Medicaid Program; Multiple Source Drug Definition, 58491-58497 [E8-23653]

Download as PDF Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations States prior to publication of the notice in the Federal Register. A major rule cannot take effect until 60 days after it is published in the Federal Register. This action is not a ‘‘major rule’’ as defined by 5 U.S.C. 804(2). This rule will be effective October 7, 2008. DEPARTMENT OF HEALTH AND HUMAN SERVICES List of Subjects in 40 CFR Part 59 [CMS–2238–F] Air pollution control, Consumer and commercial products, Confidential business information, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds. RIN 0938–AP26 Dated: September 30, 2008. Stephen L. Johnson, Administrator. For the reasons stated in the preamble, title 40, chapter I of the Code of Federal Regulations is amended as follows: ■ PART 59—[AMENDED] 1. The authority citation for part 59 continues to read as follows: ■ Authority: 42 U.S.C. 7414 and 7511b(e). Subpart A—General 2. Section 59.1 is revised to read as follows: ■ jlentini on PROD1PC65 with RULES § 59.1 Final determinations under Section 183(e)(3)(C) of the CAA. This section identifies the consumer and commercial product categories for which EPA has determined that CTGs will be substantially as effective as regulations in reducing VOC emissions in ozone nonattainment areas: (a) Wood furniture coatings; (b) Aerospace coatings; (c) Shipbuilding and repair coatings; (d) Lithographic printing materials; (e) Letterpress printing materials; (f) Flexible packaging printing materials; (g) Flat wood paneling coatings; (h) Industrial cleaning solvents; (i) Paper, film, and foil coatings; (j) Metal furniture coatings; (k) Large appliance coatings; (l) Miscellaneous metal products coatings; (m) Plastic parts coatings; (n) Auto and light-duty truck assembly coatings; (o) Fiberglass boat manufacturing materials; and (p) Miscellaneous industrial adhesives. [FR Doc. E8–23750 Filed 10–6–08; 8:45 am] BILLING CODE 6560–50–P VerDate Aug<31>2005 18:31 Oct 06, 2008 Jkt 217001 Centers for Medicare & Medicaid Services 42 CFR Part 447 Medicaid Program; Multiple Source Drug Definition Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Final rule. AGENCY: SUMMARY: This final rule revises the definition of ‘‘multiple source drug’’ to better conform the regulatory definition to the provisions of section 1927(k)(7) of the Social Security Act. It also responds to public comments received on the March 14, 2008 interim final rule with comment period. DATES: Effective Date: This final rule is effective November 6, 2008. FOR FURTHER INFORMATION CONTACT: Gail Sexton, (410) 786–4583. SUPPLEMENTARY INFORMATION: I. Background In the July 17, 2007 Federal Register we published a final rule with comment period (72 FR 39142) implementing the provisions of the Deficit Reduction Act of 2005 (DRA) pertaining to prescription drugs under the Medicaid Program. In that rule, we codified terms pertaining to the calculation and reporting of average manufacturer price (AMP) and best price and amended existing regulations regarding the calculation of the Federal upper limits (FULs) for certain covered outpatient drugs. The rule was effective October 1, 2007. On March 14, 2008, we issued an interim final rule with comment period (73 FR 13785) that revised the definition of multiple source drug to conform to the statutory provisions. As stated in that rule, the interim final rule with comment period was not issued in response to public comments received on the Medicaid prescription drug rule. We are still considering those comments. On November 15, 2007, the National Association of Chain Drug Stores and the National Community Pharmacists Association filed a motion for a preliminary injunction in the United States District Court for the District of Columbia. They contended, in part, that the definition of ‘‘multiple source drug’’ adopted in the Medicaid prescription drug rule is contrary to the statutory language in that it defined a multiple source drug, in part, as a drug PO 00000 Frm 00057 Fmt 4700 Sfmt 4700 58491 which is sold or marketed in the United States, as opposed to the State. Plaintiffs argued that all drugs are not generally available in every State. National Association of Chain Drug Stores et al. v. Health and Human Services, Civil Action No. 1:07–cv–02017 (RCL). Although we continue to believe that, when an FDA-approved, therapeutically, pharmaceutically, and bioequivalent drug is sold or marketed in the United States, at least one therapeutically, pharmaceutically, and bioequivalent drug is sold or marketed in every State, we issued an interim final rule with comment period to revise the definition of ‘‘multiple source drug.’’ We stated that we expected the effect of the revision, if any, to be minimal. We are publishing this final rule to address comments received on the interim final rule with comment period published on March 14, 2008 (73 FR 13785). Specifically, we are addressing comments pertaining to the definition of ‘‘multiple source drug’’ in the March 14, 2008 interim final rule with comment period. For a full discussion of the multiple source drug definition provisions see the March 14, 2008 interim final rule with comment period (73 FR 13785). As noted in the interim final rule with comment period, this rule to the extent that it may affect Medicaid reimbursement rates for retail pharmacies, is subject to the injunction issued by the United States District Court for the District of Columbia in National Association of Chain Drug Stores et al. v. Health and Human Services, Civil Action No. 1:07–cv– 02017 (RCL). II. Provisions of the Interim Final Rule In § 447.502, we defined key terms used for payment and rebates for Medicaid covered outpatient drugs. We defined multiple source drug, with respect to a rebate period, as a covered outpatient drug for which there is at least one other drug product which is: (1) Rated as therapeutically equivalent (for the list of drug products rated as therapeutically equivalent, see the FDA’s most recent publication of ‘‘Approved Drug Products with Therapeutic Equivalence Evaluations’’ which is available at https:// www.fda.gov/cder/orange/default.htm or can be viewed at the FDA’s Freedom of Information Public Reading Room at 5600 Fishers Lane, rm. 12A–30, Rockville, MD 20857); (2) pharmaceutically equivalent and bioequivalent, as determined by the FDA; and (3) sold or marketed in the United States during the rebate period. E:\FR\FM\07OCR1.SGM 07OCR1 58492 Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations In the March 14, 2008 interim final rule with comment period, we revised the definition of ‘‘multiple source drug’’ at § 447.502 to state, in part, that a covered outpatient drug is a multiple source drug when it is sold or marketed in the ‘‘State’’ during the rebate period. In accordance with section 1927(k)(7)(C)(iii) of the Social Security Act (‘‘the Act’’) and as discussed in the interim final rule with comment period, we consider a drug to be sold or marketed in a State if it appears in a published national listing of average wholesale prices that we have selected—currently, Red Book, Bluebook, or Medi-Span—provided the listed product is generally available to the public through retail pharmacies in that State. We also addressed our belief, based on our experience with the FUL and the drug rebate program that a national market exists for covered outpatient drugs. We also provided in the interim final rule with comment period, that when a covered outpatient drug is not a multiple source drug in the State, that drug is not subject to the FUL in that State for the applicable rebate period. We further provided that where the drug does not qualify as a multiple source drug in the State, the State should apply the appropriate pricing methodologies as set forth in the approved State plan. jlentini on PROD1PC65 with RULES III. Analysis of and Responses to Public Comments We received nine items of correspondence that addressed the March 14, 2008 interim final rule with comment period. We received comments from drug manufacturers and wholesalers, retail pharmacies, and membership organizations. To the extent that comments were outside the scope of the March 14, 2008 interim final rule with comment period they are not addressed in this final rule. A summary of the major issues and our responses are discussed below. A. General Comments Comment: We received several comments expressing general support and appreciation for CMS revising the definition of ‘‘multiple source drug.’’ One commenter specifically stated that the statutory definition of ‘‘multiple source drug’’ has existed since 1990, and it is important for CMS to include that definition in the regulations. One commenter noted that States appreciate the increased flexibility to determine a product’s availability and to be able to adjust FUL prices accordingly. Response: We appreciate these and all comments received relating to our interim final rule with comment period VerDate Aug<31>2005 18:31 Oct 06, 2008 Jkt 217001 revising the definition of ‘‘multiple source drug.’’ B. Adherence to the Administrative Procedures Act Comment: Several commenters stated that the interim final rule with comment period was not promulgated in accordance with the Administrative Procedure Act (APA) which provides that a Federal agency provide the public with notice of, and an opportunity to comment on, proposed agency rulemaking before issuing a final rule, which includes a statement of basis and purpose that responds to public comments. Several commenters were in disagreement with CMS that a formal notice and comment rulemaking process was not necessary because they said the new rule was not an ‘‘interpretive’’ rule, a general statement of policy, and/or a rule of agency procedure or practice. Response: We disagree. We are applying the definition of ‘‘multiple source drug’’ as specified in the statute and informing the public of the procedures and practices the agency will follow to ensure compliance with the statutory provisions. We do not believe that we need to propose a rule to incorporate the words of a provision already contained in the statute, and we therefore found good cause for waiving the notice and comment procedures. We believe that such a proposed rule would not be necessary because we would not be able to change the definition in the rule in response to public comments. In addition, as discussed in the interim final rule with comment period, we believe that the interim final rule with comment period is exempt from notice and comment rulemaking as an interpretative rule, general statement of policy and/or rule of agency procedure or practice. Furthermore, we have provided an opportunity for comment and have now considered all comments in issuing this final rule. Comment: One commenter stated that the fact that the Court issued a preliminary injunction against the old rule does not, as a matter of law, constitute good cause to eliminate notice and comment rulemaking. Another commenter stated that CMS had time to go through the notice and comment rulemaking, because the rule cannot be enforced due to Federal court injunction. Response: We issued the interim final rule with comment period revising the definition of ‘‘multiple source drug’’ to better conform the definition to the statutory language and to address the concerns raised by plaintiffs in the Medicaid prescription drug rule PO 00000 Frm 00058 Fmt 4700 Sfmt 4700 litigation. In that litigation, the plaintiffs contended, in part, that the definition of ‘‘multiple source drug’’ adopted in the Medicaid prescription drug rule is contrary to the statutory language in that it defined a multiple source drug, in part, as a drug which is sold or marketed in the ‘‘United States’’ as opposed to the ‘‘State.’’ We issued this rule to apply the definition specified in the statute. We believe it is unnecessary to propose a rule to, in effect, incorporate the words of the statute and to establish a procedure to ensure compliance with that statutory provision. Furthermore, we have provided an opportunity for comment and have now considered all comments in issuing this final rule. C. Interpretive Versus Substantive Rule Comment: Several commenters submitted reasons why they believe that this rule should not be considered an interpretive rule, as explained above, but rather, a substantive rule, and thus subject to notice and comment rulemaking. One commenter stated that this rule should be considered a substantive rule because it will be published in the Federal Register. Several commenters stated that this rule amends another substantive rule subject to notice and comment rulemaking, and thus should also be considered substantive. Other commenters stated that rules which affect methodologies for calculating Federal funding levels are substantive rules that are subject to notice and comment under the APA. Several commenters stated that, because the new rule establishes significant new burdens on pharmacies and States regarding the State availability standard that has never been imposed by either the statute or CMS, it must be considered a substantive rule. Response: We disagree. We issued the March 14, 2008 interim final rule with comment period to revise the Medicaid prescription drug rule to better conform to the statute. The statute includes a provision that a multiple source drug is sold or marketed in the State during the rebate period and a separate provision that describes when a drug is considered to be sold or marketed in a State. We revised the Medicaid prescription drug rule to include these provisions and put forth procedures to ensure compliance with the statute. We consider these provisions to be exempt from notice and comment rulemaking as an interpretive rule, general statement of policy, and/or rule of agency procedure or practice. Moreover, to the extent that notice and comment rulemaking might apply, we found good cause to waive E:\FR\FM\07OCR1.SGM 07OCR1 Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations such requirements given that the revisions were made to revise the rule to better comply with the statute. Furthermore, we have provided an opportunity for comment and have now considered all comments in issuing this final rule. D. Definition—Regulation Text Changes Comment: Several commenters suggested that the term ‘‘multiple source drug’’ as it is currently defined should be revised. One commenter stated that CMS should (1) change the introductory portion to read, ‘‘multiple source drug’’ means, with respect to a rebate period, a covered outpatient drug for which there ‘‘are at least two drug products which’’, and (2) change the initial word of paragraphs (1)–(3) of the definition from ‘‘is’’ to ‘‘are.’’ Several commenters stated that for CMS to comply with the statute, the term ‘‘covered outpatient drug’’ in the rule must be replaced with ‘‘drug product’’ in paragraphs 3(i) and 3(ii) of the definition of ‘‘multiple source drug’’ to assure that FULs are applied properly. Response: We have revised the definition of multiple source drug in this final rule in accordance with the language in the Act. We have retained the term ‘‘covered outpatient drug’’ in paragraph (3)(ii) of that definition because FULs are set for ‘‘multiple source drugs,’’ which under section 1927(k)(7)(A)(i) of the Act are a subset of ‘‘covered outpatient drugs.’’ jlentini on PROD1PC65 with RULES E. Drug Versus Drug Product— Compliance With the Social Security Act Comment: Several commenters stated that the language of the rule does not follow the language of the statute because the rule does not properly distinguish between a ‘‘drug’’ and a ‘‘drug product.’’ Several commenters stated that the distinction between drug and drug product is important. Several commenters noted that a ‘‘drug’’ is a chemical ingredient contained in one or more drug products but that a ‘‘drug product’’ is a ‘‘finished dosage form’’ such as a tablet or capsule. The commenters stated that a drug may be generally available to the public through retail pharmacies in a State even though an individual drug product is not generally available to the public through retail pharmacies in a State. Response: We appreciate the comment and have revised the regulation to conform to the statute. We note, however, that the Act does not distinguish between the terms ‘‘drug’’ and ‘‘drug product’’ in the manner suggested in these comments. VerDate Aug<31>2005 18:31 Oct 06, 2008 Jkt 217001 F. National Availability Comment: One commenter stated that drug products cannot be assumed to have national availability because regional manufacturers, marketers, distributors and wholesalers may sell exclusively to entities in a specific class of trade and may not make their drug products generally available to any or all pharmacies in a given State or to the general public, even though they are listed in the national compendia. Another commenter stated that there are many instances of limited and sporadic supply of a drug product, particularly in the first year after a new multiple source drug product is introduced to the market, so that not all pharmacies have access to sufficient supply. Response: We believe, based on our experience with the FUL program that when an FDA-approved, therapeutically, pharmaceutically, and bioequivalent drug product is sold or marketed on a nationwide basis, at least one therapeutically, pharmaceutically, and bioequivalent drug product is generally sold or marketed in every State. However, we have established a process in this rule to determine whether a listed product is generally available through retail pharmacies in a State. If a State concludes that a particular covered outpatient drug has no therapeutically, pharmaceutically, and bioequivalent drug product that is generally available in that State and, as a result, does not meet the definition of a multiple source drug in the State, that drug would not be subject to the FUL in that State. When at least two therapeutically, pharmaceutically, and bioequivalent drug products are generally available to the public through retail pharmacies within the State, the drug will be considered a multiple source drug. In the case where the covered outpatient drug is not a multiple source drug, that drug would not be subject to the FUL in that State for the applicable rebate period. G. National Availability—Compliance With the Social Security Act Comment: Several commenters stated that CMS’ assumption that drug products are nationally available does not ‘‘interpret’’ the statute, but rather contradicts the statute. Other commenters stated that CMS assumes nationwide availability of all drug products without a legal or factual basis for that assumption. Several commenters stated that CMS has not compiled evidence to justify its assumption of national availability. One commenter stated that an assumption that all drug products are available PO 00000 Frm 00059 Fmt 4700 Sfmt 4700 58493 nationwide would render the statute’s State availability standard completely superfluous. Another commenter said that the same assumption of national availability was contained in CMS’ original definition of ‘‘multiple source drug’’ which looked to whether drug products were available ‘‘in the United States’’ rather than in each ‘‘State.’’ Response: The State availability requirement has been in the Social Security Act since the Omnibus Budget Reconciliation Act of 1990. Nonetheless, we have received few complaints that drug products listed in the national compendia are not widely available, and the few complaints that we have received generally suggested availability problems occurring nationwide, rather than availability problems unique to a particular State. Therefore, in light of our experience with the implementation of section 1927 of the Act, we believe that when an FDA-approved, therapeutically, pharmaceutically, and bioequivalent drug product is sold or marketed on a nationwide basis, that at least one therapeutically, pharmaceutically, and bioequivalent drug product is sold or marketed in every State. However, to the extent that a particular covered outpatient drug has no therapeutically, pharmaceutically, and bioequivalent drug product generally available to the public through retail pharmacies within a State, this rule gives States the flexibility to disregard the FUL for that drug and apply alternate pricing methodologies as set forth in the State’s approved plan. Comment: One commenter stated that a Federal court enjoined implementation of the July 17, 2007 rule’s definition of ‘‘multiple source drug’’ because it violated the provisions of the statute’s State availability standard. Several commenters stated that despite the court’s ruling, CMS has made it clear that the agency will continue to ignore the statute’s State availability standard and continue to assume that all drugs are available nationally, and that pharmacies and States may enforce the statute’s State availability standard, but CMS will not. Response: We disagree. We have revised the definition of ‘‘multiple source drug’’ as it appeared in the Medicaid prescription drug rule to be consistent with statutory language and fully compliant with the court’s preliminary ruling. We have not ignored the State availability requirement; we have set forth a mechanism for determining whether a drug is a ‘‘multiple source drug.’’ As we stated in the March 14, 2008 interim final rule, when a State confirms that a covered outpatient drug is not a multiple source E:\FR\FM\07OCR1.SGM 07OCR1 58494 Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations jlentini on PROD1PC65 with RULES drug in that State, that drug is not subject to a FUL in that State. We have further clarified in our final rule that when at least two therapeutically, pharmaceutically, and bioequivalent drug products, covered under the Medicaid drug rebate program, are generally available within the State, the drug will be considered a multiple source drug. In the case where the covered outpatient drug is not a multiple source drug, that drug would not be subject to the FUL in that State for the rebate period. Thus, we have given States increased flexibility to determine a product’s availability. We believe that this is the most effective means to ensure that drug products not available in a State are identified and not treated as multiple source drugs. Comment: A few commenters stated that if Congress had intended that CMS simply assume that equivalent drug products are available nationwide, it would not have adopted a specific process for CMS to confirm availability in each State. Response: Congress did not adopt a specific process for CMS to confirm State availability but left it to the agency to set forth such a process. We adopted the process set forth in the interim final rule with comment period because we believe that pharmacies and States are in a substantially better position to assess the availability of drugs available for purchase in their areas. For example, the States have daily updated claims files and could validate drug availability in a more timely and efficient manner than could be done at the Federal level. In addition, pharmacies are in the best position to know the drug products to which they have access. H. State Availability—Compliance With the Social Security Act Comment: A few commenters stated that this rule does not comply with the Act’s ‘‘State availability’’ standard, which they state requires CMS to confirm whether particular drug products are generally available to the public through retail pharmacies in each State. A few commenters stated that CMS must actually implement the statutory language by not applying FULs unless it has first confirmed State availability as mandated by the statute. The commenters further stated that the statute does not authorize CMS to calculate and apply FULs and then impose on pharmacies and States the burden of investigating whether particular drug products satisfy the State availability standard. The commenters state that the Federal statute clearly discusses the duty of ‘‘the Secretary’’ to apply FULs to multiple VerDate Aug<31>2005 18:31 Oct 06, 2008 Jkt 217001 source drug products that satisfy the State availability standard. Response: We disagree. The statute does not prohibit States from assisting in the availability determination or, as noted previously, otherwise set forth any mechanism for determining whether a drug is ‘‘generally available.’’ We believe the most efficient means to do so is to have the State make the initial determination that drugs are not generally available in that State. The Act, as amended by the DRA, clearly contemplates the creation of a single nationwide FUL list. To first confirm availability of each and every drug on a State-by-State basis before setting a FUL would render the FUL provisions established by the DRA administratively impossible to implement, and would create an undue burden that would make the publication of a timely list unlikely. This practice would be inconsistent with the statute which provides that the Secretary establish a FUL for each multiple source drug that enters the market on a timely basis. Comment: Several commenters asserted that CMS incorrectly instructs States that the State availability standard focuses on whether drugs are unavailable to pharmacies, not whether drug products are generally available to the public through retail pharmacies. Response: We disagree. Since the statute uses the phrase ‘‘generally available to the public through retail pharmacies,’’ we have decided that availability to retail pharmacies is a necessary component of the State availability determination. We believe that if a drug is available to a retail pharmacy, then it will be available to the public. Comment: A commenter stated that CMS has traditionally surveyed manufacturers to determine if products are available before setting a FUL. The commenter stated that he believes that CMS should undertake a similar task to determine whether each dosage form and strength of a multiple source drug is generally available to the public through retail pharmacies in each State. Response: As noted previously, we do not interpret the law to require us to continually survey drug availability in the retail pharmacies of every State. Such continuous surveys would be burdensome and very time consuming and could likely result in an untimely and outdated FUL list. In addition, such surveys would be inconsistent with our understanding of other statutory amendments in the DRA where Congress contemplated that we establish FULs on a timely basis. For example, section 1927(f)(1) of the Act requires the Secretary’s response within 7 days after PO 00000 Frm 00060 Fmt 4700 Sfmt 4700 notification of availability of multiple source products. We also note that pharmacies and States are in a substantially better position to assess the general availability of drugs in their areas. I. State Availability and FUL Reimbursement Comment: Several commenters expressed concern about the FUL reimbursement in regard to drug availability in the State. One commenter asked if States will receive an exemption from the FUL retroactively because a State determination concerning the availability of a drug will presumably be after a FUL effective date, and after CMS confirms availability issues. Another commenter stated that FULs should only be based on the AMPs of products that satisfy the State availability standard. Response: If a State can confirm that a covered outpatient drug is not a multiple source drug in the State, for a particular rebate period, the FUL will not apply to that drug in that State for that rebate period. Where the drug does not qualify as a multiple source drug in the State, the State should apply the appropriate pricing methodologies as set forth in the approved State plan. We have further clarified in our final rule that when at least two therapeutically, pharmaceutically, and bioequivalent drug products, covered under the Medicaid drug rebate program, are generally available within the State, the drug will be considered a multiple source drug. In the case where a covered outpatient drug is not a multiple source drug within the State, that drug would not be subject to the FUL in that State for the rebate period. The final comment regarding the calculation of the FUL based on certain products is outside of the scope of this rule. Comment: One commenter stated that the rule notes that if a particular State could confirm that a drug is unavailable from two sources, the FUL will be lifted for the rebate period. Response: In the case where a State can confirm that a covered outpatient drug is not a multiple source drug in the State, for a particular rebate period, the FUL will not apply to that drug in that State for that rebate period. Where the drug does not qualify as a multiple source drug in the State, the State should apply the appropriate pricing methodologies as set forth in the approved State plan. Comment: One commenter requested further information on how the multiple source definition is to be applied in a rebate period, that is, quarterly, when E:\FR\FM\07OCR1.SGM 07OCR1 jlentini on PROD1PC65 with RULES Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations the FUL process will be on a monthly schedule. Response: We appreciate the comment, but the definition of multiple source drug contemplates availability determinations on a rebate, as opposed to a monthly, period. Comment: CMS has not always assigned FULs to every group of drug products, so one commenter assumed that CMS took this approach in recognition of the lack of product availability in one or more States. One commenter stated that it is apparent that CMS limited its conclusion about at least two equivalent products being available everywhere once a generic drug enters the market by adding the modifier ‘‘nearly always.’’ Response: Prior to the DRA revisions, we focused on applicability of the FULs based on the number of suppliers listed in a national published listing of average wholesale prices (such as Red Book, Blue Book, and Medi-Span). We have no reason not to believe that virtually all drug products are generally available in every State on a nationwide basis. However, we recognize there is a potential that certain drug products may not be generally available in every State and, as a result, we have established procedures which allow States to address such drug availability. Comment: One commenter asserted that the States should be given an opportunity for an appeals process to address availability issues directly with CMS. They contend that this would support a more effective implementation of the new FUL pricing calculation by providing CMS with the ability to directly address unforeseen marketplace issues and ensure drug availability in each State across the nation. Response: We do not believe that a formal appeals process will be needed. We continue to believe that the States are in the best position to determine drug availability and implement the process afforded in this rule when a covered outpatient drug has no equivalent that is generally available in the State. We have on going communication with the States, and through those discussions States may bring availability issues to our attention, or may bring availability issues to our attention in response to a pharmacy’s complaint. We do not believe more formal appeals would be necessary as our source for setting FULs will be manufacturer submitted AMP data. Regardless, a State may disregard a FUL for a drug when it determines that the drug is not a multiple source drug within the State for the rebate period. VerDate Aug<31>2005 18:31 Oct 06, 2008 Jkt 217001 J. State Availability and Retail Pharmacy Definition Comment: One commenter stated that CMS does not define ‘‘retail pharmacies’’ in the revised definition. However, CMS has included in the definition of the ‘‘retail pharmacy class of trade’’ many entities that do not constitute retail pharmacies. The commenter stated that determining that multiple source drug products are generally available in non-retail pharmacies would not be sufficient to satisfy the State availability standard. Response: We appreciate the comment. However, the definition of retail pharmacies is outside the scope of this rulemaking. K. Burden on States and Providers Comment: Several commenters expressed concern about the burden that may be placed upon States and providers in determining whether a drug is a multiple source drug within the State. Response: We believe that the effect on States and pharmacy providers will be small given our experience with the FUL program. To the extent a State would find, however, that a covered outpatient drug product is not a multiple source drug in that State, the effect will be to permit that State to disregard the FUL price for that drug, and apply appropriate pricing methodologies as set forth in the approved State plan. Comment: One commenter expressed concern that there will be a substantial and ongoing burden on States because all retail pharmacies would have little choice but to notify the State that virtually any and every drug product may not be available as a multiple source drug in that State. Several commenters stated that a particular retail pharmacy will rarely if ever know whether a particular drug product is ‘‘generally available to the public through retail pharmacies’’ in a State. A commenter stated that, in practice, the most likely result would be that pharmacies would investigate only if they cannot buy enough inventory without losing more than they can afford. Another comment inquired how a State can confirm whether or not a multiple source drug is available from two sources. Response: The statute provides that a drug product is considered to be sold or marketed in a State if the drug product appears in a published national listing of average wholesale prices, provided the listed product is ‘‘generally available to the public through retail pharmacies in that State.’’ In light of that standard, PO 00000 Frm 00061 Fmt 4700 Sfmt 4700 58495 we see no reason why pharmacies would report that a substantial number of drugs would be generally unavailable; however, States have the authority to set reasonable standards for such reporting. We fully expect that pharmacies would report to their States information concerning any covered outpatient drug that is subject to a FUL but for which they cannot purchase an equivalent drug product. Comment: One commenter stated that CMS is not only assigning States the burden of determining whether a multiple source drug is available in the marketplace (as listed in the Regulatory Impact Statement) but also of determining the adequacy of the FUL rates to cover pharmacy actual acquisition costs. Response: We disagree. As we have previously indicated, we believe that the effect on States and pharmacy providers will be small. This rule does not require that States determine the adequacy of the FUL relative to the pharmacies’ actual acquisition costs. L. State Versus Federal Responsibility Comment: CMS has given no guidance as to what the agency believes constitutes ‘‘general availability to the public’’ and what is considered by CMS to be a sufficient number of retail pharmacies that offer the drug product in sufficient quantities to be ‘‘generally available to the public.’’ Response: At this time we have not provided a definition of general availability to the public. The definition of multiple source drug has been in the statute since the amendments of the Omnibus Budget Reconciliation Act of 1990 and yet we have received very few complaints that drug products listed in the national compendia are not generally available, and the few complaints that we have received generally pertained to availability problems occurring nationwide, rather than availability problems unique to a particular State. We continue to believe that complaints regarding general availability will be infrequent and thus do not believe it is necessary to provide additional instructions to States at this time. However, if, after consultation with the States, we determine it is necessary to offer additional guidance, we will do so. We also note that the commenter has misconstrued this regulation which, in accordance with the statute, provides that the listed product be generally available to the public through retail pharmacies. General availability to the public is determined not by considering which drug products pharmacies have chosen to offer but by considering which drug E:\FR\FM\07OCR1.SGM 07OCR1 58496 Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations jlentini on PROD1PC65 with RULES products are available for pharmacies to offer. We believe that if a drug is available to a retail pharmacy, then it will be available to the general public. Comment: One commenter expressed concern that, if States cannot or will not act when pharmacies report a lack of availability of a drug, will CMS establish a process for pharmacies to directly petition CMS to remove a FUL? The commenter adds that CMS has not indicated that it will implement a timely process to remove the FUL on a product in a State. Response: We have not established a separate Federal process for pharmacies to petition us for removal of a FUL and based on our experience with the FUL program, we see no need to add such a process at this time. We consider it the responsibility of the State to confirm the information provided by the pharmacies. Comment: One commenter proposed that rather than having a process that has to be managed in 50 different States, it would be more efficient for CMS to establish a national process for States and providers to express their concerns. Response: As discussed previously, we disagree. The statute and regulation provide that the listed product be generally available to the public through retail pharmacies in that State. We believe that States and pharmacies in those States are in a better position to assess the general availability of drugs in their areas. M. Effects on Other Issues Comment: We received an audit report entitled, Audit of Chain and Independent Pharmacies, Mass Merchandisers, Proprietary Stores and Foodstores with Pharmacies, March 2006, attached to a comment. Response: We appreciate the report. However, the report did not address the provisions of this rule. Comment: We received several comments regarding the definitions of AMP, wholesaler, and retail class of trade as well as comments regarding the outlier policy applied when setting FULs. Response: The purpose of this rule is to define ‘‘multiple source drug.’’ The topics addressed by the commenters regarding AMP, wholesaler, retail class of trade, and outliers are not within the scope of this final rule. Comment: One commenter stated that CMS must adopt a definition of ‘‘multiple source drug’’ that is based on the median or weighted AMP in order to ensure that such drug products are available to the public through retail pharmacies. One commenter urged CMS to clarify that when a drug product VerDate Aug<31>2005 18:31 Oct 06, 2008 Jkt 217001 ceases to meet either the first or second prong of the ‘‘multiple source drug’’ definition (that is, there is not at least one other drug which is rated by the FDA as therapeutically equivalent in the most recent publication of the Approved Drug Products with Therapeutic Equivalence Evaluations and is pharmaceutically equivalent and bioequivalent as determined by FDA) that CMS will take Federal action to remove that drug from the FUL list and inform State Medicaid agencies to cease application of the FUL. Further, the commenter requested that CMS confirm that the State-by-State approach applies only in situations where the third prong of the ‘‘multiple source drug’’ definition is not satisfied—that is, where a generic equivalent is not ‘‘sold or marketed in the State.’’ Response: To the extent that a drug does not qualify as a multiple source drug, that drug is not subject to the FUL. Those comments concerning the revised definition of multiple source drug and the FUL methodology are not within the scope of the interim final rule with comment period. Comment: One commenter asserted that updating AMPs and AMP based FULs monthly does not assure availability of drug products at the FUL rates, since corrections are not made to previously issued FULs. Another commenter stated that this proposed rule change does nothing to address fundamental shortcomings of using the currently proposed basis to set FULs. Response: These comments are beyond the scope of this rulemaking document and will not be addressed in this rulemaking document. IV. Provisions of the Final Regulations This final rule incorporates the provisions of the March 2008 interim final rule with comment period with two changes. In § 447.205, paragraph (3)(i) of the definition of multiple source drug, the term ‘‘covered outpatient drug’’ is revised to read ‘‘drug product,’’ and ‘‘listed product’’ respectively to reflect the statutory language. V. Collection of Information Requirements This document does not impose any information collection and recordkeeping requirements. Consequently, it need not be reviewed by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 35). PO 00000 Frm 00062 Fmt 4700 Sfmt 4700 VI. Regulatory Impact Statement We have examined the impact of this rule as required by Executive Order 12866 (September 1993, Regulatory Planning and Review), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96–354), section 1102(b) of the Act, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4), Executive Order 13132 on Federalism, and the Congressional Review Act (5 U.S.C. 804(2)). Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). This final rule does not reach the economic threshold and thus is not considered a major rule. The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Individuals and States are not included in the definition of a small entity. We are not preparing an analysis for the RFA because the Secretary has determined that this final rule will not have a significant economic impact on a substantial number of small entities. The only small entities that will potentially be affected by this final rule are small pharmacies. We believe that the effect will be small because we are unaware of any situation in which there are at least two FDA-approved, therapeutically, pharmaceutically, and bioequivalent drugs generally available in one State but not another State. To the extent a State would find, however, that a drug is not a multiple source drug in that State because no FDA-approved, therapeutically, pharmaceutically, and bioequivalent drug product is generally available in that State, the only effect will be to permit that State to disregard the FUL price for a drug that no longer qualifies as a multiple source drug in that State when determining the aggregate limit. To the extent this final rule has an effect on small retail pharmacies, that effect will be to increase payment rates to those pharmacies by allowing States to disregard FULs for certain drugs. Small pharmacies would only need to report when one drug in a two-drug group of therapeutically, pharmaceutically, and E:\FR\FM\07OCR1.SGM 07OCR1 jlentini on PROD1PC65 with RULES Federal Register / Vol. 73, No. 195 / Tuesday, October 7, 2008 / Rules and Regulations bioequivalent drugs is unavailable. However, such reporting would clearly be in their interest. In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a metropolitan statistical area and has fewer than 100 beds. We are not preparing an analysis for section 1102(b) of the Act, because the Secretary has determined that this final rule will not have a significant impact on the operations of a substantial number of small rural hospitals. Small rural hospitals would be affected only to the extent that no FDA-approved, therapeutically and bioequivalent drug is available in that State for a particular outpatient drug provided through their outpatient pharmacies. As discussed above for pharmacies, States may choose to change reimbursement for drugs that are not multiple source drugs within the State, but this change is expected to increase reimbursement. Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending on State, local, or tribal governments in the aggregate, or by the private sector, in any 1 year of $100 million in 1995, updated annually for inflation. In 2008, that threshold is approximately $130 million. This final rule does not contain any mandates that will impose spending costs on State, local, or tribal governments in the aggregate, or by the private sector, of $130 million. Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has Federalism implications. This regulation will impose only a very small burden, if any, on States. When a pharmacy has notified a State that a drug on the CMS FUL list may not be available as a multiple source drug in that State, the State should determine whether the pharmacy’s assertion of lack of general availability in the State is valid. The State, however, has no obligation to make an independent assessment of drug availability in the absence of such notification by a pharmacy. This final rule will only revise payment rates in those rare cases VerDate Aug<31>2005 18:31 Oct 06, 2008 Jkt 217001 in which a particular FDA-approved therapeutically, pharmaceutically, and bioequivalent drug is not generally available to the public through retail pharmacies in a particular State and, as a result, only one therapeutically, and bioequivalent drug product is generally available to the public through those pharmacies. In this circumstance, a State would need to confirm the information received from its pharmacies regarding drug availability. This would impose only a small burden on States. State systems are designed to allow for payment changes as a routine matter and to change the composition of the FUL groups or delete FUL groups. Since this regulation does not impose any significant costs on State or local governments, the requirements of E.O. 13132 are not applicable. In accordance with the provisions of Executive Order 12866, this regulation was reviewed by the Office of Management and Budget. List of Sections in 42 CFR Part 447 Accounting, Administrative practice and procedure, Drugs, Grant programs— health, Health facilities, Health professions, Medicaid, Reporting and recordkeeping requirements, rural areas. ■ For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services, is confirming the interim rule published on March 14, 2008 (73 FR 13785) as final with the following changes: PART 447—PAYMENTS FOR SERVICES 1. The authority citation for part 447 continues to read as follows: ■ Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302). 2. Section 447.502 the definition of ‘‘Multiple source drug’’ is amended by revising paragraph (3)(i) to read as follows: ■ § 447.502 Definitions. * * * * * Multiple source drug * * * * * * * * (3) * * * (i) A drug product is considered sold or marketed in a State if it appears in a published national listing of average wholesale prices, selected by the Secretary, provided that the listed product is generally available to the public through retail pharmacies in that State. * * * * * (Catalog of Federal Domestic Assistance Program No. 93.778, Medical Assistance Program) PO 00000 Frm 00063 Fmt 4700 Sfmt 4700 58497 Dated: August 20, 2008. Kerry Weems, Acting Administrator, Centers for Medicare & Medicaid Services. Approved: August 21, 2008. Michael O. Leavitt, Secretary. [FR Doc. E8–23653 Filed 10–6–08; 8:45 am] BILLING CODE 4120–01–P DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration 50 CFR Part 648 [Docket No. 070817467–8554–02] RIN 0648–XK82 Magnuson-Stevens Fishery Conservation and Management Act Provisions; Fisheries of the Northeastern United States; Atlantic Sea Scallop Fishery; Closure of the Limited Access General Category Scallop Fishery to Individual Fishing Quota Scallop Vessels National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Temporary rule; closure. AGENCY: SUMMARY: NMFS announces that the Limited Access General Category (LAGC) Scallop Fishery will close to individual fishing quota (IFQ) scallop vessels until it re-opens on December 1, 2008, under current regulations. This action is based on the determination that the third quarter scallop total allowable catch (TAC) for LAGC IFQ scallop vessels (including vessels issued an IFQ letter of authorization (LOA) to fish under appeal), is projected to be landed. This action is being taken to prevent IFQ scallop vessels from exceeding the 2008 third quarter TAC, in accordance with the regulations implementing Amendment 11 to the Atlantic Sea Scallop Fishery Management Plan (FMP), enacted by Framework 19 to the FMP, and the Magnuson-Stevens Fishery Conservation and Management Act. DATES: The closure of the LAGC fishery to all IFQ scallop vessels is effective 0001 hr local time, October 5, 2008, through November 30, 2008. FOR FURTHER INFORMATION CONTACT: Christopher Biegel, Fishery Management Specialist, (978) 281–9112, fax (978) 281–9135. SUPPLEMENTARY INFORMATION: Regulations governing fishing activity in E:\FR\FM\07OCR1.SGM 07OCR1

