Medicare Program; Proposed Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs for Contract Year 2013 and Other Proposed Changes; Considering Changes to the Conditions of Participation for Long Term Care Facilities, 63018-63091 [2011-25844]
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63018
Federal Register / Vol. 76, No. 196 / Tuesday, October 11, 2011 / Proposed Rules
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Centers for Medicare & Medicaid
Services
42 CFR Parts 417, 422, 423, and 483
[CMS–4157–P]
RIN 0938–AQ86
Medicare Program; Proposed Changes
to the Medicare Advantage and the
Medicare Prescription Drug Benefit
Programs for Contract Year 2013 and
Other Proposed Changes; Considering
Changes to the Conditions of
Participation for Long Term Care
Facilities
Centers for Medicare &
Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
AGENCY:
The proposed rule would
revise the Medicare Advantage (MA)
program (Part C) regulations and
prescription drug benefit program (Part
D) regulations to implement new
statutory requirements; strengthen
beneficiary protections; exclude plan
participants that perform poorly;
improve program efficiencies; and
clarify program requirements. We are
also considering changes to the long
term care facility conditions of
participation pertaining to pharmacy
services.
SUMMARY:
To be assured consideration,
comments must be received at one of
the addresses provided below, no later
than 5 p.m. on December 12, 2011.
ADDRESSES: In commenting, please refer
to file code CMS–4157–P. Because of
staff and resource limitations, we cannot
accept comments by facsimile (FAX)
transmission.
You may submit comments in one of
four ways (please choose only one of the
ways listed):
1. Electronically. You may submit
electronic comments on this regulation
to https://www.regulations.gov. Click on
the link ‘‘Submit electronic comments
on CMS regulations with an open
comment period.’’ (Attachments should
be in Microsoft Word, WordPerfect, or
Excel; however, we prefer Microsoft
Word.)
2. By regular mail. You may mail
written comments to the following
address ONLY:
Centers for Medicare & Medicaid
Services, Department of Health and
Human Services, Attention: CMS–4157–
P, P.O. Box 8013, Baltimore, MD 21244–
8013.
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Please allow sufficient time for mailed
comments to be received before the
close of the comment period.
3. By express or overnight mail. You
may send written comments (one
original and two copies) to the following
address ONLY:
Centers for Medicare & Medicaid
Services, Department of Health and
Human Services, Attention: CMS–4157–
P, Mail Stop C4–26–05, 7500 Security
Boulevard, Baltimore, MD 21244–1850.
4. By hand or courier. Alternatively,
you may deliver (by hand or courier)
your written comments (one original
and two copies) to one of the following
addresses prior to the close of the
comment period:
a. For delivery in Washington, DC—
Centers for Medicare & Medicaid
Services, Department of Health and
Human Services, Room 445–G, Hubert
H. Humphrey Building, 200
Independence Avenue, SW.,
Washington, DC 20201.
(Because access to the interior of the
Hubert H. Humphrey Building is not
readily available to persons without
Federal government identification,
commenters are encouraged to leave
their comments in the CMS drop slots
located in the main lobby of the
building. A stamp-in clock is available
for persons wishing to retain a proof of
filing by stamping in and retaining an
extra copy of the comments being filed.)
b. For delivery in Baltimore, MD—
Centers for Medicare & Medicaid
Services, Department of Health and
Human Services, 7500 Security
Boulevard, Baltimore, MD 21244–1850.
If you intend to deliver your
comments to the Baltimore address, call
telephone number (410) 786–1066 in
advance to schedule your arrival with
one of our staff members.
Comments erroneously mailed to the
addresses indicated as appropriate for
hand or courier delivery may be delayed
and received after the comment period.
For information on viewing public
comments, see the beginning of the
SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT:
Christian Bauer, (410) 786–6043, and
Kathryn Jansak, (410) 786–9364, General
information.
Christopher McClintick, (410) 786–
4682, Part C issues.
Deborah Larwood, (410) 786–9500, Part
D issues.
Kristy Nishimoto, (206) 615–2367, Part
C and D enrollment and appeals
issues.
Deondra Moseley, (410) 786–4577, Part
C and D payment issues.
SUPPLEMENTARY INFORMATION:
Submitting Comments: We welcome
comments from the public on all issues
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set forth in this rule to assist us in fully
considering issues and developing
policies. You can assist us by
referencing the file code CMS–4157–P.
Inspection of Public Comments: All
comments received before the close of
the comment period are available for
viewing by the public, including any
personally identifiable or confidential
business information that is included in
a comment. We post all comments
received before the close of the
comment period on the following Web
site as soon as possible after they have
been received at: https://
www.regulations.gov. Follow the search
instructions on that Web site to view
public comments.
Comments received timely will also
be available for public inspection as
they are received, generally beginning
approximately 3 weeks after publication
of a document, at the headquarters of
the Centers for Medicare & Medicaid
Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday
through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an
appointment to view public comments,
phone at 1–800–743–3951.
Table of Contents
I. Background
II. Provisions of the Proposed Regulation
A. Implementing Statutory Provisions
1. Coverage Gap Discount Program
(§ 423.100, § 423.505, § 423.1000,
§ 423.1002, and Subpart W (§ 423.2300–
423.2410))
a. Scope (§ 423.2300)
b. Definitions (§ 423.2305)
(1) Applicable Beneficiary
(2) Applicable Drug
(3) Incurred Costs
(4) Manufacturer
(5) Medicare Part D Discount Information
(6) Negotiated Price
(7) Other Health or Prescription Drug
Coverage
c. Condition for Coverage of Drugs under
Part D (§ 423.2305)
d. Medicare Coverage Gap Discount
Program Agreement (§ 423.2315)
(1) Obligations of the Manufacturer
(2) Length of Agreement
e. Payment Processes for Part D Sponsors
(§ 423.2320)
(1) Interim Payments
(2) Coverage Gap Discount Reconciliation
f. Provision of Applicable Discounts on
Applicable Drugs for Applicable
Beneficiaries (§ 423.2325)
(1) Obligations of Part D Sponsors; Pointof-Sale Discounts
(2) Collection of Data
(3) Other Health or Prescription Drug
Coverage
(4) Supplemental Benefits
(5) Pharmacy Prompt Payment
g. Manufacturer Discount Payment Audit
and Dispute Resolution (§ 423.2330)
(1) Third Party Administrator Audits
(2) Manufacturer Audits
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(3) Dispute Resolution
h. Beneficiary Dispute Resolution
(423.2335)
i. Compliance Monitoring and Civil Money
Penalties (§ 423.2340)
j. Termination of Agreement (§ 423.2345)
2. Inclusion of Benzodiazepines and
Barbiturates as Part D Covered Drugs
(§ 423.100)
3. Pharmacy Benefit Manager’s
Transparency Requirements (§ 423.501
and § 423.514)
B. Strengthening Beneficiary Protections
1. Good Cause and Reinstatement into a
Cost Plan (§ 417.460)
2. Requiring MA Plans to Issue ID Cards
(§ 422.111)
3. Determination of Actuarially Equivalent
Creditable Prescription Drug Coverage
(§ 423.56)
4. Who May File Part D Appeals with the
Independent Review Entity (§ 423.600
and § 423.602)
5. Independence of LTC Consultant
Pharmacists (§ 483.60)
C. Excluding Poor Performers
1. CMS Termination of Health Care
Prepayment Plans (§ 417.801)
2. Plan Performance Ratings as a Measure
of Administrative and Management
Arrangements and as a Basis for
Termination or Non-Renewal of a
Medicare Contract (§ 422.504, § 422.510,
§ 423.505, and § 423.509)
3. Denial of Applications Submitted by
Part C and D Sponsors with a Past
Contract Termination or CMS-Initiated
Non-Renewal (§ 422.502 and § 423.503)
D. Improving Program Efficiencies
1. Cost Contract Plan Public Notification
Requirements in Cases of Non-Renewal
(§ 417.492)
2. New Benefit Flexibility for FullyIntegrated Dual Eligible Special Needs
Plans (FIDE SNPs) (§ 422.102)
3. Application of the Medicare HospitalAcquired Conditions and Present on
Admission Indicator Policy to MA
Organizations (§ 422.504)
4. Clarifying Coverage of Durable Medical
Equipment (§ 422.100 and § 422.111)
a. Access to Preferred DME Items and
Supplies
b. Medical Necessity Requirements for
DME Items and Supplies
c. Transition Period for Coverage of NonPreferred DME Items and Supplies
d. Midyear Changes to Preferred DME
Items and Supplies
e. Appeals
f. Disclosure of DME Coverage Limitations
5. Broker and Agent Requirements
(§ 422.2274 and § 423.2274)
6. Establishment and Application of Daily
Cost-Sharing Rate as Part of Drug
Utilization Management and Fraud,
Abuse, and Waste Control Program
(§ 423.104 and § 423.153)
E. Clarifying Program Requirements
1. Technical Corrections to Enrollment
Provisions (§ 417.422, § 417.432,
§ 422.60, and § 423.56)
2. Extending MA and Part D Program
Disclosure Requirements to Section 1876
Cost Contract Plans (§ 417.427)
3. Clarification of, and Extension to Local
Preferred Provider Plans, of Regional
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Preferred Provider Organization Plan
Single Deductible Requirement
(§ 422.101)
4. Technical Change to Private Fee-ForService Plan Explanation of Benefits
Requirements (§ 422.216)
5. Application Requirements for Special
Needs Plans (§ 422.500, § 422.501,
§ 422.502, § 422.641, and § 422.660)
6. Timeline for Resubmitting Previously
Denied MA Applications (§ 422.501)
7. Clarification of Contract Requirements
for First Tier and Downstream Entities
(§ 422.504 and § 423.505)
8. Valid Prescriptions (§ 423.100 and
§ 423.104)
9. Medication Therapy Management
Comprehensive Medication Reviews and
Beneficiaries in LTC Settings (§ 423.153)
10. Employer Group Waiver Plans
Requirement to Follow All Part D Rules
Not Explicitly Waived (§ 423.458)
11. Access to Covered Part D Drugs
Through Use of Standardized
Technology and National Provider
Identifiers (§ 423.120)
III. Collection of Information Requirements
IV. Response to Public Comments
V. Regulatory Impact Analysis
Regulations Text
Acronyms
AO Accrediting Organization
ADS Automatic Dispensing System
AEP Annual Enrollment Period
AHFS American Hospital Formulary
Service
AHFS–DI American Hospital Formulary
Service-Drug Information
AHRQ Agency for Health Care Research
and Quality
ALJ Administrative Law Judge
ANOC Annual Notice of Change
AOR Appointment of Representative
BBA Balanced Budget Act of 1997 (Pub. L.
105–33)
BBRA [Medicare, Medicaid and State Child
Health Insurance Program] Balanced
Budget Refinement Act of 1999 (Pub. L.
106–113)
BIPA [Medicare, Medicaid, and SCHIP]
Benefits Improvement Protection Act of
2000 (Pub. L. 106–554)
BLA Biologics License Application
CAHPS Consumer Assessment Health
Providers Survey
CAP Corrective Action Plan
CCIP Chronic Care Improvement Program
CC/MCC Complication/Comorbidity and
Major Complication/Comorbidity
CCS Certified Coding Specialist
CDC Centers for Disease Control
CHIP Children’s Health Insurance Programs
CMR Comprehensive Medical Review
CMS Centers for Medicare & Medicaid
Services
CMS–HCC CMS Hierarchal Condition
Category
CTM Complaints Tracking Module
COB Coordination of Benefits
CORF Comprehensive Outpatient
Rehabilitation Facility
CPC Certified Professional Coder
CY Calendar year
DEA Drug Enforcement Administration
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DIR Direct and Indirect Remuneration
DME Durable Medical Equipment
DMEPOS Durable Medical Equipment,
Prosthetic, Orthotics, and Supplies
D–SNPs Dual Eligible SNPs
DOL U.S. Department of Labor
DRA Deficit Reduction Act of 2005 (Pub. L.
109–171)
DUM Drug Utilization Management
EGWP Employer Group/Union-Sponsored
Waiver Plan
EOB Explanation of Benefits
EOC Evidence of Coverage
ESRD End-Stage Renal Disease
FACA Federal Advisory Committee Act
FDA Food and Drug Administration
FEHBP Federal Employees Health Benefits
Plan
FFS Fee-For-Service
FIDE Fully-integrated Dual Eligible
FIDE SNPs Fully-integrated Dual Eligible
Special Needs Plans
FMV Fair Market Value
FY Fiscal year
GAO Government Accountability Office
HAC Hospital-Acquired Conditions
HCPP Health Care Prepayment Plans
HEDIS HealthCare Effectiveness Data and
Information Set
HHS [U.S. Department of] Health and
Human Services
HIPAA Health Insurance Portability and
Accountability Act of 1996 (Pub. L. 104–
191)
HMO Health Maintenance Organization
HOS Health Outcome Survey
HPMS Health Plan Management System
ICD–9–CM Internal Classification of
Disease, 9th, Clinical Modification
Guidelines
ICEP Initial Coverage Enrollment Period
ICL Initial Coverage Limit
ICR Information Collection Requirement
ID Identification
IPPS [Acute Care Hospital] Inpatient
Prospective Payment System
IRE Independent Review Entity
IVC Initial Validation Contractor
LEP Late Enrollment Penalty
LIS Low Income Subsidy
LPPO Local Preferred Provider
Organization
LTC Long Term Care
MA Medicare Advantage
MAAA Member of the American Academy
of Actuaries
MA–PD Medicare Advantage-Prescription
Drug Plan
MIPPA Medicare Improvements for Patients
and Providers Act of 2008 (Pub. L. 110–
275)
MOC Medicare Options Compare
MOOP Maximum Out-of-Pocket
MPDPF Medicare Prescription Drug Plan
Finder
MMA Medicare Prescription Drug,
Improvement, and Modernization Act of
2003 (Pub. L. 108–173)
MS–DRG Medicare Severity Diagnosis
Related Group
MSA Metropolitan Statistical Area
MSAs Medical Savings Accounts
MSP Medicare Secondary Payer
MTM Medication Therapy Management
MTMP Medication Therapy Management
Program
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NAIC National Association Insurance
Commissioners
NCPDP National Council for Prescription
Drug Programs
NCQA National Committee for Quality
Assurance
NDA New Drug Application
NDC National Drug Code
NGC National Guideline Clearinghouse
NIH National Institutes of Health
NOMNC Notice of Medicare Non-coverage
NPI National Provider Identifier
OIG Office of Inspector General
OMB Office of Management and Budget
OPM Office of Personnel Management
OTC Over the Counter
PART C Medicare Advantage
PART D Medicare Prescription Drug Benefit
Program
PBM Pharmacy Benefit Manager
PDE Prescription Drug Event
PDP Prescription Drug Plan
PFFS Private Fee for Service Plan
POA Present on Admission (Indicator)
POS Point-of-Sale
PPO Preferred Provider Organization
PPS Prospective Payment System
P&T Pharmacy & Therapeutics
QIO Quality Improvement Organization
QRS Quality Review Study
PACE Programs of All Inclusive Care for the
Elderly
RADV Risk Adjustment Data Validation
RAPS Risk Adjustment Payment System
RHIA Registered Health Information
Administrator
RHIT Registered Health Information
Technician
RPPO Regional Preferred Provider
Organization
SEP Special Enrollment Periods
SHIP State Health Insurance Assistance
Programs
SNF Skilled Nursing Facility
SNP Special Needs Plan
SPAP State Pharmaceutical Assistance
Programs
SSA Social Security Administration
SSI Supplemental Security Income
TPA Third Party Administrator
TrOOP True Out-of-Pocket
U&C Usual and Customary
UPIN Uniform Provider Identification
Number
USP U.S. Pharmacopoeia
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SUPPLEMENTARY INFORMATION:
I. Background
The Balanced Budget Act of 1997
(BBA) (Pub. L. 105–33) created a new
‘‘Part C’’ in the Medicare statute
(sections 1851 through 1859 of the
Social Security Act (the Act)) which
established what is now known as the
Medicare Advantage (MA) program. The
Medicare Prescription Drug,
Improvement, and Modernization Act of
2003 (MMA) (Pub. L. 108–173), enacted
on December 8, 2003, added a new ‘‘Part
D’’ to the Medicare statute (sections
1860D–1 through 1860D–42 of the Act)
entitled the Medicare Prescription Drug
Benefit Program, and made significant
changes to the existing Part C program,
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which it named the Medicare Advantage
(MA) Program. The MMA directed that
important aspects of the Part D program
be similar to, and coordinated with,
regulations for the MA program.
Generally, the provisions enacted in the
MMA took effect January 1, 2006. The
final rules implementing the MMA for
the MA and Part D prescription drug
programs appeared in the January 28,
2005 Federal Register (70 FR 4588
through 4741 and 70 FR 4194 through
4585, respectively).
Since the inception of both Parts C
and D, we have periodically revised our
regulations either to implement
statutory directives or to incorporate
knowledge obtained through experience
with both programs. For instance, in
September 2008 and January 2009, we
issued Part C and D regulations (73 FR
54226 and 74 FR 1494, respectively) to
implement provisions in the Medicare
Improvement for Patients and Providers
Act (MIPPA) (Pub. L. 110–275). We
promulgated a separate interim final
rule in January 2009 to address MIPPA
provisions related to Part D plan
formularies (74 FR 2881). In April 2010,
we issued Part C and D regulations (75
FR 19678) which strengthened various
program participation and exit
requirements; strengthened beneficiary
protections; ensured that plan offerings
to beneficiaries included meaningful
differences; improved plan payment
rules and processes; improved data
collection for oversight and quality
assessment; implemented new policies;
and clarified existing program policy.
In a final rule that appeared in the
April 15, 2011 Federal Register (76 FR
21432), we continued our process of
implementing improvements in policy
consistent with those included in the
April 2010 final rule, and also
implemented changes to the Part C and
Part D programs made by recent
legislative changes. The Patient
Protection and Affordable Care Act
(Pub. L. 111–148) was enacted on March
23, 2010, as passed by the Senate on
December 24, 2009, and the House on
March 21, 2010. The Health Care and
Education Reconciliation Act (Pub. L.
111–152), which was enacted on March
30, 2010, modified a number of
Medicare provisions in Pub. L. 111–148
and added several new provisions. The
Patient Protection and Affordable Care
Act (Pub. L. 111–148) and the Health
Care and Education Reconciliation Act
(Pub. L. 111–152) are collectively
referred to as the Affordable Care Act.
The Affordable Care Act included
significant reforms to both the private
health insurance industry and the
Medicare and Medicaid programs.
Provisions in the Affordable Care Act
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concerning the Part C and D programs
largely focused on beneficiary
protections, MA payments, and
simplification of MA and Part D
program processes. These provisions
affected implementation of our policies
regarding beneficiary cost-sharing,
assessing bids for meaningful
differences, and ensuring that costsharing structures in a plan are
transparent to beneficiaries and not
excessive. In the April 2011 final rule,
we revised regulations on a variety of
issues based on the Affordable Care Act
and our experience in administering the
MA and Part D programs. The rule
covered areas such as marketing,
including agent/broker training;
payments to MA organizations based on
quality ratings; standards for
determining if organizations are fiscally
sound; low income subsidy policy
under the Part D program; payment
rules for non-contract health care
providers; extending current network
adequacy standards to Medicare
medical savings account (MSA) plans
that employ a network of providers;
establishing limits on out-of-pocket
expenses for MA enrollees; and several
revisions to the special needs plan
requirements, including changes
concerning SNP approvals.
II. Provisions of the Proposed
Regulations
In the sections that follow, we discuss
the proposed changes to the regulations
in 42 CFR parts 417, 422, and 423
governing the MA and prescription drug
benefit programs. We also are
considering changes to the regulations
setting forth Medicare conditions of
participation for long-term care
facilities, which are currently codified
at 42 CFR part 483. To better frame the
discussion, we have structured the
overall preamble narrative by topic area
rather than by subpart order.
Accordingly, our proposals address the
following five specific topic areas:
• Implementing provisions of MIPPA
and the Affordable Care Act.
• Strengthening beneficiary
protections.
• Excluding poor performers.
• Improving program efficiencies.
• Clarifying program requirements.
Several of the proposed revisions and
clarifications affect both the MA and
prescription drug programs, while a few
affect cost contracts under section 1876
of the Act. Within each topic area, we
provide a chart that lists the associated
regulatory citations and we discuss the
provisions in order of appearance in the
proposed regulations. We are also
considering changing the long term care
facility conditions of participation
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pertaining to pharmacy services and,
accordingly, cover that issue under the
appropriate topic in the preamble
section, in order of regulation location
under consideration.
We note that these regulations would
be effective 60 days after the publication
of the final rule that would finalize the
proposed changes discussed in this
proposed rule, except where otherwise
noted in the preamble. Only one
proposed item would have a different
effective date: section 175(b) of MIPPA
provides that the proposed amendments
requiring that benzodiazepines and, for
specified health conditions, barbiturates
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source of direction. Regulations under a
MIPPA provision would provide first
line treatment for beneficiaries with
certain health conditions who require
benzodiazepines and, as specified,
barbiturates. We believe that
implementing section 6005 of the
Affordable Care Act, which requires us
to collect Pharmacy Benefit Manager
(PBM) spread amounts, would establish
necessary transparency related to
entities that provide pharmacy benefits
management services to Part D sponsors.
The changes based on provisions in the
Affordable Care Act and MIPPA are
detailed in Table 1.
be considered as Part D drugs apply to
prescriptions dispensed on or after
January 1, 2013.
A. Implementing Statutory Provisions
This section contains three
provisions, two of which would
implement sections of the Affordable
Care Act and one which would
implement a MIPPA mandate. We
propose to consolidate and codify
previous guidance regarding the
Coverage Gap Discount Program
mandated by the Affordable Care Act.
Through this consolidation we aim to
provide stakeholders a central, clear
TABLE 1—PROVISIONS TO IMPLEMENT STATUTORY PROVISIONS
Part 423
Preamble section
Provision
Subpart
II.A.1. ...................
Coverage Gap Discount Program ..............................................................
II.A.2. ...................
II.A.3. ...................
Inclusion of Benzodiazepines and Barbiturates as Part D Covered Drugs
Pharmacy Benefit Manager’s Transparency Requirements ......................
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1. Coverage Gap Discount Program
(§ 423.100, § 423.505(b), § 423.1000,
§ 423.1002, and § 423.2300 through
§ 423.2345 (Subpart W))
The Medicare Prescription Drug
Benefit was enacted into law on
December 8, 2003, in section 101 of the
MMA and codified in sections 1860D–
1 through 1860D–42 of the Act. Section
101 of the MMA amended Title XVIII of
the Act by redesignating Part D as Part
E and inserting new Part D, which
establishes the voluntary Prescription
Drug Benefit Program (Part D). The Part
D program is available to individuals
who are entitled to Medicare Part A or
enrolled in Medicare Part B. We
contract with private companies
referred to as Part D sponsors to
administer the Part D program via stand
alone prescription drug plans (PDPs)
and prescription drug plans offered by
Medicare Advantage Organizations
(MA–PDs). The Part D program became
effective January 1, 2006.
The MMA established standard Part D
prescription drug coverage that consists
of coverage subject to an annual
deductible, 25 percent coinsurance (or
an actuarially equivalent cost-sharing
design) up to the initial coverage limit
(ICL), and catastrophic coverage for
individuals who exceed the annual
maximum true out-of-pocket (TrOOP)
threshold with cost-sharing equal to the
greater of a $2/$5 copayment or
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Subpart
Subpart
Subpart
Subpart
Subpart
Subpart
Subpart
coinsurance of 5 percent. Prior to the
enactment of the Affordable Care Act,
under standard coverage, individuals
that did not receive additional costsharing subsidies from CMS or
additional coverage by other secondary
payers (for example, State
Pharmaceutical Assistance Programs)
were responsible for paying one
hundred percent of the Part D
negotiated price for covered Part D
claims above the ICL until their TrOOP
costs exceed the annual threshold
amount.
The Affordable Care Act made several
amendments to Part D of Title XVIII of
the Act, including adding sections
1860D–43 and 1860D–14A of the Act,
and amending section 1860D–2(b) of the
Act. Beginning on January 1, 2011, these
amendments started phasing out the
Part D coverage gap, or ‘‘donut hole’’ for
Medicare beneficiaries who do not
already receive low-income subsidies
from CMS by establishing the Medicare
Coverage Gap Discount Program
(Discount Program) and gradually
increasing coverage in the coverage gap
for both generic drugs (beginning in
2011) and brand name drugs and
biological products (beginning in 2013).
By 2020, beneficiary cost-sharing for all
covered brand-name and generic drugs
and biological products will equal 25
percent until they reach catastrophic
coverage.
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C ..................
K ..................
T ..................
T ..................
W (new) .......
C ..................
K ..................
Section(s)
§ 423.100
§ 423.505
§ 423.1000
§ 423.1002
§ 423.2300–§ 423.2345
§ 423.100
§ 423.501
§ 423.514
The Discount Program makes
manufacturer discounts available at the
point-of-sale to applicable Medicare
beneficiaries receiving applicable drugs
while in the coverage gap. In general,
the discount on each applicable drug is
50 percent of an amount equal to the
negotiated price of the drug (less any
dispensing fee). Manufacturers must
agree to provide these discounts by
signing an agreement with CMS in order
for their applicable drugs to continue to
be covered under Medicare Part D,
unless we use our authority under
section 1860D–43(c) of the Act to make
an exception that allows coverage
without an agreement.
While manufacturer discounts under
the Discount Program must be made
available at point-of-sale, the Affordable
Care Act does not specify how this
should be done. At the same time, it
prohibits us from receiving or
distributing any funds of the
manufacturer under the program. In
order to provide point-of-sale discounts,
we determined that an entity must have
the information necessary to determine
at that point in time that the drug is
discountable, the beneficiary is eligible
for the discount, the claim is wholly or
partly in the coverage gap, and the
amount of the discount, taking into
consideration negotiated plan prices
and that plan supplemental benefits
must pay before the discount amount
can be determined. We determined that
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the only entities that have the
information necessary to provide pointof-sale discounts under the Discount
Program are Part D sponsors. Only the
Part D sponsor knows which Part D
drugs are on its formulary and which
enrollees have obtained an exception to
receive a non-formulary Part D drug.
The Part D sponsor has the low-income
subsidy (LIS) information for
beneficiaries that is necessary to
exclude such claims from the Discount
Program. The Part D sponsor tracks
gross drug spend and TrOOP costs,
which are necessary for determining
when the beneficiary enters and exits
the coverage gap. In addition, only the
Part D sponsor knows which portion of
the claim is in the coverage gap. For
these reasons, we believe only the Part
D sponsor can accurately provide the
discount at point-of-sale.
We explored the viability of a model
whereby a third party administrator
(TPA) could directly adjudicate the
discount payment to pharmacies. In this
hypothetical model, the pharmacy
would submit the Part D claim to the
Part D sponsor and receive information
on the response that would direct the
pharmacy to bill the third party for
applicable claims. While this model
initially showed promise, our
discussions with industry through
National Council of Prescription Drug
Program (NCPDP) workgroups revealed
that neither the current Health
Insurance Portability and
Accountability Act (HIPAA) electronic
pharmacy claims billing standard nor
the next HIPAA approved version of the
billing standard could support the
transfer of information from the Part D
sponsor that would be necessary to
specify the appropriate claims and
appropriate discount amounts to be
billed to the third party administrator,
or allow for accurate coordination of
benefits among payers. Consequently,
we determined that this model cannot
be used to implement the Discount
Program in the foreseeable future.
Section 1860D–14A(d)(5) of the Act
authorizes us to implement the Discount
Program through program instruction.
We used this authority to issue program
guidance to Part D sponsors, with an
abbreviated notice and comment period,
instructing them to provide applicable
discounts on applicable drugs to
applicable beneficiaries at point-of-sale
beginning on January 1, 2011. The
guidance also specified that Part D
sponsors would report discount
amounts to us, that we would invoice
manufacturers on a quarterly basis for
these discounts, and that the
manufacturers would repay each Part D
sponsor directly for the invoiced
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discount provided on the
manufacturers’ behalf. We determined
that this model was necessary because
Part D sponsors needed to provide the
discounts at point-of-sale (as explained
previously) and we needed to
coordinate the discount payments
between manufacturers and Part D
sponsors to ensure discounts were
appropriately provided by the Part D
sponsors and reimbursed by the
manufacturers without directly
receiving or distributing manufacturer
funds (which we are prohibited from
doing by section 1860D–14A(d)(2)(A) of
the Act).
We needed to implement the Discount
Program through program instruction
because of the January 1, 2011
implementation deadline. Although not
required, we are now proposing to
codify most existing Discount Program
requirements (that is, those that we have
previously implemented through the
relevant Agreements and guidance)
through full notice and comment
rulemaking to provide additional
transparency and a formal framework
for operating the Discount Program and
enforcing its requirements.
a. Scope (§ 423.2300)
Subpart W of part 423 implements
provisions included in sections 1860D–
14A and 1860D–43 of the Act. This
subpart sets forth requirements as
follows:
• Condition of coverage of drugs
under Part D.
