Civilian Health and Medical Program of the Uniformed Services (CHAMPUS)/TRICARE: Inclusion of TRICARE Retail Pharmacy Program in Federal Procurement of Pharmaceuticals, 43394-43397 [E8-17024]
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Federal Register / Vol. 73, No. 144 / Friday, July 25, 2008 / Proposed Rules
HTSUS
Tariff shift and/or other requirements
6212 ..................
(2) If the good does not consist of two or more component parts, a change to heading 6210 through 6211 from any heading
outside that group, except from heading 5007, 5111 through 5113, 5208 through 5212, 5309 through 5311, 5407 through
5408, 5512 through 5516, 5602 through 5603, 5801 through 5806, 5809 through 5811, 5903, 5906 through 5907, 6001
through 6006, and 6217, and subheading 6307.90, and provided that the change is the result of a fabric-making process.
(1) If the good is not knit to shape and consists of two or more component parts, a change to an assembled good of heading
6212 from unassembled components, provided that the change is the result of the good being wholly assembled in a single
country, territory, or insular possession.
(2) If the good is not knit to shape and does not consist of two or more component parts, a change to heading 6212 from any
other heading, except from heading 5007, 5111 through 5113, 5208 through 5212, 5309 through 5311, 5407 through 5408,
5512 through 5516, 5602 through 5603, 5801 through 5806, 5809 through 5811, 5903, 5906 through 5907, 6001 through
6006, and 6217, and subheading 6307.90, and provided that the change is the result of a fabric-making process.
(3) If the good is knit to shape, a change to heading 6212 from any other heading, provided that the knit to shape components are knit in a single country, territory, or insular possession.
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PART 134—COUNTRY OF ORIGIN
MARKING
22. The authority citation for part 134
continues to read as follows:
Authority: 5 U.S.C. 301, 19 U.S.C. 66, 1202
(General Note 3(i), Harmonized Tariff
Schedule of the United States (HTSUS)),
1304, 1624.
23. Section 134.1 is amended by
revising paragraphs (b), (d)(1) and (d)(2)
to read as follows:
§ 134.1
Definitions.
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(b) Country of origin. ‘‘Country of
origin’’ means the country of
manufacture, production, or growth of
any article of foreign origin entering the
United States as determined under
§§ 102.1 through 102.21 of this chapter.
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(d) * * *
(1) If an imported article will be
further processed in the United States,
the processor will be the ‘‘ultimate
purchaser’’ if the country of origin of the
processed good is determined to be the
United States under §§ 102.1 through
102.21 of this chapter.
(2) If the country of origin of the
processed good is not determined to be
the United States under §§ 102.1
through 102.21 of this chapter, the
consumer or user of the article, who
obtains the article after the processing,
will be regarded as the ‘‘ultimate
purchaser.’’
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24. Section 134.35 is revised to read
as follows:
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§ 134.35 Articles effecting a change in
country of origin.
If an imported article will be used in
further processing in the United States,
the processor will be considered the
ultimate purchaser if the processed good
is determined to be a good of the United
States under §§ 102.1 through 102.21 of
this chapter. In such a case, the
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imported article is excepted from
individual marking pursuant to 19
U.S.C. 1304(a)(3)(D) and § 134.32(d) of
this part, provided the outermost
container in which it is imported will
reasonably indicate the country of origin
of the article to the ultimate purchaser.
PART 177–ADMINISTRATIVE RULINGS
25. The authority citation for part 177
continues to read as follows:
Authority: 5 U.S.C. 301, 19 U.S.C. 66, 1202
(General Note 3(i), Harmonized Tariff
Schedule of the United States), 1502, 1624,
1625.
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country or instrumentality under
§§ 102.1 through 102.21 of this chapter.
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W. Ralph Basham,
Commissioner, U.S. Customs and Border
Protection.
Approved: July 21, 2008.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. E8–17025 Filed 7–24–08; 8:45 am]
BILLING CODE 9111–14–P
DEPARTMENT OF DEFENSE
26. Section 177.22 is amended by
revising paragraph (a) to read as follows:
Office of the Secretary
§ 177.22
[DoD–2008–HA–0029; 0720–AB22]
Definitions.
(a) Country of origin. (1) For purposes
of this subpart, an article is a product of
a country or instrumentality only if:
(i) It is wholly the growth, product, or
manufacture of that country or
instrumentality; or
(ii) In the case of an article which
consists in whole or in part of materials
from another country or instrumentality,
it has been substantially transformed
into a new and different article of
commerce.
(2) The term ‘‘instrumentality’’ will
not be construed to include any agency
or division of the government of a
country, but may be construed to
include such arrangements as the
European Economic Community. For
purposes of this section, the expression
‘‘wholly the growth, product, or
manufacture’’ refers to articles wholly
obtained or produced within the
meaning of § 102.1(g) of this chapter,
and a substantial transformation into a
‘‘new and different article of commerce’’
occurs when the country of origin of an
article which is produced in a country
or instrumentality from foreign
materials is determined to be that
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32 CFR Part 199
Civilian Health and Medical Program of
the Uniformed Services (CHAMPUS)/
TRICARE: Inclusion of TRICARE Retail
Pharmacy Program in Federal
Procurement of Pharmaceuticals
Office of the Secretary,
Department of Defense (DoD).