Agencies

[Federal Register Volume 73, Number 195 (Tuesday, October 7, 2008)]
[Rules and Regulations]
[Pages 58491-58497]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-23653]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 447

[CMS-2238-F]
RIN 0938-AP26


Medicaid Program; Multiple Source Drug Definition

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

ACTION: Final rule.

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SUMMARY: This final rule revises the definition of ``multiple source 
drug'' to better conform the regulatory definition to the provisions of 
section 1927(k)(7) of the Social Security Act. It also responds to 
public comments received on the March 14, 2008 interim final rule with 
comment period.

DATES: Effective Date: This final rule is effective November 6, 2008.

FOR FURTHER INFORMATION CONTACT: Gail Sexton, (410) 786-4583.

SUPPLEMENTARY INFORMATION: 

I. Background

    In the July 17, 2007 Federal Register we published a final rule 
with comment period (72 FR 39142) implementing the provisions of the 
Deficit Reduction Act of 2005 (DRA) pertaining to prescription drugs 
under the Medicaid Program. In that rule, we codified terms pertaining 
to the calculation and reporting of average manufacturer price (AMP) 
and best price and amended existing regulations regarding the 
calculation of the Federal upper limits (FULs) for certain covered 
outpatient drugs. The rule was effective October 1, 2007. On March 14, 
2008, we issued an interim final rule with comment period (73 FR 13785) 
that revised the definition of multiple source drug to conform to the 
statutory provisions. As stated in that rule, the interim final rule 
with comment period was not issued in response to public comments 
received on the Medicaid prescription drug rule. We are still 
considering those comments. On November 15, 2007, the National 
Association of Chain Drug Stores and the National Community Pharmacists 
Association filed a motion for a preliminary injunction in the United 
States District Court for the District of Columbia. They contended, in 
part, that the definition of ``multiple source drug'' adopted in the 
Medicaid prescription drug rule is contrary to the statutory language 
in that it defined a multiple source drug, in part, as a drug which is 
sold or marketed in the United States, as opposed to the State. 
Plaintiffs argued that all drugs are not generally available in every 
State. National Association of Chain Drug Stores et al. v. Health and 
Human Services, Civil Action No. 1:07-cv-02017 (RCL). Although we 
continue to believe that, when an FDA-approved, therapeutically, 
pharmaceutically, and bioequivalent drug is sold or marketed in the 
United States, at least one therapeutically, pharmaceutically, and 
bioequivalent drug is sold or marketed in every State, we issued an 
interim final rule with comment period to revise the definition of 
``multiple source drug.'' We stated that we expected the effect of the 
revision, if any, to be minimal.
    We are publishing this final rule to address comments received on 
the interim final rule with comment period published on March 14, 2008 
(73 FR 13785). Specifically, we are addressing comments pertaining to 
the definition of ``multiple source drug'' in the March 14, 2008 
interim final rule with comment period. For a full discussion of the 
multiple source drug definition provisions see the March 14, 2008 
interim final rule with comment period (73 FR 13785).
    As noted in the interim final rule with comment period, this rule 
to the extent that it may affect Medicaid reimbursement rates for 
retail pharmacies, is subject to the injunction issued by the United 
States District Court for the District of Columbia in National 
Association of Chain Drug Stores et al. v. Health and Human Services, 
Civil Action No. 1:07-cv-02017 (RCL).

II. Provisions of the Interim Final Rule

    In Sec.  447.502, we defined key terms used for payment and rebates 
for Medicaid covered outpatient drugs. We defined multiple source drug, 
with respect to a rebate period, as a covered outpatient drug for which 
there is at least one other drug product which is: (1) Rated as 
therapeutically equivalent (for the list of drug products rated as 
therapeutically equivalent, see the FDA's most recent publication of 
``Approved Drug Products with Therapeutic Equivalence Evaluations'' 
which is available at https://www.fda.gov/cder/orange/default.htm or can 
be viewed at the FDA's Freedom of Information Public Reading Room at 
5600 Fishers Lane, rm. 12A-30, Rockville, MD 20857); (2) 
pharmaceutically equivalent and bioequivalent, as determined by the 
FDA; and (3) sold or marketed in the United States during the rebate 
period.

[[Page 58492]]

    In the March 14, 2008 interim final rule with comment period, we 
revised the definition of ``multiple source drug'' at Sec.  447.502 to 
state, in part, that a covered outpatient drug is a multiple source 
drug when it is sold or marketed in the ``State'' during the rebate 
period. In accordance with section 1927(k)(7)(C)(iii) of the Social 
Security Act (``the Act'') and as discussed in the interim final rule 
with comment period, we consider a drug to be sold or marketed in a 
State if it appears in a published national listing of average 
wholesale prices that we have selected--currently, Red Book, Bluebook, 
or Medi-Span--provided the listed product is generally available to the 
public through retail pharmacies in that State. We also addressed our 
belief, based on our experience with the FUL and the drug rebate 
program that a national market exists for covered outpatient drugs. We 
also provided in the interim final rule with comment period, that when 
a covered outpatient drug is not a multiple source drug in the State, 
that drug is not subject to the FUL in that State for the applicable 
rebate period. We further provided that where the drug does not qualify 
as a multiple source drug in the State, the State should apply the 
appropriate pricing methodologies as set forth in the approved State 
plan.

III. Analysis of and Responses to Public Comments

    We received nine items of correspondence that addressed the March 
14, 2008 interim final rule with comment period. We received comments 
from drug manufacturers and wholesalers, retail pharmacies, and 
membership organizations. To the extent that comments were outside the 
scope of the March 14, 2008 interim final rule with comment period they 
are not addressed in this final rule. A summary of the major issues and 
our responses are discussed below.

A. General Comments

    Comment: We received several comments expressing general support 
and appreciation for CMS revising the definition of ``multiple source 
drug.'' One commenter specifically stated that the statutory definition 
of ``multiple source drug'' has existed since 1990, and it is important 
for CMS to include that definition in the regulations. One commenter 
noted that States appreciate the increased flexibility to determine a 
product's availability and to be able to adjust FUL prices accordingly.
    Response: We appreciate these and all comments received relating to 
our interim final rule with comment period revising the definition of 
``multiple source drug.''

B. Adherence to the Administrative Procedures Act

    Comment: Several commenters stated that the interim final rule with 
comment period was not promulgated in accordance with the 
Administrative Procedure Act (APA) which provides that a Federal agency 
provide the public with notice of, and an opportunity to comment on, 
proposed agency rulemaking before issuing a final rule, which includes 
a statement of basis and purpose that responds to public comments. 
Several commenters were in disagreement with CMS that a formal notice 
and comment rulemaking process was not necessary because they said the 
new rule was not an ``interpretive'' rule, a general statement of 
policy, and/or a rule of agency procedure or practice.
    Response: We disagree. We are applying the definition of ``multiple 
source drug'' as specified in the statute and informing the public of 
the procedures and practices the agency will follow to ensure 
compliance with the statutory provisions. We do not believe that we 
need to propose a rule to incorporate the words of a provision already 
contained in the statute, and we therefore found good cause for waiving 
the notice and comment procedures. We believe that such a proposed rule 
would not be necessary because we would not be able to change the 
definition in the rule in response to public comments. In addition, as 
discussed in the interim final rule with comment period, we believe 
that the interim final rule with comment period is exempt from notice 
and comment rulemaking as an interpretative rule, general statement of 
policy and/or rule of agency procedure or practice.
    Furthermore, we have provided an opportunity for comment and have 
now considered all comments in issuing this final rule.
    Comment: One commenter stated that the fact that the Court issued a 
preliminary injunction against the old rule does not, as a matter of 
law, constitute good cause to eliminate notice and comment rulemaking. 
Another commenter stated that CMS had time to go through the notice and 
comment rulemaking, because the rule cannot be enforced due to Federal 
court injunction.
    Response: We issued the interim final rule with comment period 
revising the definition of ``multiple source drug'' to better conform 
the definition to the statutory language and to address the concerns 
raised by plaintiffs in the Medicaid prescription drug rule litigation. 
In that litigation, the plaintiffs contended, in part, that the 
definition of ``multiple source drug'' adopted in the Medicaid 
prescription drug rule is contrary to the statutory language in that it 
defined a multiple source drug, in part, as a drug which is sold or 
marketed in the ``United States'' as opposed to the ``State.'' We 
issued this rule to apply the definition specified in the statute. We 
believe it is unnecessary to propose a rule to, in effect, incorporate 
the words of the statute and to establish a procedure to ensure 
compliance with that statutory provision.
    Furthermore, we have provided an opportunity for comment and have 
now considered all comments in issuing this final rule.