• The Medicare Coverage Gap
Discount Program Agreement.
• Coverage gap discount payment
processes for Part D sponsors.
• Provision of applicable discounts
on applicable drugs for applicable
beneficiaries.
• Manufacturer audit and dispute
resolution processes.
• Resolution of beneficiary disputes
involving coverage gap discounts.
• Compliance monitoring and civil
money penalties.
• The termination of the Discount
Program Agreement.
b. Definitions (§ 423.2305)
Proposed § 423.2305 includes
definitions for terms that are frequently
used in this subpart. Those terms we
believe need additional clarification are
described separately in this section of
the proposed rule.
(1) Applicable Beneficiary
Applicable beneficiary is defined in
§ 423.100. We clarify that enrollees in
employer-sponsored group prescription
drug plans (as defined in § 423.454) may
qualify as applicable beneficiaries.
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(2) Applicable Drug
Applicable drug is defined in
§ 423.100. We clarify that applicable
drugs include all covered Part D drugs
marketed under a new drug application
(NDA) or biologics license application
(BLA) (other than a product licensed
under section 351(k) of the Public
Health Service Act). This means that
such drugs and biological products
would be subject to an applicable
discount in the coverage gap even if a
Part D sponsor otherwise considers the
product to be generic under its benefit.
Conversely, covered Part D drugs that
are marketed under trade names and
generally thought of as brand-name
drugs or biological products, but are not
approved under an NDA or licensed
under a BLA (other than a product
licensed under section 351(k) of the
Public Health Service Act), are not
applicable drugs that would be subject
to an applicable discount in the
coverage gap. Finally, drugs excluded
from Part D under section 1860D–
2(e)(2)(A) of the Act are not covered Part
D drugs and therefore, such drugs
would not be applicable drugs subject to
an applicable discount even if covered
by the Part D sponsor under an
enhanced benefit. Part D sponsors
would need to make these
determinations on a National Drug Code
(NDC) by NDC basis.
The second part of the definition
provides that an applicable drug is
either available on-formulary if a Part D
sponsor uses a formulary, or available
under the benefits provided by a Part D
sponsor that does not use a formulary,
or available to a particular beneficiary
through an exception or appeal for that
particular beneficiary. Applicable drugs
covered under transition and emergency
fill policies are considered covered
through an exception and, therefore,
would be subject to applicable
discounts.
In addition, we interpret the
definition of an applicable drug for
purposes of the Discount Program to
exclude Part D compounds. While Part
D sponsors may cover compounds with
at least one Part D drug ingredient, and
that ingredient would be an applicable
drug if dispensed on its own, in light of
the operational difficulty in accurately
determining which portion(s) of a Part
D compound represents the Part D drug,
we believe that the applicable drug
determination must be made with
respect to the compound as a whole.
Given that a compound as a whole is
not approved under an NDA or BLA, a
compound does not meet the definition
of an applicable drug.
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(3) Incurred Costs
Section 3301 of the Affordable Care
Act amends section 1860D–2(b)(4) of the
Act by adding subparagraph (E) when
applying subparagraph (A) to include
the negotiated price (as defined in
paragraph (6) of section 1860D–14A(g)
of the Act) of an applicable drug of a
manufacturer that is furnished to an
applicable beneficiary under Medicare
Coverage Gap Discount Program
regardless of whether part of such costs
were paid by a manufacturer under such
program, except that incurred costs
shall not include the portion of the
negotiated price that represents the
reduction in coinsurance resulting from
the application of paragraph (2)(D) (that
is, gap coverage). Therefore, we propose
to revise the definition of incurred costs
in § 423.100 by adding the following
language to paragraph (2)(ii) of such
definition—‘‘or by a manufacturer as
payment for an applicable discount (as
defined § 423.2305) under the Medicare
Coverage Gap Discount Program (as
defined in § 423.2305)’’. This would
mean that all applicable discounts paid
by manufacturers would be treated as
incurred costs for purposes of
calculating the beneficiary’s TrOOP.
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(4) Manufacturer
Section 1860D–14A(g)(5) of the Act
defines manufacturer under the
Discount Program as any entity which is
engaged in the production, preparation,
propagation, compounding, conversion
or processing of prescription drug
products, either directly or indirectly,
by extraction from substances of natural
origin, or independently by means of
chemical synthesis, or by a combination
of extraction and chemical synthesis.
Such term does not include a wholesale
distributor of drugs or a retail pharmacy
licensed under State law. We propose to
adopt this statutory language in
§ 423.2305 and also add the following
clarifying language ‘‘but includes
entities otherwise engaged in
repackaging or changing the container,
wrapper, or labeling of any applicable
drug product in furtherance of the
distribution of the applicable drug from
the original place of manufacture to the
person who makes the final delivery or
sale to the ultimate consumer for use.’’
We propose adding this language to the
definition to be consistent with the
definition of the term ‘‘manufacturer’’ in
section 510 for the Federal Food Drug
and Cosmetic Act as well as to track the
defined term in the Discount Program
Agreement.
Moreover, we believe this is the only
practical way to define manufacturer so
that we can accurately assign
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responsibility for the discounts. While
applicable drugs may actually be made
by a limited number of companies,
many more companies commonly
repackage or relabel drug products and
market them with their own labeler
codes. Registered drug establishments
are required by law to provide the FDA
with a current list of all drugs
manufactured, prepared, propagated,
compounded, or processed by it for
commercial distribution. (See section
510 of the Federal Food, Drug, and
Cosmetic Act 921 U.S.C. 360.) Each
listed product is identified by a unique
NDC, which identifies the labeler,
product, and trade package size. The
first segment, the labeler code, identifies
the firm that manufactures (including
repackers and relabelers) or distributes
(under its own name) the drug.
Therefore, we can accurately identify
the company responsible for labeling
the product and require this company to
pay the discount. Alternatively, it
would be very difficult, if not
impossible, to track such relabeled or
repackaged products back to the original
maker of the drug if we limited the
definition of manufacturer to the
original maker. We would interpret
‘‘entities otherwise engaged in
repackaging or changing the container,
wrapper, or labeling * * *’’ to mean the
companies associated with the unique
labeler codes that are included in the
NDCs of the applicable drugs dispensed
by pharmacies, therefore these
companies would be considered
manufacturers under the Discount
Program.
Applicable drugs are marketed with
labels that include a labeler code
identifying the company that labels the
product. While the same applicable
drug may be marketed by multiple
companies, only one company is linked
to a unique labeler code. All
manufacturers of applicable drugs,
meaning all companies that label
applicable drugs with unique labeler
codes, would be required to sign an
agreement for any applicable drugs with
such labeler codes to be covered under
Medicare Part D as of January 1, 2011.
Only one manufacturer would be
identified with each labeler code and,
therefore, only one manufacturer would
be responsible for paying applicable
discounts associated with that labeler
code at any given time.
(5) Medicare Part D Discount
Information
In accordance with section 1860D–
14A(d)(3)(C) of the Act, we require the
TPA to provide adequate and timely
information to manufacturers,
consistent with the Discount Program
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Agreement with the manufacturers, as
necessary for the manufacturer to fulfill
its obligations under the Discount
Program. Accordingly, we require the
TPA to invoice each manufacturer each
quarter on behalf of Part D sponsors for
the applicable discounts advanced by
the Part D sponsors to applicable
beneficiaries and reported to CMS on
the prescription drug event (PDE)
records. The TPA also provides
information to the manufacturer along
with each quarterly invoice that is
derived from applicable data elements
available on PDE records as determined
by CMS. We propose to define this
information in § 423.2305 as Medicare
Part D Discount Information.
Generally, the Medicare Part D
Discount Information would include
certain claim-level detail derived from
the PDE record. Information such as
applicable drug NDC, dispensing
pharmacy, quantity dispensed, date of
service, days supply, prescription and
fill number, and reported gap discount
would be provided. We would provide
this information so that a manufacturer
could evaluate the accuracy of claimed
discounts and resolve disputes
concerning the manufacturer’s payment
obligations under the Discount Program.
Under the current Medicare Coverage
Gap Discount Program Agreement with
manufacturers, ‘‘Medicare Part D
Discount Information’’ refers to the
information derived from applicable
data elements available on PDEs and set
forth in Exhibit A of the Agreement that
will be sent from the TPA to the
manufacturer along with each quarterly
invoice. However, section III(f) of the
Agreement generally prohibits us from
disclosing any identifying beneficiary
information under the Discount
Program. Although the ‘‘Medicare Part D
Discount Information’’ does not include
specific beneficiary identifiers, an issue
arises when the volume of claims for an
applicable drug is so low that the data
provided as ‘‘Medicare Part D Discount
Information’’ could be used to identify
a Medicare beneficiary.
In order to protect the identity of
Medicare beneficiaries, we have a cellsize suppression policy that prohibits
disclosure of data if the data cell
contains 10 or fewer individuals. In
applying this policy to the Discount
Program, CMS would be unable to
disclose all the data elements currently
specified as ‘‘Medicare Part D Discount
Information’’ when 10 or fewer
beneficiaries with the same applicable
drug (identified as having the same first
two segments of NDC) have claims at
the same pharmacy. This threshold is
based on all Part D claims for an
applicable drug (identified as having the
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same first two segment of the NDC) at
the same pharmacy, not 10 or fewer
applicable beneficiaries with coverage
gap claims.
When we agreed to provide the data
elements specified in Exhibit A of the
current Medicare Coverage Gap
Discount Program Agreement, we did
not take into consideration this issue
that arises if claims volume is so low
that this information could reasonably
be used to identify a beneficiary.
Consequently, we believe we would
need to further limit the information
that could be provided to manufacturers
based upon the prohibition on releasing
beneficiary identifying information. We
propose withholding the Service
Provider Identifier information when a
claim qualifies as low volume (that is,
10 or fewer beneficiaries receiving the
same drug product at the same
pharmacy). This would mean that the
remaining claims-level detail would be
provided, but it would not specify the
service provider for each claim. By
doing this, we would comply with the
CMS cell size suppression policy while
still providing claims-level detail that
would be helpful to manufacturers for
evaluating the accuracy of the invoiced
discount payments. We seek comments
on this proposal.
(6) Negotiated Price
We propose to define negotiated price
for purposes of the Discount Program
consistent with section 1860D–
14A(g)(6), which defines ‘‘negotiated
price’’ in terms of its meaning in
§ 423.100 as of the date of enactment of
the section (that is, as of March 23,
2010), except that such definition does
not include dispensing fees. Part D
vaccine administration fees would be
excluded from the definition of
negotiated price for purposes of the
Discount Program because we believe
that, for purposes of the Discount
Program, they are analogous to
dispensing fees, which are explicitly
excluded from the definition of
negotiated price for purposes of
determining the applicable discount.
Unlike sales tax, dispensing fees and
vaccine administration fees pay for
services apart from the applicable drug
itself. This is made clear by the fact that
a vaccine administration fee may be
billed separately from the dispensing of
the vaccine. Sales tax remains included
in the definition of negotiated price
under the Discount Program. Thus, we
are proposing to define ‘‘negotiated
price’’ for purposes of the Discount
Program and this subpart as: the price
for a covered Part D drug that— (1) the
Part D sponsor (or other intermediary
contracting organization) and the
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network dispensing pharmacy or other
network dispensing provider have
negotiated as the amount such network
entity will receive, in total, for a
particular drug; (2) is reduced by those
discounts, direct or indirect subsidies,
rebates, other price concessions, and
direct or indirect remuneration that the
Part D sponsor has elected to pass
through to Part D enrollees at the pointof-sale; and (3) excludes any dispensing
fee or vaccine administration fee for the
applicable drug.
Further, although the statutory
definition speaks only to the negotiated
price with respect to a network
pharmacy, given that there is no
limitation on an applicable beneficiary’s
entitlement to applicable discounts on
applicable drugs obtained out-ofnetwork, we do not believe Congress
intended to exclude these discounts
from the Discount Program. Therefore,
we propose to specify in § 423.2305 that
the negotiated price also means, for
purposes of out-of-network claims, the
plan allowance as determined under
§ 423.124, less any dispensing fee and
vaccine administration fee.
(7) Other Health or Prescription Drug
Coverage
Section 1860D–14A(c)(1)(A)(v) of the
Act requires that the applicable
discount get applied before any
coverage or financial assistance under
other health benefit plans or programs
that provide coverage or financial
assistance for the purchase or provision
of prescription drug coverage on behalf
of applicable beneficiaries. Section
423.2305 of the proposed rule would
define the term ‘‘other health or
prescription drug coverage’’ as any
coverage or financial assistance under
other health benefit plans or programs
that provide coverage or financial
assistance for the purchase or provision
of prescription drug coverage on behalf
of applicable beneficiaries. This would
include any programs that provide
coverage or financial assistance outside
of Part D. Thus, the applicable discount
would apply before any ‘‘other health or
prescription drug coverage’’ such as
state pharmaceutical assistance
programs (SPAPs), Aids Drug Assistance
Programs (ADAPs), Indian Health
Service, or supplemental coverage
required by the Commonwealth of
Puerto Rico.
In addition, we propose to include in
the definition of ‘‘other health or
prescription drug coverage’’ any
coverage offered through employer
group health or waiver plans (EGWPs)
other than basic prescription drug
coverage as defined in § 423.100. We
would also propose to make a
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conforming change to the definition of
supplemental benefits in § 423.100 to
exclude benefits offered by EGWPs. Our
proposal with respect to EGWPs would
mean that a manufacturer discount
always would be applied before any
additional coverage beyond Part D,
whether offered by the EGWP itself or
by another party. We believe a clear
standard in this regard is necessary to
ensure we can properly administer the
Discount Program for EGWP enrollees in
light of our existing policies and
procedures with respect to EGWP plans.
Under current waivers authorized by
section 1860D–22(b) of the Act, EGWP
sponsors submit only one formulary and
standard-defined benefit package for
review by CMS. EGWP sponsors may
then customize actual formularies and
benefit packages for specific employer
or union clients, for example, by adding
drugs to their formularies that are not
covered under the basic benefit and/or
reducing enrollee cost-sharing. Until
now, we have allowed EGWP sponsors
to determine whether any benefits
offered under the EGWPs were Medicare
(Part D) or non-Medicare (non-Part D)
benefits because we did not collect
information about or otherwise oversee
specific EGWP benefit packages.
However, with the implementation of
the Discount Program, determining
whether such benefits are supplemental
Part D benefits (which would be applied
before the applicable discount) or nonMedicare benefits (which would apply
after the discount) is significant. We
believe that many EGWP sponsors have
already restructured their benefits so
that the EGWP provides only basic Part
D coverage (with full coverage gap) and
considers any additional benefits as
non-Medicare benefits. Given that we do
not receive or review the final benefit
packages and formularies offered to
EGWP enrollees, we propose to exercise
our waiver authority under section
1860D–22(b) of the Act to exclude all
benefits offered by EGWPs from the
definition of supplemental benefits and,
therefore, these benefits, other than
basic prescription drug coverage (as
defined in § 423.100), would be
considered ‘‘other health or prescription
drug coverage’’ for purposes of the
Discount Program. We seek comments
on this proposal.
As an alternative to this proposal, we
considered requiring EGWP sponsors to
submit their final benefit packages for
review and approval. Under this option,
we would have limited EGWPs to
offering only supplemental benefits that
meet the requirements of
§ 423.104(f)(1)(ii). However, in addition
to the significant challenges associated
with expanding our review process to
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accommodate another 25,000 to 50,000
benefit packages, this ultimately would
not prevent employers or unions from
offering separate benefits that would not
be overseen or regulated by us; and
therefore, would not provide the clear
standard for distinguishing
supplemental benefits from other health
or prescription drug coverage for
purposes of determining the applicable
discount. Moreover, this alternative
approach could adversely affect EGWP
enrollees to the extent it would require
EGWPs to make significant changes in
order to bring their supplemental
benefits in line with Part D rules—
because it might prompt EGWPs to drop
those supplemental benefits altogether
or otherwise reduce coverage.
Consequently, we believe it is better to
clearly remove all employer sponsored
benefits, other than basic prescription
drug coverage as defined in § 423.100,
from our purview, which we believe
would leave EGWP enrollees in the
same place they are today, while, as
noted above, providing all participants
in the Discount Program a bright line
test for determining when the applicable
discount applies.
c. Condition for Coverage of Drugs
Under Part D (§ 423.2310)
Section 1860D–43(a) of the Act
specifies that in order for coverage
under Part D to be available for the
covered Part D drugs (as defined in
section 1860D–2(e) of the Act)) of a
manufacturer, that manufacturer must
agree to participate in the Discount
Program, enter into a Discount Program
Agreement, and enter into an agreement
with the TPA. Although the statute
appears to plainly contemplate that all
manufacturers of covered Part D drugs
must sign Discount Program Agreements
in order for coverage under Part D to be
available for such drugs, when read in
context with the other provisions
governing the Discount Program, we
believe the plainest reading of section
1860D–43(a) is both inappropriate and
infeasible. Thus, in implementing the
Discount Program last year, we specified
in program guidance that the exclusion
from Part D coverage applies only to the
applicable drugs of a manufacturer that
fails to sign the Agreement and
participate in the Program. We currently
apply the exclusion from Part D
coverage only to a manufacturer’s
applicable drugs. Other Part D drugs,
such as generic drugs (as defined in
§ 423.4) of a manufacturer continue to
be covered under Medicare Part D
irrespective of the manufacturer’s
participation in the Discount Program.
We propose to codify this policy in
regulations.
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The rationale for our narrower
interpretation of section 1860D–43(a) of
the Act is based on concern about
beneficiary access to generic drugs and
consideration of other contemporaneous
provisions governing the Discount
Program. First, given that the purpose of
the Discount Program is to reduce
financial burdens on beneficiaries in the
coverage gap, we do not think that the
requirements of section 1860D–43(a) of
the Act were intended to potentially
limit the availability of less expensive
generic Part D drugs (which would
occur if the generic products of a nonparticipating manufacturer were
excluded). Rather, they were intended
to ensure that manufacturers of brand
name drugs had a strong incentive to
participate in the Discount Program.
When we were implementing the
Discount Program last year, we were
particularly concerned, in light of the
short timeframe provided by the
Affordable Care Act for collecting
signed agreements from participating
manufacturers for 2011, that a strict
reading of the exclusion would have
had the unintended consequence of
negatively affecting the availability of
generic drugs under Part D beginning
January 1, 2011.
As noted above, we further believe
that section 1860D–43(a) of the Act
must be read in its proper context—in
other words, it must coexist with all of
the other requirements of the Discount
Program, which are set forth in section
1860D–14A of the Act. Section 1860–D–
14A of the Act requires manufacturers
to provide discounts on applicable
drugs at the point-of-sale, to provide
appropriate data to CMS, and to comply
with other requirements imposed by us
or the TPA. Further, as described in
more detail below, manufacturers with
an agreement are subject to periodic
audits by CMS and civil money
penalties. Finally, section 1860D–14A of
the Act specifies that, beginning with
2012, a manufacturer must enter into a
Discount Program Agreement for a year
no later than January 30 of the previous
year—in other words, for a
manufacturer to participate in the
Discount Program for 2012, it would
have had to have signed a Discount
Program Agreement by January 30,
2011. In addition to these statutory
requirements, there are administrative
aspects of the Discount Program that
include, but are not limited to,
establishing connectivity with the TPA
and with CMS, establishing electronic
fund transfer accounts with more than
700 Part D sponsors, maintaining labeler
code information with CMS, and
reviewing file layouts and records for
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quarterly invoicing and payment
reconciliation.
None of these statutory or
administrative requirements is relevant
to manufacturers of non-applicable
drugs. Indeed, it would be impossible
for a manufacturer with no applicable
drugs to ‘‘participate’’ in the Discount
Program (as a strict reading of section
1860D–43(a)(1) would require). Further,
it would be wasteful and burdensome to
require manufacturers of non-applicable
drugs to undertake all of the
administrative requirements set forth in
the Discount Program Agreement with
respect to drugs that are not subject to
the requirements of section 1860D–14A
of the Act.
With that in mind, we next turn to the
issue of manufacturers with applicable
drugs that also have non-applicable
drugs. In our view, the same rationale
applies to these manufacturers—
although they can participate in the
Discount Program with respect to their
applicable drugs, they cannot do so with
respect to their non-applicable drugs.
We believe it would be both unfair and
potentially very disruptive to
beneficiaries to treat manufacturers of
non-applicable drugs differently based
on whether they also happen to make
applicable drugs. For example, suppose
that a manufacturer with no applicable
drugs declines to participate in the
Discount Program because it is literally
unable to comply with the statutory
requirements of section 1860D–14A of
the Act. This manufacturer then
acquires or begins to manufacture an
applicable drug on February 1. If this
manufacturer then was subject to the
broader exclusion in section 1860D–
43(a) of the Act arguably all of its
drugs—both generic and applicable—
would be non-covered for a period of
almost two years. We do not believe that
Congress intended such a disruptive
result. Rather, we believe it is more
appropriate to consider section 1860D–
43(a) of the Act as excluding the
applicable drugs of a manufacturer that
fails to participate in the Discount
Program.
In light of all of these considerations,
we believe the a reasonable
interpretation of 1860D–43(a) of the
Act—one that preserves Congressional
intent both to ensure manufacturer
participation in the Discount Program
and to alleviate financial burden for
beneficiaries—is that the exclusion from
Part D coverage applies only to the
applicable drugs of manufacturers that
fail to enter into a Discount Program
Agreement and participate in the
Discount Program. We seek comments
on this proposal.
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Section 1860D–43(c)(1) of the Act
authorizes CMS to allow coverage for
drugs that are not covered by Discount
Program Agreements if CMS has made
a determination that the availability of
the drug is essential to the health of
beneficiaries under this part, and we
propose to codify this requirement in
§ 423.2310(b) of our proposed rule.
However, we believe it is highly
unlikely that we will need to exercise
this authority given the strong
participation by manufacturers in the
Discount Program since 2011 and the
likely availability of therapeutic
alternatives for any Part D drugs.
srobinson on DSK4SPTVN1PROD with PROPOSALS3
d. Medicare Coverage Gap Discount
Program Agreement (§ 423.2315)
Section 1860D–14A of the Act
requires us to enter into agreements
with manufacturers that participate in
the Discount Program and to establish a
model agreement in accordance with
terms specified under section 1860D–
14A(b) of the Act that provides for the
performance of duties required under
section 1860D–14A(c)(1) of the Act. We
established the model agreement on
August 1, 2010 and propose to codify in
§ 423.2315 those provisions that we
believe must be included in the model
agreement in order to meet the statutory
requirements in these sections.
(1) Obligations of the Manufacturer
Section 1860D–14(A)(b)(1) of the Act
specifies that the Discount Program
Agreement between CMS and the
manufacturers shall require
manufacturers to provide applicable
beneficiaries access to applicable
discounts for applicable drugs of the
manufacturer at the point-of-sale. In
light of how the Discount Program has
been structured (see the discussion
section II.A.1. of this proposed rule), we
would propose to implement this
requirement as set forth in the current
Discount Program Agreement; that is,
we would propose in § 423.2315(b)(2) to
require manufacturers to reimburse all
applicable discounts provided by Part D
sponsors on behalf of the manufacturer
for all applicable drugs having NDCs
with the manufacturer’s FDA-assigned
labeler code(s) that were invoiced to the
manufacturer within a maximum of 3
years of the date of dispensing based
upon information reported to CMS by
Part D sponsors and used by CMS or the
TPA to calculate the invoice.
In order for CMS and Part D sponsors
to determine which applicable drugs are
covered by Discount Program
Agreements, the manufacturers must
provide CMS with the FDA-assigned
labeler code(s) for all applicable drug
NDCs covered by their Discount
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Program Agreement. Under the current
Discount Program Agreement,
manufacturers must provide all of their
labeler codes to CMS and must
promptly update CMS with any
additional labeler codes for applicable
drugs no later than three business days
after having received written
notification of the codes from the FDA.
We included this requirement in the
Discount Program Agreement because,
for the reasons previously described, it
is the most efficient and accurate way to
track which manufacturer is responsible
for paying the applicable discount for an
applicable drug and to assist plan
sponsors in determining which drugs
are applicable drugs. We maintain an
up-to-date listing of the labeler codes
covered under the Discount Program
Agreements on the CMS website so that
Part D sponsors can determine which
labeler codes are covered by a Discount
Program Agreement. To ensure that we
have up-to-date information for this
purpose, § 423.2315(b)(4) would require
manufacturers to provide CMS with all
labeler codes for all the manufacturer’s
applicable drugs and promptly update
CMS with additional labeler codes for
applicable drugs no later than three
business days after having received
written notification of the codes from
the FDA.
To permit CMS and Part D sponsors
to accurately identify applicable drugs,
we propose to codify the requirement
set forth in the Discount Program
Agreement that manufacturers
electronically list and maintain up-todate electronic listing of all NDCs of the
manufacturer, including the timely
removal of discontinued NDCs, in the
FDA NDC Directory. We believe this
requirement will help ensure that all
currently marketed applicable drugs are
subject to the applicable discount and
that only currently marketed applicable
drugs are subject to the discount.
Because manufacturers know the
regulatory and marketing status of their
products, they are in the best position
to make this information available to
Part D sponsors and CMS. We believe
maintaining an up-to-date FDA
electronic listing provides the most
efficient, timely, and authoritative
mechanism to accomplish this purpose
while placing little additional burden
on manufacturers that already must use
the FDA electronic registration and
listing system to comply with other FDA
requirements.
We also propose to require
manufacturers to maintain up-to-date
NDC listings with the electronic
database vendors for which they
provide their NDCs for pharmacy claims
processing. Part D sponsors rely upon
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these databases for adjudication of
pharmacy claims at the point-of-sale,
including discounting applicable drugs,
and, therefore it is imperative that the
information in these databases is
accurate and up-to-date. Our proposal
would require manufacturers to ensure
that electronic database vendors are
prospectively notified of NDCs for
products that no longer are available on
the market. We believe this requirement
will benefit manufacturers because it
will ensure that applicable discounts
cease being applied as of the last lot
expiration date of an applicable drug
that is no longer on the market.
In implementing the Discount
Program Agreement, we required
manufacturers to pay each Part D
sponsor in the manner specified by us
within 38 calendar days of receipt of an
invoice and Medicare Part D Discount
Information for the quarterly applicable
discounts included on the invoice. As
previously described, we implemented
the Discount Program such that Part D
sponsors pay applicable discounts on
behalf of manufacturers in order to
comply with the statutory mandate that
discounts be provided at the point-ofsale; and therefore, we require
manufacturers to reimburse plan
sponsors promptly because it is the
manufacturers that are financially
responsible for payment of applicable
discounts. Given this structure, we
propose to codify this requirement at
§ 423.2315(b)(3). We further propose in
§ 423.2315(b)(10) to require that
manufacturers pay the quarterly
invoices to accounts established by Part
D sponsors via electronic funds transfer,
unless otherwise specified by CMS, and
within 5 business days of the transfer
provide the TPA with electronic
documentation in a manner specified by
CMS. We believe these requirements are
appropriate because they provide
sufficient time for manufacturers to
process the information in order to
make the payments and are generally
consistent with manufacturer
obligations under the Medicaid Drug
Rebate Program. Moreover,
§ 423.2315(b)(2) would prohibit
manufacturers from withholding
discount payments for their applicable
drugs pending dispute resolution and,
therefore, the 38-day requirement
applies even if the manufacturer decides
to dispute discount payments. As noted
in our May 21, 2010 guidance, we
believe this requirement is necessary to
ensure that the manufacturer discounts
are paid to Part D sponsors in a timely
manner and are not delayed due to
disputed amounts. We address our
proposals with respect to
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manufacturers’ disputes later in this
section of the proposed rule.
Section 1860D–14A(b)(2) of the Act
requires each manufacturer with a
Discount Program Agreement in effect to
collect and have available appropriate
data, as determined by CMS, to ensure
that it can demonstrate to CMS
compliance with the requirements
under the Discount Program. In
§ 423.2315 (b)(5), we would codify this
requirement by specifying that such
information would include data related
to manufacturer labeler codes, FDA drug
approvals, FDA NDC Directory listings,
NDC expiration dates, utilization and
pricing information relied on by the
manufacturer to dispute quarterly
invoices and any other data we
determine are necessary to carry out the
Discount Program, and that
manufacturers must collect, have
available and maintain such information
for a period of not less than 10 years
from the date of payment of the invoice.
The minimum 10-year retention
requirement aligns with the standard
Part D record retention requirement for
Part D sponsors, thereby ensuring that
applicable information would be
maintained by manufacturers for the
same time period.
Section 423.2315(b)(6) would require
manufacturers to comply with the audit
and the dispute resolution requirements
proposed in § 423.2330, which are
discussed in section II.A.1.g. of this
proposed rule.