ACTION: Proposed rule.
AGENCY:
SUMMARY: Section 703 of the National
Defense Authorization Act for Fiscal
Year 2008 (NDAA–08) states with
respect to any prescription filled on or
after the date of enactment of the
NDAA, the TRICARE retail pharmacy
program (TRRx) shall be treated as an
element of the DoD for purposes of
procurement of drugs by Federal
agencies under section 8126 of title 38,
United States Code (U.S.C.), to the
extent necessary to ensure
pharmaceuticals paid for by the DoD
that are provided by network retail
pharmacies under the program to
eligible covered beneficiaries are subject
to the pricing standards in such section
8126. NDAA–08 was enacted on January
28, 2008. The statute requires
implementing regulations. This
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proposed rule is to implement section
703 of the NDAA 2008.
DATES: Written comments received at
the address indicated below by
September 23, 2008 will be considered
and addressed in the final rule.
ADDRESSES: You may submit comments,
identified by docket number and/or RIN
number and title, by any of the
following methods:
Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
Mail: Federal Docket Management
System Office, 1160 Defense Pentagon,
Washington, DC 20301–1160.
Instructions: All submissions received
must include the agency name and
docket number or Regulatory
Information Number (RIN) for this
Federal Register document. The general
policy for comments and other
submissions from members of the public
is to make these submissions available
for public viewing on the Internet at
https://www.regulations.gov as they are
received without change, including any
personal identifiers or contact
information.
FOR FURTHER INFORMATION CONTACT:
Captain William Blanche, TRICARE
Management Activity, telephone (703)
681–2890.
SUPPLEMENTARY INFORMATION:
A. Background
Section 703 of the National Defense
Authorization Act for Fiscal Year 2008
(NDAA–08) (Pub. L. 110–181) enacted
10 U.S.C. 1074g(f). It provides that with
respect to any prescription filled on or
after the date of enactment of the
NDAA, the TRRx shall be treated as an
element of the DoD for purposes of
procurement of drugs by Federal
agencies under section 8126 of title 38,
United States Code (U.S.C.), to the
extent necessary to ensure
pharmaceuticals paid for by the DoD
that are provided by network retail
pharmacies under the program to
eligible covered beneficiaries are subject
to the pricing standards in such section
8126. NDAA–08 was enacted on January
28, 2008. The statute requires
implementing regulations.
The Veterans Health Care Act (VHCA)
of 1992, codified at 38 U.S.C. 8126,
established Federal Ceiling Prices
(FCPs) of covered pharmaceuticals
(requiring a minimum 24% discount off
non-Federal average manufacturing
prices—‘‘non-FAMP’’) procured by the
four designated agencies covered in the
Act: Department of Veterans Affairs
(VA), DoD, Coast Guard, and the Public
Health Service/Indian Health Service.
The non-FAMP is the average price paid
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to the manufacturer by wholesalers (or,
if there are insufficient wholesale sales,
others who purchase directly from the
manufacturer) for drugs distributed to
non-federal purchasers, taking into
account any cash discounts or similar
reductions given to those purchasers.
The VA administers the VHCA discount
program on behalf of the four specified
agencies. The DoD consulted closely
with the VA in the development of this
proposed rule.
The TRICARE Pharmacy Benefits
Program operates under the authority of
10 U.S.C. 1074g. It provides outpatient
drugs to TRICARE beneficiaries through
Military Treatment Facility (MTF)
pharmacies, the TRICARE mail order
pharmacy program (TMOP), and a TRRx
consisting of TRICARE Retail Pharmacy
Network and retail non-network
pharmacies. As implemented, the new
statutory requirement will only apply to
pharmaceuticals paid for by DoD and
provided to eligible beneficiaries
through the TRICARE Retail Pharmacy
Network.
The TRICARE Retail Pharmacy
Network is managed under a single
Pharmacy Benefits Manager contract,
linked to the DoD Pharmacy Benefits
Office, and enabled by a management
information system to verify beneficiary
eligibility, check for potential drug
interactions, and authorize payment for
the pharmaceuticals used to fill the
beneficiary’s prescription. The
management information system also
records data on all prescriptions filled
through the Retail Pharmacy Network,
permitting an accurate accounting of all
retail network pharmaceuticals paid for
by DoD under the TRICARE Pharmacy
Benefits Program. Since the beginning of
the FCP program, outpatient
pharmaceuticals provided by DoD
through MTF pharmacies have been
subject to FCPs, as have those under the
TMOP program since it began.
Implementation of similar applicability
to the TRICARE Retail Pharmacy
Network component of the Program is
the subject of this proposed regulation.