C. Interpretive Versus Substantive Rule

    Comment: Several commenters submitted reasons why they believe that 
this rule should not be considered an interpretive rule, as explained 
above, but rather, a substantive rule, and thus subject to notice and 
comment rulemaking. One commenter stated that this rule should be 
considered a substantive rule because it will be published in the 
Federal Register. Several commenters stated that this rule amends 
another substantive rule subject to notice and comment rulemaking, and 
thus should also be considered substantive. Other commenters stated 
that rules which affect methodologies for calculating Federal funding 
levels are substantive rules that are subject to notice and comment 
under the APA. Several commenters stated that, because the new rule 
establishes significant new burdens on pharmacies and States regarding 
the State availability standard that has never been imposed by either 
the statute or CMS, it must be considered a substantive rule.
    Response: We disagree. We issued the March 14, 2008 interim final 
rule with comment period to revise the Medicaid prescription drug rule 
to better conform to the statute. The statute includes a provision that 
a multiple source drug is sold or marketed in the State during the 
rebate period and a separate provision that describes when a drug is 
considered to be sold or marketed in a State. We revised the Medicaid 
prescription drug rule to include these provisions and put forth 
procedures to ensure compliance with the statute. We consider these 
provisions to be exempt from notice and comment rulemaking as an 
interpretive rule, general statement of policy, and/or rule of agency 
procedure or practice. Moreover, to the extent that notice and comment 
rulemaking might apply, we found good cause to waive

[[Page 58493]]

such requirements given that the revisions were made to revise the rule 
to better comply with the statute.
    Furthermore, we have provided an opportunity for comment and have 
now considered all comments in issuing this final rule.

D. Definition--Regulation Text Changes

    Comment: Several commenters suggested that the term ``multiple 
source drug'' as it is currently defined should be revised. One 
commenter stated that CMS should (1) change the introductory portion to 
read, ``multiple source drug'' means, with respect to a rebate period, 
a covered outpatient drug for which there ``are at least two drug 
products which'', and (2) change the initial word of paragraphs (1)-(3) 
of the definition from ``is'' to ``are.'' Several commenters stated 
that for CMS to comply with the statute, the term ``covered outpatient 
drug'' in the rule must be replaced with ``drug product'' in paragraphs 
3(i) and 3(ii) of the definition of ``multiple source drug'' to assure 
that FULs are applied properly.
    Response: We have revised the definition of multiple source drug in 
this final rule in accordance with the language in the Act. We have 
retained the term ``covered outpatient drug'' in paragraph (3)(ii) of 
that definition because FULs are set for ``multiple source drugs,'' 
which under section 1927(k)(7)(A)(i) of the Act are a subset of 
``covered outpatient drugs.''

E. Drug Versus Drug Product--Compliance With the Social Security Act

    Comment: Several commenters stated that the language of the rule 
does not follow the language of the statute because the rule does not 
properly distinguish between a ``drug'' and a ``drug product.'' Several 
commenters stated that the distinction between drug and drug product is 
important. Several commenters noted that a ``drug'' is a chemical 
ingredient contained in one or more drug products but that a ``drug 
product'' is a ``finished dosage form'' such as a tablet or capsule. 
The commenters stated that a drug may be generally available to the 
public through retail pharmacies in a State even though an individual 
drug product is not generally available to the public through retail 
pharmacies in a State.
    Response: We appreciate the comment and have revised the regulation 
to conform to the statute. We note, however, that the Act does not 
distinguish between the terms ``drug'' and ``drug product'' in the 
manner suggested in these comments.

F. National Availability

    Comment: One commenter stated that drug products cannot be assumed 
to have national availability because regional manufacturers, 
marketers, distributors and wholesalers may sell exclusively to 
entities in a specific class of trade and may not make their drug 
products generally available to any or all pharmacies in a given State 
or to the general public, even though they are listed in the national 
compendia. Another commenter stated that there are many instances of 
limited and sporadic supply of a drug product, particularly in the 
first year after a new multiple source drug product is introduced to 
the market, so that not all pharmacies have access to sufficient 
supply.
    Response: We believe, based on our experience with the FUL program 
that when an FDA-approved, therapeutically, pharmaceutically, and 
bioequivalent drug product is sold or marketed on a nationwide basis, 
at least one therapeutically, pharmaceutically, and bioequivalent drug 
product is generally sold or marketed in every State. However, we have 
established a process in this rule to determine whether a listed 
product is generally available through retail pharmacies in a State. If 
a State concludes that a particular covered outpatient drug has no 
therapeutically, pharmaceutically, and bioequivalent drug product that 
is generally available in that State and, as a result, does not meet 
the definition of a multiple source drug in the State, that drug would 
not be subject to the FUL in that State. When at least two 
therapeutically, pharmaceutically, and bioequivalent drug products are 
generally available to the public through retail pharmacies within the 
State, the drug will be considered a multiple source drug. In the case 
where the covered outpatient drug is not a multiple source drug, that 
drug would not be subject to the FUL in that State for the applicable 
rebate period.

G. National Availability--Compliance With the Social Security Act

    Comment: Several commenters stated that CMS' assumption that drug 
products are nationally available does not ``interpret'' the statute, 
but rather contradicts the statute. Other commenters stated that CMS 
assumes nationwide availability of all drug products without a legal or 
factual basis for that assumption. Several commenters stated that CMS 
has not compiled evidence to justify its assumption of national 
availability. One commenter stated that an assumption that all drug 
products are available nationwide would render the statute's State 
availability standard completely superfluous. Another commenter said 
that the same assumption of national availability was contained in CMS' 
original definition of ``multiple source drug'' which looked to whether 
drug products were available ``in the United States'' rather than in 
each ``State.''
    Response: The State availability requirement has been in the Social 
Security Act since the Omnibus Budget Reconciliation Act of 1990. 
Nonetheless, we have received few complaints that drug products listed 
in the national compendia are not widely available, and the few 
complaints that we have received generally suggested availability 
problems occurring nationwide, rather than availability problems unique 
to a particular State. Therefore, in light of our experience with the 
implementation of section 1927 of the Act, we believe that when an FDA-
approved, therapeutically, pharmaceutically, and bioequivalent drug 
product is sold or marketed on a nationwide basis, that at least one 
therapeutically, pharmaceutically, and bioequivalent drug product is 
sold or marketed in every State. However, to the extent that a 
particular covered outpatient drug has no therapeutically, 
pharmaceutically, and bioequivalent drug product generally available to 
the public through retail pharmacies within a State, this rule gives 
States the flexibility to disregard the FUL for that drug and apply 
alternate pricing methodologies as set forth in the State's approved 
plan.
    Comment: One commenter stated that a Federal court enjoined 
implementation of the July 17, 2007 rule's definition of ``multiple 
source drug'' because it violated the provisions of the statute's State 
availability standard. Several commenters stated that despite the 
court's ruling, CMS has made it clear that the agency will continue to 
ignore the statute's State availability standard and continue to assume 
that all drugs are available nationally, and that pharmacies and States 
may enforce the statute's State availability standard, but CMS will 
not.
    Response: We disagree. We have revised the definition of ``multiple 
source drug'' as it appeared in the Medicaid prescription drug rule to 
be consistent with statutory language and fully compliant with the 
court's preliminary ruling. We have not ignored the State availability 
requirement; we have set forth a mechanism for determining whether a 
drug is a ``multiple source drug.'' As we stated in the March 14, 2008 
interim final rule, when a State confirms that a covered outpatient 
drug is not a multiple source

[[Page 58494]]

drug in that State, that drug is not subject to a FUL in that State. We 
have further clarified in our final rule that when at least two 
therapeutically, pharmaceutically, and bioequivalent drug products, 
covered under the Medicaid drug rebate program, are generally available 
within the State, the drug will be considered a multiple source drug. 
In the case where the covered outpatient drug is not a multiple source 
drug, that drug would not be subject to the FUL in that State for the 
rebate period. Thus, we have given States increased flexibility to 
determine a product's availability. We believe that this is the most 
effective means to ensure that drug products not available in a State 
are identified and not treated as multiple source drugs.
    Comment: A few commenters stated that if Congress had intended that 
CMS simply assume that equivalent drug products are available 
nationwide, it would not have adopted a specific process for CMS to 
confirm availability in each State.
    Response: Congress did not adopt a specific process for CMS to 
confirm State availability but left it to the agency to set forth such 
a process. We adopted the process set forth in the interim final rule 
with comment period because we believe that pharmacies and States are 
in a substantially better position to assess the availability of drugs 
available for purchase in their areas. For example, the States have 
daily updated claims files and could validate drug availability in a 
more timely and efficient manner than could be done at the Federal 
level. In addition, pharmacies are in the best position to know the 
drug products to which they have access.

