard; rather, it was incorporated into the latest version 
of NCPDP SCRIPT (v. 8.0) as a transaction. This is in NCPDP's formal 
review process. The formulary and benefits protocol is a discrete 
standard and is also undergoing NCPDP formal review and ANSI 
accreditation.
    Comment: Commenters generally opposed adoption of the RxHub 
protocols, even if they became accredited standards. The commenters 
recommended that those standards be pilot tested. A few commenters 
supported adoption of the RxHub protocols. No other foundation 
standards for these functions were proposed by commenters.
    Response: In response to many comments about the need for pilot 
testing the formulary and benefits standard and concerns about its 
interoperability with other standards, we will not adopt it as a 
foundation standard, but will include it in pilot testing. However, the 
transactions may be used voluntarily in the meantime.
    We are not adopting the RxHub medication history protocol as a 
foundation standard because it is included as a transaction in NCPDP 
SCRIPT v. 8.0, which does not meet the criterion for adequate industry 
experience. We plan to include that version of NCPDP SCRIPT, including 
the medication history functionality, in the pilot project.

E. Comments and Responses on Related Issues

    In the proposed rule, we requested comments on various issues 
related to the e-prescribing process. We received numerous comments on 
those issues and we discuss those comments and our responses in the 
following section:
1. State Preemption
    The MMA addresses preemption of State laws at section 1860D-4(e)(5) 
of the Act as follows:
    ``(5) Relation to State laws. The standards promulgated under this 
subsection shall supersede 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 the eligibility, benefits, and prescriptions with 
respect to covered Part D drugs under this part.''
    In the February 4, 2005 proposed rule, we proposed to interpret 
this language as preempting State law provisions that conflict with 
Federal electronic prescription drug program requirements that are 
adopted under Part D. This interpretation allows Federal preemption of 
State laws that are either contrary to the Federal standards or that 
restrict the ability to carry out (or stand as an obstacle to) the 
electronic prescription drug program requirements, and that pertain to 
the electronic transmission of prescriptions or certain information 
regarding covered Part D drugs (such as medication history) for Part D 
enrolled individuals.
    This is an important issue because there is wide variation among 
the State laws regarding the extent to which electronic prescribing can 
be done, what information e-prescriptions must contain, how that 
information is worded and represented, and whether and how this 
information can be received into or transmitted from that State. As a 
result, Part D sponsors may face significant operational barriers and 
costs in implementing their e-prescribing programs.
    We invited public comment on our proposed interpretation of the 
scope of preemption, particularly with respect to relevant contrary 
State statutes that commenters believe should be preempted, beyond 
those that would be preempted under our proposed interpretation. We 
specifically asked for comment on whether this preemption provision 
pertains 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 asked for comment on whether this 
preemption provision pertains to only electronic prescription 
transactions or to paper transactions as well. The comments that we 
received in response to our requests and our response to those comments 
are as follows:
    Comment: Some commenters agreed that the MMA's preemption provision 
would pertain only to electronic prescriptions for Part D enrolled 
Medicare beneficiaries for drugs covered under Part D, as set forth in 
our proposed rule. However, many other commenters argued for a broader 
interpretation of the statute. Some commenters suggested preempting 
State laws concerning e-prescribing for all drugs that are prescribed 
for all Medicare beneficiaries. The commenters believed that the 
narrower interpretation would be unworkable because it would create one 
set of rules for Part D enrolled beneficiaries and another set for 
other Medicare

[[Page 67575]]