B. Provisions of the Rule
The proposed rule would add a new
paragraph (q) to § 199.21. Paragraph
(q)(1) repeats the new statutory
requirement. Paragraph (q)(2) provides
that an agreement by a manufacturer to
honor the FCPs in the Retail Pharmacy
Network component of the Pharmacy
Benefits Program is a condition of
inclusion of a drug on the uniform
formulary. Further, it states that a drug
not under such an agreement requires
preauthorization to be provided through
the Retail Pharmacy Network. In
addition, it indicates that drugs covered
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by this requirement are TRICARE Retail
Pharmacy Network provided drugs that
are covered by the VA’s FCP program,
except any prescription for which the
TRICARE Pharmacy Benefits Program is
the second payer. While DoD proposes
in this rulemaking to enter into
voluntary agreements with
manufacturers that would make
prescriptions filled on or after the date
of enactment of NDAA–08 subject to
FCPs, the Department solicits comment
regarding any other appropriate and
legally permissible implementation
approach and/or date from which to
begin making prescriptions filled in the
Retail Pharmacy Network subject to
FCPs. DoD is specifically interested in
the legal justification, including under
section 703 of NDAA–08, for any
alternative implementation approaches
and/or dates that commenters may
propose.
Paragraph (q)(3) establishes refund
procedures to, in the words of the
statute, ‘‘ensure that pharmaceuticals
paid for by the DoD that are provided
by pharmacies under the program to
eligible covered beneficiaries under this
section are subject to the pricing
standards’’ of the FCP program. The
refund procedures will, to the extent
practicable, incorporate common
industry practices for implementing
pricing agreements between
manufacturers and large pharmacy
benefit plan sponsors. Such procedures
shall provide the manufacturer at least
70 days from the date of submission by
TMA to the manufacturer (initially
expected to be on a quarterly basis) of
the TRICARE pharmaceutical utilization
data needed to calculate the refund
before the refund payment is due. The
basis of the refund will be the difference
between the average non-federal price of
the drug sold by the manufacturer to
wholesalers, as represented by the most
recent annual non-FAMP (reported to
VA) and the FCP or, in the discretion of
the manufacturer, the difference
between FCP and direct commercial
contract sales prices specifically
attributable to TRICARE paid
pharmaceuticals, determined for each
applicable National Drug Code (NDC)
listing. Further, this paragraph of the
rule provides that a refund due under
the statute is subject to the overpayment
recovery procedures of § 199.11 of the
TRICARE regulation.
Finally, paragraph (q)(4) states that in
the case of the failure of a manufacturer
of a covered drug to make or honor an
agreement to ensure that DoD pays no
more than the FCP for covered drugs
provided through the TRICARE Retail
Pharmacy Network component of the
program, the Director, TMA, in addition
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Federal Register / Vol. 73, No. 144 / Friday, July 25, 2008 / Proposed Rules
to other actions referred to in the rule,
may take any other action authorized by
law.
Ceiling Prices to the TRICARE Retail
Pharmacy Network in Fiscal Years 2009
through 2011 are:
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C. Regulatory Procedures
Millions
Executive Order 12866, ‘‘Regulatory
Planning and Review’’
Executive Order (EO) 12866 requires
that a comprehensive regulatory impact
analysis be performed on any
economically significant regulatory
action, defined primarily as one that
would result in an effect of $100 million
or more in any one year. The DoD has
examined the economic, legal, and
policy implications of this proposed
rule and has concluded that it is an
economically significant regulatory
action under section 3(f)(1) of the EO.
The economic impact of applying
Federal Ceiling Prices to the TRICARE
Retail Pharmacy Network is in the form
of reducing the prices of drugs paid for
by DoD in the retail pharmacy
component of the TRICARE Pharmacy
Benefits Program, making them
comparable to the prices paid by DoD in
the Military Treatment Facility and Mail
Order Pharmacy components of the
program.
A recent Government Accountability
Office Report, ‘‘DoD Pharmacy Program:
Continued Efforts Needed to Reduce
Growth in Spending at Retail
Pharmacies,’’ April 2008 (GAO–08–
327), found that DoD’s drug spending
‘‘more than tripled from $1.6 billion in
fiscal year 2000 to $6.2 billion in fiscal
year 2006’’ and that retail pharmacy
spending ‘‘drove most of this increase,
rising almost nine-fold from $455
million to $3.9 billion and growing from
29 percent of overall drug spending to
63 percent.’’ DoD concurs in these
findings. The principal economic
impact of this proposed rule is to
moderate somewhat the rate of growth
in the retail pharmacy component of the
program.
DoD has estimated the reduced
spending associated applying Federal
Ceiling Prices to the Retail Pharmacy
Network. DoD funds the Military Health
System through two separate
mechanisms. One is the Defense Health
Program (DHP) appropriation, which
pays for health care for all beneficiaries
except those who are also eligible for
Medicare. DoD-funded health care for
DoD beneficiaries who are also eligible
for Medicare is paid for by way of an
accrual fund called the MedicareEligible Retiree Health Care Fund
(MERHCF) under 10 U.S.C Chapter 56.