H. State Availability--Compliance With the Social Security Act

    Comment: A few commenters stated that this rule does not comply 
with the Act's ``State availability'' standard, which they state 
requires CMS to confirm whether particular drug products are generally 
available to the public through retail pharmacies in each State. A few 
commenters stated that CMS must actually implement the statutory 
language by not applying FULs unless it has first confirmed State 
availability as mandated by the statute. The commenters further stated 
that the statute does not authorize CMS to calculate and apply FULs and 
then impose on pharmacies and States the burden of investigating 
whether particular drug products satisfy the State availability 
standard. The commenters state that the Federal statute clearly 
discusses the duty of ``the Secretary'' to apply FULs to multiple 
source drug products that satisfy the State availability standard.
    Response: We disagree. The statute does not prohibit States from 
assisting in the availability determination or, as noted previously, 
otherwise set forth any mechanism for determining whether a drug is 
``generally available.'' We believe the most efficient means to do so 
is to have the State make the initial determination that drugs are not 
generally available in that State. The Act, as amended by the DRA, 
clearly contemplates the creation of a single nationwide FUL list. To 
first confirm availability of each and every drug on a State-by-State 
basis before setting a FUL would render the FUL provisions established 
by the DRA administratively impossible to implement, and would create 
an undue burden that would make the publication of a timely list 
unlikely. This practice would be inconsistent with the statute which 
provides that the Secretary establish a FUL for each multiple source 
drug that enters the market on a timely basis.
    Comment: Several commenters asserted that CMS incorrectly instructs 
States that the State availability standard focuses on whether drugs 
are unavailable to pharmacies, not whether drug products are generally 
available to the public through retail pharmacies.
    Response: We disagree. Since the statute uses the phrase 
``generally available to the public through retail pharmacies,'' we 
have decided that availability to retail pharmacies is a necessary 
component of the State availability determination. We believe that if a 
drug is available to a retail pharmacy, then it will be available to 
the public.
    Comment: A commenter stated that CMS has traditionally surveyed 
manufacturers to determine if products are available before setting a 
FUL. The commenter stated that he believes that CMS should undertake a 
similar task to determine whether each dosage form and strength of a 
multiple source drug is generally available to the public through 
retail pharmacies in each State.
    Response: As noted previously, we do not interpret the law to 
require us to continually survey drug availability in the retail 
pharmacies of every State. Such continuous surveys would be burdensome 
and very time consuming and could likely result in an untimely and 
outdated FUL list. In addition, such surveys would be inconsistent with 
our understanding of other statutory amendments in the DRA where 
Congress contemplated that we establish FULs on a timely basis. For 
example, section 1927(f)(1) of the Act requires the Secretary's 
response within 7 days after notification of availability of multiple 
source products. We also note that pharmacies and States are in a 
substantially better position to assess the general availability of 
drugs in their areas.

I. State Availability and FUL Reimbursement

    Comment: Several commenters expressed concern about the FUL 
reimbursement in regard to drug availability in the State. One 
commenter asked if States will receive an exemption from the FUL 
retroactively because a State determination concerning the availability 
of a drug will presumably be after a FUL effective date, and after CMS 
confirms availability issues. Another commenter stated that FULs should 
only be based on the AMPs of products that satisfy the State 
availability standard.
    Response: If a State can confirm that a covered outpatient drug is 
not a multiple source drug in the State, for a particular rebate 
period, the FUL will not apply to that drug in that State for that 
rebate period. Where the drug does not qualify as a multiple source 
drug in the State, the State should apply the appropriate pricing 
methodologies as set forth in the approved State plan. We have further 
clarified in our final rule that when at least two therapeutically, 
pharmaceutically, and bioequivalent drug products, covered under the 
Medicaid drug rebate program, are generally available within the State, 
the drug will be considered a multiple source drug. In the case where a 
covered outpatient drug is not a multiple source drug within the State, 
that drug would not be subject to the FUL in that State for the rebate 
period. The final comment regarding the calculation of the FUL based on 
certain products is outside of the scope of this rule.
    Comment: One commenter stated that the rule notes that if a 
particular State could confirm that a drug is unavailable from two 
sources, the FUL will be lifted for the rebate period.
    Response: In the case where a State can confirm that a covered 
outpatient drug is not a multiple source drug in the State, for a 
particular rebate period, the FUL will not apply to that drug in that 
State for that rebate period. Where the drug does not qualify as a 
multiple source drug in the State, the State should apply the 
appropriate pricing methodologies as set forth in the approved State 
plan.
    Comment: One commenter requested further information on how the 
multiple source definition is to be applied in a rebate period, that 
is, quarterly, when

[[Page 58495]]

the FUL process will be on a monthly schedule.
    Response: We appreciate the comment, but the definition of multiple 
source drug contemplates availability determinations on a rebate, as 
opposed to a monthly, period.
    Comment: CMS has not always assigned FULs to every group of drug 
products, so one commenter assumed that CMS took this approach in 
recognition of the lack of product availability in one or more States. 
One commenter stated that it is apparent that CMS limited its 
conclusion about at least two equivalent products being available 
everywhere once a generic drug enters the market by adding the modifier 
``nearly always.''
    Response: Prior to the DRA revisions, we focused on applicability 
of the FULs based on the number of suppliers listed in a national 
published listing of average wholesale prices (such as Red Book, Blue 
Book, and Medi-Span). We have no reason not to believe that virtually 
all drug products are generally available in every State on a 
nationwide basis. However, we recognize there is a potential that 
certain drug products may not be generally available in every State 
and, as a result, we have established procedures which allow States to 
address such drug availability.
    Comment: One commenter asserted that the States should be given an 
opportunity for an appeals process to address availability issues 
directly with CMS. They contend that this would support a more 
effective implementation of the new FUL pricing calculation by 
providing CMS with the ability to directly address unforeseen 
marketplace issues and ensure drug availability in each State across 
the nation.
    Response: We do not believe that a formal appeals process will be 
needed. We continue to believe that the States are in the best position 
to determine drug availability and implement the process afforded in 
this rule when a covered outpatient drug has no equivalent that is 
generally available in the State. We have on going communication with 
the States, and through those discussions States may bring availability 
issues to our attention, or may bring availability issues to our 
attention in response to a pharmacy's complaint. We do not believe more 
formal appeals would be necessary as our source for setting FULs will 
be manufacturer submitted AMP data. Regardless, a State may disregard a 
FUL for a drug when it determines that the drug is not a multiple 
source drug within the State for the rebate period.

J. State Availability and Retail Pharmacy Definition

    Comment: One commenter stated that CMS does not define ``retail 
pharmacies'' in the revised definition. However, CMS has included in 
the definition of the ``retail pharmacy class of trade'' many entities 
that do not constitute retail pharmacies. The commenter stated that 
determining that multiple source drug products are generally available 
in non-retail pharmacies would not be sufficient to satisfy the State 
availability standard.
    Response: We appreciate the comment. However, the definition of 
retail pharmacies is outside the scope of this rulemaking.

K. Burden on States and Providers

    Comment: Several commenters expressed concern about the burden that 
may be placed upon States and providers in determining whether a drug 
is a multiple source drug within the State.
    Response: We believe that the effect on States and pharmacy 
providers will be small given our experience with the FUL program. To 
the extent a State would find, however, that a covered outpatient drug 
product is not a multiple source drug in that State, the effect will be 
to permit that State to disregard the FUL price for that drug, and 
apply appropriate pricing methodologies as set forth in the approved 
State plan.
    Comment: One commenter expressed concern that there will be a 
substantial and ongoing burden on States because all retail pharmacies 
would have little choice but to notify the State that virtually any and 
every drug product may not be available as a multiple source drug in 
that State. Several commenters stated that a particular retail pharmacy 
will rarely if ever know whether a particular drug product is 
``generally available to the public through retail pharmacies'' in a 
State. A commenter stated that, in practice, the most likely result 
would be that pharmacies would investigate only if they cannot buy 
enough inventory without losing more than they can afford. Another 
comment inquired how a State can confirm whether or not a multiple 
source drug is available from two sources.
    Response: The statute provides that a drug product is considered to 
be sold or marketed in a State if the drug product appears in a 
published national listing of average wholesale prices, provided the 
listed product is ``generally available to the public through retail 
pharmacies in that State.'' In light of that standard, we see no reason 
why pharmacies would report that a substantial number of drugs would be 
generally unavailable; however, States have the authority to set 
reasonable standards for such reporting. We fully expect that 
pharmacies would report to their States information concerning any 
covered outpatient drug that is subject to a FUL but for which they 
cannot purchase an equivalent drug product.
    Comment: One commenter stated that CMS is not only assigning States 
the burden of determining whether a multiple source drug is available 
in the marketplace (as listed in the Regulatory Impact Statement) but 
also of determining the adequacy of the FUL rates to cover pharmacy 
actual acquisition costs.
    Response: We disagree. As we have previously indicated, we believe 
that the effect on States and pharmacy providers will be small. This 
rule does not require that States determine the adequacy of the FUL 
relative to the pharmacies' actual acquisition costs.