beneficiaries. Since prescribers may not know at the point-of-care 
whether a Medicare beneficiary is enrolled in Part D, or whether the 
drug being prescribed would be covered under Part D, they would not 
know whether State law applied, or was preempted.
    Response: Based on these comments, we agree that the preemption 
provision can be read more broadly than proposed in the February 4, 
2005 proposed rule. The scope of preemption includes all Part D-
eligible individuals, whether or not they are enrolled in a Part D 
plan. This group is identical to the universe of persons who 
participate in Medicare (Parts A or B or both). Since Medicare A or B 
status is virtually always known or immediately ascertainable by a 
prescriber, this interpretation will minimize both confusion and 
mistakes. This is particularly important because the patients 
themselves may not always know whether they are enrolled in Part D 
(beneficiaries often know the plan name, but not their enrollment 
status), but will have a Medicare card and number if they are enrolled 
in Parts A or B.
    The preemption provision and other language in the e-prescribing 
statute give the Federal government the ability to preempt those State 
laws that ``restrict the ability to carry out this part'' and ``pertain 
to the electronic transmission of medication history and of information 
on eligibility, benefits, and prescriptions with respect to part D 
drugs under this part'' (section 1860D-4(e)(5) of the Act). This 
language permits preemption to pertain to more than Part D enrolled 
individuals. Therefore, we are interpreting section 1860D-4(e)(5) of 
the Act to preempt all contrary State laws that are applicable to a 
prescription that is transmitted electronically not only for those 
individuals who are enrolled in Part D, but for all Part D eligible 
individuals.
    As to our proposal to limit preemption to ``covered Part D drugs,'' 
we agree with commenters that it will not always be possible for a 
prescriber to know, in advance, which category a particular drug falls. 
Indeed, some drugs, such as immunosuppressive drugs, may be reimbursed 
under either Part D or Part B depending not only on which coverage the 
patient has, but also on whether the transplant occurred before or 
after turning age 65. We do not believe that the States have any 
plausible interest in applying different rules in these situations, or 
that prescribers should face such uncertainty. Accordingly, we 
interpret the MMA preemption provision as preempting State laws that 
restrict the Department of Health and Human Services' (DHHS) ability to 
carry out electronic prescribing, as specified at section 1860D-4(e) of 
the Act, and pertain to the electronic prescribing, for Part D eligible 
individuals, of drugs that may be covered by Part D in at least some 
circumstances, whether or not that particular prescription is covered 
under Part D in those specific circumstances.
    We have codified the statutory preemption provision found at 
section 1860D-4(e) of the Act in this final rule. This addition, found 
at Sec.  423.160(a)(4), is essentially identical to the statutory 
language.
    Comment: Some commenters proposed an even broader interpretation, 
arguing that preemption should pertain to all e-prescribing, not just 
to e-prescribing in the Medicare context. They stated that limiting 
preemption to Medicare would create a ``Medicare silo'' with 
significantly different rules than for other payers, which would be 
costly for PBMs, plans, and pharmacies to address and administer. Those 
commenters believe that one set of rules for all payers would 
facilitate the adoption of e-prescribing outside the Medicare program. 
They contend that some States have existing statutory or regulatory 
barriers that could impede the success of e-prescribing. For example, 
some State laws were drafted with only paper prescriptions in mind and, 
thus, may not be well-suited to e-prescribing applications.
    Response: We agree that broadening our interpretation of State 
preemption to include all Medicare beneficiaries and drugs that may be 
covered by Part D, in at least some circumstances, whether or not that 
particular prescription is covered under Part D, is consistent with our 
statutory authority. It also would reduce confusion for prescribers 
and, therefore, would likely encourage expanded use of e-prescribing 
and the adopted standards. Therefore, we interpret the MMA's State 
preemption provision to preempt State laws that are contrary to the e-
prescribing standards or restricts the ability to carry out this part 
for drugs that may be covered under Part D, in at least some 
circumstances, whether or not that particular prescription is covered 
under Part D, and that are e-prescribed for any Part D eligible 
beneficiaries. We also urge States to enact legislation consistent with 
and complementary to the goals of the MMA's e-prescribing provisions 
and to remove existing barriers to e-prescribing.
    Comment: Several commenters proposed that the preemption should be 
applied to any State laws that could be considered a barrier to e-
prescribing. Some commenters noted that this interpretation would be 
consistent with their view of the Congress' intent to enable e-
prescribing. The commenters suggested preempting a variety of laws, 
such as those that--
     Prohibit or fail to allow for e-prescribing;
     Establish requirements or standards for e-prescribing 
content and formats that are inconsistent with current e-prescribing 
practices in other jurisdictions; and
     Prevent e-prescribing across State lines.
    One commenter stressed that State laws also can afford patient 
safety and quality of care protections and that preempting those laws 
could adversely affect patient safety and quality.
    Response: While these commenters suggested categories of laws that 
might be preempted, few specific examples emerged. Under our 
interpretation of the statutory preemption provision, State laws that 
restrict the ability of entities to electronically prescribe covered 
Part D drugs for Part D eligible individuals in accordance with the 
Federal provisions would be preempted. While we agree that some State 
laws preempted under our interpretation of the statute may have had 
health or safety objectives, the statutory test is whether those laws 
are contrary to the standards we adopt or restrict the ability to carry 
out e-prescribing under Part D, and also pertain to the electronic 
transmission of prescription-related information. We also note that for 
a law to ``pertain'' to e-prescribing, it need not specifically single 
out e-prescribing. Our strategy is to define a general preemption rule 
in this final rule and identify several specific categories of laws 
that would be preempted. Preemption of these State laws is necessary 
because they restrict the ability of entities to electronically 
prescribe covered Part D drugs for Part D eligible individuals. 
Further, this preemption is necessary at a minimum in order for Part D 
sponsors and the providers and pharmacies that choose to e-prescribe 
covered Part D drugs for Part D eligible individuals to conduct e-
prescribing beginning on January 1, 2006. Of course, under the 
statutory provisions, preemption of State laws that are contrary to 
these standards, or otherwise restrict the ability to carry out e-
prescribing, will be effective upon the effective date of this 
regulation.
    We also anticipate that, as problems are identified with particular 
State laws or practices, some States will enact laws to address 
specific patient safety or confidentiality concerns that will not be 
contrary to, or restrict the ability to