Funds are paid into the MERHCF from
military personnel appropriations and
the general U.S. treasury. DoD estimated
cost reductions from applying Federal
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FY–2009 DHP Reduced Spending ...........................................
FY–2009 MERHCF Reduced
Spending .................................
FY–2010 DHP Reduced Spending ...........................................
FY–2010 MERHCF Reduced
Spending .................................
FY–2011 DHP Reduced Spending ...........................................
FY–2011 MERHCF Reduced
Spending .................................
$352
367
388
404
427
444
As a frame of reference, total TRICARE
Pharmacy Benefits Program spending
(incorporating these spending
reductions) is estimated to be $8 billion
in FY–2009, $8.4 billion in FY–2010,
and $9.3 billion in FY–2011.
Congressional Review Act, 5 U.S.C. 801,
et seq.
Under the Congressional Review Act,
a major rule may not take effect until at
least 60 days after submission to
Congress of a report regarding the rule.
A major rule is one that would have an
annual effect on the economy of $100
million or more or have certain other
impacts. This proposed rule is a major
rule under the Congressional Review
Act. As noted above, applying Federal
Ceiling Prices to the TRICARE Retail
Pharmacy Network will reduce DoD
spending on pharmaceuticals by more
than $100 million per year.
Sec. 202, Pub. L. 104–4, ‘‘Unfunded
Mandates Reform Act’’
This rule does not contain a Federal
mandate that may result in the
expenditure by State, local and tribunal
governments, in aggregate, or by the
private sector, of $100 million or more
(adjusted for inflation) in any one year.
Public Law 96–354, ‘‘Regulatory
Flexibility Act’’ (5 U.S.C. 601)
The Regulatory Flexibility Act (RFA)
requires that each Federal agency
prepare and make available for public
comment, a regulatory flexibility
analysis when the agency issues a
regulation which would have a
significant impact on a substantial
number of small entities. DoD does not
anticipate that this regulation will result
in changes that would impact small
entities, including retail pharmacies,
whose reimbursements are not affected
by the proposed rule. In addition, drugs
newly subject to implementation of
Federal Ceiling Prices under the
proposed rule represent less than 2% of
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manufacturers’ prescription drug sales.
Therefore, this proposed rule is not
expected to result in significant impacts
on a substantial number of small
entities.
Public Law 96–511, ‘‘Paperwork
Reduction Act’’ (44 U.S.C. Chapter 35)
This proposed rule contains
information collection requirements
subject to the Paperwork Reduction Act
(PRA) of 1995 (44 U.S.C. 3501–3511).
This consists of responding to the
periodic TMA report of the TRICARE
prescription utilization data needed to
calculate the refund. This information
collection has been approved with OMB
Control Number 0720–0032. No person
is required to respond to, nor shall any
person be subject to a penalty for failure
to comply with, a collection of
information subject to the requirements
of the PRA, unless that collection of
information displays a currently valid
OMB Control Number.
Executive Order 13132, ‘‘Federalism’’
This proposed rule does not have
federalism implications, as set forth in
Executive Order 13132. This rule does
not have substantial direct effects on the
States; the relationship between the
National Government and the States; or
the distribution of power and
responsibilities among the various
levels of Government.
Public Comments Invited
This is a proposed rule. DoD invites
public comments on all of its
provisions.
List of Subjects in 32 CFR Part 199
Claims, Health care, Health insurance,
Military personnel, Pharmacy benefits.
Accordingly, 32 CFR part 199 is
proposed to be amended as follows:
PART 199—[AMENDED]
1. The authority citation for part 199
continues to read as follows:
Authority: 5 U.S.C. 301; 10 U.S.C. chapter
55.
2. Section 199.21 is amended by
adding a new paragraph (q), to read as
follows:
§ 199.21.
Pharmacy Benefits Program.
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(q) Pricing standards for retail
pharmacy program.—(1) Statutory
requirement.—As required by 10 U.S.C.
1074g(f), with respect to any
prescription filled on or after the date of
the enactment of the National Defense
Authorization Act for Fiscal Year 2008,
the TRICARE retail pharmacy program
shall be treated as an element of the
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DoD for purposes of the procurement of
drugs by Federal agencies under 38
U.S.C. 8126 to the extent necessary to
ensure pharmaceuticals paid for by the
DoD that are provided by pharmacies
under the program to eligible covered
beneficiaries under this section are
subject to the pricing standards in such
section 8126.
(2) Manufacturer written agreement.
(i) A written agreement by a
manufacturer to honor the pricing
standards required by 10 U.S.C. 1074g(f)
and referred to in paragraph (q)(1) of
this section for pharmaceuticals
provided through retail network
pharmacies shall with respect to a
particular covered drug be a condition
for:
(A) Inclusion of that drug on the
uniform formulary under this section;
and
(B) Availability of that drug through
retail network pharmacies without
preauthorization under paragraph (k) of
this section.