L. State Versus Federal Responsibility

    Comment: CMS has given no guidance as to what the agency believes 
constitutes ``general availability to the public'' and what is 
considered by CMS to be a sufficient number of retail pharmacies that 
offer the drug product in sufficient quantities to be ``generally 
available to the public.''
    Response: At this time we have not provided a definition of general 
availability to the public. The definition of multiple source drug has 
been in the statute since the amendments of the Omnibus Budget 
Reconciliation Act of 1990 and yet we have received very few complaints 
that drug products listed in the national compendia are not generally 
available, and the few complaints that we have received generally 
pertained to availability problems occurring nationwide, rather than 
availability problems unique to a particular State. We continue to 
believe that complaints regarding general availability will be 
infrequent and thus do not believe it is necessary to provide 
additional instructions to States at this time. However, if, after 
consultation with the States, we determine it is necessary to offer 
additional guidance, we will do so. We also note that the commenter has 
misconstrued this regulation which, in accordance with the statute, 
provides that the listed product be generally available to the public 
through retail pharmacies. General availability to the public is 
determined not by considering which drug products pharmacies have 
chosen to offer but by considering which drug

[[Page 58496]]

products are available for pharmacies to offer. We believe that if a 
drug is available to a retail pharmacy, then it will be available to 
the general public.
    Comment: One commenter expressed concern that, if States cannot or 
will not act when pharmacies report a lack of availability of a drug, 
will CMS establish a process for pharmacies to directly petition CMS to 
remove a FUL? The commenter adds that CMS has not indicated that it 
will implement a timely process to remove the FUL on a product in a 
State.
    Response: We have not established a separate Federal process for 
pharmacies to petition us for removal of a FUL and based on our 
experience with the FUL program, we see no need to add such a process 
at this time. We consider it the responsibility of the State to confirm 
the information provided by the pharmacies.
    Comment: One commenter proposed that rather than having a process 
that has to be managed in 50 different States, it would be more 
efficient for CMS to establish a national process for States and 
providers to express their concerns.
    Response: As discussed previously, we disagree. The statute and 
regulation provide that the listed product be generally available to 
the public through retail pharmacies in that State. We believe that 
States and pharmacies in those States are in a better position to 
assess the general availability of drugs in their areas.

M. Effects on Other Issues

    Comment: We received an audit report entitled, Audit of Chain and 
Independent Pharmacies, Mass Merchandisers, Proprietary Stores and 
Foodstores with Pharmacies, March 2006, attached to a comment.
    Response: We appreciate the report. However, the report did not 
address the provisions of this rule.
    Comment: We received several comments regarding the definitions of 
AMP, wholesaler, and retail class of trade as well as comments 
regarding the outlier policy applied when setting FULs.
    Response: The purpose of this rule is to define ``multiple source 
drug.'' The topics addressed by the commenters regarding AMP, 
wholesaler, retail class of trade, and outliers are not within the 
scope of this final rule.
    Comment: One commenter stated that CMS must adopt a definition of 
``multiple source drug'' that is based on the median or weighted AMP in 
order to ensure that such drug products are available to the public 
through retail pharmacies. One commenter urged CMS to clarify that when 
a drug product ceases to meet either the first or second prong of the 
``multiple source drug'' definition (that is, there is not at least one 
other drug which is rated by the FDA as therapeutically equivalent in 
the most recent publication of the Approved Drug Products with 
Therapeutic Equivalence Evaluations and is pharmaceutically equivalent 
and bioequivalent as determined by FDA) that CMS will take Federal 
action to remove that drug from the FUL list and inform State Medicaid 
agencies to cease application of the FUL. Further, the commenter 
requested that CMS confirm that the State-by-State approach applies 
only in situations where the third prong of the ``multiple source 
drug'' definition is not satisfied--that is, where a generic equivalent 
is not ``sold or marketed in the State.''
    Response: To the extent that a drug does not qualify as a multiple 
source drug, that drug is not subject to the FUL. Those comments 
concerning the revised definition of multiple source drug and the FUL 
methodology are not within the scope of the interim final rule with 
comment period.
    Comment: One commenter asserted that updating AMPs and AMP based 
FULs monthly does not assure availability of drug products at the FUL 
rates, since corrections are not made to previously issued FULs. 
Another commenter stated that this proposed rule change does nothing to 
address fundamental shortcomings of using the currently proposed basis 
to set FULs.
    Response: These comments are beyond the scope of this rulemaking 
document and will not be addressed in this rulemaking document.

IV. Provisions of the Final Regulations

    This final rule incorporates the provisions of the March 2008 
interim final rule with comment period with two changes.
    In Sec.  447.205, paragraph (3)(i) of the definition of multiple 
source drug, the term ``covered outpatient drug'' is revised to read 
``drug product,'' and ``listed product'' respectively to reflect the 
statutory language.

V. Collection of Information Requirements

    This document does not impose any information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 35).

VI. Regulatory Impact Statement

    We have examined the impact of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 
section 1102(b) of the Act, the Unfunded Mandates Reform Act of 1995 
(Pub. L. 104-4), Executive Order 13132 on Federalism, and the 
Congressional Review Act (5 U.S.C. 804(2)).
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any 1 year). This final 
rule does not reach the economic threshold and thus is not considered a 
major rule.
    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Individuals and States are not included in the 
definition of a small entity.
    We are not preparing an analysis for the RFA because the Secretary 
has determined that this final rule will not have a significant 
economic impact on a substantial number of small entities.
    The only small entities that will potentially be affected by this 
final rule are small pharmacies. We believe that the effect will be 
small because we are unaware of any situation in which there are at 
least two FDA-approved, therapeutically, pharmaceutically, and 
bioequivalent drugs generally available in one State but not another 
State. To the extent a State would find, however, that a drug is not a 
multiple source drug in that State because no FDA-approved, 
therapeutically, pharmaceutically, and bioequivalent drug product is 
generally available in that State, the only effect will be to permit 
that State to disregard the FUL price for a drug that no longer 
qualifies as a multiple source drug in that State when determining the 
aggregate limit. To the extent this final rule has an effect on small 
retail pharmacies, that effect will be to increase payment rates to 
those pharmacies by allowing States to disregard FULs for certain 
drugs. Small pharmacies would only need to report when one drug in a 
two-drug group of therapeutically, pharmaceutically, and

[[Page 58497]]

bioequivalent drugs is unavailable. However, such reporting would 
clearly be in their interest. In addition, section 1102(b) of the Act 
requires us to prepare a regulatory impact analysis if a rule may have 
a significant impact on the operations of a substantial number of small 
rural hospitals. This analysis must conform to the provisions of 
section 604 of the RFA. For purposes of section 1102(b) of the Act, we 
define a small rural hospital as a hospital that is located outside of 
a metropolitan statistical area and has fewer than 100 beds. We are not 
preparing an analysis for section 1102(b) of the Act, because the 
Secretary has determined that this final rule will not have a 
significant impact on the operations of a substantial number of small 
rural hospitals. Small rural hospitals would be affected only to the 
extent that no FDA-approved, therapeutically and bioequivalent drug is 
available in that State for a particular outpatient drug provided 
through their outpatient pharmacies. As discussed above for pharmacies, 
States may choose to change reimbursement for drugs that are not 
multiple source drugs within the State, but this change is expected to 
increase reimbursement.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending on State, local, or 
tribal governments in the aggregate, or by the private sector, in any 1 
year of $100 million in 1995, updated annually for inflation. In 2008, 
that threshold is approximately $130 million. This final rule does not 
contain any mandates that will impose spending costs on State, local, 
or tribal governments in the aggregate, or by the private sector, of 
$130 million.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. This regulation will impose only a very small burden, if 
any, on States. When a pharmacy has notified a State that a drug on the 
CMS FUL list may not be available as a multiple source drug in that 
State, the State should determine whether the pharmacy's assertion of 
lack of general availability in the State is valid. The State, however, 
has no obligation to make an independent assessment of drug 
availability in the absence of such notification by a pharmacy. This 
final rule will only revise payment rates in those rare cases in which 
a particular FDA-approved therapeutically, pharmaceutically, and 
bioequivalent drug is not generally available to the public through 
retail pharmacies in a particular State and, as a result, only one 
therapeutically, and bioequivalent drug product is generally available 
to the public through those pharmacies. In this circumstance, a State 
would need to confirm the information received from its pharmacies 
regarding drug availability. This would impose only a small burden on 
States. State systems are designed to allow for payment changes as a 
routine matter and to change the composition of the FUL groups or 
delete FUL groups. Since this regulation does not impose any 
significant costs on State or local governments, the requirements of 
E.O. 13132 are not applicable.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Sections in 42 CFR Part 447

    Accounting, Administrative practice and procedure, Drugs, Grant 
programs--health, Health facilities, Health professions, Medicaid, 
Reporting and recordkeeping requirements, rural areas.

0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicaid Services, is confirming the interim rule published on March 
14, 2008 (73 FR 13785) as final with the following changes:

PART 447--PAYMENTS FOR SERVICES

0
1. The authority citation for part 447 continues to read as follows:


    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 
1302).


0
2. Section 447.502 the definition of ``Multiple source drug'' is 
amended by revising paragraph (3)(i) to read as follows:


Sec.  447.502  Definitions.

* * * * *
    Multiple source drug * * *
* * * * *
    (3) * * *
    (i) A drug product is considered sold or marketed in a State if it 
appears in a published national listing of average wholesale prices, 
selected by the Secretary, provided that the listed product is 
generally available to the public through retail pharmacies in that 
State.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program)

    Dated: August 20, 2008.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: August 21, 2008.
Michael O. Leavitt,
Secretary.
 [FR Doc. E8-23653 Filed 10-6-08; 8:45 am]
BILLING CODE 4120-01-P
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