Section 1860D–43(a)(3) of the Act
requires manufacturers to enter into and
have in effect, under terms and
conditions specified by CMS, a contract
with a third party that CMS contracted
with under subsection (d)(3) of section
1860D–14A of the Act. We propose to
codify this requirement in
§ 423.2315(b)(9) by requiring the
manufacturer to enter into and have in
effect, under terms and conditions
specified by CMS, an agreement with
the TPA that has a contract under
section 1860D–14A(d)(3) of the Act.
Finally, proposed § 423.2315(b)(11)
would restrict the use of information
disclosed to the manufacturer on the
invoice, as part of the Medicare Part D
Discount Information, or upon audit or
dispute such that the manufacturer
could use such information only for
purposes of paying the discount under
the Discount Program. This means that
manufacturers would be allowed to use
the information only as necessary to
evaluate the accuracy of claimed
discounts and resolve disputes
concerning the manufacturer’s payment
obligations under the Discount Program.
We believe this is an important
limitation because we are making claim-
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level detail available to manufacturers
that is not otherwise available to the
public and therefore, should not be used
for reasons beyond which it is being
made available. As specified in the Data
Use Provisions in Exhibit C of the
Discount Program Agreement, the
manufacturer would be prohibited from
using the information to perform any
functions not governed by the Discount
Program Agreement, including, but not
limited to, determination of nonCoverage Gap Discount payments to Part
D sponsors and their subcontractors,
payments to other providers of health
and drug benefits under any Federal
health care program or for marketing
activities. Nevertheless, we recognize
that manufacturers need to account for
the discounts for financial statement
forecasting and accounting purposes
and therefore, these restrictions would
not apply to the use of aggregated,
summary-level data (that is, not
prescription or claim-level data) for
such purposes.
(2) Length of Agreement
Section 1860D–14A(b)(4)(A) of the
Act states that an agreement shall be
effective for an initial period of not less
than 18 months and shall automatically
be renewed for a period of not less than
1 year unless terminated under section
1860D–14A(b)(4)(B) of the Act. To
ensure that the end of the initial term of
each Discount Program Agreement
corresponds to the end of a calendar
year, § 423.2315(c)(3) would specify that
all Discount Program Agreements have
an initial period of 24 months, with
automatic renewal for a period of one
year each January 1 thereafter, unless
the agreement is terminated in
accordance with § 423.2345.
e. Payment Processes for Part D
Sponsors (§ 423.2320)
(1) Interim Payments
Section 1860D–14A(c)(1)(A)(ii) of the
Act requires that manufacturer
discounts be provided to applicable
beneficiaries at the point-of-sale. To
ensure that Part D sponsors have the
funds available to advance the gap
discounts at the point-of-sale, we are
proposing to provide monthly interim
coverage gap payments to Part D
sponsors under § 423.2320(a).
We propose to base these interim
payments on a percentage of the
coverage gap drug cost assumptions
submitted with plan bids under
§ 423.265 and negotiated and approved
under § 423.272, adjusted as necessary
to account for applicable drug costs for
applicable beneficiaries. Recognizing
that Part D sponsors receive payments
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63027
from manufacturers for invoiced
discount amounts during the quarterly
invoice process, we seek to ensure that
Part D sponsors do not receive duplicate
Discount Program payments for the
manufacturer discounts advanced to
beneficiaries at the point-of-sale. Thus,
we propose to offset the Part D
payments made to the Part D sponsor for
each Part D plan by the discount
amounts invoiced to manufacturers for
that Part D plan.
EGWPs are not required to submit
Part D bids. Thus, we do not have the
information necessary to estimate the
cost of manufacturer discounts for these
Part D plans. Similar to our current
policy for prospective low-income cost
sharing subsidy and reinsurance
subsidy payments, we propose not to
provide interim payments to EGWPs.
However, EGWPs will receive final
reconciled coverage gap payments
under the reconciliation process
described in § 423.2320(b).
Program of All-inclusive Care for the
Elderly (PACE) plans would not receive
interim coverage gap payments because
their enrollees already have zero costsharing without any coverage gap.
(2) Coverage Gap Discount
Reconciliation
Because the interim coverage gap
payments are estimates, Part D sponsors
may incur actual Discount Program
costs that are greater or less than the
interim coverage gap payments. We
would perform a cost-based
reconciliation to ensure that Part D
sponsors are paid dollar for dollar for all
manufacturer discount amounts as
reported on invoiced PDE data
submitted for Part D payment
reconciliation. This process is termed
‘‘Coverage Gap Discount
Reconciliation’’ under § 423.2320(b) and
will occur after Part D payment
reconciliation.
The purpose of the coverage gap
discount reconciliation is to make Part
D sponsors whole for the gap discount
amounts provided to applicable
beneficiaries at the point-of-sale. In
general, we would calculate the
Coverage Gap Discount Reconciliation
amount by subtracting the interim
coverage gap payments from all
manufacturer discount amounts as they
are reported on PDE records by Part D
sponsors. If the difference is positive,
we would pay the difference to Part D
sponsors. If the interim coverage gap
payments exceed the manufacturer
discount amounts, we would recover
the difference from Part D sponsors.
Manufacturer discount amounts
reported on PDE records submitted by
the PDE submission deadline for Part D
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payment reconciliation are included in
Coverage Gap Discount Reconciliation.
We would continue to accept PDEs with
manufacturer discount amounts for 37
months following the end of the benefit
year. Any manufacturer discount
amounts reported on PDE records
submitted after the PDE submission
deadline for Part D payment
reconciliation would continue to be
invoiced to manufacturers and
manufacturers would remit payments
for invoiced coverage gap discount
amounts to Part D sponsors.
srobinson on DSK4SPTVN1PROD with PROPOSALS3
f. Provision of Applicable Discounts on
Applicable Drugs for Applicable
Beneficiaries (§ 423.2325)
(1) Obligations of Part D Sponsors;
Provision of Point-of-Sale Discounts
Section 1860D–14A(c)(1)(A)(ii) of the
Act requires the manufacturer discounts
to be provided at the point-of-sale. As
extensively discussed previously in this
subpart, manufacturer discounts can be
provided at point-of-sale only if the
entity adjudicating the electronic
pharmacy claim has the information
necessary to determine at that point in
time: (1) The drug is an applicable drug;
(2) the beneficiary is an applicable
beneficiary; (3) the claim is wholly or
partly in the coverage gap; and (4) the
amount of the discount, taking into
consideration Part D supplemental
benefits that pay first. We have
determined that the only entity capable
of providing the discount at point-ofsale is the Part D sponsor because no
other entity would have all four pieces
of information. Therefore, § 423.2325(a)
would require Part D sponsors to
provide applicable beneficiaries with
applicable discounts on applicable
drugs at point-of-sale. Part D sponsors
would be required by § 423.2325(b)(1) to
determine that: (1) An enrollee is an
applicable beneficiary (as defined in
§ 423.100); (2) a Part D drug is an
applicable drug (as defined in
§ 423.100); and (3) the amount of the
applicable discount (as defined in
§ 423.2305) in order to provide a
discount at point-of-sale.
Part D sponsors would use the date of
dispensing for purposes of providing an
applicable discount at point-of-sale and
determining the amount of such
discount. However, if later information
changes the beneficiary’s eligibility for
the applicable discount back to the date
of dispensing (for example, retroactive
low-income subsidy status changes, or
retroactive changes resulting from
automated TrOOP balance transfers
between Part D sponsors via Financial
Information Reporting (FIR)
transactions), or changes the amount of
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the applicable discount or the
applicable beneficiary’s cost sharing, we
propose to require, in § 423.2325(b)(2),
that Part D sponsors make retroactive
adjustments to the applicable discount
as necessary to reflect such changes. For
example, if a claim for an applicable
drug was originally adjudicated in the
initial coverage phase but later moved
into the coverage gap as a result of
receipt of an automated TrOOP balance
transfer from a previous Part D sponsor,
the applicable discount and the
corrected beneficiary cost-sharing
would be reported on the adjusted PDE.
Conversely, if an original claim was
adjudicated in the coverage gap with an
applicable discount but later
reprocessed in the catastrophic phase as
a result of an automated TrOOP balance
transfer, the applicable discount
reported on the adjusted PDE is the
mechanism for refunding the
manufacturer.
If an applicable beneficiary has a
claim for an applicable drug that
straddles the coverage gap and another
phase of the Part D benefit, section
1860D–14A(g)(4)(C) of the Act requires
Part D sponsors only provide the
discount on the portion of the
negotiated price of the applicable drug
that falls at or above the initial coverage
limit and below the annual out-ofpocket threshold. Because our proposed
definition of negotiated price for
purposes of the Discount Program
would exclude both the dispensing fee
and vaccine administration fee,
§ 423.2325(b)(3) would require the
dispensing fee and vaccine
administration fee be included in the
portion of the negotiated price that falls
below the ICL or above the annual outof-pocket threshold, to the extent
possible (that is, as much of the
dispensing fee that can be included in
the portion below the ICL or above the
annual out-of-pocket threshold). If the
portion of the negotiated price that falls
below the ICL or above the annual outof-pocket threshold is less than the sum
of the dispensing fee and vaccine
administration fee, the dispensing fee
must be included first in the portion
that falls below the ICL or above the
annual out-of-pocket threshold. The
Affordable Care Act authorizes CMS to
establish procedures to determine the
discount at point-of-sale and is silent on
the order in which negotiated price and
non-negotiated price apply (as opposed
to with supplemental and other health
or prescription drug coverage) and thus,
we propose this requirement in order to
further support the statutory goal of
alleviating the burden of the coverage
gap on applicable beneficiaries.
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Section 423.2325(b)(4) would require
Part D sponsors to determine whether
any affected beneficiaries need to be
notified by the Part D sponsor that an
applicable drug is eligible for Part D
coverage whenever CMS specifies a
retroactive effective date for a labeler
code and would require the Part D
sponsors to notify such beneficiaries.
This situation could occur if
participating manufacturers fail to
notify CMS when a new labeler code
becomes available or otherwise fail to
provide us with all of their labeler codes
as required. As required in proposed
§ 423.2315(b)(4), manufacturers
participating in the Discount Program
must submit to CMS all of their labeler
codes. We make the participating labeler
code information available to Part D
sponsors so they can determine which
drug products are covered by Discount
Program Agreements. Part D sponsors
cannot cover any applicable drugs
marketed with labeler codes that are not
specified by CMS as participating in the
Discount Program. Consequently, a
manufacturer’s failure to provide a
labeler code to CMS could result in
beneficiaries being denied access to
both covered Part D drugs and
applicable discounts.
While we anticipate such occurrences
will be very rare, we believe it is
necessary that Part D sponsors
determine whether affected
beneficiaries need to be notified once
CMS makes the labeler code and
effective date information available to
the Part D sponsor. For example, Part D
sponsors generally would need to notify
affected beneficiaries that had denied
claims if their claims history reasonably
indicates that the beneficiary either
might still need the previously denied
drug or paid for the drug out-of-pocket.
If the claims history indicates that the
beneficiary has not received an
alternative replacement medication
since the denied claim, it might
reasonably be inferred that the
beneficiary still needs (or should be
reimbursed for) the denied drug. We
recognize that this would place a
burden on Part D sponsors through no
fault of their own, but, in these rare
instances, we believe it would help
ensure the beneficiaries have
appropriate access to Part D drugs and
applicable discounts. It would also
increase the likelihood that
manufacturers would be held
responsible for paying discounts that
should have been paid previously.
We do not believe the point-of-sale
requirement was intended to exclude
discount payments for claims that were
not adjudicated by the Part D sponsor at
point-of-sale: even though the statute
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requires provision of the discount at the
point-of-sale, it does not state that
applicable beneficiaries are not entitled
to the discount if it was not provided at
the point-of-sale. Instead, we believe
this requirement was meant to ensure
the discount would be available at the
point-of-sale when and if a claim is
electronically adjudicated. However, in
limited circumstances beneficiaries
submit claims for reimbursement that
were not adjudicated at the point-ofsale, such as when they needed to
obtain a prescription from an out-ofnetwork pharmacy. Therefore, our
guidance and the Discount Program
Agreement specify that Part D sponsors
provide, and manufacturers reimburse,
applicable discounts for applicable
drugs submitted by applicable
beneficiaries via paper claims, including
out-of-network and in-network paper
claims, if such claims are payable under
Part D. In these situations, beneficiaries
are still entitled to the discount and
therefore, we propose to codify this
requirement in § 423.2325(c).
srobinson on DSK4SPTVN1PROD with PROPOSALS3
(2) Collection of Data
Section 1860D–14A(c)(1)(C) of the Act
states that we may collect appropriate
data from Part D sponsors in a
timeframe that allows for applicable
discounts to be provided for applicable
drugs. Section 423.2325(d) of the
proposed rule would require Part D
sponsors to provide CMS with
appropriate data on the applicable
discount provided by the Part D
sponsors in a manner specified by CMS.
In implementing the Discount Program
we determined that using the existing
PDE reporting process to collect the
necessary data would be most efficient
and least burdensome for Part D
sponsors. Thus, we would require Part
D sponsors to report the applicable
discount that was provided at the pointof-sale as part of the PDE record in
addition to the other claim-level detail
that is reported on the PDE. We would
also require Part D sponsors to report
confirmation of payment from
manufacturers during the quarterly
invoice process.
(3) Other Health or Prescription Drug
Coverage
Section 1860D–14A(c)(1)(A)(v) of the
Act requires that applicable discounts
for applicable drugs get applied before
any coverage or financial assistance
under other health benefit plans or
programs that provide coverage or
financial assistance for the purchase or
provision of prescription drug coverage
on behalf of applicable beneficiaries as
the Secretary may specify. We propose
to codify the requirement in
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§ 423.2325(f) by specifying that an
applicable discount must be applied to
beneficiary cost-sharing when Part D is
the primary payer before any other
health or prescription drug coverage is
applied. Since the Part D sponsor would
provide the discount at the same time as
it makes primary payment on the claim,
this coordination generally would take
place in real time as the claim is
adjudicated by the pharmacy in
accordance with existing Part D
coordination of benefit requirements.
We specify that this requirement would
not apply to Medicare secondary payer
claims because the beneficiary would
not have a Medicare Part D coverage gap
on the initial claim to the primary
payer. However, this requirement would
apply to coordination of benefit claims
in which the Part D sponsor coordinates
benefits post point-of-sale with another
payer who paid primary in error.
(4) Supplemental Benefits
Section 1860D–14A(c)(2) of the Act
provides that if an applicable
beneficiary has supplemental benefits
under his or her Part D plan, the
applicable discounts shall not be
provided until after such supplemental
benefits have been applied.
Supplemental benefits offered under a
Part D plan would have the meaning set
forth in § 423.100 (see discussion of
supplemental benefits under the
proposed definition ‘‘other health or
prescription drug coverage’’). Section
423.2325(e)(1) would codify this
requirement by specifying that an
applicable discount is applied to
beneficiary cost-sharing after
supplemental benefits have been
applied to the claim for an applicable
drug, and paragraph (e)(2) would
establish that no applicable discount is
available if supplemental benefits
eliminate the coverage gap so that a
beneficiary has zero cost-sharing on a
claim.
If a Part D sponsor offers a plan with
supplemental benefits on applicable
drugs covered between the plan’s initial
coverage limit and the Medicare Part D
catastrophic threshold using either
coinsurance or fixed copay, the value of
the supplemental benefits would need
to be calculated first on any claim for an
applicable drug as the difference
between the proposed supplemental
cost-sharing and the coinsurance under
the basic benefit. For example, if the
supplemental benefit for an applicable
drug had a 60 percent coinsurance, the
value of the supplemental benefits that
would need to be applied first (plan
liability) would be 40 percent (100
percent coinsurance under basic minus
60 percent coinsurance) of the
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63029
negotiated price of the drug. The
applicable discount would then be
calculated as 50 percent of the
negotiated price (as defined in § 423.
2305) less the supplemental benefit.
Beneficiary cost-sharing would then be
the remainder of the negotiated price
after the plan liability and applicable
discount had been applied. Thus, in the
case of either a coinsurance or copay
design for supplemental benefits, the
amount the beneficiary pays at point-ofsale would generally be approximately
50 percent of his or her expected costsharing under the plan’s benefit
package. This amount will change over
time as the coinsurance level for a
beneficiary is reduced until it reaches
25 percent in 2020. Section
423.2325(e)(3) would require that the
dispensing fee and the vaccine
administration fee be included in the
Part D sponsor liability portion of a
claim with supplemental benefits. For
the same reasons that we propose to
require the dispensing fee and the
vaccine administration fee to be applied
to the portion of a claim for an
applicable drug that falls below the
initial coverage limit or above the
annual out-of-pocket threshold, to the
extent possible, on straddle claims, we
believe including the dispensing fee and
the vaccine administration fee in the
plan liability supports the statutory goal
of alleviating the burden of the coverage
gap on applicable beneficiaries.
(5) Pharmacy Prompt Payment
Section 1860D–14A(c)(1)(A)(iv) of the
Act requires procedures to ensure that,
not later than the applicable number of
calendar days after the dispensing of an
applicable drug by a pharmacy or mail
order service, the pharmacy or mail
order service is reimbursed for an
amount equal to the difference between:
(1) The negotiated price of the
applicable drug; and (2) the discounted
price of the applicable drug. This
amount would be equal to the amount
of the applicable discount. The
applicable number of calendar days
with respect to claims for
reimbursement submitted electronically
is 14 days, and otherwise, is 30 days.
We propose to implement this
requirement in § 423.2325(g) by
specifying that Part D sponsors
reimburse a pharmacy or mail order
service the amount of the applicable
discount no later than the applicable
number of calendar days after the date
of dispensing an applicable drug. This
requirement would apply to all network
pharmacies, including but not limited to
long term care pharmacies and home
infusion pharmacies.
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We considered using the existing
prompt pay requirements in § 423.520
as the basis for implementing the
discount payment prompt pay
requirements because it seemed to make
sense given that the discounts are
included on the pharmacy claims and
the timeframes are identical. However,
unlike § 423.520, § 423.2325(g) does not
exclude mail order or long term care
pharmacies. Therefore, Part D sponsors
that do not currently pay mail order or
long term care pharmacies in
accordance with the § 423.520 prompt
pay requirements for other network
pharmacies would need to establish
another mechanism for reimbursing
these pharmacies for discount payments
in accordance with the § 423.2325(g).
Finally, we propose to add a new
paragraph (24) to § 423.505(b) so that
the requirements we are proposing in
§ 423.2325 are included in all Part D
sponsor contracts with us.
g. Manufacturer Discount Payment
Audit and Dispute Resolution
(§ 423.2330)
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(1) Third Party Administrator Audits
Section 1860D–14A(d)(3)(D) of the
Act permits manufacturers to conduct
periodic audits, directly or through
contracts, of the data and information
used by the TPA to determine discounts
for applicable drugs of the manufacturer
under the Discount Program. Section
423.2330(a) would codify the provisions
of the Discount Program Agreement
governing these audits by specifying the
requirements for requesting an audit
and the rights of manufacturers
associated with conducting audits.
We propose in § 423.2330(a)(1) that
the term periodic be defined as no more
often than annually. We believe that this
standard would ensure that all
manufacturers have an opportunity to
conduct meaningful audits within
available TPA resources. The proposed
definition of periodic represents a
balance between frequent audits that
may provide the greatest level of detail
and very infrequent audits that may be
less costly to implement, but may not
provide needed information in a timely
manner.
While we considered allowing
quarterly audits, we do not believe that
there will be significant quarter to
quarter changes in data collection and
invoice calculation procedures that
would warrant such frequent audits.
Given that the TPA will need to allow
all participating manufacturers the
opportunity to conduct audits, we
believe that an annual audit strikes the
right balance of providing meaningful
and timely information to
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manufacturers that can reasonably be
accommodated by the TPA.
Section 1860D–14A(d)(3)(D) of the
Act requires that our contract with the
TPA permit audits by manufacturers of
the data and information used by the
TPA to determine discounts for
manufacturer’s applicable drugs.
Because the statute thus permits the
manufacturer to audit data used by the
TPA, and importantly, does not grant
manufacturers a right to audit CMS or
the Part D sponsors, we propose to
specify in regulations that the audit
right is limited to information held by
the TPA and used to calculate
discounts. This means that the
manufacturer would not have the ability
to audit CMS records or the records of
Part D sponsors. We believe the data
provided from the TPA provides
manufacturers with appropriate and
sufficient information to conduct an
audit because it provides the claim-level
information specified in the Discount
Program Agreement that is used to
calculate the discounts. We believe that
defining the data available for audit also
requires balancing considerations
between efficiently administering the
Discount Program and providing
manufacturers with an appropriate level
of information to validate invoices.
Section 423.2330(a)(3) would establish,
consistent with the Discount Program
Agreement, that manufacturers may
audit a statistically significant sample of
the database used by the TPA to
calculate gap discounts. We believe that
a statistically significant sample
provides a balance between allowing an
audit to include: (1) All of the data,
which would provide complete
information, but would be unwieldy in
terms of resources; and (2) a very small
sample that would have insufficient
information but be inexpensive to
implement. Moreover, the use of a
statistically valid sample meets
generally accepted auditing standards,
would provide sufficient data to
manufacturers to reach statistically
valid conclusions that could be used to
dispute discount payments, and is an
efficient use of audit resources.
Proposed § 423.2330(a)(3) also
supports our obligation to protect the
privacy of beneficiary medical
information. This section proposes that,
with the exception of work papers, audit
data may not leave the room where the
audit is conducted, which would further
protect beneficiary privacy. Another
measure to protect the confidentiality of
beneficiary medical information is
contained in proposed § 423.2330(a)(4),
which would specify that the auditor
may only release an opinion of the
results of the audit and may not release
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any other information obtained from the
audit, including its work papers, to its
client, employer, or any other party. We
believe these limitations on the
distribution of data support beneficiary
privacy, while addressing manufacturer
need for access to data that are relevant
to the calculation of the gap discounts.
These regulations all would codify
provisions in the current Discount
Program Agreement.
(2) Manufacturer Audits
Section 1860D–14A (e)(1) of the Act
specifies that each manufacturer with a
Discount Program Agreement in effect
shall be subject to periodic audit by
CMS and we propose to codify this
requirement in § 423.2330(b). Similar to
the limitation in § 423.2330(a)(1), we
propose to define the term periodic in
§ 423.2330(b)(1) as no more often than
annually. In § 423.2330(b)(3) we
propose that we would have the right to
audit appropriate data of the
manufacturer, including data related to
a manufacturer’s FDA-assigned labeler
codes, expiration date of NDCs,
utilization, and pricing information
relied on by the manufacturer to dispute
quarterly invoices, as well as any other
data CMS determines are necessary to
carry out the Discount Program.
(3) Dispute Resolution
Section 1860D–14A(c)(1)(A)(vii) of
the Act requires the Secretary to
establish ‘‘a reasonable dispute
resolution mechanism to resolve
disagreements between manufacturers,
applicable beneficiaries, and the third
party with a contract * * * .’’
Therefore, we propose in
§ 423.2330(c) a multi-stage dispute
resolution process consisting of: (1) An
initial dispute stage; (2) an appeals stage
for manufacturers that do not accept the
findings of the dispute process; and (3)
a final administrator review when either
a manufacturer or CMS disagree with
the outcome of the initial appeals
process.
Before proposing this multistage
dispute resolution process, we reviewed
potentially analogous appeals
mechanisms, both within the Medicare
program and in other, similar
government programs, such as Tricare
and Medicaid. Within the Medicare Part
D program we reviewed the appeals
process for organizations seeking to
become Part D sponsors and the appeals
process for Medicare beneficiaries
challenging denials of benefits. We also
reviewed the appeals mechanism for the
Department of Defense (DoD) Tricare
program and Medicaid—two existing
government programs that collect
rebates from pharmaceutical
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manufacturers. In each instance, we
found a multistage dispute resolution
program. We concluded that a multistage process results in balanced,
equitable decisions because of the
multiple perspectives that are available.
Therefore, we are proposing a similar
multistage process for the Medicare
Coverage Gap dispute resolution
process.
Section 423.2330(c) would include a
timetable for the three-stage approach to
manage the process most efficiently and
to support equal treatment of each
appeal. The timetable ensures that
manufacturers’ disputes are resolved as
quickly as possible, while allowing both
parties to perform the necessary
calculations and investigations to
evaluate the gap discount invoice. The
proposed timeframes were established
by estimating the time required to
analyze the data presented, by the
volume of claims, and by considering
the characteristics of the Discount
Program compared to the other similar
programs previously noted.
Specifically, we propose in
§ 423.2330(c)(1) that manufacturers may
dispute quarterly gap discount amounts
by providing notice of the dispute to the
TPA within 60 days of the receipt of
information that is the subject of the
dispute. The information is limited to
data received from the TPA, or as a
result of a manufacturer’s audit.
We believe that the deadline for filing
disputes will result in more prompt
remuneration to manufacturers
receiving positive decisions and more
predictable workloads for the dispute
infrastructure.
Proposed § 423.2330(c)(2) also states
that the notice of dispute be
accompanied by supporting evidence
that is material, specific, and related to
the dispute. We propose this
requirement because the manufacturer
bears the burden of proof that the PDE
data is incorrect. We also propose in
§ 423.2330(c)(3) to codify the Discount
Program Agreement provision that
manufacturers may not withhold any
invoiced amounts pending dispute
resolution except for invoiced amounts
for applicable drugs without labeler
codes provided by the manufacturer to
us. The proposition to generally bar the
withholding of disputed invoice
amounts is justified because gap
discounts are owed by manufacturers
but are paid by Part D sponsors to
beneficiaries at the point-of-sale; we
believe that the prohibition of
withholding disputed invoices will
minimize the risk to Part D sponsors for
these discount-related incurred
liabilities without significantly
increasing the financial risk to a
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manufacturer because of the extensive
quality assurance CMS performs on
PDEs submitted by Part D sponsors. The
PDE data used to calculate quarterly
invoices are of high quality. The PDE
data are derived from claims for each
prescription submitted to Part D
sponsors for payment. Part D sponsors
validate each claim to comply with the
False Claims Act and as part of their
process to reimburse pharmacies for the
cost of the drug. In addition, we
implement multiple edits to validate the
PDE data submitted by Part D sponsors.
Those edits include identification and
adjustment of outlier and other
inappropriate entries for variables such
as discount amount, beneficiary
eligibility for the gap discount, incorrect
NDCs, etc. Therefore, the burden of
proof is on manufacturers to
demonstrate that the data used to
calculate the quarterly invoice are
incorrect.
Section 423.2330(c)(4) would allow
manufacturers to request an additional
adjudication by the Independent Review
Entity (IRE), under contract with CMS,
within 30 days of the receipt of an
unfavorable determination from the
TPA, or if no decision was received
from the TPA, within 90 days of the
receipt of the dispute submission. This
section also proposes that the IRE be
required to make a determination within
ninety calendar days of receipt of the
manufacturer request for an appeal.
Section 423.2330(c)(6) establishes a
final administrative step to support an
equitable dispute resolution process. We
are proposing that both manufacturers
and CMS would have the right to
request a final review of the dispute by
the Administrator. Since we administer
the Discount Program and
manufacturers have financial liability
for the discounts, both parties have an
interest in ensuring an equitable
resolution to the dispute. We propose
that this request be made within 30 days
after the manufacturer receives a
decision from the IRE to facilitate a
timely outcome. Finally, we propose
that the decision of the Administrator
would be final and binding.
We propose to codify the policies as
described and welcome comments on
the dispute and appeals process.
h. Beneficiary Dispute Resolution
(§ 423.2335)
Section 1860D–14A(c)(1)(A)(vii) of
the Act requires CMS to provide a
reasonable dispute mechanism to
resolve disagreements between
manufacturers, applicable beneficiaries,
and the TPA. While § 423.2330(c) would
address the disputes that could arise
between the manufacturer and CMS or
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63031
the TPA, § 423.2335 would provide the
beneficiary dispute resolution
requirements. Specifically, § 423.2335
would provide that beneficiaries shall
have access to the Part D coverage
determination and appeals process as
described in § 423.558 through
§ 423.638 for disputes involving the
availability and amount of applicable
discounts under the Discount Program.
As previously discussed in this
preamble, we have determined that the
Part D sponsor is the only entity capable
of accurately providing applicable
discounts at the point-of-sale because of
its detailed knowledge of the drug, the
beneficiary, and the claim. Part D
sponsors would advance applicable
discounts as part of their normal process
for adjudicating Part D claims. Since we
consider the discounts to be a Part D
benefit we propose that the existing
mechanism that Part D sponsors have in
place to accommodate coverage
determinations and appeals related to
Part D sponsor decisions on the amount
of cost-sharing for a drug be used for
beneficiary disputes associated with the
Discount Program (see § 423.558
through § 423.638).