(ii) A covered drug not under an
agreement under paragraph (q)(2)(i) of
this section requires preauthorization
under paragraph (k) of this section to be
provided through a retail network
pharmacy under the Pharmacy Benefits
Program. This preauthorization
requirement does not apply to other
points of service under the Pharmacy
Benefits Program.
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(iii) For purposes of this paragraph
(q)(2), a covered drug does not include:
(A) A drug that is not a covered drug
under 38 U.S.C. 8126;
(B) A drug provided under a
prescription that is not covered by 10
U.S.C. 1074g(f);
(C) A drug that is not provided
through a retail network pharmacy
under this section;
(D) Any pharmaceutical for which the
TRICARE Pharmacy Benefits Program is
the second payer under paragraph (m) of
this section; and
(E) Any other exception, consistent
with law, established by the Director,
TMA.
(3) Refund procedures. (i) The
agreement referred to in paragraph (q)(2)
of this section shall include refund
procedures to ensure that
pharmaceuticals paid for by the DoD
that are provided by retail network
pharmacies under the pharmacy
benefits program are subject to the
pricing standards referred to in
paragraph (q)(1) of this section.
(ii) The refund procedures referred to
in paragraph (q)(3)(i) of this section
shall, to the extent practicable,
incorporate common industry practices
for implementing pricing agreements
between manufacturers and large
pharmacy benefit plan sponsors. Such
procedures shall provide the
manufacturer at least 70 days from the
date of the submission of the TRICARE
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43397
pharmaceutical utilization data needed
to calculate the refund before the refund
payment is due. The basis of the refund
will be the difference between the
average non-federal price of the drug
sold by the manufacturer to wholesalers,
as represented by the most recent
annual non-Federal average
manufacturing prices (non-FAMP)
(reported to the Department of Veterans
Affairs (VA)) and the FCP or, in the
discretion of the manufacturer, the
difference between the FCP and direct
commercial contract sales prices
specifically attributable to the reported
TRICARE paid pharmaceuticals,
determined for each applicable NDC
listing.
(iii) A refund due under this
paragraph (q) is subject to § 199.11 of
this part.
(4) Remedies. In the case of the failure
of a manufacturer of a covered drug to
make or honor an agreement under this
paragraph (q), the Director, TMA, in
addition to other actions referred to in
this paragraph (q), may take any other
action authorized by law.
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Dated: July 18, 2008.
Patricia L. Toppings,
OSD Federal Register Liaison Officer,
Department of Defense.
[FR Doc. E8–17024 Filed 7–24–08; 8:45 am]
BILLING CODE 5001–06–P
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]]>Agencies
[Federal Register Volume 73, Number 144 (Friday, July 25, 2008)]
[Proposed Rules]
[Pages 43394-43397]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-17024]
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DEPARTMENT OF DEFENSE
Office of the Secretary
32 CFR Part 199
[DoD-2008-HA-0029; 0720-AB22]
Civilian Health and Medical Program of the Uniformed Services
(CHAMPUS)/TRICARE: Inclusion of TRICARE Retail Pharmacy Program in
Federal Procurement of Pharmaceuticals
AGENCY: Office of the Secretary, Department of Defense (DoD).
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: Section 703 of the National Defense Authorization Act for
Fiscal Year 2008 (NDAA-08) states with respect to any prescription
filled on or after the date of enactment of the NDAA, the TRICARE
retail pharmacy program (TRRx) shall be treated as an element of the
DoD for purposes of procurement of drugs by Federal agencies under
section 8126 of title 38, United States Code (U.S.C.), to the extent
necessary to ensure pharmaceuticals paid for by the DoD that are
provided by network retail pharmacies under the program to eligible
covered beneficiaries are subject to the pricing standards in such
section 8126. NDAA-08 was enacted on January 28, 2008. The statute
requires implementing regulations. This
[[Page 43395]]
proposed rule is to implement section 703 of the NDAA 2008.
DATES: Written comments received at the address indicated below by
September 23, 2008 will be considered and addressed in the final rule.
ADDRESSES: You may submit comments, identified by docket number and/or
RIN number and title, by any of the following methods:
Federal eRulemaking Portal: https://www.regulations.gov. Follow the
instructions for submitting comments.
Mail: Federal Docket Management System Office, 1160 Defense
Pentagon, Washington, DC 20301-1160.
Instructions: All submissions received must include the agency name
and docket number or Regulatory Information Number (RIN) for this
Federal Register document. The general policy for comments and other
submissions from members of the public is to make these submissions
available for public viewing on the Internet at https://
www.regulations.gov as they are received without change, including any
personal identifiers or contact information.
FOR FURTHER INFORMATION CONTACT: Captain William Blanche, TRICARE
Management Activity, telephone (703) 681-2890.