[[Page 67576]]

carry out, the requirements of this final rule. We encourage States to 
consider the impact on Federal e-prescribing standards of laws that 
could directly or indirectly impede the adoption of e-prescribing 
technology and standards on a statewide and national basis. We also 
urge States to enact legislation consistent with and complementary to 
the goals of the MMA's e-prescribing provisions. This includes removing 
existing barriers to e-prescribing. We believe that, under this 
approach, we can achieve national uniformity in e-prescribing standards 
and practices, while preserving the maximum reasonable autonomy for 
State-specific practices that do not consequentially hamper e-
prescribing. If other State laws also stand as an obstacle to 
Congress's goal of implementing uniform e-prescribing standards that 
are to be used in electronic prescribing of Part D covered drugs for 
Part D eligible individuals, we can reevaluate the scope of preemption 
that is warranted when we adopt additional standards or in future 
rulemaking.
    At this time, we have identified several categories of State laws 
that are preempted, in whole or in part, upon the effective date of 
this final rule. These categories are intended to be examples and do 
not constitute an exhaustive list. However, they are illustrative of 
the examples identified through NCVHS testimony and comments received 
in response to our proposed rule; our application of the MMA's 
preemption provisions to those State laws are based on our 
interpretation of the statute, in which State laws would be preempted 
if they restrict the ability of entities to electronically prescribe 
covered Part D drugs for Part D eligible individuals in accordance with 
Federal provisions. It is important to note that those State laws are 
preempted to the extent that they pertain to covered Part D drugs that 
are electronically prescribed for Part D eligible individuals. A State 
law, whether or not it includes an e-prescribing standard, can be 
preempted if it is contrary to the adopted standards or restricts the 
ability to carry out Part D standards, and pertains to electronic 
transmission of prescription-related information. Those categories of 
State laws are as follows:
     State laws that expressly prohibit electronic prescribing.
     State laws that prohibit the transmission of electronic 
prescriptions through intermediaries, such as networks and switches or 
PBMs, or that prohibit access to such prescriptions by plans or their 
agents or other duly authorized third parties.
     State laws that require certain language to be used, such 
as dispense as written, to indicate whether generic drugs may or may 
not be substituted, insofar as such language is not consistent with the 
adopted standard.
     State laws that require handwritten signatures or other 
handwriting on prescriptions.
    We interpret the MMA preemption provision to preempt State laws 
that prohibit e-prescribing. Such laws would clearly restrict the 
Department's ability to carry out the e-prescribing program for Part D, 
and they pertain to the electronic transmission of prescription and 
prescription-related information for covered Part D drugs. The 
application of this preemption provision is necessary for e-prescribing 
to occur for covered Part D drugs for Part D eligible individuals.
    We interpret the MMA preemption to preempt laws that prohibit 
transmission of electronic prescriptions through intermediaries because 
they would effectively preclude e-prescribing since establishing direct 
connectivity between each prescriber and each pharmacy is impractical, 
according to NCVHS testimony and information from other sources. In 
addition, this is current industry practice, and Part D plans may in 
many cases use software systems that rely on third party processing e-
prescriptions either simultaneously or before they reach pharmacies. 
Without preemption, this type of law would restrict the ability to 
carry out e-prescribing for Medicare Part D because prescribers would 
be unable to e-prescribe covered Part D drugs for Part D eligible 
individuals.
    We interpret the preemption provision to preempt State laws that 
establish specific generic substitution language to the extent that 
such a requirement is not consistent with an adopted standard--that is, 
where an adopted standard does not permit use of specific generic 
substitution language or where the State requires that the language be 
placed at a specific location on the prescription. Such requirements 
would be contrary to adopted standards and restrict the ability of Part 
D sponsors to conduct e-prescribing in accordance with the adopted 
standards.
    Lastly, we interpret the preemption provision to preempt State laws 
that require handwritten signatures or other handwriting on 
prescriptions. Those laws restrict e-prescribing for Part D covered 
drugs for Part D eligible individuals because they introduce manual 
requirements and a resulting paper product into the electronic 
prescribing process, which effectively prevents the prescription from 
being transmitted electronically from the prescriber to the pharmacy as 
required by this final rule. As a result, these State laws restrict the 
ability of entities to electronically prescribe covered Part D drugs