Although section 1860D–
14A(c)(1)(A)(vii) of the Act specifies
disputes that could arise between
manufacturers, applicable beneficiaries
and the TPA, we believe that under the
Discount Program model whereby Part
D sponsors provide the discounts at
point-of-sale, each Part D sponsor is the
appropriate party to address any
beneficiary disputes that would
otherwise involve manufacturers or the
TPA. We believe that the beneficiary
would generally contact his or her plan
with any questions about any coverage
gap claims, including the availability or
amount of an applicable discount.
Currently a beneficiary who wishes to
see how his or her claim amounts were
calculated, including those affected by a
manufacturer discount, would consult
the Explanation of Benefit (EOB) form
distributed by the Part D sponsor. For
2011, we amended the model EOB to
add coverage gap discounts as ‘‘other
payments’’ that count toward a
beneficiary’s out-of-pocket costs.
Beneficiaries may not know at the pointof-sale whether a manufacturer discount
has been applied to their claim, or if the
discount has been applied correctly.
Part D sponsors direct beneficiaries to
their EOBs for information about claimspayment amounts. The EOB instructs
beneficiaries to contact the Part D
sponsor with any remaining concerns.
Maintaining this consistent process for
all member benefit payments would be
the easiest for the beneficiaries to
understand and follow, and, we believe,
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impose minimal additional burden on
Part D sponsors.
Although we could establish a
separate mechanism for beneficiary
disputes under the Discount Program,
we decline to do so because we believe
it would prove duplicative and
inefficient for Part D sponsors,
beneficiaries, and us. It also would be
potentially more confusing for
beneficiaries who would be unable to
rely on a single process to resolve their
benefit-related inquiries. For all of these
reasons, we propose to designate the
existing Part D coverage determination
appeals process as the mechanism for
beneficiary disputes about the Discount
Program.
i. Compliance Monitoring and Civil
Money Penalties (§ 423.2340)
Section 1860D–14A(e)(2) of the Act
requires us to impose a civil money
penalty (CMP) on a manufacturer that
fails to provide applicable beneficiaries
applicable discounts for applicable
drugs of the manufacturer in accordance
with the Discount Program Agreement.
The statute sets forth the formula for
determining the CMP amount, which
will equal the sum of the amount that
the manufacturer would have paid with
respect to such discounts under the
agreement (which will then be used to
pay the discounts which the
manufacturer had failed to provide) plus
25 percent of such amount. Section
423.2340 would implement these
requirements and establish the
procedures for imposing and collecting
the CMPs in accordance with subpart T
of this part. Accordingly, we propose to
revise the definition of ‘‘affected party’’
in subpart T (as defined in § 423.1002)
by adding the term ‘‘manufacturer’’ (as
defined in § 423.2305) to the definition
and clarifying that we interpret the use
of ‘‘Part D sponsor’’ throughout subpart
T to be synonymous with ‘‘affected
party’’. In accordance with the Discount
Program Agreement and proposed
§ 423.2315(b)(3), manufacturers must
pay each Part D sponsor within 38
calendar days of receipt from the TPA
of the electronic invoice and Medicare
Part D Discount Information for the
applicable discounts included on the
invoice except as specified in
§ 423.2330(c)(3). Therefore, we consider
a manufacturer to have failed to provide
applicable beneficiaries applicable
discounts for applicable drugs of the
manufacturer in accordance with the
Discount Program Agreement if it fails
to comply with this requirement unless
such failure is due to technical or other
reasons beyond the control of the
manufacturer, such as a natural disaster.
Consequently, we would impose a civil
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money penalty whenever a
manufacturer fails to make full payment
on its invoice within 38 calendar days
of receipt of the invoice and Medicare
Part D Discount Information for the
applicable discount included on the
invoice unless such failure is due to
technical or other reasons beyond the
control of the manufacturer. We plan to
add this provision to the Discount
Program Agreement.
Section 423.2340(c) would codify the
methodology for determining the
amount of the CMP as equal to the
amount of applicable discount the
manufacturer would have paid under
the Discount Program Agreement, which
will then be used to pay the applicable
discount that the manufacturer had
failed to provide, plus 25 percent of
such amount. This amount may be
reduced by any amount that the
manufacturer has paid after the 38th
calendar day but before the date the
CMP is collected. We interpret this to
mean that the CMP would be calculated
based upon the outstanding invoiced
amount that was not paid within 38
calendar days of receipt as required
under the Discount Program Agreement
and proposed § 423.2315(b)(3)
irrespective of any partial or late
payments. In other words, a
manufacturer’s failure to pay the entire
invoice amount would trigger the CMP
and late payments would not relieve the
manufacturer of its obligation to pay an
additional 25 percent of the unpaid
amount from the invoice. In order to
ensure consistency and transparency
with the imposition of these civil money
penalties, unless the exception applies
(that is, the payment is late due to
technical or other reasons beyond the
control of the manufacturer), we would
impose the additional 25 percent on all
invoiced amounts not paid within 38
calendar days of receipt, even, for
example, if the payment is only 1 day
late.
Section 423.2340(d) specifies that if
CMS makes a determination to impose
a CMP, we would send a written notice
of our decision to impose a CMP that
includes a description of the basis for
the determination, the basis for the
penalty, the amount of the penalty, the
date the penalty is due, the
manufacturer’s right to a hearing (as
specified under § 423.1006) and
information about where to file the
request for hearing. To ensure a
consistent approach to CMPs, we
propose extending existing appeal
procedures for CMPs in subpart T of this
part to manufacturers appealing a CMP
imposed under the Discount Program.
We have utilized this appeals process
for more than 20 years for various types
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of adverse agency determinations
affecting an array of medical providers,
MA organizations, and Part D sponsors.
We therefore propose to use this well
established process and infrastructure
for CMP appeals from manufacturers
that have contracted with the Discount
Program and are delinquent in paying
the discounts as required. To that end,
we propose to revise the definition of
‘‘affected party’’ in § 423.1002 to
include manufacturers participating in
the Discount Program. Section
423.2340(e) would provide that we
would initiate collection of the CMP
following expiration of the timeframe
for requesting an ALJ hearing, which is
60 calendar days from the CMP
determination, as specified in
§ 423.1020 if the manufacturer did not
request a hearing; and CMS would
initiate collection of the CMP once the
administrative decision is final if a
manufacturer requests a hearing and our
decision to impose the CMP is upheld.
Section 1860D–14A(e)(2)(B) of the Act
states that the provisions of section
1128A of the Act (except subsections (a)
and (b)) apply to CMPs under this
subpart to the same extent that they
apply to a CMP or procedure under
section 1128A(a) of the Act. We propose
to codify this requirement in
§ 423.2340(f). We welcome comments
on this proposal.
j. Termination of Agreement
(§ 423.2345)
Section 1860D–14A(b)(4)(B)(i) of the
Act provides that we may terminate a
Discount Program Agreement for a
knowing and willful violation of the
requirements of the agreement or other
good cause shown. Such termination
shall not be effective earlier than 30
days after the date of notice to the
manufacturer of such termination and
CMS shall provide, upon request, a
hearing concerning such termination,
and such hearing shall take place prior
to the effective date of the termination
with sufficient time for such effective
date to be repealed if CMS determines
appropriate. Section 423.2345 would
codify these requirements consistent
with the termination provisions in the
Discount Program Agreement. For
instance, § 423.2345(a)(1) would clarify
that ‘‘good cause shown’’ must relate to
the manufacturer’s participation in the
Discount Program. Our proposed
regulation would further specify that we
must provide the manufacturer with an
opportunity to cure any ground for
termination within 30 calendar days of
receipt of the written termination
notice. In addition, we propose,
consistent with the statutory
requirement as reflected in the Discount
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Program Agreement, that the
manufacturer may request a hearing
with a hearing officer concerning such
termination if requested in writing
within 15 calendar days of receiving
notice of the termination, and such
hearing must take place prior to the
effective date of termination with
sufficient time for such effective date to
be repealed if we determine appropriate.
In order to address potential timing
issues with appeals during the
termination process, we propose to
clarify in § 423.2345(a)(2) that
termination must not be effective earlier
than 30 days after the date of notice to
the manufacturer of such termination
and must not be effective prior to
resolution of timely appeal requests
received in accordance with paragraphs
(a)(4) and (a)(5) of this section. Proposed
sections (a)(4) and (a)(5) state, in part,
that CMS will provide a manufacturer
with a hearing before the hearing officer
about such termination if requested in
writing within 15 calendar days of
receiving notice of the termination.
Further, CMS or a manufacturer that has
received an unfavorable determination
from the hearing officer may request
review by the CMS Administrator
within 30 calendar days of receipt of the
notification of such determination.
Therefore, a termination would not be
effective until either the timeframes to
pursue a hearing with the hearing
officer or CMS Administrator have
passed or a final decision has been
issued by the hearing officer or CMS
Administrator and there is no remaining
opportunity to request further review.
We also propose in § 423.2345(a)(5)(i)
to specify that CMS or a manufacturer
that has received an unfavorable
determination from the hearing officer
may request review by the CMS
Administrator within thirty calendar
days of receipt of the notification of
such determination. The Discount
Program Agreement currently provides
only that a manufacturer may request
review of an unfavorable decision by the
CMS Administrator. However, we
believe that a fair appeals process must
ensure that both parties have an
opportunity for further review of a
decision made by an independent
review entity. The decision of the CMS
Administrator would be final and
binding on either party. We request
comments on these termination
requirements.
Section 1860D–14A(b)(4)(B)(ii) of the
Act provides that a manufacturer may
terminate the Discount Program
Agreement for any reason. Such
termination shall be effective as of the
day after the end of the calendar year if
the termination occurs before January 30
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of a calendar year or as of the day after
the end of the succeeding calendar year
if the termination occurs on or after
January 30 of a calendar year. We
propose to codify these requirements in
§ 423.2345(b).
Section 1860D–14A(b)(4)(B)(iii) of the
Act states that any termination shall not
affect discounts for applicable drugs of
the manufacturer that are due under the
Discount Program Agreement before the
effective date of the termination and we
propose to codify this requirement in
§ 423.2345(c). However, upon the
effective date of the Discount Program
Agreement termination, the
manufacturer’s drugs would no longer
be covered under Medicare Part D. In
addition, § 423.2345(d) would specify
that we would cease releasing data to
the manufacturer except as necessary to
ensure the manufacturer reimburses
applicable discounts for time periods in
which the Discount Program Agreement
was in effect and would notify the
manufacturer to destroy data files
provided by us under the Discount
Program Agreement.
Finally, § 423.2345(e) would restrict
reinstatement of manufacturers that
previously terminated their Discount
Program Agreements or had them
terminated by CMS to those
manufacturers that pay any and all
outstanding applicable discounts
incurred during any previous periods
under Discount Program Agreements.
2. Inclusion of Benzodiazepines and
Barbiturates as Part D Covered Drugs
(§ 423.100)
Section 175 of the Medicare
Improvements for Patients and
Providers Act of 2008 (MIPPA),
amended section 1860D–2(e)(2)(A) of
the Act to include barbiturates, when
used for the medical indications of
epilepsy, cancer, or a chronic mental
health disorder and to include
benzodiazepines. These amendments
apply to prescriptions dispensed on or
after January 1, 2013. Accordingly, we
propose to revise the definition of Part
D drug at § 423.100, by including
barbiturates (when used for the
previously noted medical indications)
and benzodiazepines that are dispensed
on or after January 1, 2013. Like any
covered prescription drugs under the
Part D benefit program, benzodiazepines
and barbiturates must meet all other
conditions as defined in § 423.100 of a
Part D covered drug such as: FDA
approved for safety and effectiveness as
a prescription drug under section 505 of
the Federal Food, Drug, and Cosmetic
Act; used and sold in the United States;
not otherwise covered by Medicare Part
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63033
A or Part B; and used only for medically
accepted indications.
We remind plans that it is their
responsibility to use the tools (that is,
system edits, quality assurance checks)
at their disposal to ensure barbiturates
are covered for the conditions specified
in statute. Also, given the vulnerability
of these drugs to misuse and abuse, it is
recommended that Part D sponsors use
their Drug Utilization Report tools to
identify and prevent waste and clinical
abuses/misuses.
3. Pharmacy Benefit Manager’s
Transparency Requirements (§ 423.501
and § 423.514)
Under section 6005 of the Affordable
Care Act, Part A of Title XI of the Act
was amended by inserting after section
1150 of the Act a new section: ‘‘SEC.
1150A. Pharmacy Benefit Manager’s
Transparency Requirements.’’ Section
1150A of the Act contains several new
reporting requirements for Part D
sponsors under Part D of title XVIII,
qualified health benefits plans (QHBP)
offered through an exchange established
by a State under section 1311 of the
Affordable Care Act, and entities that
provide pharmacy benefits management
services, referred to in this section as
pharmacy benefit managers (PBMs). The
purpose of these new reporting
requirements is to promote transparency
of financial transactions involving Part
D sponsors, QHBPs, and PBMs. Under
section 1150A, the information is
required to be reported to the Secretary
by the Part D sponsor or QHBP and, in
the case of a PBM, to the Part D sponsor
or QHBP. In accordance with this
authority, we propose to codify various
reporting requirements in our regulation
at § 423.514. In addition, we propose to
add a definition for ‘‘bona fide service
fees’’ to our regulations at § 423.501.
Under the authority of section 1860D–
15 of the Act, we collect from Part D
sponsors cost data necessary to
determine payments under the Part D
program. Currently, we collect from Part
D sponsors PDE data that provide
detailed information on each drug
dispensed under Part D. In addition, we
collect direct and indirect remuneration
(DIR) information that indicates the
amount of remuneration received by the
sponsor or its PBM from pharmaceutical
manufacturers and other sources. Part D
sponsors are required to report these
cost data to CMS within 6 months of the
end of the coverage year.
We propose to amend our regulations
to implement the provisions of section
1150A of the Act with respect to Part D
sponsors and the PBMs that manage
prescription drug coverage under a
contract with a Part D sponsor. The
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provisions of section 1150A of the Act
with respect to QHBPs and their PBMs
will be addressed in separate
rulemaking.
The specific information that is
required to be collected and reported
under Section 1150A of the Act by each
Part D sponsor and PBM for a contract
year is the following:
• The percentage of all prescriptions
that were provided through retail
pharmacies compared to mail order
pharmacies.
• The percentage of prescriptions for
which a generic drug was available and
dispensed (generic dispensing rate), by
pharmacy type (which includes an
independent pharmacy, chain
pharmacy, supermarket pharmacy, or
mass merchandiser pharmacy that is
licensed as a pharmacy by the State and
that dispenses medication to the general
public), that is paid by the Part D
sponsor or PBM under the contract.
• The aggregate amount and the type
of rebates, discounts, or price
concessions (excluding bona fide
service fees) that the PBM negotiates
that are attributable to patient
utilization under the plan, the aggregate
amount of the rebates, discounts, or
price concessions that are passed
through to the plan sponsor, and the
total number of prescriptions that were
dispensed.
• The aggregate amount of the
difference between the amount the Part
D sponsor pays the PBM and the
amount that the PBM pays retail
pharmacies, and mail order pharmacies,
and the total number of prescriptions
that were dispensed.
Under section 1150A(c) of the Act,
information disclosed by a Part D
sponsor or PBM is confidential and
generally shall not be disclosed by the
Secretary or by a plan receiving the
information. Consistent with the statute
as applied to Part D sponsors and PBMs
that provide pharmacy benefits
management services on behalf of Part
D sponsors, we propose to add language
listing the following exceptions, which
allow the Secretary to disclose the
information in a form which does not
disclose the identity of a specific PBM,
plan, or prices charged for drugs, for the
following purposes:
• As the Secretary determines
necessary to carry out section 1150A or
Part D of Title XVIII.
• To permit the Comptroller General
to review the information provided.
• To permit the Director of the
Congressional Budget Office to review
the information provided.
We believe the exception allowing
disclosure to States to carry out section
1311 of the Act is relevant in the context
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of QHBPs but is not relevant to the Part
D sponsors and their PBMs. Thus, this
exception will be addressed in separate
rulemaking regarding the provisions of
1150A of the Act with respect to QHBPs
and their PBMs.
As required by section 1150A(d) of
the Act, the provisions of section
1927(b)(3)(C) of the Act shall apply to a
Part D sponsor or PBM that fails to
provide the required information on a
timely basis or knowingly provides false
information ‘‘in the same manner as
such provisions apply to a manufacturer
with an agreement under that section.’’
Consistent with the statute, we are
implementing this new reporting
requirement by updating the regulations
to specify reporting requirements for
pharmacy benefits manager data. Each
entity that provides pharmacy benefits
management services must provide to
the Part D sponsor, and each Part D
sponsor must provide to CMS, the data
elements required by this rulemaking.
Accordingly, in § 423.514, we propose
to add language requiring that each
entity that provides pharmacy benefits
management services must provide to
the Part D sponsor, and that each
sponsor of a Part D plan provide to
CMS, all of the following information in
a manner specified by CMS:
• The total number of prescriptions
that were dispensed.
• The percentage of all prescriptions
that were provided through retail
pharmacies compared to mail order
pharmacies.
• The percentage of prescriptions for
which a generic drug was available and
dispensed (generic dispensing rate), by
pharmacy type (which includes an
independent pharmacy, chain
pharmacy, supermarket pharmacy, or
mass merchandiser pharmacy that is
licensed as a pharmacy by the State and
that dispenses medication to the general
public), that is paid by the Part D
sponsors or PBM under the contract.
• The aggregate amount and type of
rebates, discounts, or price concessions
(excluding bona fide service fees) that
the PBM negotiates that are attributable
to patient utilization under the plan.
• The aggregate amount of the
rebates, discounts or price concessions
that are passed through to the plan
sponsor.
• The aggregate amount of the
difference between the amount the Part
D sponsor pays the PBM and the
amount that the PBM pays retail
pharmacies, and mail order pharmacies.
The information submitted under this
regulation would be subject to the
confidentiality requirements under
section 1150A(c) of the Act, and the
provisions of section 1927(b)(3)(C) of
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the Act are applicable to any Part D
sponsor or PBM that fails to provide this
information on a timely basis or that
knowingly provides false information in
the same manner as those provisions
apply to a manufacturer with an
agreement under section 1927 of the
Act.
We believe that we already collect
much of the above listed information.
For example, we can tally the total
number of prescription dispensed from
PDE records. Other information can be
collected by modifying existing
reporting mechanisms. For example, the
aggregate amount of the difference
between the amount the Part D sponsor
pays the PBM and the amount the PBM
pays pharmacies (that is, the PBM
spread) is available from the DIR data
reported to CMS by Part D sponsors on
the 2010 DIR Report for Payment
Reconciliation: Summary Report. We
plan to add to the DIR reporting
requirements PBM spread amounts for
retail pharmacies and PBM spread
amounts for mail order pharmacies in
order to meet section 1150A of the Act
reporting requirements.
In the interests of administrative
simplicity and to minimize reporting
burden on Part D sponsors, we would
like to further leverage existing data
sources and reporting mechanisms.
Thus, we solicit comment on whether
any of the following data elements can
be collected using existing data sources
such as PDE records and/or added to
existing reporting mechanisms, and
whether any may require a separate
reporting mechanism:
• Number of retail prescriptions.
• Number of mail order prescriptions.
• Number of prescriptions dispensed
by independent pharmacies.
• Number of prescriptions dispensed
by chain pharmacies.
• Number of prescriptions dispensed
by supermarket pharmacies.
• Number of prescriptions dispensed
by state-licensed mass merchandisers to
the general public.
We note that the provisions regarding
DIR under the Part D program do not
mention DIR attributable to patient
utilization, whereas section 1150A of
the Act references rebates, discounts,
and price concessions that are
attributable to patient utilization. We
are soliciting comments regarding
whether there are differences between
DIR under the Part D program and DIR
attributable to patient utilization. If
there are any such differences, we also
seek comments regarding whether we
should establish additional reporting
requirements for DIR attributable to
patient utilization.
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Consistent with the requirement
under section 1150A of the Act that
plans exclude bona fide service fees
when they report the aggregate amount
and type of rebates, discounts or price
concessions, we also propose to amend
the regulations at § 423.501 to add the
following definition for bona fide
service fees:
B. Strengthening Beneficiary Protections
This section includes provisions
aimed at strengthening beneficiary
protections under Parts C and D. We are
also considering changes under the long
term care (LTC) conditions of
participation. In our opinion, it is
appropriate to provide for reinstatement
of beneficiaries in the section 1876 cost
plans from which they were disenrolled
for failing to pay premiums when they
can establish good cause for their failure
to pay. We anticipate that this would
result in uninterrupted plan coverage
for eligible beneficiaries thereby
improving access to healthcare for
individuals such as those with chronic
conditions requiring continual
monitoring and medication. Similarly,
we expect that requiring enrollees in
MA plans to be provided with uniform
ID cards that all providers can easily
recognize would facilitate access to
health care for those beneficiaries. We
also think that calculating creditable
coverage by excluding the value of
additional coverage in the coverage gap
and the manufacturer’s discount—the
standard that qualifies retiree drug
coverage for the retiree drug subsidy—
would mean a beneficiary receiving
retiree drug coverage would be less
likely to be assessed a late enrollment
penalty if he or she decided to enroll in
Bona fide service fees means fees paid by
a manufacturer to an entity that represent fair
market value for a bona fide, itemized service
actually performed on behalf of the
manufacturer that the manufacturer would
otherwise perform (or contract for) in the
absence of the service arrangement, and that
are not passed on in whole or in part to a
client or customer of an entity, whether or
not the entity takes title to the drugs. Bona
fide service fees include, but are not limited
to, distribution service fees, inventory
management fees, product stocking
allowances, and fees associated with
administrative services agreements and
patient care programs (such as medication
compliance programs and patient education
programs).
We are soliciting comment on this
definition, which is taken without
modification from section 1150A of the
Act and is consistent with the
definitions used in Medicare FFS and
Medicaid. We intend to monitor the
reported bona fide service fees reported
by Part D sponsors to ensure compliance
with program requirements.
a Part D plan. Enabling health care
professionals to request Independent
Review Entity (IRE) reconsiderations of
Part D coverage determinations on
behalf of enrollees without having to
obtain signed authorized representative
forms would, in our opinion, lessen the
burden faced by providers seeking to
assist enrollees with appeals and would
encourage more health care
professionals to step forward and help
beneficiaries access this level of the
appeals process. Lastly, the various
arrangements that exist involving LTC
facilities, LTC pharmacies and the LTC
consultant pharmacists these
pharmacies provide to LTC facilities,
and pharmaceutical manufacturers and/
or distributors have raised concerns
regarding the quality of the consultant
pharmacist reviews and the potential
impact on resident health and safety.
We believe these concerns may be
addressed by changes we are
considering that would require LTC
consultant pharmacists be independent
of the LTC facility pharmacy,
pharmaceutical manufacturers or
distributors, or any affiliate of these
entities. The foregoing proposals and
the change under consideration are set
forth in Table 2.
TABLE 2—PROVISIONS TO STRENGTHEN BENEFICIARY PROTECTIONS
Part 417
Preamble
section
II.B.1 ...........
Good
Cause
and Reinstatement
into a
Cost Plan.
Requiring
MA Plans
to Issue
Member
ID cards.
Determination of
Actuarially
Equivalent Creditable
Prescription Drug
Coverage.
Who May
File Part
D Appeals with
the Independent
Review
Entity.
II.B.2 ...........
II.B.3 ...........
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Part 422
Part 423
Part 483
Provision
II.B.4 ...........
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Subpart
Subpart
Subpart
Section
Subpart
Section
Subpart
Subpart K ..
§ 417.460 ...
N/A ............
N/A ............
N/A ............
N/A ............
N/A ............
N/A.
N/A ............
N/A ............
Subpart A ..
§ 422.111 ...
N/A ............
N/A ............
N/A ............
N/A.
N/A ............
N/A ............
Subpart K ..
§ 422.56 .....
N/A ............
N/A ............
N/A ............
N/A.
N/A ............
N/A ............
N/A ............
N/A ............
Subpart M ..
§ 423.600,
N/A ............
§ 423.602.
N/A.
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Federal Register / Vol. 76, No. 196 / Tuesday, October 11, 2011 / Proposed Rules
TABLE 2—PROVISIONS TO STRENGTHEN BENEFICIARY PROTECTIONS—Continued
Part 417
Independence of
LTC Consultant
Pharmacists.
Part 422
Part 423
Part 483
Provision
II.B.5 ...........
srobinson on DSK4SPTVN1PROD with PROPOSALS3
Preamble
section
Subpart
Subpart
Subpart
Section
Subpart
Section
Subpart
N/A ............
N/A ............
N/A ............
N/A ............
N/A ............
N/A ............
Subpart B ..
1. Good Cause and Reinstatement Into a
Cost Plan (§ 417.460)
Current regulations at § 417.460(c)
specify that an HMO or competitive
medical plan may disenroll a member
who fails to pay premiums or other
charges imposed by the HMO or
competitive medical plan for deductible
and coinsurance amounts. The cost plan
must demonstrate that it made
reasonable efforts to collect the unpaid
amount (for example, attempted to
contact the member by phone or mail)
and sent the enrollee written notice of
the proposed disenrollment (including
an explanation of the enrollee’s right to
a hearing under the HMO’s or
competitive medical plan’s grievance
procedures). Cost plans also have the
option of not disenrolling members who
fail to pay their premiums or costsharing. Whichever policy they choose,
it must be applied consistently to all
members in the plan.
In the April 2011 final rule (76 FR
21511), we established rules that
allowed beneficiaries disenrolled from
MA and Part D plans for failure to pay
premiums the ability to request
reinstatement into the plan from which
they were involuntarily disenrolled
provided they could establish good
cause and pay all arrearages. We
established these rules at § 422.74 and
§ 423.44 not only because they were
consistent with the policy for
delinquent Medicare Part B premium
payments, but because beneficiaries
who were disenrolled from an MA or
Part D plan for failure to pay premiums
generally were not eligible for a special
enrollment period. We believed there
may be situations where individuals
had extenuating circumstances that
prevented them from paying their
premiums timely and that reinstatement
would be appropriate.
We received broad support for this
regulatory change for MA and Part D
plans, and stated at the time that we
would consider expanding the scope of
this provision to section 1876 cost
enrollees in the future. Based on
feedback we have received from
partners, we are proposing to amend
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§ 417.460(c) regarding disenrollment for
non-payment of premiums to allow for
the reinstatement of enrollment for good
cause subsequent to an involuntary
disenrollment associated with the
failure to pay premiums or other costsharing amounts. In order to be eligible
for reinstatement, the beneficiary would
have to pay all outstanding arrearages,
including premiums that accrued during
the period of disenrollment. We believe
this is an important protection to
provide beneficiaries enrolled in cost
plans because even though members of
cost plans do not have the same election
period restrictions as those in MA and
Part D plans, a reinstatement of
enrollment would remove the
involuntary disenrollment and result in
continuous coverage.
We propose that the requirements for
reinstatement be similar to those
established under Part C and Part D.
That is, the reinstatement must be
requested, good cause determined and
payment made of all premium or cost
sharing arrearages, including amounts
that would have been due since the
disenrollment, within 3 months of the
disenrollment date. Examples of good
cause would be similar to those
established for individuals disenrolled
from MA or Part D plans and may
include, but are not limited to: (1) An
unexpected, prolonged hospitalization;
(2) an error by a Federal government
employee or plan representative; or
(3) loss of home or severe impact by fire,
or other exceptional circumstance
outside the beneficiary’s control. We
also propose that good cause would not
exist if the only basis for requesting
reinstatement was a change in the
individual’s circumstances subsequent
to the involuntary disenrollment
resulting in his or her ability to pay the
premiums.
We would note that an individual
who is involuntarily disenrolled within
the same timeframe from both his or her
cost plan and a separate prescription
drug plan (not affiliated with the cost
plan) would need to seek separate good
cause determinations for reinstatement
into both plans. This is because the two
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Section
§ 483.60.
plans may have different grace periods
and arrearage amounts.
2. Requiring MA Plans To Issue ID
Cards (§ 422.111)
Pursuant to section 1860D–4(a)(1) of
the Act and § 423.120(c), and consistent
with standards established by CMS, Part
D sponsors must issue and re-issue as
appropriate a card or other technology
that enrollees can use to access
negotiated prices for Part D covered
drugs. While we have made
recommendations through subregulatory guidance (https://
www.cms.gov/ManagedCareMarketing/)
with respect to member identification
(ID) cards for Medicare Advantage (MA)
Preferred Provider Organization and
Private Fee-for-Service products, we
have issued no related requirements.
Many MA organizations issue ID cards
to their enrollees, though absent
regulation, there is no way to ensure
consistency of information across such
documents. We believe it is important to
establish requirements for the MA
member ID card to ensure that
information such as the plan’s customer
service number, link to the plan’s
website and member ID number are
disclosed to enrollees for access to care.
Specifically, we propose to require that
ID cards contain the following
information: (1) For an MA PPO or PPFS
plan, a statement that Medicare Limiting
Charges apply; (2) an address for the
plan’s website; (3) a customer service
number; and (4) the individual
identification number for each enrollee,
to clearly identify that he or she is a
member of the plan.