SUPPLEMENTARY INFORMATION:
A. Background
Section 703 of the National Defense Authorization Act for Fiscal
Year 2008 (NDAA-08) (Pub. L. 110-181) enacted 10 U.S.C. 1074g(f). It
provides that with respect to any prescription filled on or after the
date of enactment of the NDAA, the TRRx shall be treated as an element
of the DoD for purposes of procurement of drugs by Federal agencies
under section 8126 of title 38, United States Code (U.S.C.), to the
extent necessary to ensure pharmaceuticals paid for by the DoD that are
provided by network retail pharmacies under the program to eligible
covered beneficiaries are subject to the pricing standards in such
section 8126. NDAA-08 was enacted on January 28, 2008. The statute
requires implementing regulations.
The Veterans Health Care Act (VHCA) of 1992, codified at 38 U.S.C.
8126, established Federal Ceiling Prices (FCPs) of covered
pharmaceuticals (requiring a minimum 24% discount off non-Federal
average manufacturing prices--``non-FAMP'') procured by the four
designated agencies covered in the Act: Department of Veterans Affairs
(VA), DoD, Coast Guard, and the Public Health Service/Indian Health
Service. The non-FAMP is the average price paid to the manufacturer by
wholesalers (or, if there are insufficient wholesale sales, others who
purchase directly from the manufacturer) for drugs distributed to non-
federal purchasers, taking into account any cash discounts or similar
reductions given to those purchasers. The VA administers the VHCA
discount program on behalf of the four specified agencies. The DoD
consulted closely with the VA in the development of this proposed rule.
The TRICARE Pharmacy Benefits Program operates under the authority
of 10 U.S.C. 1074g. It provides outpatient drugs to TRICARE
beneficiaries through Military Treatment Facility (MTF) pharmacies, the
TRICARE mail order pharmacy program (TMOP), and a TRRx consisting of
TRICARE Retail Pharmacy Network and retail non-network pharmacies. As
implemented, the new statutory requirement will only apply to
pharmaceuticals paid for by DoD and provided to eligible beneficiaries
through the TRICARE Retail Pharmacy Network.
The TRICARE Retail Pharmacy Network is managed under a single
Pharmacy Benefits Manager contract, linked to the DoD Pharmacy Benefits
Office, and enabled by a management information system to verify
beneficiary eligibility, check for potential drug interactions, and
authorize payment for the pharmaceuticals used to fill the
beneficiary's prescription. The management information system also
records data on all prescriptions filled through the Retail Pharmacy
Network, permitting an accurate accounting of all retail network
pharmaceuticals paid for by DoD under the TRICARE Pharmacy Benefits
Program. Since the beginning of the FCP program, outpatient
pharmaceuticals provided by DoD through MTF pharmacies have been
subject to FCPs, as have those under the TMOP program since it began.
Implementation of similar applicability to the TRICARE Retail Pharmacy
Network component of the Program is the subject of this proposed
regulation.
B. Provisions of the Rule
The proposed rule would add a new paragraph (q) to Sec. 199.21.
Paragraph (q)(1) repeats the new statutory requirement. Paragraph
(q)(2) provides that an agreement by a manufacturer to honor the FCPs
in the Retail Pharmacy Network component of the Pharmacy Benefits
Program is a condition of inclusion of a drug on the uniform formulary.
Further, it states that a drug not under such an agreement requires
preauthorization to be provided through the Retail Pharmacy Network. In
addition, it indicates that drugs covered by this requirement are
TRICARE Retail Pharmacy Network provided drugs that are covered by the
VA's FCP program, except any prescription for which the TRICARE
Pharmacy Benefits Program is the second payer. While DoD proposes in
this rulemaking to enter into voluntary agreements with manufacturers
that would make prescriptions filled on or after the date of enactment
of NDAA-08 subject to FCPs, the Department solicits comment regarding
any other appropriate and legally permissible implementation approach
and/or date from which to begin making prescriptions filled in the
Retail Pharmacy Network subject to FCPs. DoD is specifically interested
in the legal justification, including under section 703 of NDAA-08, for
any alternative implementation approaches and/or dates that commenters
may propose.
Paragraph (q)(3) establishes refund procedures to, in the words of
the statute, ``ensure that pharmaceuticals paid for by the DoD that are
provided by pharmacies under the program to eligible covered
beneficiaries under this section are subject to the pricing standards''
of the FCP program. The refund procedures will, to the extent
practicable, incorporate common industry practices for implementing
pricing agreements between manufacturers and large pharmacy benefit
plan sponsors. Such procedures shall provide the manufacturer at least
70 days from the date of submission by TMA to the manufacturer
(initially expected to be on a quarterly basis) of the TRICARE
pharmaceutical utilization data needed to calculate the refund before
the refund payment is due. The basis of the refund will be the
difference between the average non-federal price of the drug sold by
the manufacturer to wholesalers, as represented by the most recent
annual non-FAMP (reported to VA) and the FCP or, in the discretion of
the manufacturer, the difference between FCP and direct commercial
contract sales prices specifically attributable to TRICARE paid
pharmaceuticals, determined for each applicable National Drug Code
(NDC) listing. Further, this paragraph of the rule provides that a
refund due under the statute is subject to the overpayment recovery
procedures of Sec. 199.11 of the TRICARE regulation.
Finally, paragraph (q)(4) states that in the case of the failure of
a manufacturer of a covered drug to make or honor an agreement to
ensure that DoD pays no more than the FCP for covered drugs provided
through the TRICARE Retail Pharmacy Network component of the program,
the Director, TMA, in addition
[[Page 43396]]
to other actions referred to in the rule, may take any other action
authorized by law.
C. Regulatory Procedures
Executive Order 12866, ``Regulatory Planning and Review''
Executive Order (EO) 12866 requires that a comprehensive regulatory
impact analysis be performed on any economically significant regulatory
action, defined primarily as one that would result in an effect of $100
million or more in any one year. The DoD has examined the economic,
legal, and policy implications of this proposed rule and has concluded
that it is an economically significant regulatory action under section
3(f)(1) of the EO. The economic impact of applying Federal Ceiling
Prices to the TRICARE Retail Pharmacy Network is in the form of
reducing the prices of drugs paid for by DoD in the retail pharmacy
component of the TRICARE Pharmacy Benefits Program, making them
comparable to the prices paid by DoD in the Military Treatment Facility
and Mail Order Pharmacy components of the program.
A recent Government Accountability Office Report, ``DoD Pharmacy
Program: Continued Efforts Needed to Reduce Growth in Spending at
Retail Pharmacies,'' April 2008 (GAO-08-327), found that DoD's drug
spending ``more than tripled from $1.6 billion in fiscal year 2000 to
$6.2 billion in fiscal year 2006'' and that retail pharmacy spending
``drove most of this increase, rising almost nine-fold from $455
million to $3.9 billion and growing from 29 percent of overall drug
spending to 63 percent.'' DoD concurs in these findings. The principal
economic impact of this proposed rule is to moderate somewhat the rate
of growth in the retail pharmacy component of the program.
DoD has estimated the reduced spending associated applying Federal
Ceiling Prices to the Retail Pharmacy Network. DoD funds the Military
Health System through two separate mechanisms. One is the Defense
Health Program (DHP) appropriation, which pays for health care for all
beneficiaries except those who are also eligible for Medicare. DoD-
funded health care for DoD beneficiaries who are also eligible for
Medicare is paid for by way of an accrual fund called the Medicare-
Eligible Retiree Health Care Fund (MERHCF) under 10 U.S.C Chapter 56.
Funds are paid into the MERHCF from military personnel appropriations
and the general U.S. treasury. DoD estimated cost reductions from
applying Federal Ceiling Prices to the TRICARE Retail Pharmacy Network
in Fiscal Years 2009 through 2011 are:
------------------------------------------------------------------------
Millions
------------------------------------------------------------------------
FY-2009 DHP Reduced Spending................................ $352
FY-2009 MERHCF Reduced Spending............................. 367
FY-2010 DHP Reduced Spending................................ 388
FY-2010 MERHCF Reduced Spending............................. 404
FY-2011 DHP Reduced Spending................................ 427
FY-2011 MERHCF Reduced Spending............................. 444
------------------------------------------------------------------------
As a frame of reference, total TRICARE Pharmacy Benefits Program
spending (incorporating these spending reductions) is estimated to be
$8 billion in FY-2009, $8.4 billion in FY-2010, and $9.3 billion in FY-
2011.
Congressional Review Act, 5 U.S.C. 801, et seq.
Under the Congressional Review Act, a major rule may not take
effect until at least 60 days after submission to Congress of a report
regarding the rule. A major rule is one that would have an annual
effect on the economy of $100 million or more or have certain other
impacts. This proposed rule is a major rule under the Congressional
Review Act. As noted above, applying Federal Ceiling Prices to the
TRICARE Retail Pharmacy Network will reduce DoD spending on
pharmaceuticals by more than $100 million per year.
Sec. 202, Pub. L. 104-4, ``Unfunded Mandates Reform Act''
This rule does not contain a Federal mandate that may result in the
expenditure by State, local and tribunal governments, in aggregate, or
by the private sector, of $100 million or more (adjusted for inflation)
in any one year.
Public Law 96-354, ``Regulatory Flexibility Act'' (5 U.S.C. 601)
The Regulatory Flexibility Act (RFA) requires that each Federal
agency prepare and make available for public comment, a regulatory
flexibility analysis when the agency issues a regulation which would
have a significant impact on a substantial number of small entities.
DoD does not anticipate that this regulation will result in changes
that would impact small entities, including retail pharmacies, whose
reimbursements are not affected by the proposed rule. In addition,
drugs newly subject to implementation of Federal Ceiling Prices under
the proposed rule represent less than 2% of manufacturers' prescription
drug sales. Therefore, this proposed rule is not expected to result in
significant impacts on a substantial number of small entities.