Implementation of these provisions
will ensure providers have easy access
to the necessary information for
verifying coverage and processing
claims. Therefore, under our authority
at section 1852(c) of the Act to require
that MA organizations disclose MA plan
information upon request, as well as our
authority under section 1856(b)(1) to
establish standards by regulation and
section 1857(e) of the Act to specify
additional contractual terms and
conditions the Secretary may find
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necessary and appropriate, we propose
to amend § 422.111 by adding a new
paragraph (i) to expressly require MA
plans issue and re-issue, as necessary, a
card that contains certain information
and enables enrollees to access all
covered services. Additionally, in an
effort to protect beneficiaries from
misuse of personal information, we will
explicitly prohibit plan sponsors from
disclosing social security numbers or
health insurance claim numbers on the
member ID cards. We will provide
further instructions in the Medicare
Marketing Guidelines.
3. Determination of Actuarially
Equivalent Creditable Prescription Drug
Coverage (§ 423.56)
Section 1860D–22 of the Act outlines
the special rules for employersponsored programs. Subsection 1860D–
22(a) of the Act establishes that the
Secretary shall provide payment to
sponsors of qualified retiree
prescription drug plans that provide
equivalent or better coverage than the
actuarial value of standard prescription
drug coverage. The Affordable Care Act
amended section 1860D–22(a)(2)(A) of
the Act by adding a provision with
regard to the actuarial equivalence of
retiree prescription drug coverage to the
defined standard coverage. The new
provision requires that when attesting to
the actuarial equivalence of the plan’s
prescription drug coverage to the
defined standard coverage, qualified
retiree prescription drug plans not take
into account the value of any discount
or coverage provided during the gap
between the initial coverage limit
during the year and the out-of-pocket
threshold for the defined standard
coverage under Part D. This change was
intended to carve-out coverage provided
during the gap when determining the
actuarial equivalence of retiree
prescription drug coverage for the
purpose of qualifying for the retiree
drug subsidy payment under section
1860D–22(a)(2) of the Act. In addition,
section 1860D–14A(g)(1) of the Act
expressly excludes enrollees in RDS
plans from the definition of ‘‘applicable
beneficiary.’’ Thus, these Part D eligible
individuals are not entitled to gap
coverage or any applicable discount on
drugs. In accordance with these
legislative changes, we revised the
retiree drug subsidy calculation by
amending § 423.884(d) to remove the
value of any discount or coverage
provided during the coverage gap from
the valuation of the RDS coverage. In
other words, the calculation of the
actuarial value of defined standard Part
D coverage for the purposes of the RDS
attestation excludes discounts provided
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to applicable beneficiaries in the gap by
the discount program under 1860D–14A
of the Act and the decreases in gap
coinsurance for applicable beneficiaries
under 1860D–2(b) of the Act.
Section 1860D–13(b)(4) of the Act
defines creditable prescription drug
coverage to include coverage that at
least meets the actuarial equivalence
requirements in 1860D–13(b)(5)(A) of
the Act. Section 1860D–13(b)(5)(A) of
the Act further states that an
individual’s prescription drug coverage
meets the actuarial equivalence
requirements only if the coverage is
determined (in a manner specified by
the Secretary) to provide coverage of the
cost of prescription drugs the actuarial
value of which (as defined by the
Secretary) to the individual equals to or
exceeds the actuarial value of the
standard prescription drug coverage (as
determined under section 1860D–11(c)
of the Act). The Affordable Care Act, as
amended, establishes two types of
standard prescription drug coverage.
Specifically, the standard defined
benefit now includes provisions that
apply only for applicable beneficiaries
(see sections 1860D–2(b)(2)(C) and (D)
of the Act), while the rest of the
standard defined benefit applies for
other enrollees. Thus, we calculate two
actuarial values for standard
prescription drug coverage—one value
that would apply to applicable
beneficiaries, and another value for
standard prescription drug coverage
when establishing the low-income
subsidy. As a result of these changes, we
need to clarify which actuarial
equivalence standard is used for the
valuation of creditable prescription drug
coverage when determining whether an
individual is subject to the late
enrollment penalty (LEP) under 1860D–
13(b) of the Act.
We believe the value of the defined
standard benefit, as it applies to the
valuation of creditable coverage, should
be consistent with the regulation change
for the valuation of the retiree drug
subsidy calculation. Retiree prescription
drug coverage is a primary source of
creditable coverage. This being the case,
we are proposing to align the actuarial
value calculation we use for purposes of
section 1860D–13(b) of the Act with the
actuarial value calculation used to
determine the value of the retiree drug
subsidy. By using the same value for
both determinations, we will be
ensuring that the individuals who are
enrolled in retiree drug plans that have
met and attested to the actuarial
equivalence value of defined standard
prescription drug coverage as provided
under § 423.884(5)(iii)(C) are not subject
to the LEP under § 423.46.
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63037
To this end, we are proposing to
amend § 423.56(a) to exclude the value
of gap discounts or coverage, so that it
is consistent with the calculation of the
actuarial value of qualified retiree
prescription drug coverage found at
§ 423.884(d). We also propose to revise
the reference to ‘‘CMS actuarial
guidelines’’ in § 423.56(a) to read ‘‘CMS
guidelines.’’ We believe this revision
would allow CMS additional flexibility
to provide interpretive guidance on the
definition of creditable coverage for
reasons beyond those relating to
actuarial principles.
4. Who May File Part D Appeals With
the Independent Review Entity
(§ 423.600 and § 423.602)
Section 1860D–4(h) of the Act directs
the Secretary to establish a Part D
appeals process that is similar to the
appeals process used for MA appeals.
The Parts C and D appeals procedures
are set forth in Subpart M of Parts 422
and 423 of our regulations, respectively.
In our January 12, 2009 final rule (74 FR
1494), we amended both these sets of
regulations to strengthen enrollee access
to the Part C and Part D appeals process.
Specifically, we amended the MA
appeals regulations at § 422.582 to
permit physicians to request standard
plan reconsiderations of pre-service
requests on behalf of MA enrollees.
Consistent with section 1860D–4(g) of
the Act, we made a corresponding
change to the Part D regulations at
§ 423.580, allowing physicians and
other prescribers to request standard
redeterminations on behalf of enrollees.
Allowing prescribers to request coverage
determinations and plan level appeals
on behalf of enrollees has significantly
enhanced enrollee access to these
processes.
Subsequent program experience has
taught us that these changes to the Part
D appeal process may not go far enough
in terms of improving access to the Part
D appeals process, as explained in this
section. Consequently, we are proposing
to revise the Part D regulations at
§ 423.600 to allow physicians and other
prescribers to request Independent
Review Entity (IRE) reconsiderations on
behalf of enrollees. We are also
proposing to make a corresponding
change to the notice provisions at
§ 423.602(a).
Currently, the Part D IRE reports that
approximately 46 percent of the cases it
dismisses lack a valid appointment of
representative (AOR) form, and that the
overwhelming majority of these
dismissed appeals (close to 90 percent)
are initiated by prescribers. Such
dismissals impede prescribers from
assisting enrollees in obtaining timely
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independent review of their cases which
creates the potential for delays in
prescription drug access. Furthermore,
given a prescribers’ ability to act on
behalf of an enrollee in requesting Part
D plan level appeals, prescribers
frequently express dissatisfaction with
not being able to also assist patients
with IRE level appeals and the
perceived burden associated with
becoming the enrollee’s appointed
representative. Clearly, this proposal
would significantly reduce the number
of requests for review that the Part D IRE
dismisses due to the lack of an AOR
form. In addition, because the IRE will
no longer have to seek an AOR form, it
will be able to immediately initiate
substantive review of these cases. Thus,
we believe this change would enhance
beneficiary access to the appeals process
and better ensure prompt IRE decisions
on whether requested drugs should be
covered under Part D.
Under this proposal, the regulations
would continue to require a Part D
enrollee, or a prescriber acting on his/
her behalf, to request an IRE review;
adverse redeterminations would not be
automatically forwarded to the IRE. We
have considered requiring autoforwarding of adverse redetermination
requests under the Part D program, but
we continue to believe that the statute
supports the position that in order to
obtain IRE review the enrollee (or
someone acting on the enrollee’s behalf)
must request such review. (See the
January 28, 2005 final rule (70 FR 4193)
for a discussion of this issue.) Although
section 1860D–4(h) of the Act states that
only the Part D eligible individual shall
be entitled to bring an appeal to the IRE,
we do not interpret this language as
precluding a prescriber from acting on
a Part D enrollee’s behalf in requesting
IRE review. As required by section
1860D–4(h) of the Act, this proposed
change makes the MA and prescription
drug benefit programs’ appeals
processes more similar, by giving Part D
prescribers a mechanism to assist
enrollees in accessing IRE review. In the
MA program, the regulatory requirement
that adverse plan reconsiderations be
auto-forwarded to the IRE essentially
gives physicians acting on behalf of
enrollees direct access to the IRE
reconsideration process. Also, as
explained in our January 2009 final rule,
allowing prescribers to request IRE
appeals on behalf of enrollees does not
present a conflict of interest because
Part D prescribers are generally not
entitled to payment from the enrollee,
pharmacy, or plan for the prescribed
drug, and therefore, do not have a
financial interest in the outcome of
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appeals in the same manner as
physicians requesting appeals under the
MA program. Furthermore, we believe
that an enrollee’s prescriber has already
been selected by the enrollee and
occupies a position of trust. A prescriber
is in a good position to know whether
an independent review is warranted and
is in the best interest of his or her
patient.
This proposal should reduce
administrative burdens under the IRE
appeal process by eliminating the need
for prescribers to routinely obtain AOR
forms from enrollees and permitting
prescribers to assist their patients in the
appeals process without taking on the
added responsibilities attendant to
being an appointed representative. In
contrast to the ongoing authority of
appointed representatives, this proposal
would allow a prescriber to act on an
enrollee’s behalf on an as-needed, caseby-case basis. A completed AOR form is
not necessary or advisable for
prescribers who are only seeking to
assist Part D enrollees in exercising their
own appeal rights under the statute.
Prescribers will not have the same
authority as an appointed
representative, such as the right to bring
appeals at any level, the right to obtain
information on appeals, etc. Instead, we
envision that from the time of the initial
IRE appeal request, the prescriber’s role
will remain what it has been—providing
a supporting statement or the clinical
information necessary to approve
coverage, if appropriate. Accordingly,
we believe that this proposal will
promote enrollee access to the Part D
appeals process, reduce the burden on
the prescriber community, and allow a
more efficient use of appeals resources.
We are proposing a corresponding
change to § 423.602(a) to specify that the
IRE is responsible for notifying the
prescriber of its decision when the
prescriber makes the request on behalf
of the enrollee. The enrollee will receive
a written decision notice from the IRE,
ensuring that enrollees are fully
informed about the review process and
able to participate if they choose to do
so. We intend to issue additional
manual guidance regarding the specifics
of prescriber notice requirements.
As in § 422.582 and § 423.580, we are
proposing that prescribers must notify
enrollees whenever they request IRE
review on their behalf, and we intend to
issue additional operational guidance
with respect to how this requirement
may be satisfied. Finally, we want to
make clear that this proposal addresses
only the right of a prescriber to file an
appeal on behalf of an enrollee at the
IRE level. Other individuals who wish
to act on behalf of an enrollee in filing
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an appeal must continue to do so as the
enrollee’s representative.
5. Independence of LTC Consultant
Pharmacists (§ 483.60)
Under sections 1819(b)(4) and
1919(b)(4) of the Act, long term care
(LTC) facilities must provide, either
directly or under arrangements with
others, for the provision of
pharmaceutical services to meet the
needs of each resident. This
requirement is codified in regulations at
§ 483.60, which require LTC facilities to
employ or obtain the services of a
licensed pharmacist to provide
consultation on all aspects of the
provision of pharmacy services in the
facility, including a drug regimen
review at least once a month for each
facility resident.
In the process of performing the drug
regimen reviews, if the consultant
pharmacist recommends a modification
of a resident’s drug treatment regimen,
he/she notates the resident’s medical
record with the recommendation to the
prescribing physician. The prescribing
physician must respond to the
recommendation and, based on our
experience, the physician generally
follows it because the consultant
pharmacist is considered to be an
unbiased expert of pharmacology in the
LTC setting. As a result of their role in
LTC facilities, LTC consultant
pharmacists have significant influence
over the drugs that LTC facility
residents receive.
In accordance with section 1860D–
4(b)(1) of the Act, as codified in our
regulations at § 423.120(a)(5), Part D
sponsors are required to provide LTC
facility residents who are plan enrollees
convenient access to LTC pharmacies.
We expect that each LTC facility would
select one, or possibly more than one,
eligible network LTC pharmacy to
provide Medicare drug benefits to its
residents. We have specified minimum
performance and service criteria in the
Medicare Prescription Drug Benefit
Manual, Chapter 5 (‘‘Benefits and
Beneficiary Protections’’), section 50.5.2
(available on the CMS Web site at:
https://www.cms.gov/PrescriptionDrug
CovContra/Downloads/Chapter5.pdf).
Commonly, nursing homes contract
with a single LTC pharmacy for
prescription drugs for facility residents.
Very often the same LTC pharmacy then
also contracts with the facility to
provide consultant pharmacists for
required consultation on all aspects of
the provision of pharmacy services in
the facility, including the monthly
resident drug regimen reviews. In verbal
conversations with industry
representatives, we have been informed
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that LTC pharmacies typically provide
the consultant pharmacists to nursing
homes at rates that are well below the
LTC pharmacy’s cost and below fair
market value.
We have been concerned with the
potential effect on patient safety and
quality of care of various contractual
arrangements involving LTC facilities,
LTC pharmacies, the LTC consultant
pharmacists these pharmacies provide
to LTC facilities, and pharmaceutical
manufacturers and/or distributors.
These arrangements may take many
forms. The practice of LTC pharmacies’
providing consultant pharmacists to
nursing homes at below cost or fair
market value is one such type of
arrangement. We are concerned that
these arrangements may be used to
entice nursing homes to enter into
contracts with the LTC pharmacy for
pharmacy dispensing services and the
purchase of prescription drugs. We are
greatly concerned with financial
arrangements that involve payments
from pharmaceutical manufacturers
directly or indirectly to LTC pharmacies
and LTC consultant pharmacists for
encouraging physicians to prescribe the
manufacturer’s drug(s) for residents.
The impact of these financial incentives
is heightened when, as permitted under
State law or by the State Pharmacy
Board, LTC facilities sign agreements
with LTC pharmacies permitting the
consultant pharmacists to make
medication switches. These types of
arrangements may result in incentives
for the LTC consultant pharmacist to
make recommendations that conflict
with the best interests of nursing home
residents, as well as with Part D
sponsors’ formularies and/or drug
utilization management (DUM)
programs. Any such arrangements have
the potential to directly or indirectly
influence consultant pharmacist drug
regimen recommendations. As a result,
the arrangements bring into question the
ability of the LTC consultant
pharmacists to provide impartial
reviews of the residents’ drug regimens,
which in turn raises concerns regarding
the quality of those reviews and
potential impact on resident health and
safety.
Industry estimates indicate that three
LTC pharmacy organizations have 90
percent of the market. Based on these
estimates, the LTC pharmacy industry is
highly concentrated, and we believe,
therefore, these arrangements are
widespread. As a result, we are
concerned that the lack of independence
of the consultant pharmacist from the
interests of the LTC pharmacy or other
LTC pharmacy-related organization may
lead to recommendations that steer
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nursing home residents to certain drugs.
This steering could result in the
overprescribing of medications, the
prescribing of drugs that are
inappropriate for LTC residents, or the
use of unnecessary or inappropriate
therapeutic substitutions. Such
potential outcomes can pose serious
jeopardy to nursing home residents’
health and safety. Although we have no
evidence directly linking these
arrangements to adverse outcomes, we
believe a requirement under
consideration that LTC consulting
pharmacists be independent would be
appropriate and prudent because it
would ensure that financial
arrangements did not influence the
consultant pharmacist’s clinical
decision making to the detriment of LTC
residents. Our concerns are not merely
theoretical. We are aware of claims
brought by qui tam relators under the
False Claims Act alleging that, for
instance, an LTC pharmacy received
quarterly payments styled as rebates
from the pharmaceutical manufacturer
to engage in an active intervention
program to convince physicians to
prescribe a manufacturer’s antipsychotic
agent to the physicians’ nursing home
patients and to authorize all competitive
products only after the failure of the
manufacturer’s product. In 2005, the
Food and Drug Administration (FDA)
issued warnings of the increasing death
rate associated with the use of
antipsychotic agents for behavioral
symptoms for older persons with
dementia. In reporting the results of 17
clinical trials, FDA noted an
approximately 1.6 to 1.7 fold increase in
mortality, compared to placebo-treated
patients, in these studies.1 Thus, any
financial arrangements that encourage
consultant pharmacists to prescribe
these drugs to older LTC residents with
dementia contrary to FDA warnings may
detrimentally affect those residents’
health and safety.
Recent research suggests the use of
antipsychotic drugs in nursing homes
remains high—higher, in fact, than the
percentage of residents diagnosed with
psychoses. Despite the serious safety
concerns, researchers reported nearly 1
in 3 nursing home residents in the U.S.
received antipsychotic drugs in 2007.2
Prior research examining potentially
inappropriate prescription drugs among
1 FDA,
Public Health Advisory: Deaths with
Antipsychotics in Elderly Patients with Behavioral
Disturbances, April 2005. Accessed online at https://
www.fda.gov/Drugs/DrugSafety/PublicHealth
Advisories/UCM053171 on May 26, 2010.
2 Chen, Y, Briesacher, BA, Field, TS Tjia, J Lau,
DT, Gurwitz, JH. Unexplained Variation across US
Nursing Homes in Antipsychotic Prescribing Rates.
Archives of Internal Medicine. 2010:170(11):89–95.
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63039
nursing home residents found half of
the almost 3,400 study residents were
prescribed a potentially inappropriate
prescription medication. Forty percent
of these residents had medication that
was identified as both inappropriate and
generally to be avoided among older
LTC residents; a third of these
medications posed a potential for severe
harm. The therapeutic class most
prevalent was antipsychotic agents.3
More recently, a review by the HHS
Office of Inspector General of Medicare
Part D claims for atypical antipsychotics
for elderly nursing home residents in
the first half of 2007 found that 22
percent of those drugs were not
administered in accordance with CMS
standards for unnecessary drug use in
nursing homes. The OIG also found a
very high incidence of atypical
antipsychotic prescribing for elderly
nursing home patients with dementia
despite the presence of an FDA black
box warning that such prescribing is
associated with increased mortality.
In addition to research findings,
nursing home survey and certification
data reported in the CMS online survey
and certification reporting system
indicate unnecessary drug use in
nursing homes continues to be a
problem. In 2006, we issued updated
guidance for LTC survey and
certification reviews of the use of
potentially unnecessary medications.4
The guidance, providing specific
information on medications that are
problematic to the nursing home
population, was implemented in
December 2006. In the 7 years prior to
the implementation, the percent of
surveys with a citation for unnecessary
drug use ranged from 12.6 to 14.0
percent. Since implementation,
however, the percent of surveys with
these citations has increased yearly from
18.2 percent in 2007 to 19.4 percent in
2009.
The research and our survey and
certification data indicate that the use of
unnecessary medications, particularly
antipsychotics, is problematic in LTC
facilities. Although our findings do not
directly connect LTC pharmacy
relationships with consultant
pharmacists to these research findings
and survey results, we believe it is
reasonable to presume that the
3 Lau, DT, Kasper, JD, Potter, DE and Lyles, A.
Potentially Inappropriate Medication Prescriptions
among Elderly Nursing Home Residents: Their
Scope and Associated Resident and Facility
Characteristics. Health Services Research.
2004:39(5):1257–1276.
4 CMS, Guidance for Unnecessary Drugs
§ 483.25(l), September 2006. Accessed online at
https://cms.gov/manuals/Downloads/som107ap_pp_
guidelines_ltcf.pdf on June 3, 2010.
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incentives present in the relationships
among consultant pharmacist, LTC
pharmacies and drug manufacturers can
influence the prescribing practices
reflected in these data.
As a result, we believe requiring the
independence of consultant pharmacists
is necessary and appropriate and are
considering making such a change. We
solicit comments on our understanding
in this matter, as well as on our changes
under consideration discussed in this
section.
We note further that, although Federal
regulations at § 483.25(l) require LTC
facilities to avoid unnecessary drugs,
our experience indicates that this
responsibility generally is delegated to
the consultant pharmacist who is, for
the most part, provided by the facility’s
contracted LTC pharmacy. According to
a June 2008 report of a study by the
HHS Office of Inspector General (OIG)
regarding Part D drugs and LTC facility
residents, about 80 percent of the 128
nursing home administrators
interviewed for the study indicated the
consultant pharmacists performing their
facility’s drug regimen reviews were
employed by the nursing home’s LTC
pharmacy.5 Further, this report states
that 54 percent of the 79 pharmacy
directors interviewed for the study
reported that their pharmacy receives
rebates from pharmaceutical
manufacturers that are frequently based
on market share or volume. However,
only three of the pharmacy directors
reported providing rebate information to
the LTC facility. Thus, in delegating
responsibility for avoiding use of
unnecessary drugs to consultant
pharmacists, nursing homes generally
are unaware of any financial interests
that can bias the pharmacist’s drug
recommendations.
Consultant pharmacists perform
monthly drug regimen reviews for all
LTC facility residents. During this
review, the consultant pharmacist may
recommend a medication change. In
making a decision whether to accept the
recommended change, prescribing
physicians are likewise generally
unaware of the LTC pharmacy rebate
arrangements with pharmaceutical
manufacturers that may influence the
recommendation. In the previously
cited report, the OIG noted that when a
consultant pharmacist recommended a
medication change during the drug
regimen review, the recommendation
was accepted by the prescribing
physician about 74 percent of the time.6
We believe severing the relationship
between the consultant pharmacist and
the LTC pharmacy, pharmaceutical
manufacturers and distributors, and any
affiliated entities would further protect
the safety of LTC residents because it
will ensure that financial arrangements
do not influence the consultant
pharmacist’s clinical decision making to
the detriment of LTC residents.
Therefore, we are considering
requiring that LTC consultant
pharmacists be independent of any
affiliations with the LTC facilities’ LTC
pharmacies, pharmaceutical
manufacturers and distributors, or any
affiliates of these entities. For the
reasons described in this section, we
believe such a requirement is necessary
to ensure that consultant pharmacist
decisions are objective and unbiased.
That is, LTC facilities must use a
qualified professional pharmacist to
conduct drug regimen reviews and make
medication recommendations based
solely on what is in the best interests of
the resident. We believe this can be
achieved only if the consultant
pharmacist is working without the
influence of conflicting financial
interests that might otherwise encourage
overprescribing and overutilization,
which creates health and safety risks for
residents. We note that some
arrangements we are addressing here
may also implicate the fraud and abuse
laws for which the HHS OIG and the
Department of Justice (DOJ) have
jurisdiction.
The changes we are considering
would use the authority available under
sections 1819(d)(4)(B) and 1919(d)(4)(B)
of the Act to require that LTC consultant
pharmacists be independent. The cited
statutory provision gives the Secretary
authority to establish ‘‘such other
requirements relating to the health,
safety, and well-being of residents
* * *.’’
We are considering requiring that long
term care facilities employ or directly or
indirectly contract the services of a
licensed pharmacist who is
independent. We also are considering
including a definition of the term
‘‘independence’’ to mean that the
licensed pharmacist must not be
employed, under contract, or otherwise
affiliated with the facility’s pharmacy, a
pharmaceutical manufacturer or
distributor, or any affiliate of these
entities. Our changes would also
prohibit nursing homes from contracting
5 HHS, Office of Inspector General, ‘‘Availability
of Medicare Part D Drugs to Dual-Eligible Nursing
Home Residents,’’ June 2008. Available online at
https://oig.hhs.gov/oei/reports/oei-02-06-00190.pdf.
Accessed on June 28, 2010.
6 HHS, Office of Inspector General, ‘‘Availability
of Medicare Part D Drugs to Dual-Eligible Nursing
Home Residents,’’ June 2008. Available online at
https://oig.hhs.gov/oei/reports/oei-02-06-00190.pdf.
Accessed on June 28, 2010.
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for the provision of consultant
pharmacy services with entities (such as
a subsidiary of an LTC pharmacy) that
have been created for the purpose of
providing reorganized consultant
pharmacist services.
We do not believe it necessary to
define the terms ‘‘affiliate’’ or
‘‘affiliated’’ as we believe the meaning
should be broadly interpreted to cover
all relationships that incent
overprescribing and inappropriate
prescribing in LTC facilities. We do not
intend, however, for any of the changes
under consideration to prohibit any
relationships that would be inherently
free of conflict of interest. Thus, we
solicit comment on the specific
relationships that should be permitted.
We are aware that some Indian Tribes
and Tribal organizations own LTC
facilities that serve their members and
that the Tribe may also own the
pharmacy that serves the facility. We
believe that the Tribal-owned LTC
facility may employ the services of a
pharmacist to provide consultation and
perform drug regimen reviews who is
also employed by the facility’s
pharmacy without violating the
independence requirement. In these
instances, because the LTC facility and
pharmacy are commonly owned by the
Tribe, the consultant pharmacist’s
incentives for prescribing are aligned
with the best interests of not only the
Tribal members who are LTC residents,
but also the Tribe. We believe a similar
alignment of interests would exist in
Indian Health Services (IHS) owned
facilities and Tribal facilities that are
serviced by IHS pharmacies. We expect
there are other LTC providers or systems
in which the incentives for prescribing
are similarly aligned to sufficiently limit
the risk of conflicts of interest and
ensure the best interests of the LTC
residents are served. Therefore, we are
thinking of including an exception for
Tribal owned LTC facilities and
pharmacies. We also solicit comment
from the public on our interpretation
that in these unique situations
independence is not an issue because
the risk of conflicts of interest is
sufficiently limited.
We anticipate that if we were to
require that LTC facilities engage
independent consultant pharmacists,
this would cause consultant
pharmacists to reorganize to achieve
independence from the parties (facility
pharmacies, pharmaceutical
manufacturers and distributors, and
affiliated entities) with which the
consultant pharmacists are currently
affiliated. That is, we believe the
consultant pharmacists currently
assigned to LTC facilities would seek to
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retain relationships with those facilities,
either through direct employment or by
banding together with other consultant
pharmacists, for instance, in
professional corporations. We believe
that if the changes under consideration
were to take effect beginning January
2013, such a time frame would provide
sufficient time for implementation of
the requirement. However, we recognize
that there may be some areas where
certain conditions or extenuating
circumstances might argue for a longer
implementation period. Specifically, we
anticipate that LTC facilities in rural
areas would face the greatest challenges
in recruiting qualified consultant
pharmacists, particularly if the
consultant pharmacists currently
serving the rural facilities do not
reorganize in order to continue to
provide services. Therefore, the
requirements under consideration may
need to be modified to assist these
facilities. One way to assist would be to
extend the time period for
implementation. Thus, we are soliciting
comment on whether to provide for a
later effective date for rural facilities as
opposed to other LTC facilities or to
make other accommodations for the
unique circumstances in which rural
facilities operate. While we do not
believe that any consultant pharmacist
should have a conflict of interest, we are
also soliciting comments on whether it
would make sense to waive the
independence requirement to permit
alternative approaches. In describing
these other approaches, comments
should address the protections that
would be implemented to reduce the
risk of conflict of interest due to the lack
of independence of the consultant
pharmacists.
It is our understanding that LTC
consultant pharmacists commonly
perform approximately 60 drug regimen
reviews in a day. We suspect that this
rate may be too high given our
expectation that independent consultant
pharmacists would conduct more
thorough drug regimen reviews,
monitoring for drug side effects and
efficacy. Therefore, although we are not
proposing in this rule to codify changes
to the drug regimen review
requirements, we are soliciting public
comment on best practices related to the
conduct of drug regimen reviews. We
will use these comments to inform
possible future rulemaking regarding the
drug regimen review requirements.
C. Excluding Poor Performers
This section includes three proposals
designed to strengthen our ability to
remove poor performers. We believe we
could protect beneficiaries through the
proposal that would enable us to
terminate health care prepayment plans
(HCPPs) whose administration does not
meet specified financial, reporting, and
access requirements.
A second proposal would enable us to
look at the plan rating system, which we
developed to provide beneficiaries with
information about the quality and
performance of health and drug plans to
assist in plan selection during the open
enrollment period. The plan ratings
include process measures that focus on
whether good medical care or drug care
was provided, outcome measures that
address the result of that care, and
measures that relate to administrative
processes that support and direct the
provision of care. It is our view that the
star rating system not only provides
beneficiaries/consumers with easy-tounderstand information critical for
making choices among sponsors, but
provides a powerful tracking tool that
enables us to continue to administer the
Part C and D programs with the best
interests of the beneficiaries in mind.
We propose to give CMS the authority
to terminate MAOs and Part D sponsors
that have failed to provide, over a
course of 3-years, service meriting at
least 3-star ratings. A second proposal
would give CMS the authority to deny
applications submitted by MAOs and
Part D sponsors that have performed
poorly in the past. We anticipate that
this proposal would directly enable us
to protect beneficiaries from poor care.
Both these provisions, in our opinion,
would give entities that want to
administer benefits to Medicare
beneficiaries a strong incentive to pay
attention to the star rating criteria and
provide for better quality health care if
they wish to stay in or join the program.
See Table 3 for details of these
proposals.
TABLE 3—PROVISIONS TO EXCLUDE POOR PERFORMERS
Part 417
Preamble section
Part 422
Part 423
Provision
Subpart
II.C.1 ..................
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CMS Termination of
Health Care
Prepayment
Plans.
Plan Performance Ratings
as a Measure of Administrative and
Management
Arrangements and as
a Basis for
Termination
or
Non-Renewal
of a Medicare
Contract.
21:42 Oct 07, 2011
Section
Subpart
Section
Subpart
Subpart U ........
§ 417.801 ........
N/A ..................
N/A ..................
N/A ..................
N/A.
N/A ..................
N/A ..................
Subpart K ........
§ 422.504 ........
§ 422.510 ........
Subpart K ........
§ 423.505.
§ 423.509.
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TABLE 3—PROVISIONS TO EXCLUDE POOR PERFORMERS—Continued
Part 417
Preamble section
Subpart
II.C.3 ..................
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Part 423
Section
Denial of Appli- N/A ..................
cations Submitted by
Part C and D
Sponsors
with a Past
Contract Termination or
CMS-Initiated
Non-Renewal.
1. CMS Termination of Health Care
Prepayment Plans (§ 417.801)
Section 1833(a)(10)(A) of the Act
authorizes payment to HCPPs, but does
not specify program requirements.
Consequently, we have incorporated
features of both section 1876 of the Act
cost contract plan, and MA program
regulations to establish benefit,
enrollment, appeals, and other HCPP
program features. For example, in our
January 2005 final rule (70 FR 4588
through 4741), we extended
fundamental features of the MA appeals
process to HCPPs.
Although our current regulations at
§ 417.801(d) permit us to terminate a
contract with an HCPP, we propose to
codify specific reasons for HCPP
termination in § 417.801(d) to
strengthen our oversight and
enforcement capability. In addition,
specifying additional elements through
notice-and-comment rulemaking would
ensure that all HCPPs are aware that
their failure to comply with such
requirements may lead to termination of
their contracts with us. Section
417.801(d) currently provides that we
may terminate or not renew a contract
with an HCPP if the HCPP: (1) No longer
meets the requirements for participation
and reimbursement as an HCPP; (2) is
not in substantial compliance with the
provisions of the agreement or
applicable statutory or regulatory
requirements; or (3) undergoes a change
in ownership. We propose to retain the
bases for termination but to modify
§ 417.801(d)(ii) to include three specific
elements of substantial non-compliance
with the CMS contract, applicable CMS
regulations, or applicable provision of
the Act as a basis for CMS termination
of an HCPP.
First, in their agreements with us,
HCPPs agree to provide adequate access
to providers and to document such
access. Accordingly, we would specify
that failure to provide adequate access
to providers, or documentation of such
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Provision
21:42 Oct 07, 2011
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Subpart
Section
Subpart
N/A ..................
N/A ..................
§ 422.502 ........
Subpart K ........
access, is a basis for determining that an
HCPP is not in substantial compliance
with applicable regulatory
requirements. We propose to include
this basis for termination in new
paragraph (d)(1)(ii)(A). Second, HCPPs
are required to provide data to us and
to maintain financial records and
statistics related to costs payable by
CMS for CMS audit or review. This
requirement is currently captured in
§ 417.806, which cross references
financial records requirements at
§ 417.568, of the section 1876 cost
contract plan regulations. We would
specify, in new paragraph (d)(1)(ii)(B),
that failure to provide such data and/or
to maintain records appropriately is a
basis for determining that an HCPP is
not in substantial compliance. Third,
HCPPs must report costs to us in
addition to maintaining financial
records and following other financial
requirements specified at § 417.568 of
the cost contract program regulations.
Currently, these requirements are also
referenced in HCPPs’ agreements with
CMS. We propose that a new paragraph
at (d)(1)(ii)(C) would specify that a
failure to report costs to CMS will
constitute a basis for determining that
an HCPP is not in substantial
compliance.
2. Plan Performance Ratings as a
Measure of Administrative and
Management Arrangements and as a
Basis for Termination or Non-Renewal
of a Medicare Contract (§ 422.504,
§ 422.510, § 423.505, and § 423.509)
Since 2007, we have developed and
published annual performance ratings
for all stand-alone Medicare PDPs. In
2008, we began issuing ratings for MA
plans as well. The ratings are based on
measures that address a range of health
and drug plan performance categories,
including access to care,
communication with members, and
clinical quality of care. The scores in
each performance category are based on
data reported by MA organizations and
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Section
§ 423.503.
PDP sponsors, beneficiary survey
responses, and monitoring conducted by
CMS and its contractors. We rate MA
organizations and Part D sponsors on a
5-star scale, with the best performers
receiving a rating of 5 stars. The
organizations receive a score for each
performance measure, a summary score
each for Part C and Part D, as well as
an overall rating. Under the
methodology developed and applied by
CMS for its star rating process, a rating
of 3 or more stars is an indication of
sponsors with ‘‘average’’ or better
performance. By contrast, organizations
receiving a summary or overall score
below 3 stars are among the weakest
performers in the Medicare Part C and
D programs.
The Medicare regulations at
§ 422.503(b)(4) and § 423.504(b)(4) state
that, to qualify as an MAO or Part D
sponsor, an organization must have
administrative and management
arrangements satisfactory to CMS,
including, per § 422.503(b)(4)(ii) and
§ 423.504(b)(4)(ii), personnel and
systems sufficient for the organization to
implement, control, and evaluate the
activities associated with the delivery of
Part C and D benefits. Once under
contract with CMS as an MAO or Part
D sponsor, an organization remains
obligated to maintain satisfactory
administrative and management
arrangements, a point we propose to
clarify by adding paragraphs
§ 422.504(a)(17) and § 423.505(b)(25) to
the list of required elements in CMS’
contracts with MAOs and Part D
sponsors. Also, as explained later in this
section, we believe that the plan ratings
are a direct indicator of the ongoing
effectiveness of a contracting
organization’s administrative and
management arrangements. Therefore,
we propose adding paragraphs
§ 422.504(a)(18) and § 423.505(b)(26) to
require an organization to demonstrate
that it maintains satisfactory
administrative and management
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arrangements by achieving a summary
plan rating of at least 3 stars each year.
We also propose to establish the
failure to achieve a 3-star summary
rating consistently as a basis for contract
termination. As the measures in the star
ratings are based largely on Part C and
D program requirements, and the plan
ratings are a reflection of a sponsor’s
performance across a range of program
areas, we believe that a sponsor with a
low Part C or Part D summary star rating
has failed in a significant way to meet
its obligations as an MAO or Part D
sponsor. (As we calculate the summary
rating score by taking an average of the
measure-level stars, sponsors can
receive scores on individual measures of
less than 3 stars but still achieve a
summary rating of at least 3 stars.) A
sponsor that fails to achieve a good
rating for 3 consecutive years has
demonstrated consistently that it is
unable or unwilling to take corrective
action to improve its Part C or D
performance.
As noted previously, to qualify as an
MAO or Part D sponsor, an organization
must have effective administrative and
management arrangements. Such
arrangements involve the allocation and
coordination of an organization’s
resources to ensure that it can fulfill the
entire range of its obligations related to
the delivery of Medicare benefits. Of
course, the importance of these
arrangements only increases once an
organization has entered into an MAO
or Part D sponsor contract as the quality
of the arrangements is tested repeatedly
by the process of actually delivering
Medicare benefits in a timely and
effective manner during the term of the
contract. Because of the critical role
administrative and management
arrangements play in ensuring an
organization’s compliance with its
Medicare obligations, we believe it is
necessary to make clear, by adding to
the set of required CMS contract
elements, that organizations must
continue to maintain effective
administrative and management
arrangements even after they have
entered into Medicare contracts.
Accordingly, we propose adding
paragraphs § 422.504(a)(17) and
§ 423.505(b)(25) which state that the
maintenance of effective administrative
and management arrangements is a
material term of the MAO and Part D
sponsor contracts. The summary rating
for a plan sponsor is calculated
according to the methodologies outlined
in the Plan Star Ratings technical notes,
and is based on a formula that factors in
a sponsor’s scores on all measures
pertaining to Part C to calculate the Part
C summary rating and pertaining to Part
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D to calculate the Part D summary
rating. Organizations that offer both Part
C and Part D benefits receive an overall
rating that combines the Part C and D
star ratings results. To evaluate an
organization’s administration and
management capabilities accurately, it is
necessary to review its performance
across a range of operational areas.
Because the summary Plan Rating scores
are based on a sponsor’s performance of
a wide range of Medicare requirements
within each of the MA and Part D
programs, the scores are a reliable
measure of the quality of an
organization’s administrative and
management arrangements. Therefore,
to articulate the standard by which we
would measure compliance with that
obligation, we propose to establish as a
requirement that organizations must
achieve a summary plan rating of at
least 3 stars for each of Part C and Part
D each year by adding paragraph
§ 422.504(a)(18) and adding paragraph
§ 423.505(b)(26). It would not be
appropriate to use the overall rating for
this purpose, as organizations that offer
both Part C and Part D benefits must
fully meet the requirements of each
program independently. It is
conceivable that if we exclusively rely
upon the overall measure, strong
performance within one program could
mask poor performance in the other
program, which would not be an
acceptable outcome.
The star ratings may also be used as
a basis for contract enforcement actions.
We have the authority under section
1857(c)(2) of the Act to terminate CMS’
contract with an MAO or a Part D
sponsor when we determine that the
organization has failed substantially to
carry out the contract or is carrying out
the contract in a manner inconsistent
with the efficient and effective
administration of the Part C or D
programs. A summary rating of less than
3 stars can be achieved only when a
sponsor demonstrates poor performance
across a range of measures. Therefore,
we believe that sponsors that
consistently achieve poor plan ratings
have demonstrated a substantial failure
to comply with the terms of their
Medicare contracts. Also, low-rated
sponsors interfere with the efficient and
effective administration of the MA and
Part D programs as beneficiaries rely on
us to ensure that the array of plan
choices only includes offerings from
sponsors that have demonstrated that
they can provide at least good quality
services to their members.
Accordingly, we propose to amend
the bases upon which CMS may
terminate an MAO or Part D sponsor
contract under § 422.510(a) and
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§ 423.509(a) to include a sponsor’s
failure to achieve at least a 3-star
summary plan performance rating for
three consecutive contract years. We
believe that 3 years is sufficient time for
a sponsor, once it has received notice of
its low star rating, to develop and
implement corrective action and for
improved performance to be reflected in
the star ratings issued at the conclusion
of the 3-year period.
We base our determinations that good
plan ratings are indicative of the
strength of an organization’s
administrative and management
arrangements and that consistently poor
plan ratings are a basis for contract
termination on the fact that the elements
of the plan ratings correlate to Part C
and D requirements described in
applicable statutes and regulations.
While the exact measures may vary
slightly from year to year, each year’s
plan ratings are based on similar
elements from previous years, as they
are developed in consultation with a
workgroup of industry stakeholders and
based on a review of stated Part C and
D program requirements. The most
recent plan ratings, issued in September
2010, provide a useful template for
demonstrating the correlation between
program requirements and the
performance measured. (See 2011 Part C
Technical Notes and 2011 Part D Plan
Ratings Technical Notes: September
2010.)
The 2010 Part C plan ratings were
organized into five domains—‘‘Staying
Healthy: Screenings Tests, and
Vaccines’’; ‘‘Managing Chronic (Long
Term) Conditions’’; ‘‘Ratings of Health
Plan Responsiveness and Care’’; ‘‘Health
Plan Members’ Complaints and
Appeals’’; and ‘‘Health Plan Telephone
Customer Service.’’ The Part C
regulations at § 422.152(a)(2) state that
MAOs must conduct quality
improvement projects that can be
expected to have a favorable effect on
health outcomes and enrollee
satisfaction and address areas identified
by CMS. The Staying Healthy measures
evaluated the extent to which MAOs
provided screenings to their members
for conditions such as breast cancer,
colorectal cancer, elevated cholesterol,
glaucoma, and osteoporosis, as well as
providing monitoring to patients with
long term medication, and flu vaccines
to plan members. As these measures
have been consistently included in the
Part C plan ratings over a period of
several years, it is fair to say that MAOs
have known over that same timeframe
that we would rate them on quality
improvement projects designed to
address the identified conditions and
that they should take action to improve
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their scores for this measure. Moreover,
we have clearly fulfilled our obligation
under § 422.152(a)(2) to identify areas
that MAOs need to address for this
purpose by annually publishing the
methodology and results both publicly
on the CMS Web site and in the form
of private previews for MAOs to review
their own results. As a result, an MAO’s
score in the ‘‘Staying Healthy’’ domain
is a fair measure of the extent to which
it is complying with § 422.152(a)(2).
The ‘‘Managing Chronic (Long Term)
Conditions’’ domain most closely
mirrors the requirements at
§ 422.152(a)(1) which obligate MAOs to
have a chronic care improvement
program that addresses populations
identified by us based on a review of
current quality performance. The
measures in this domain concern the
management of conditions such as
osteoporosis, diabetes, and high blood
pressure. Again, the measures have
remained largely constant for a number
of years, so MAOs have had effective
notice that we had identified
beneficiaries with those conditions as
the populations for which we would
expect sponsors to implement effective
chronic care improvement programs.
The measures related to the ‘‘Health
Plan Responsiveness and Access to
Care’’ domain demonstrate an MAO’s
compliance with its obligations under
§ 422.112(a)(1) to maintain a provider
network sufficient to ensure its
enrollees’ access to covered services.
The measures ‘‘Getting Needed Care’’
and ‘‘Getting Appointments and Care
Quickly’’ are both based on the results
of beneficiary surveys concerning their
experiences in being able to get timely
appointments with plan-contracted
providers. The measure ‘‘Doctors Who
Communicate Well’’ reflects enrollees’
responses to a series of questions
concerning the quality of their
interaction with plan-contracted
physicians, including the amount of
time the physicians spent with an
enrollee and the care with which the
physicians conducted appointments, all
of which indicate the extent to which
those services are provided in a manner
consistent with professionally
recognized standards of health care, per
§ 422.504(a)(3)(iii).
In the ‘‘Health Plan Member’s
Complaints and Appeals’’ domain, we
provide a rating of the extent to which
an MAO affords its members their
coverage determination appeal rights
under the Part C program. The Part C
regulations at Part 422, Subpart M,
require MAOs to adhere to standards
and timeframes for issuing timely and
accurate determinations concerning the
coverage of health services for their
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members as well as the processing of
their appeals of such determinations.
The ‘‘Makes Timely Decisions about
Appeals’’ rating measures the extent to
which an MAO meets the regulatory
deadlines for issuing responses to
member appeals while the ‘‘Reviewing
Appeals Decisions’’ rating measures the
frequency with which the MAO
determinations were overturned by the
Independent Review Entity (IRE). The
analysis for these measures was
conducted by Maximus, Inc., which we
contracted as an IRE for Part C appeals.
The remaining measures under this
domain, ‘‘Complaints about the Health
Plan’’ and ‘‘Corrective Action Plans’’
(CAPs) provide a more general view of
an MAO’s performance from two
different perspectives. The
‘‘Complaints’’ measure is based on a
calculation of the rate (that is,
complaints per 1,000 members) at
which we receive complaints from
beneficiaries, providers, or others
affected by the MAO’s operations. The
CAP measure reflects the number and
type of findings made by us during an
audit of an MAO’s performance. Thus,
these two measures provide a snapshot
of the MAO’s compliance with range of
requirements from the perspective of the
members it must serve as well as CMS.
The ratings in the last Part C domain,
‘‘Health Plan Customer Service,’’ are the
product of a series of measures related
to the requirement that MAOs operate a
customer service call center that is
responsive to the needs of Medicare
beneficiaries. In particular, the domain
rating is based on the results obtained
by a CMS contractor that conducts test
calls to MAO customer service lines to
assess the extent to which the call
centers provide accurate plan
information, in languages spoken by
beneficiaries residing in the plan’s
service area, and with limited hold
times consistent with the standards
stated in the Medicare Marketing
Guidelines we have issued pursuant to
§ 422.111(g).
The four domains of the Part D Plan
Ratings similarly correspond to the
requirements with which Part D plan
sponsors must comply. The Part D
domains are ‘‘Drug Plan Customer
Service;’’ ‘‘Drug Plan Member
Complaints and Medicare Audit
Findings;’’ ‘‘Member Experience with
the Drug Plan;’’ and ‘‘Drug Pricing and
Patient Safety.’’ The domain ‘‘Drug Plan
Customer Service’’ includes measures
concerning hold times, accuracy of
information, and foreign language
interpretation services are the Part D
equivalents of the measures used in the
Part C plan rating. They reflect the Part
D sponsor’s compliance with the
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customer service call center
requirements described in the Medicare
Marketing Guidelines issued in
accordance with § 423.128(d)(1). The
measure related to hold times for
pharmacists’ calls to the sponsor are
evidence of the sponsor’s compliance
with the requirement, stated at
§ 423.128(d)(1) that the sponsor operate
a call center to provide technical
assistance to pharmacists concerning
their plan operations. This domain also
contains three measures related to plan
performance of its obligations related to
the issuance of coverage determinations
and processing of members’ appeal
requests, per Part 423, Subpart M. The
last measure in this domain indicates
the extent to which a sponsor is
complying with CMS processes for
ensuring that the data used by
pharmacists to determine a customer’s
Part D plan enrollment is accurate and
up to date. The provision of this data,
referred to as ‘‘4Rx data’’ is part of Part
D sponsors’ obligation, stated at
§ 423.505(b)(2), to process enrollments
in a manner consistent with the
requirements stated in Part 423, Subpart
B.
The second domain, ‘‘Drug Plan
Member Complaints and Medicare
Audit Findings,’’ consists largely of the
same kind of measures related to
beneficiary satisfaction and CMS audit
findings as included in the Part C plan
ratings, and the discussion provided
above of their bearing on a
determination of a sponsor’s compliance
with program requirements is applicable
to the Part D ratings as well.
The ‘‘Member Experience with Drug
Plan’’ domain consists of measures
related to plan members’ experience in
getting access to information about their
Part D plan or getting prescriptions
filled easily when using the plan. These
measures provide evidence of a
sponsor’s compliance with the
requirement, stated at § 423.128, that it
disseminate information about its Part D
plans, and that it provide benefits
through a point of claims adjudication
system (per § 423.505(b)(17)) operated
through a contracted pharmacy network
that meets Part D access requirements
(per § 423.120).
The ‘‘Drug Pricing and Patient Safety’’
domain consists, in part, of measures
related to a sponsor’s ability to maintain
and transmit accurate information
related to its members’ LIS eligibility
status and the information concerning
drug prices available at network
pharmacies. Under this domain, CMS
assesses, by comparing its data with that
of Part D sponsors, the accuracy of a
sponsor’s records concerning the LIS
status of its members, a significant part
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of their obligation under § 423.800 to
participate in the administration of the
low-income subsidy portion of the Part
D benefit program. With respect to drug
pricing, we compare sponsors’ data
reported to us with other data sources,
including prescription drug event data
and data from commercially available
drug pricing reference files. The
remaining two measures in this domain
assess the sponsor’s efforts to ensure
that its members are being directed
away from drugs with a high risk of side
effects and that those members with
diabetes are treating their high blood
pressure with medication appropriate
for their condition. Both of these
measures are indications of a sponsor’s
compliance with its obligation under
§ 423.150(c) to develop and implement
drug utilization review systems that
identify patterns of inappropriate care
among its enrollees.
The thresholds we have established
for the star ratings in each category are
based on regulatory standards or our
review of industry performance over
several years. From that systematic
review, for each regulatory standardbased measure we consider the actual
contract scores in relation to a
theoretical distribution of all possible
measures with the regulatory standard
considered a 3-star rating. (For example,
in 2008 CMS announced to Part D
sponsors that, after a review of industry
performance during the first 2 years of
the Part D program, we had established
that sponsors would be required to
submit 4Rx data for 99 percent of their
enrollment transactions to be
considered compliant with Part D
enrollment processing requirements.)
When an absolute performance standard
has not yet been established, we look at
a contract’s performance on a measure
relative to all other contracts’
performance on the same measure. In
either case we usually segment the
range of the actual contract scores for
each measure into one of the 5-star
groupings. The segmentation of the
scores into groups is based on statistical
techniques that minimize the distance
between scores within a grouping (or
‘‘cluster’’) and maximize the distance
between scores in different groupings.
There may not be clusters in each
grouping, therefore there could be as
many as 5 or as few as one rating in the
final data. In developing that
methodology, we reserved 1- and 2-star
ratings for performance that was
significantly below what a review of
industry-wide performance would show
to be acceptable and achievable by
competently administered sponsors.
This establishment of compliance
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standards through the analysis of all
Medicare contractors’ performance to
identify outliers is consistent with our
regulatory authority at § 422.504(m)(2)
and § 423.505(n)(2). We have previously
issued guidance (for example, CY 2012
Call Letter, page 119, issued April 4,
2011) to MAOs and Part D sponsors
indicating that we considered
organizations with 3 consecutive years
of less than 3-star Plan Ratings to be out
of compliance with Medicare program
requirements. We stated there that
organizations with such a Plan Rating
history should expect that, prior to
initiating a termination action, we
would confirm that the data used to
calculate the Plan Ratings did reflect an
organization’s substantial failure to
comply with Part C or D requirements.
In essence, we noted that poor Plan
Rating scores were a strong indication,
but not conclusive evidence, of
substantial non-compliance. In applying
that policy, we include Plan Ratings
issued in years prior to the issuance of
the guidance to identify organizations
whose performance may warrant
contract termination.
With the elevation of low Plan Ratings
from the status of likely indicator to
conclusive evidence of substantial noncompliance, we believe that the use of
prospective Plan Ratings is more
appropriate in our application of this
authority. Therefore, we propose that
we would not begin calculating the 3year period until after organizations
have received notice through the
rulemaking process of the new basis for
contract termination. As we plan on this
proposal to be issued as part of a final
rule in the spring 2012, we expect to use
only those Plan Ratings issued after the
publication of the final rule. That is, we
would use the contract year 2013 Plan
Ratings, which we expect to issue in
September 2012, as the first set of
ratings in the calculation of any
sponsor’s 3 consecutive years of Plan
Ratings. We invite public comment on
our proposal for identifying the first set
of Plan Ratings we would use in
determining whether a sponsor’s
performance during 3 consecutive years
supported a CMS decision to terminate
its Medicare contract.
3. Denial of Applications Submitted by
Part C and D Sponsors With a Past
Contract Termination or CMS–Initiated
Non-Renewal (§ 422.502 and § 423.503)
In accordance with § 422.502(b) and
§ 423.503(b) applicants with current or
prior contracts with CMS are subject to
our denial of their applications if they
fail during the preceding 14-months to
comply with the requirements of the
Part C or D programs even if the
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63045
applications otherwise demonstrate that
they meet all of the Part C or D sponsor
qualifications. In the April 2011 final
rule (76 FR 21432), we added provisions
at § 422.502(b)(2) and § 423.503(b)(2)
concerning the treatment of entities
submitting applications to us when the
entity has operated its contract(s) with
CMS for less than 14-months at the time
it submits a new application or service
area expansion request. In the interest of
ensuring that new entrants to the Part C
or Part D programs can fully manage
their current contracts and books of
business before further expanding, we
added a provision that in the absence of
14-months performance history, we may
deny an application based on a lack of
information available to determine an
applicant’s capacity to comply with the
requirements of the Part C or Part D
program, respectively.
At this time, we are proposing to
further refine our intended approach to
using past performance in making
application determinations.
Specifically, we are concerned about
entities submitting applications to us
when the entity has had a previous
Medicare contract terminated or nonrenewed by CMS. We initiate
termination or non-renewal of a contract
only when the MA organization or Part
D sponsor has committed extremely
serious violations of the Part C or Part
D program. In the past, these contract
actions by CMS have been rare. The
bases for a termination are specified in
§ 422.510 and § 423.509, and include
such serious violations as substantially
failing to carry out the terms of its
Medicare contract; committing fraud;
and failing to carry out the requirements
for beneficiary access to services by, for
instance, not implementing required
appeals and grievance processes or not
establishing provider and pharmacy
networks that meet our requirements.
The bases for a CMS-initiated nonrenewal are specified in § 422.506(b)
and § 423.507(b), and include the same
list of violations, plus several others.
Nevertheless, despite the seriousness of
termination and CMS-initiated nonrenewal actions, and the underlying
noncompliance that would have led to
such a drastic step, the regulation is
silent concerning when these
organizations may re-enter the Part C
and Part D programs. As such, we
currently rely upon the past
performance provisions in
§ 422.502(b)(1) and § 423.503(b)(2) to
determine whether an application from
a previously terminated or CMS-nonrenewed organization is approvable.
These provisions limit the period of
time we can review for purposes of
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assessing past performance to 14months. Fourteen months is a
reasonable amount of time to review the
performance of organizations with
current and ongoing Medicare Part C
and Part D contracts. In the case of
organizations whose performance was
so poor as to have their contract(s)
terminated or non-renewed by CMS, we
believe that a 14-month look-back is an
inadequate amount of time.
In contrast to the regulation’s silence
on a ‘‘waiting period’’ for organizations
whose contracts have been terminated
or non-renewed by CMS, long-standing
provisions at § 422.506(a)(4),
§ 422.508(c), § 422.512(e),
§ 423.507(a)(3), § 423.508(e), and
§ 423.510(e) require that organizations
that have voluntarily non-renewed or
terminated their contracts must wait 2
years before they may reenter the
program. We believe that the interval
between the effective date of a contract’s
CMS-initiated termination or nonrenewal should be no less than in the
case of a voluntary termination or nonrenewal. Indeed, a period of greater than
2 years is appropriate, for these entities
have broken faith with the program in
a more significant way than in the case
of a voluntary non-renewal.
As such, we are proposing to modify
the past performance review period to
capture CMS-initiated terminations or
non-renewals that became effective
within the 38 months preceding the
submission of a new application. The
selection of 38 months accounts for a 3year period, plus the 2 months of the
year during which applications are
being prepared for submission to CMS.
Three years represents 1 additional year
compared to the 2 years of waiting time
for voluntary non-renewals. To make
this change, we propose adding new
paragraphs at § 422.502(b)(3) and at
§ 423.503(b)(3) to state that if CMS has
terminated or non-renewed an MA
organization’s or Part D sponsor’s
contract, effective within the 38 months
preceding the deadline established by
CMS for the submission of contract
qualification applications, we may deny
an application based on the applicant’s
substantial failure to comply with the
requirements of the Part C or Part D
program even if the applicant currently
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meets all of the requirements of this
part.
Additionally, in the April 2011 final
rule, we defined ‘‘covered persons’’ for
the purpose of determining which
organizations are prohibited from recontracting with CMS for the two years
following a voluntary non-renewal.
Specifically, we codified that the 2-year
ban on new Part C or Part D sponsor
contracts to which non-renewing
organizations are subject under the
regulation be expanded to include
organizations owned or managed by an
individual (referred to as a covered
person) who served in a similar capacity
for a previously non-renewed Part C or
Part D organization. The requirement
assists CMS in prohibiting and
preventing each such organization from
gaming the Medicare program by
reapplying for a contract as a new
organization during the 2-year ban,
when the applying organization has
common ownership and management
control. In essence, this requirement
helps ensure that the provisions of the
2-year application prohibition are given
full effect.
For consistency and to prevent the
same sort of gaming by organizations
whose contracts have been terminated
or non-renewed by CMS, we propose to
add new paragraphs at § 422.502(b)(4)
and at § 423.503(b)(4) to replicate the
existing language concerning covered
persons as currently exists for
voluntarily-non-renewing organizations.
Specifically, the newly proposed
language states that in implementing the
38-month provision, we may deny an
application where the applicant’s
covered persons also served as covered
persons for the terminated or nonrenewed contract. As with the voluntary
non-renewal provisions, in this instance
‘‘covered person’’ would mean one of
the following: (1) All owners of
terminated organizations who are
natural persons, other than shareholders
who have an ownership interest of less
than 5 percent; (2) an owner in whole
or part interest in any mortgage, deed of
trust, note or other obligation secured
(in whole or in part) by the organization,
or any of the property or assets thereof,
which whole or part interest is equal to
or exceeds 5 percent of the total
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property and assets of the organization;
(3) a member of the board of directors
or board of trustees of the entity, if the
organization is organized as a
corporation.