Public Law 96-511, ``Paperwork Reduction Act'' (44 U.S.C. Chapter 35)
This proposed rule contains information collection requirements
subject to the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-
3511). This consists of responding to the periodic TMA report of the
TRICARE prescription utilization data needed to calculate the refund.
This information collection has been approved with OMB Control Number
0720-0032. No person is required to respond to, nor shall any person be
subject to a penalty for failure to comply with, a collection of
information subject to the requirements of the PRA, unless that
collection of information displays a currently valid OMB Control
Number.
Executive Order 13132, ``Federalism''
This proposed rule does not have federalism implications, as set
forth in Executive Order 13132. This rule does not have substantial
direct effects on the States; the relationship between the National
Government and the States; or the distribution of power and
responsibilities among the various levels of Government.
Public Comments Invited
This is a proposed rule. DoD invites public comments on all of its
provisions.
List of Subjects in 32 CFR Part 199
Claims, Health care, Health insurance, Military personnel, Pharmacy
benefits.
Accordingly, 32 CFR part 199 is proposed to be amended as follows:
PART 199--[AMENDED]
1. The authority citation for part 199 continues to read as
follows:
Authority: 5 U.S.C. 301; 10 U.S.C. chapter 55.
2. Section 199.21 is amended by adding a new paragraph (q), to read
as follows:
Sec. 199.21. Pharmacy Benefits Program.
* * * * *
(q) Pricing standards for retail pharmacy program.--(1) Statutory
requirement.--As required by 10 U.S.C. 1074g(f), with respect to any
prescription filled on or after the date of the enactment of the
National Defense Authorization Act for Fiscal Year 2008, the TRICARE
retail pharmacy program shall be treated as an element of the
[[Page 43397]]
DoD for purposes of the procurement of drugs by Federal agencies under
38 U.S.C. 8126 to the extent necessary to ensure pharmaceuticals paid
for by the DoD that are provided by pharmacies under the program to
eligible covered beneficiaries under this section are subject to the
pricing standards in such section 8126.
(2) Manufacturer written agreement. (i) A written agreement by a
manufacturer to honor the pricing standards required by 10 U.S.C.
1074g(f) and referred to in paragraph (q)(1) of this section for
pharmaceuticals provided through retail network pharmacies shall with
respect to a particular covered drug be a condition for:
(A) Inclusion of that drug on the uniform formulary under this
section; and
(B) Availability of that drug through retail network pharmacies
without preauthorization under paragraph (k) of this section.
(ii) A covered drug not under an agreement under paragraph
(q)(2)(i) of this section requires preauthorization under paragraph (k)
of this section to be provided through a retail network pharmacy under
the Pharmacy Benefits Program. This preauthorization requirement does
not apply to other points of service under the Pharmacy Benefits
Program.
(iii) For purposes of this paragraph (q)(2), a covered drug does
not include:
(A) A drug that is not a covered drug under 38 U.S.C. 8126;
(B) A drug provided under a prescription that is not covered by 10
U.S.C. 1074g(f);
(C) A drug that is not provided through a retail network pharmacy
under this section;
(D) Any pharmaceutical for which the TRICARE Pharmacy Benefits
Program is the second payer under paragraph (m) of this section; and
(E) Any other exception, consistent with law, established by the
Director, TMA.
(3) Refund procedures. (i) The agreement referred to in paragraph
(q)(2) of this section shall include refund procedures to ensure that
pharmaceuticals paid for by the DoD that are provided by retail network
pharmacies under the pharmacy benefits program are subject to the
pricing standards referred to in paragraph (q)(1) of this section.
(ii) The refund procedures referred to in paragraph (q)(3)(i) of
this section shall, to the extent practicable, incorporate common
industry practices for implementing pricing agreements between
manufacturers and large pharmacy benefit plan sponsors. Such procedures
shall provide the manufacturer at least 70 days from the date of the
submission of the TRICARE pharmaceutical utilization data needed to
calculate the refund before the refund payment is due. The basis of the
refund will be the difference between the average non-federal price of
the drug sold by the manufacturer to wholesalers, as represented by the
most recent annual non-Federal average manufacturing prices (non-FAMP)
(reported to the Department of Veterans Affairs (VA)) and the FCP or,
in the discretion of the manufacturer, the difference between the FCP
and direct commercial contract sales prices specifically attributable
to the reported TRICARE paid pharmaceuticals, determined for each
applicable NDC listing.
(iii) A refund due under this paragraph (q) is subject to Sec.
199.11 of this part.
(4) Remedies. In the case of the failure of a manufacturer of a
covered drug to make or honor an agreement under this paragraph (q),
the Director, TMA, in addition to other actions referred to in this
paragraph (q), may take any other action authorized by law.
* * * * *
Dated: July 18, 2008.
Patricia L. Toppings,
OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. E8-17024 Filed 7-24-08; 8:45 am]
BILLING CODE 5001-06-P