The combined effect of these
proposals is to ensure appropriate
requirements exist concerning program
re-entry subsequent to all types of
terminations and non-renewals, and to
strengthen the past performance review
to capture the most serious types of noncompliance (resulting in CMS-initiated
terminations and non-renewals) for a
more reasonable period of time.
D. Improving Program Efficiencies
By reducing regulatory burdens for
MA Organizations, Part D sponsors, and
cost contractors, lowering transaction
costs, and reducing waste and
unnecessary spending, we believe we
can improve program efficiency and
keep costs down and improve the
quality of care received by Medicare
beneficiaries. Non-renewing cost
contractors would save money if we
eliminated the current regulatory
requirement to purchase print
advertising announcing their nonrenewals. Implementing the hospitalacquired conditions (HACs) and present
on admission indicator policy that is
currently required under the Original
Medicare Inpatient Hospital Prospective
Payment system (IPPS) for MA plans
would continue our efforts to enhance
quality and efficiency of care, and
promote incentives for hospitals to
eliminate medical errors and reduce
Medicare expenditures for poor quality
or unnecessary care. MAOs and Part D
sponsors that are no longer tied to
particular agent/broker compensation
amounts would save transaction and
other costs if rules regarding agent/
broker compensation were made more
flexible. Cost-sharing tailored to a trial
fill of a prescription drug would not
only save money for each beneficiary
who found that the drug did not work
for him or her, but would also lessen the
problems of disposal or diversion of
unused drugs.
These proposals and others are
outlined in Table 4.
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TABLE 4—PROVISIONS TO IMPROVE PROGRAM EFFICIENCIES
Part 417
Preamble section
Part 422
Part 423
Provision
Subpart
II.D.1 ......................
II.D.2 ......................
II.D.3 ......................
II.D.4 ......................
II.D.5 ......................
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II.D.6 ......................
Cost Contract
Plan Public Notification Requirements in
Cases of NonRenewal.
New Benefit Flexibility for FullyIntegrated Dual
Eligible Special
Needs Plans
(FIDE SNPs).
Application of the
Medicare Hospital-Acquired
Conditions and
Present on Admission Indicator Policy to
MA Organizations.
Clarifying Coverage of Durable Medical
Equipment.
Broker and Agent
Requirements.
Establishment and
Application of
Daily Cost-Sharing Rate as Part
of Drug Utilization Management and
Fraud, Abuse
and Waste Control Program.
Section
Subpart
Section
Subpart
Subpart L .......
§ 417.492 .......
N/A .................
N/A .................
N/A .................
N/A
N/A .................
N/A .................
Subpart C ......
§ 422.102 .......
N/A .................
N/A
N/A .................
N/A .................
Subpart C ......
§ 422.504 .......
N/A .................
N/A
N/A .................
N/A .................
Subpart C ......
§ 422.100,
§ 422.111.
N/A .................
N/A
N/A .................
N/A .................
Subpart V ......
§ 422.2274 .....
Subpart V ......
§ 423.2274
N/A .................
N/A .................
N/A .................
N/A .................
Subpart D ......
§ 423.104,
§ 423.153
1. Cost Contract Plan Public Notification
Requirements in Cases of Non-Renewal
(§ 417.492)
Section 1876 of the Act provided the
Secretary with the authority to enter
into contracts with HMOs on a cost
basis. While section 1876(k)(1)(A) of the
Act precludes the Secretary from
entering into new cost contracts after
the establishment of Part C, existing
contracts are grandfathered, and subject
to regulations, including § 417.492,
which sets forth rules that apply to nonrenewal of a cost contract.
In the event that such a contract is
non-renewed, the cost plan or CMS
must notify both the enrollees of the
organization and the general public of
the non-renewal. As specified in
§ 417.492(a)(1)(iii), public notification
must include ‘‘notice in one or more
newspapers of general circulation in
each community or county located in
the HMO’s or CMP’s geographic area.’’
We propose removing the current
requirements at § 417.492(a)(1)(iii) and
(b)(1)(iii) for non-renewing cost-
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contracting plans (in voluntary nonrenewal situations) and for CMS (in
CMS-initiated non-renewal situations)
to notify the general public concerning
the impending non-renewal. Our
proposed removal of this requirement is
motivated by the cost of newspaper
advertisements and the declining rate of
newspaper circulation. In addition, we
believe that the requirement that cost
plans provide personalized non-renewal
information is sufficient to ensure
adequate non-renewal notice.
2. New Benefit Flexibility for FullyIntegrated Dual Eligible Special Needs
Plans (FIDE SNPs) (§ 422.102)
Congress established dual eligible
SNPs (D–SNPs) under the Medicare
Modernization Act of 2003 (MMA) with
the intention of better integrating care
for individuals eligible for both
Medicare and Medicaid (‘‘dual eligible’’
beneficiaries). The Affordable Care Act
created a subset of D–SNPs, fullyintegrated dual eligible SNPs (FIDE
SNPs), which CMS further defined in
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Section
our April 2011 final rule (76 FR 21443
and 76 FR 21444) at § 422.2 as D–SNPs
that: (1) Provide dual eligible
beneficiaries access to Medicare and
Medicaid benefits under a single
managed care organization; (2)
coordinate delivery of covered Medicare
and Medicaid health and long-term care
services; (3) possess a valid capitated
contract with the State for specified
primary, acute, and long-term care
benefits consistent with State policy;
and (4) comply with CMS and State
policy regarding marketing, appeals,
quality assurance, and enrollment
communication procedures.
Section 2602(c) of the Affordable Care
Act also charged us with making
Medicare and Medicaid work together
more effectively to improve patient care
and lower costs. Thus, we are
implementing initiatives aimed at
improving quality and access to care for
dual eligible beneficiaries, simplifying
processes, and eliminating regulatory
conflicts and cost-shifting that occurs
between the Medicare and Medicaid
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programs, States, and the Federal
government. (For more information on
this initiative, see our CY 2012 Call
Letter, at https://www.cms.gov/
MedicareAdvtgSpecRateStats/
Downloads/Announcement2012.pdf.)
To further these goals, we propose to
give certain SNPs additional flexibility
with respect to plan design, as
discussed in detail later in this section.
Under this proposed rule, FIDE SNPs
that are currently operational, that have
operated in the previous contract year,
and that meet certain CMS criteria
including, but not limited to, being of
high-quality (as defined by CMS in the
calendar year 2013 draft/final call
letter), would be afforded this benefit
flexibility.
Section 1852(a)(3) of the Act and our
regulations at § 422.2, § 422.100(c)(1),
and § 422.102 allow us considerable
discretion in deciding what benefits
beyond those covered under Medicare
Parts A, B, or D can be offered to MA
enrollees as a ‘‘supplemental benefit’’
that is included in an MA plan for every
enrollee who joins the plan (other
benefits may be offered at the enrollee’s
option). We are interested in assessing
whether certain supplemental benefits
could help prevent health status decline
in the dual eligible population, and
reduce the quantity and cost of future
health care needs. To this end, and as
described in this section, we propose
amending our regulations at § 422.102(e)
to allow certain FIDE SNPs that CMS
deems eligible the flexibility to offer
supplemental benefits beyond those that
we currently allow for MA plans.
We currently apply the same guidance
as to what can be offered as a
supplemental benefit to all MA plans,
regardless of plan type. In recent years,
we have used guidance (see § 30.1 of
Chapter 4 of the Medicare Managed Care
Manual, ‘‘Benefits and Beneficiary
Protections,’’ https://www.cms.gov/
manuals/downloads/mc86c04.pdf) to
clarify that supplemental benefits must
be items and services that are—
• Primarily health related, meaning
that an item or service is directly healthrelated, not for comfort or cosmetic or
daily maintenance purposes, and has a
use that is either national typical usage
or part of a community pattern of care;
• Have a cost—that is, a non-zero
direct medical cost associated with their
provision; and
• Not Part A- or B-covered benefits.
This guidance was based on concerns
that competitive pressures were leading
some MA organizations to spend
Medicare rebate dollars (MA
organizations with ‘‘bid’’ amounts for
covering A and B services below the A
and B ‘‘benchmark’’ amount for their
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county may use a percentage of the
difference to offer additional benefits)
on items that were more focused on
providing marketing and enrollment
incentives than on delivering quality,
cost effective health care. We also were
concerned that MA organizations could
attempt to offer supplemental benefits
that discriminate against certain
enrollees and thereby violate the antidiscrimination prohibition in section
1852(a)(3) of the Act.
While these concerns still prevail, we
believe that allowing certain SNPs
greater flexibility in offering
supplemental benefits beginning
contract year 2013 would advance our
overall goal of better integrating care for
dual eligible beneficiaries. In addition,
by limiting benefit flexibilities to those
plans that are qualified to participate in
this initiative, we reduce the likelihood
that States could shift costs to the
Medicare program by cutting Medicaid
services and benefits from their State
Medicaid plans.
We propose limiting the flexibility
that would be offered under this
proposed rule to FIDE SNPs. Because
FIDE SNPs are required to offer LTC
supports and services, we believe that
an approach that limits benefits
flexibility to FIDE SNPs, as opposed to
all D–SNP types, would be more
consistent with the objective of keeping
beneficiaries at risk of
institutionalization in their homes,
preventing health status decline that
triggers additional utilization of health
services, and lowering costs for the
Medicaid and Medicare programs. We
request comment on whether extending
supplemental benefit flexibilities under
our proposed § 422.102(e) to eligible
SNPs that are SNP types other than
FIDE SNPs could measurably reduce
unnecessary utilization and improve
beneficiary outcomes in an equivalent
manner.
We are also proposing to further limit
the benefit flexibility under this
proposed rule to those qualified SNPs
that serve only full-benefit dual eligible
beneficiaries. We believe that dual
eligible beneficiaries who receive full
State Medicaid benefits would have the
most to gain from fully-integrated
Medicare-Medicaid plan benefit
offerings that include additional
Medicare supplemental benefits.
Furthermore, in circumstances where a
State reduces coverage of a Medicaid
benefit, we believe that the ability to
offer additional Medicare supplemental
benefits to full-benefit dual eligible
enrollees is particularly critical in order
to ensure continuity of care.
We are particularly interested in
assessing whether certain supplemental
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benefits could prevent health status
decline in the dual eligible population
and reduce the quantity and cost of
future health care needs. Examples of
benefits that could be offered under this
proposed rule would include—
• Personal care services in the home;
• Non-skilled nursing activities in the
home;
• Custodial care; and
• In-home food delivery for
vulnerable beneficiaries. (We note that
our current guidance on supplemental
benefits permits in-home food delivery
on a limited basis—that is, for a limited
duration and only in certain
circumstances.)
We would review each qualified
SNP’s proposed supplemental benefit
offerings for conformance to the SNP’s
model of care (MOC), and we would
approve additional supplemental
benefit offerings for these qualified
SNPs as we deem necessary.
We request comment on what specific
categories and types of supplemental
benefits we should consider for the
purposes of extending benefits
flexibility to qualified FIDE SNPs
participating in this initiative, as well as
on the circumstances under which plans
should be permitted to offer these
additional supplemental benefits. We
also request comment on additional
restrictions that should govern plans’
ability to offer these additional benefits,
and how we might be able to expand the
scope of approved supplemental
benefits in a manner that allows plans
to serve their dual eligible enrollees
effectively and efficiently.
We also recognize that the services,
Medicare Part C premium coverage, and
out-of-pocket (OOP) cost-sharing
benefits that dual eligible beneficiaries
receive vary according to their Medicaid
eligibility category and the State where
they reside. We request comments on
ways to minimize this proposed
provision’s cost impact on dual eligible
beneficiaries, while ensuring that States,
SNPs, and providers can feasibly
provide additional supplemental
benefits to a full benefit dual eligible
population.
In order to implement this proposal,
we propose amending § 422.102 to add
a new paragraph (e) specifying that,
subject to CMS approval, and as
specified annually by CMS, certain FIDE
SNPs may offer additional supplemental
benefits beyond those other MA plans
may offer where CMS finds that the
offering of such benefits could better
integrate care for the dual eligible
population. All such benefits would be
consistent with the rules for
supplemental benefits under Part 422,
including § 422.2, § 422.100(c)(1), and
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§ 422.102. Assuming that this proposal
is finalized, we would issue guidance in
our annual Call Letter and in Chapter 4
of the Medicare Managed Care
Manual—to provide guidance on the
applicability of this provision, as well as
examples of the specific additional
supplemental benefits flexibilities that
could be afforded under this initiative.
We solicit comments on this approach.
3. Application of the Medicare HospitalAcquired Conditions and Present on
Admission Indicator Policy to MA
Organizations (§ 422.504)
We propose to require by regulation
that MA organizations provide in their
contracts with hospitals that they will
reduce payments for Part A hospital
services for serious events that could be
prevented through evidence-based
guidelines, in accordance with the
hospital-acquired conditions (HACs)
and present on admission indicator
(POA) policy that is currently required
for hospitals paid under the Original
Medicare Acute Care Hospital Inpatient
Prospective Payment System (IPPS). We
believe this proposed change is
necessary to bring MA requirements in
line with current HAC–POA policy in
the fee-for-service Medicare program, as
well as—in the near future—to the
Medicaid program.
Section 5001(c) of the Deficit
Reduction Act of 2005 (DRA) added
section 1886(d)(4)(D) of the Act to
require a quality adjustment in
Medicare Severity Diagnosis Related
Group (MS–DRG) payments for certain
hospital-acquired conditions. We have
titled the provision ‘‘Hospital-Acquired
Conditions and Present on Admission
Indicator Reporting’’ (HAC & POA). For
discharges occurring on or after October
1, 2008, IPPS hospitals do not receive
the higher payment for cases when one
of the selected conditions is acquired
during hospitalization (that is, was not
present on admission). The case is paid
as though the secondary diagnosis is not
present. We periodically revise the list
of conditions, in consultation with the
Centers for Disease Control (CDC), in
accordance with the Act. There are
currently 10 HAC categories, including
conditions such as air embolism, blood
incompatibility, various types of falls
and trauma, and certain types of
surgical site infections. The FY 2012
IPPS final rule (76 FR 51476) contains
a full discussion of the current HAC–
POA policy as well as final changes for
FY 2012. The final policy includes the
addition of several new ICD–9–CM
diagnosis codes to current HAC
categories, and a revision of one
subcategory title from ‘‘Electric Shock’’
to ‘‘Other Injuries.’’ In addition, section
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II.F.3. of the FY 2012 IPPS final rule
includes updates and findings from the
Research Triangle Institute,
International (RTI) evaluation on CMS’
Hospital-Acquired Conditions and
Present on Admission Indicator. This is
an intra-agency project with funding
and technical support coming from
CMS, OPHS, AHRQ, and CDC. The RTI
evaluation includes the impact of the
Hospital-Acquired Condition-Present on
Admission (HAC–POA) provisions on
the changes in the incidence of selected
conditions, effects on Medicare
payments, impacts on coding accuracy,
unintended consequences, and infection
and event rates. The evaluation will also
examine the implementation of the
program and evaluate additional
conditions for future selection. (For a
complete discussion of the current
HAC–POA policy, changes to the HAC–
POA policy for FY 2012, and current
RTI report see the FY 2012 IPPS final
rule (August 18, 2011 (76 FR 51504
through 51522).)
Additionally, section
1886(d)(4)(D)(iii) of the Act requires that
hospitals, effective with discharges
occurring on or after October 1, 2007,
submit information on Medicare claims
specifying whether diagnoses were
POA. Collection of POA indicator data
is necessary to identify which
conditions were acquired during
hospitalization for the HAC payment
provision as well as for broader public
health uses of Medicare data. We have
implemented a payment policy for the
IPPS to pay the CC/MCC MS–DRGs for
those HACs with POA codes indicating
that the diagnosis was either present on
admission or clinically undetermined if
the secondary diagnosis was present on
admission. We will not pay the
complication/comorbidity and major
complication/comorbidity (CC/MCC)
MS–DRGs for those HACs coded with
POA codes indicating that the
secondary diagnosis was not present on
admission or that it was unknown if the
secondary diagnosis was present on
admission (73 FR 48486 and 48487,
August 19, 2008).
The HAC and POA web page at
https://www.cms.gov/HospitalAcqCond
provides further information. In
addition, specific instructions for
providers on how to select the correct
POA indicator for each diagnosis code
were included in the ICD–9–CM Official
Guidelines for Coding and Reporting,
available on the CDC Web site at:
https://www.cdc.gov/nchs/data/icd9/
icdguide10.pdf. Additional information
regarding POA indicator reporting and
original Medicare application of the
POA reporting options is available on
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63049
the CMS Web site at: https://
www.cms.gov/HospitalAcqCond/.
Looking toward the future of
Medicare and Medicaid, Congress set
forth in the Affordable Care Act
requirements to further Medicare’s
development of value-based purchasing
programs (VBP), health care provider
quality reporting, and expansion of the
HAC program to encourage further
incentives to improve quality and
affordability of care and increase public
transparency. Section 3008(b) of the
Affordable Care Act requires the
Secretary to undertake a study and
report to Congress by January 1, 2012 on
extending HAC–POA payment policy
for IPPS hospitals to other facilities
providing medical care to Medicare
beneficiaries, such as hospital
outpatient departments, non-IPPS
hospitals, skilled nursing facilities, and
others.
In addition, section 3008(a) of the
Affordable Care Act requires us to
implement for the IPPS, a rate-based
payment policy to reduce payments to
hospitals in the lowest quartile of
performance on risk-adjusted quality
measures HACs, effective beginning FY
2015. The amount of payment will be 99
percent of the amount of payment that
would otherwise apply to such
discharges. This section also requires us
to make information available to the
public regarding HACs of each
applicable hospital on the Hospital
Compare Internet website.
Finally, section 2702 of the Affordable
Care Act requires the Secretary to
identify current State practices that
prohibit payment for HACs and
incorporate the practices identified, or
elements of such practices, which the
Secretary determines appropriate for
application to the Medicaid program in
regulations. The new regulations will
prohibit payments to States under
section 1903 of the Act for any amounts
expended for providing medical
assistance for health care-acquired
conditions specified in the regulations.
In addition, section 2702 of the
Affordable Care Act requires the
Secretary to apply to State plans (or
waivers) under title XIX of the Act the
regulations promulgated pursuant to
section 1886(d)(4)(D) of the Act relating
to the HAC–POA payment policy, as
appropriate for the Medicaid program.
Final regulations implementing these
requirements were published in the
June 6, 2011 Federal Register (76 FR
32816). The final rule was effective July
1, 2011 but gives States the option to
implement between July 1, 2011 and
July 1, 2012.
It is important to us to continue to
align these incentives between the fee-
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for-service and MA programs and, as
noted above, with the Medicaid
program. Section 1856(b)(1) of the Act
authorizes the Secretary to establish MA
standards by regulation. In addition,
section 1857(e)(1) of the Act authorizes
the Secretary to impose additional terms
and conditions found necessary and
appropriate. Based on this general
authority in the Act, we propose to
require MA organizations to implement
policies and procedures to reduce
reimbursements to contracted hospitals
for Part A inpatient hospital services for
serious events that could be prevented
through evidence-based guidelines, in
accordance with the HAC–POA policy
that is required for hospitals paid under
the IPPS. Consistent with practice under
the IPPS, MAOs should not reimburse
hospitals the higher payment for cases
when one of the selected conditions is
acquired during hospitalization (that is,
was not POA). Any such case would be
paid as though the secondary diagnosis
is not present. We note that MA
organizations are already required to
pay non-contract provider hospitals the
amount that they would receive for
services under Original Medicare,
including any applicable reductions for
HACs. This requirement is outlined in
the MA Payment Guide for out of
Network Payments, available at https://
www.cms.gov/MedicareAdvtgSpec
RateStats/downloads/oonpayments.pdf.
The HAC–POA policy promotes
increased quality, efficiency of care, and
incentives for hospitals to eliminate
medical errors and reduce Medicare
expenditures for poor quality or
unnecessary care. It is one of several
VBP tools the agency uses; others
include measuring performance, using
payment incentives, publicly reporting
performance results, applying national
and local coverage policy decisions, and
enforcing conditions of participation.
We believe that with robust input and
participation of MA organizations and
other stakeholders, we can achieve these
goals for efficiency and quality in the
MA program while implementing the
policies in a way that takes into account
the varying models, access, and
payment features of the MA program.
We understand that MA organizations
may pay hospitals on a capitated basis
or through other payment systems that
may not be similar to that of the IPPS
and also may not currently incorporate
the POA indicator policy. We want to
allow flexibility for MA organizations to
determine the best methodology within
their contract structures with hospitals
for reporting these serious conditions
and events, determining whether the
condition was present on admission or
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caused during the inpatient hospital
stay, and paying hospitals
appropriately. However, we also believe
that plans already have some
operational systems in place to facilitate
implementation of the requirement. For
example, MA organizations must
already pay noncontract providers the
amount that they would receive under
Original Medicare, which includes
reducing the payment for HACs that
were not present on admission. Also,
beginning January 3, 2012, MA
organizations will be required to collect
and submit encounter data for each item
and service provided to MA enrollees in
accordance with risk adjustment
policies required in § 422.310(d) (Form
Number: CMS–10340 (OMB#: 0938–
New). We would collect the encounter
data electronically from Medicare
Advantage Organizations via the Health
Insurance Portability and
Accountability Act (HIPAA) compliant
standard Health Care Claims
transactions for professional data and
institutional data. The HIPAA 5010
claim form used for this transaction is
the same claim form that hospital
providers use to submit claims under
Original Medicare, including specific
fields for POA information. In addition,
the current MA plan rating system
includes measures related to some of
these serious events. Therefore, we
believe that these distinct policies can
be aligned to produce all of the intended
results, including net savings to MA
organizations and Medicare by avoiding
unnecessary costs in the delivery of
care.
We propose to amend § 422.504(i)(3)
by adding a new paragraph (iv) to
require that, beginning in CY 2013, MA
organizations provide in their contracts
with hospitals that payment will not be
made to contracting hospitals in the
case of serious preventable events and
hospital-acquired conditions in
accordance with section 1886(d)(4)(D) of
the Act and all applicable Medicare
policies. We solicit comments and
recommendations on what other issues
to consider in finalizing our proposal to
apply the current fee-for-service HAC–
POA policy to MA plans.
4. Clarifying Coverage of Durable
Medical Equipment (§ 422.100 and
§ 422.111)
Medicare beneficiaries not enrolled in
an MA plan may obtain their Medicarecovered durable medical equipment
(DME) items and supplies from any
Medicare-certified DME supplier. If a
DME supplier does not stock a
particular manufacturer’s product or
brand of DME, the beneficiary may
obtain that product or brand from
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another supplier or request his or her
supplier of choice order the particular
product or brand he or she uses or
which his or her physician has ordered.
While sections 1852(a)(1)(A) and (B) of
the Act require MA plans to provide
Parts A and B-covered items and
services (with the exception of hospice
care), including DME items and
supplies, network-based MA plans may
maintain networks of appropriate
providers sufficient to provide adequate
access to covered services for their
members (see § 422.112(a)(1) and
§ 422.114(a)). In other words, networkbased MA plans may limit access to
Medicare-covered items and services via
networks, as long as those networks
provide adequate enrollee access to
services consistent with standards
established by CMS.
Medicare Advantage organizations
and other stakeholders have asked for
our guidance with respect to limitations
DME coverage that result from MA
organizations limiting enrollees to
specified DME providers, or to specified
DME manufacturers. Specifically, some
MA organizations have asked us
whether they could offer lower costsharing for ‘‘preferred’’ DME products or
brands versus ‘‘non-preferred’’ DME
products or brands, as well as whether
they could limit coverage of certain
DME items and supplies to specific
manufacturers’ products or brands. In
guidance in section 50.1 of Chapter 4 of
the Medicare Managed Care Manual,
‘‘Benefits and Beneficiary Protections’’
(see https://www.cms.gov/manuals/
downloads/mc86c04.pdf), we specified
that, beginning in CY 2011, plans could
establish several cost-sharing levels
(that is, tiers) for DME items, supplies,
and Part B drugs, provided that: (1) The
highest cost sharing tier is at or below
the relevant cost sharing threshold
established by CMS for DME and Part B
drugs; and (2) plans ensure access to all
products through the network of
providers. However, we have not
specified in regulation or guidance
whether network-based MA plans may,
within a specified category of DME,
limit coverage to specific manufacturers’
DME products or brands. While we do
not collect information on this type of
coverage limitation in our plan benefit
package (PBP) software, we are aware
anecdotally that some MA organizations
employ this practice to some extent. For
example, one MA organization limits
coverage of diabetic test strips and
monitors to those manufactured by
certain entities.
Although some organizations thus are
already limiting DME to specific brands,
we believe that our proposal would help
ensure that MA organizations maximize
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program efficiencies by driving enrollee
utilization to specific DME products for
which MA organizations may have
negotiated bulk discounts. In addition,
given that MA organizations are
currently employing DME product or
brand coverage limitations, we believe it
is important to establish a regulatory
framework for ensuring appropriate and
adequate MA enrollee access to DME
items and supplies.
Therefore, and under our authority in
section 1856(b)(1) of the Act to establish
MA standards by regulation and in
section 1857(e)(1) of the Act to impose
additional terms and conditions found
necessary and appropriate, we propose
to add a new paragraph (l) to § 422.100
that clarifies that MA organizations may
limit coverage to specific manufacturers
or brands, and imposes conditions on
doing so. Specifically, in order to ensure
that MA enrollees have adequate access
to their DME benefits, proposed
§ 422.100(l) would establish
requirements with respect to access and
medical necessity, require transition
periods, address mid-year changes to
preferred DME items and supplies,
appeals, and require disclosure of DME
coverage limitations to enrollees.
We recognize that this is a complex
issue. Therefore, we solicit comments
on all aspects of these proposed changes
and whether additional or strengthened
beneficiary protections would be
warranted under this policy. If we
finalize this proposal, we intend to
monitor and assess plans’ compliance
with the new requirements—including
through review of beneficiary
complaints and grievances, and appeals
data—to ensure MA enrollees have
appropriate and adequate access to their
Part B-covered DME items and supplies.
a. Access to Preferred DME Items and
Supplies
We propose requiring that MA
organizations wishing to limit coverage
within a specific category of DME to
specific manufacturers’ products or
brands take necessary steps to ensure
that enrollees have access to all
preferred manufacturer products
through their contracts with network
DME suppliers. We recognize that not
all DME suppliers in a network will
always stock all preferred products or
brands of DME items and supplies;
however, we would expect contracted
suppliers to make arrangements to
special order products or brands of any
preferred DME item or supply, as well
as any non-preferred DME item or
supply that is determined to be
medically necessary. We would reflect
this change in proposed
§ 422.100(l)(2)(i).
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b. Medical Necessity Requirements for
DME Items and Supplies
In accordance with § 422.112(a)(6)(ii),
MA organizations must have established
policies and procedures that allow for
individual medical necessity
organization determinations if there is a
question about whether a service or item
should be covered. MA organizations
making medical necessity
determinations must have a medical
director, who is a physician, ensuring
the accuracy of organization
determinations and reconsiderations as
per § 422.562(a)(4). Within Subpart M, if
the MA organization’s determination is
contested, reconsideration by the
organization, and an independent
review entity of the determination are
possible under § 422.578 and § 422.592,
with administrative law judge and
Medicare Appeal Council hearings/
reviews of unfavorable reconsiderations
possible under § 422.600, and § 422.608.
Therefore, we propose requiring MA
organizations—to the extent that they
elect to limit coverage of DME items and
supplies to specific manufacturers’
products or brands—to provide coverage
of any medically necessary DME item
and supply, including DME items and
supplies made by non-preferred
manufacturers. We would reflect this
change in proposed § 422.100(l)(2)(ii).
c. Transition Period for Coverage of
Non-Preferred DME Items and Supplies
As provided under § 423.120(b)(3),
MA organizations offering an MA–PD
plan and Part D sponsors are required to
provide for an appropriate transition
process for enrollees transitioning from
other coverage who are currently
prescribed Part D drugs not on the new
Part D plan’s formulary. The purpose of
this transition period is to transition the
new enrollee to a therapeutically
substitutable formulary drug or,
alternatively, to obtain a formulary
exception whereby the Part D plan
would continue to cover the nonformulary drug for the remainder of the
plan year for reasons of medical
necessity.
Similarly, we propose requiring MA
organizations to continue to ensure
access to non-preferred brands of DME
supplies—such as ostomy bags and
diabetic test strips—for a transition
period comprising the first 90 days of
coverage under the plan, as specified by
CMS. Similar to the Part D transition
process, we expect that MA
organizations would provide one refill
during the 90-day transition period. We
also propose requiring that, during this
90-day transition period, MA
organizations cover repairs to non-
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preferred DME items, such as
wheelchairs, feeding pumps, and
hospital beds. That is, an MA
organization would be required to
service (including providing a loaner)
DME items owned or rented by an
enrollee needing repairs during the 90day transition period. If, after the
transition period ends such items
needed repair, the plan could choose to
pay for the repairs or instead provide its
preferred brand of the item. We propose
to add § 422.100(l)(2)(iii)(A) and
§ 422.100(l)(2)(iii) (B) to reflect this
proposed requirement.
We solicit comments on the features
of this transition process requirement,
including whether such a transition
period—modeled generally on that
provided under the Part D program for
non-formulary Part D drugs—is
appropriate for DME items and supplies
and whether there are additional
transition requirements we should
consider.
d. Midyear Changes to Preferred DME
Items and Supplies
We propose prohibiting MA
organizations from making ‘‘negative
changes,’’ that is, eliminating preferred
coverage of a Medicare-covered item of
DME, midyear. Plans may add to their
preferred DME products list—for
example, to add new manufacturers’
products to their coverage lists, to
provide substitute DME items and
supplies for products that are no longer
available, or to reflect national and local
coverage determinations for new DME
items and supplies. We believe this
proposed policy—allowing positive
changes and prohibiting negative
changes—strikes the appropriate
balance between allowing flexibility for
plans to designate preferred products,
while ensuring that changes to preferred
DME products are not disruptive to
enrollees. We propose to reflect this
change in proposed § 422.100(l)(2)(iv).
e. Appeals
While we considered establishing an
exceptions process for DME under this
proposed policy similar to the one
established for non-formulary Part D
drugs under § 423.578(b), we do not
believe that adding what is essentially
an additional step to the appeals process
under Subpart M of Part 422 is
necessary for MA organization
determinations concerning coverage of
specific DME brands. The Part D
exceptions process was conceived as an
initial means of obtaining coverage of
non-formulary Part D drugs for medical
necessity reasons. Once that process is
exhausted, the enrollee may appeal the
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decision under the rules of Subpart M
of Part 423.
There is evidence that beneficiary
appeals of DME coverage decisions
based on products or brands are not a
significant problem in the MA program.
For example, since the inception of the
IRE appeals process in 2006, there have
been 12,500 appeals related to
wheelchairs. Of these appeals, only 7
have concerned brand-specific issues.
Because we have no evidence of
enrollee grievances or appeals of brandspecific DME coverage issues, we
believe that the current organization
determination and appeals process in
subpart M of part 422 is sufficient to
ensure that MA enrollees have access to
specific brands of DME items when
medically necessary. We propose to
clarify at § 422.100(l)(2)(v) that plan
non-coverage of a particular
manufacturer’s product or brand of a
DME constitutes an organization
determination under § 422.566. We
solicit comments on whether the
organization determination and appeals
process currently required in subpart M
of part 422 affords MA plan enrollees
with sufficient protections for ensuring
appropriate and adequate access to
Medicare-covered DME in MA plans
that choose to limit coverage, within a
specified category of DME, to specific
manufacturers’ products or brands. We
would appreciate comments with
respect to any additional protections
that we should consider if we finalize
this proposal.
f. Disclosure of DME Coverage
Limitations
As provided under § 422.111(b)(2),
MA plans must notify enrollees—at the
time of enrollment and annually
thereafter—of the benefits offered under
the plan, including applicable
conditions and limitations, premiums,
and cost sharing, and any other
conditions associated with receipt of
benefits. This requirement has been
operationalized as the annual notice of
change/evidence of coverage (ANOC/
EOC). We would require, under
proposed § 422.100(l)(2)(vi), that MA
plans that choose to limit DME coverage
to preferred products or brands, be
required to include, in the description
of benefits required under
§ 422.111(b)(2) and under
§ 422.111(h)(2)—which requires the
provision of specific information via a
toll-free customer service call center,
and Internet website, and in writing
upon request—disclosures about these
DME coverage restrictions and their
rights to the Part C appeals process for
requests to obtain medically necessary,
non-preferred DME products or brands.
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5. Broker and Agent Requirements
(§ 422.2274 and § 423.2274)
Regulations setting forth agent and
broker compensation promulgated in
our November 10, 2008 interim final
rule with comment (73 FR 67406
through 67414) required MA
organizations and Part D plan sponsors
(‘‘plan sponsors’’) to submit historical
agent/broker compensation data from
years 2006 and 2007. In addition, we
requested that plan sponsors submit
information in 2008 that would indicate
their 2009 compensation schedules for
agents selling Medicare health plans on
their behalf. CMS conducted an analysis
of the historical compensation
information submitted by plan sponsors
and published fair market value cut-off
(FMV) amounts during the Spring of
2009. Later that year, plan sponsors
were given the opportunity to adjust
their compensation amounts to any
amount at or below the FMV. These
adjusted 2009 amounts became the
baseline amount for compensation
adjustments in future years. Subsequent
to our initial compensation guidance,
plan sponsors have expressed concerns
about the validity of continuing to base
future compensation on amounts which
were selected in 2009 and based on data
from 2006 and 2007. We have further
heard that the current economic
conditions have drastically changed
local markets such that, even as
adjusted, the 2009 compensation
amounts do not accurately reflect the
current market rates. Lastly, we have
been advised by plan sponsors that have
been in the market since 2009 that they
are at a competitive disadvantage as
compared to newly entering plans as
they may set compensation rates at
current-day FMV rates and are not tied
to 2009 compensation amounts.
Therefore, we are proposing to modify
paragraph (a), and add a new paragraph
(f), to § 422.2274 and § 423.2274 to
allow plan sponsors to annually select
their compensation amounts to reflect
rates which are at or below FMV
annually established by CMS. Under
these proposed changes, plan sponsors
would also be required to report their
intentions to use independent agents
and/or brokers in the upcoming plan
year, along with the amounts that they
will be paid, if applicable.
6. Establishment and Application of
Daily Cost-Sharing Rate as Part of Drug
Utilization Management and Fraud,
Abuse and Waste Control Program
(§ 423.104 and § 423.153)
Pursuant to our authority under
section 1860D–4(c) of the Act, which
requires PDP sponsors to have cost-
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effective drug utilization management
and a fraud, abuse, and waste control
program in place, we are proposing that
Medicare Part D sponsors be required to
provide their enrollees access to a daily
prorated cost-sharing rate for
prescriptions dispensed by a network
pharmacy for less than a 30 days supply
of certain covered Part D drugs that are
for an initial fill of a new medication,
are intended to allow the enrollee to
synchronize refill dates of multiple
drugs, or are dispensed in accordance
with § 423.154 (which sets forth the
requirements placed on Part D sponsors
with respect to dispensing of
prescription drugs in long-term care
facilities effective January 1, 2013). If
finalized as proposed, these provisions
would be codified at § 423.104 and
§ 423.153.
Current prescribing patterns and
pharmacy benefit management (PBM)
payment practices result in most
prescriptions for chronic medications
being written by providers, and
dispensed by retail pharmacies, in 30or-more day quantities. When the full
amount dispensed is not utilized by the
enrollee due to adverse medication
reaction or interaction, or due to failure
of enrollee therapeutic adherence
because of cost, inconvenience, death,
or other reason for discontinuation, it
comes at an unnecessary and wasteful
cost to the enrollee, the Medicare
program, Part D sponsors, and the
environment.
We believe that if Part D enrollees and
their prescribers had the option of
shorter days supplies of initial fills of
new prescriptions without the
disincentive of the enrollee having to
pay a full month’s (or longer)
copayment or coinsurance, a significant
portion of the current costs of
discontinued chronic medications could
be avoided. In addition, the avoidance
of unused drugs would contribute to
diminishing the environmental issues 7
caused by disposal of unused
medications, and opportunities for
criminal activities and substance abuse 8
caused by diversion of unused
7 See https://www.epa.gov/ppcp for information
about Pharmaceuticals and Personal Care Products
as Pollutants (PPCPs) on the website of the U.S.
Environmental Protection Agency.
8 See Office of National Drug Control Policy, 2008
‘‘Prescription for Danger’’, January 24, 2008, and
2009 National Drug Survey on Drug Use and Health
(NSDUH), September 2010, for more information on
the growing problem of nonmedical use of
prescription drugs in the United States, particularly
among teenagers. See also https://
www.deadiversion.usdoj.gov/ for more
information from the Drug Enforcement
Administration about the problems associated with
drug abuse resulting from legitimately made
controlled substances being diverted from their
lawful purpose into illicit drug traffic.
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medications, all of which are growing
concerns in the United States.
Currently, Part D enrollees’ costsharing is the same whether they receive
a 7-, 14-, or 30-day supply of a first fill
of a new medication. A daily costsharing rate requirement imposed on
Part D sponsors would encourage
enrollees and their prescribers to limit
day’s supplies when appropriate by also
reducing the enrollees’ out-of-pocket
costs. More specifically, under our
proposal, Part D sponsors would be
required to establish and apply a daily
cost-sharing rate, such that an enrollee
seeking a trial fill of a prescription for
a chronic medication, for example,
would pay only a prorated portion of
the established amount under his or her
Part D benefit plan that corresponds to
the actual amount of days supply that
was prescribed and is dispensed,
whether it be a 7- or 14-day supply, or
some other quantity less than 30 days,
which would be at the discretion of the
prescriber. Thus, although our proposed
daily cost-sharing rate requirement
would be mandatory for Part D
sponsors, actually taking advantage of it
would be voluntary for enrollees and
their prescribers. Neither sponsors nor
the Federal government would
determine whether an enrollee should
receive a trial fill. Rather, the decision
to try a new medication through a trial
fill would be made by the enrollee and
his or her prescriber.
Through the establishment and
application of a daily cost-sharing rate
requirement on Part D sponsors, we
believe an enrollee would be
incentivized to inquire of his or her
prescriber whether a trial fill would be
appropriate when first prescribed a
medication. We further believe enrollees
would be most likely to inquire about a
trial fill when faced with higher cost
sharing for a new medication, due to the
expense of the drug, such as when
purchasing a drug in the deductible
phase of the benefit or in the coverage
gap. We further believe prescribers
would be most likely to concur as to the
appropriateness of a trial fill when the
prescription is for an initial fill of a drug
that has significant side effects and/or is
frequently poorly tolerated. In such a
case, the prescriber could write either
one prescription for the trial fill for a
period at the prescriber’s discretion, or
two prescriptions (for example, one for
the trial fill and a second prescription
for a 30 or 90 day supply—the latter
prescription would be utilized if the
enrollee and the prescriber agreed the
drug therapy should be continued after
the trial period). If the medication were
discontinued after use of a trial fill, the
enrollee, as well as the sponsor, would
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have avoided the net costs associated
with the unused quantity that would be
dispensed under current standard
practices.
Because the prescriptions could be
written during one office visit, or could
be refilled by the prescriber directly
with the enrollee’s pharmacy after a
medication trial period, additional visits
to the prescriber would not necessarily
be required and would not need to
cause a burden to the enrollee. We
assume the two prescriptions option
would be most convenient for the
enrollee and the prescriber (when
appropriate), but seek specific comment
on this assumption. If an enrollee would
have difficulty returning to the
pharmacy, presumably he or she would
not inquire about a trial fill.
Furthermore, since prescribers would
determine whether or not the
medication being prescribed should or
could be dispensed in a trial fill, we
would not expect our proposal to have
any adverse effects on enrollees’ health.
Indeed, while we envision, as
described above, enrollees primarily
requesting less than a full month’s
supply when prescribed a drug for the
first time that is known to have
significant side effects and to be
frequently poorly tolerated, we are not
limiting the requirement for Part D
sponsors to establish and apply a daily
cost-sharing rate to such medications.
Rather, we have identified an additional
benefit which is the ability to allow for
synchronization of prescriptions. More
specifically, if an enrollee already takes
a prescription medication that is due for
a refill in 10 days, the prescriber could
write an initial prescription for a new
medication for a 10-day supply, so that
the enrollee could refill both
prescriptions on an ongoing basis in one
trip to the pharmacy (assuming the new
medication is continued) and perhaps
also achieve better medication
compliance. Similarly, enrollees who
currently take multiple medications that
refill on different dates could request
their prescribers to write prescriptions
for less than 30 days (each one likely for
a different days supply), but with 30day refills, for all but one of those
medications that is due for a refill, so
that the enrollee could refill all
prescriptions in one trip to the
pharmacy, and could refill all the
prescriptions for 30 days or more in one
trip to the pharmacy thereafter on an
ongoing a basis.
The ability to synchronize
medications should assist enrollees in
adhering to prescription treatment
regimens that involve multiple
medications, and we note that at least
one study supports this belief, and
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63053
suggests intervention targeted at
individuals who do not request refills of
all medications. In addition, we believe
the ability to synchronize medications
will be convenient for both those
enrollees who take advantage of it and
their prescribers by enabling fewer trips
to the pharmacy and fewer prescription
requests of prescribers from enrollees
through the ability to consolidate
pharmacy trips and prescriber office
visits and phone calls.
We do not expect long-term care
(LTC) enrollees to request trial fills to
synchronize medications, as this is not
our understanding of the LTC
environment with respect to
prescribing, and our April 2011 final
rule (76 FR 21432) requires 14 day or
less dispensing in LTC facilities
effective January 1, 2013. However, as
noted in that rule, we expected the LTC
dispensing requirements ‘‘would likely
lead to a change in copayment
methodology * * * [and] anticipate[d]
the implementation of particular
copayment methodologies will be
dependent on the billing and dispensing
methodologies used, and as a result
* * * copayment methodologies within
the same plan may vary depending on
the LTC facility where the beneficiary
resides. Copayment may be collected at
the first dispensing event in a month,
the last dispensing event in a month, or
prorated based on the number of days a
Part D drug was dispensed in a month.
However, due to the relatively small
copayments for low-income subsidy
(LIS) beneficiaries, copayments for LIS
beneficiaries should be billed with the
first or last dispensing event of the
month.’’ The current proposed
requirement on Part D sponsors to
establish and apply a daily cost-sharing
rate would supersede this quoted
guidance in the preamble of the April
2011 final rule. In other words, Part D
sponsors would be required to establish
and apply a prorated, uniform costsharing billing methodology for all their
enrollees, including those in LTC
facilities and those with LIS costsharing subsidies.
We recognize that establishing and
applying a daily cost-sharing rate to the
relatively small copayments for LIS
enrollees would cause such copayments
to be nominal. We seek specific
comments as to alternatives to
incentivize LIS enrollees to take
advantage of trials fills and synchronize
their medications when appropriate
other than through the establishment
and application of a daily cost-sharing
rate requirement.
Daily cost-sharing rates also may
permit pharmacies, as opposed to
prescribers, to facilitate synchronization
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of an enrollee’s medications upon his or
her request, and we seek specific
comment as to this possibility, as well
as to any issues we may need to address
to facilitate this possibility. For
instance, in order for sponsors to be able
to monitor the prevalence and
appropriateness of the dispensing of
prescriptions in shorter than 30 days
supply to ensure that a pharmacy does
not dispense a 30-day prescription in
stages in order to increase dispensing
fees, we urge the industry to develop
coding to be used by network
pharmacies to communicate to sponsors
whether a less than 30 day fill is to align
refill dates, or for that matter, is an
initial fill of a new medication, or in the
case of the LTC setting, is to
communicate the dispensing
methodology employed.
We believe that realized savings from
the daily cost-sharing rate requirement
may be partly offset by additional
dispensing fees, administrative and
programming costs, and additional
initial fills of more expensive drugs. We
assume additional dispensing fees
would result when a trial fill of a
medication is dispensed and the
enrollee returns to the pharmacy for the
remainder of the month’s supply (or
more) if the medication were successful,
or when an enrollee chooses to
synchronize medications. Thus, over a
year, there would be up to 13
dispensing events for a medication
continued after a trial fill as opposed to
up to 12. Part D sponsors may also incur
some costs to program their systems to
establish and apply a daily cost-sharing
rate to prescriptions dispensed to
enrollees with less than a 30-day
supply, as well as administrative costs
to administer the trial fill requirement
we propose here. Finally, we expect
some additional costs due to more
initial fills of brand drugs that enrollees
previously declined to try due to the
cost of a full month’s supply when the
brand drugs are known for significant
side effects and/or to be frequently
poorly tolerated.
We considered proposing a
requirement similar to the Fifteen Day
Initial Script program introduced in
Maine in the summer of 2009. In this
program, specific medications that were
identified by the MaineCare program
with high side effect profiles, high
discontinuation rates, or frequent dose
adjustments, were phased in by class
and must be dispensed in a 15-day
initial script to ensure cost effectiveness
without wasting or discarding of
dispensed, but unused, medications. We
have learned through representatives of
the program that MaineCare has
achieved overall savings for two
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consecutive State fiscal years with
respect to both brand and generic drugs
through this program, despite the
additional dispensing fees. The
representatives have also reported that
there has been very good acceptance of
the program and very little confusion
upon implementation. While we
acknowledge the savings benefits of the
mandatory MaineCare approach, we
believe that leaving the decision to
obtain less than a month’s supply of a
prescription with the enrollee and his or
her prescriber and pharmacist may be a
better approach in light of the voluntary
nature of the Medicare Part D program.
A previous review of 2009 PDE data
by CMS suggested that just under 32
percent of approximately 78.6 million
first fills for maintenance medications
are not refilled by Medicare Part D
enrollees. Maintenance medications are
used for diseases when the duration of
therapy can reasonably be expected to
exceed one year, and we assume for
purposes of estimating savings to the
Part D program that the lack of refills
indicates the prescribed medications
were discontinued. The estimated total
cost of these discontinued medications
was approximately $1.6 billion (70
percent for brands and 30 percent for
generics). However, this review did not
distinguish between community and
institutional settings. Thus, to estimate
the costs of discontinued medications in
community settings only, since the daily
cost-sharing rate requirement proposed
here does not further change the
dispensing requirements in the longterm care setting effective January 1,
2013, we reduced the total costs by
approximately 13 percent in accordance
with CMS data on gross drug costs in
the Part D program in 2009 in the
community and institutional settings to
remove a proportion representing longterm care expenses. Consequently, the
adjusted total estimated cost of 2009
community-based discontinued first
fills of chronic medications was
estimated at roughly $1.4 billion.
Potential savings of a daily costsharing requirement on Part D sponsors
would come from a reduction of these
costs which would be offset by some
additional dispensing fees. In order to
estimate the savings, we must make
assumptions about how many first fills
will be dispensed in quantities of less
than a 30-day supply, and what the
average quantity of such first fills will
be. It should be pointed out that these
assumptions are highly uncertain,
because it is very difficult to predict
enrollees’ behavioral response. Having
noted this caveat, we assume 20 percent
of first fills in 2013 will be for a supply
of less than 30 days, trending to 50
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percent by 2018, and that the average of
such fills will be for a 15-day supply.
Assuming 32 percent of these first fills
are discontinued, we estimate the
potential savings to the Part D program
to be $180 million in 2013 alone, and
over $2.5 billion by 2018.
We recognize that certain medications
are universally accepted in the health
care community as not suitable to be
dispensed in amounts less than a 30-day
supply (for example, lotions and other
drugs not in solid form). Therefore, we
propose to further limit the requirement
that sponsors establish and apply a
daily cost-sharing rate to drugs similar
to those to which to the Medicare Part
D long-term care dispensing
requirements apply. That is, the daily
cost-sharing rate requirement would
apply to solid oral doses of drugs,
except antibiotics or drugs which are
dispensed in their original containers as
indicated in the Food and Drug
Administration Prescribing Information
or are customarily dispensed in their
original packaging to assist patients
with compliance (for example, steroid
dose packs). However, unlike the longterm care dispensing requirements
which apply only to brand drugs, we are
proposing here that the daily costsharing rate requirement would apply to
both brand and generic drugs.
We also understand that, while there
may be additional waste generated by
multiple fills when medications are
continued or synchronized (for
example, more plastic bottles and paper
inserts, additional trips to pharmacies),
the harmful effects on the environment
from unused drugs, particularly the
biological implications, likely have a
much greater impact on the
environment than additional
recyclables. We seek specific comments
as to this assumption.
In light of the foregoing, we propose
to define ‘‘daily cost-sharing rate’’ in
§ 423.100. ‘‘Daily cost-sharing rate’’
would mean, as applicable, the
established monthly—
• Copayment under the enrollee’s
Part D plan divided by 30 or 31 and
rounded to the nearest lower dollar
amount or to another amount but in no
event to an amount which would
require the enrollee to pay more for a
month’s supply of the prescription than
the enrollee would have paid if a
month’s supply had been dispensed; or
• Coinsurance rate under the
enrollee’s Part D plan applied to the
ingredient cost of the prescription for a
month’s supply divided by 30 or 31. We
solicit comment on whether we should
establish specific rounding rules so that
sponsors are consistently calculating
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daily cost-sharing rates with respect to
enrollee and plan liabilities.
In addition, we would revise
§ 423.104 by adding a paragraph (i) to
state that a Part D sponsor is required
provide its enrollees access to a daily
cost-sharing rate in accordance with
§ 423.153(b)(4). Section 423.153(b)
currently requires a Part D sponsor to
establish a reasonable and appropriate
drug utilization management program.
We also propose to revise § 423.153(b)
by adding a new paragraph (4).
Paragraph (4)(i) would require a drug
utilization management program to
establish and apply a daily cost-sharing
rate to a prescription presented by an
enrollee at a network pharmacy for a
covered Part D generic or brand drug
that is dispensed for a supply of less
than 30 days, multiplied by the days
supply actually dispensed, plus any
dispensing fee in the case of
coinsurance. Paragraph (b)(4)(i)(A)
would limit the requirement to drugs
that are in the form of solid oral doses.
Paragraph (b)(4)(i)(B) would further
limit the requirement to a prescription
that is for an initial fill of a new
medication, is intended to allow the
enrollee to synchronize refill dates of
multiple drugs, or is dispensed in
accordance with § 423.154 (which sets
forth the requirements placed on Part D
sponsors with respect to dispensing of
prescription drugs in long-term care
facilities effective January 1, 2013).
Paragraph (b)(4)(ii) would state that the
requirements of (b)(4)(i) would not
apply to antibiotics or drugs dispensed
in their original container as indicated
in the Food and Drug Administration
Prescribing Information or are
customarily dispensed in their original
packaging to assist patients with
compliance.
E. Clarifying Program Requirements
We have worked with MA
organizations and Part D sponsors to
implement the Medicare Advantage and
Prescription Drug Benefit Programs
since the inception of these programs.
As part of this partnership, we have
implemented operational and/or policy
guidance via HPMS memoranda or
manual instruction to assist MA
organizations and Part D sponsors in
ensuring the proper and efficient
administration of the Part C and D
programs. We propose to codify some of
that guidance and provide other
definitive direction on policy issues in
order to address requests from
stakeholders. These proposals appear in
Table 5.
TABLE 5—PROVISIONS TO CLARIFY PROGRAM REQUIREMENTS
Part 417
Preamble section
Part 422
Part 423
Provision
Subpart
II.E.2 ......................
II.E.3 ......................
II.E.4 ......................
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II.E.5 ......................
II.E.6 ......................
II.E.7 ......................
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Technical Corrections to Enrollment Provisions.
Extending MA and
Part D Program
Disclosure Requirements to
Section 1876
Cost Contract
Plans.
Clarification of,
and Extension
to Local Preferred Provider
Plans, of Regional Preferred
Provider Organization Plan Single Deductible
Requirement.
Technical Change
to Private
Fee-For-Service
Plan Explanation of Benefits Requirements.
Application Requirements for
Special Needs
Plans.
Subpart
Section
Subpart
Subpart K ......
§ 417.422 .......
§ 417.432 .......
Subpart B ......
§ 422.60 .........
Subpart B ......
§ 423.56
Subpart K ......
§ 417.427 .......
N/A .................
N/A .................
N/A .................
N/A
N/A .................
N/A .................
Subpart C ......
§ 422.101 .......
N/A .................
N/A
N/A .................
N/A .................
Subpart E ......
§ 422.216 .......
N/A .................
N/A
N/A .................
N/A .................
Subpart K ......
§ 422.500,
§ 422.501,
§ 422.502.
N/A .................
N/A
Subpart N ......
II.E.1 ......................
Section
N/A .................
N/A
Subpart K ......
§ 423.505
Timeline for ReN/A .................
submitting Previously Denied
MA Applications.
Clarification of
N/A .................
Contract Requirements for
First Tier and
Downstream
Entities.
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N/A .................
Subpart K ......
§ 422.641,
§ 422.660.
§ 422.501 .......
N/A .................
Subpart K ......
§ 422.504 .......
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TABLE 5—PROVISIONS TO CLARIFY PROGRAM REQUIREMENTS—Continued
Part 417
Preamble section
Part 422
Part 423
Provision
Subpart
Section
Subpart
Section
Subpart
Section
II.E.8 ......................
Valid Prescriptions
N/A .................
N/A .................
N/A .................
N/A .................
Subpart C ......
II.E.9 ......................
Medication Therapy Management Comprehensive
Medication Reviews and
Beneficiaries in
LTC Settings.
Employer Group
Waiver Plans
Requirement to
Follow All Part
D Rules Not Explicitly Waived.
Access to Covered Part D
Drugs Through
Use of Standardized Technology and National Provider
Identifiers.
N/A .................
N/A .................
N/A .................
N/A .................
Subpart D ......
§ 423.100,
§ 423.104
§ 423.153
N/A .................
N/A .................
N/A .................
N/A .................
Subpart J .......
§ 423.458
N/A .................
N/A .................
N/A .................
N/A .................
Subpart C ......
§ 423.120
II.E.10 ....................
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II.E.11 ....................
1. Technical Corrections to Enrollment
Provisions (§ 417.422, § 417.432,
§ 422.60, and § 423.56)
In our April 15, 2011 final rule (76 FR
21442), we amended § 423.38(d) to
codify changes to the Annual
Coordinated Election Period (AEP)
mandated by the Affordable Care Act.
Specifically, section 3204 of the
Affordable Care Act changed the AEP to
October 15 through December 7 for 2011
and future years. In making this change,
we inadvertently neglected to revise a
reference to the former AEP timeframe
noted in § 423.56 (Procedures to
determine and document creditable
status of prescription drug coverage).
This section requires the disclosure of
creditable coverage to beneficiaries prior
to the start of the AEP and specifically
references the old date (that is,
November 15). To make this section
consistent with the statute, we are
proposing to amend § 423.56(f)(3) to
remove the outdated AEP reference.
In the April 2011 final rule (76 FR
21525), we also amended our
regulations at § 417.430 to permit CMS
approval of alternative enrollment
mechanisms for cost plans in addition
to paper forms, such as electronic
enrollment. In making this revision, we
unintentionally overlooked other
sections in this subpart that referenced
enrollment mechanisms for cost plans.
Specifically, § 417.422 (Eligibility to
enroll in an HMO or CMP) and
§ 417.432 (Conversion of enrollment)
specifically reference the requirement
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for a beneficiary signature on an
enrollment form. Because it was our
intent to broaden enrollment
mechanisms for cost plans to go beyond
paper enrollment forms, we believe we
should have revised the sections above
to remove requirements for signatures.
Therefore, we are proposing to revise
§ 417.422(d) and § 417.432(d) to remove
references to signatures and state that
individuals must complete an
application form or ‘‘another CMSapproved election mechanism’’ in order
to meet enrollment requirements.
In addition, we are proposing to
correct an outdated cross-reference at
§ 422.60(c) (Election process). This
paragraph currently references
marketing rules formerly located at
§ 422.80. These requirements were
moved to § 422.2262 (Review and
distribution of marketing materials) in
previous rulemaking.
2. Extending MA and Part D Program
Disclosure Requirements to Section
1876 Cost Contract Plans (§ 417.427)
In our April 2010 final rule (75 FR
19783 through 19785), we exercised our
authority under sections 1876(c)(3)(C)
and 1876(i)(3)(D) of the Act to extend
the MA marketing requirements to
section 1876 cost contract plans. Under
section 1876(c)(3)(C) of the Act, we may
regulate marketing of plans authorized
under section 1876 of the Act to ensure
that marketing material is not
misleading. Section 1876(i)(3)(D) of the
Act gives the Secretary the authority to
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impose ‘‘other terms and conditions’’
under contracts authorized by the
statute that the Secretary finds
‘‘necessary and appropriate.’’ As a
result, since contract year 2010, cost
plan contractors have been required to
follow all marketing requirements
specified in Subpart V of Part 422, with
the exception of § 422.2276, which
permits an MA organization to develop
marketing and informational materials
specifically tailored to members of an
employer group who are eligible for
employer-sponsor benefits through the
MA organization, as well as waives
requirements to review such materials.
As we noted in our April 2010 final rule
(75 FR 19785) extending MA marketing
requirements to cost contracts, the
statutory authority under section
1857(i)(1) of the Act, which permits the
Secretary to waive certain requirements
for employer group plans under the MA
program, does not apply to cost plans.
In extending the marketing
requirements to cost contract plans in
our April 2010 final rule, we neglected
to extend the MA organization and Part
D sponsor disclosure requirements, at
§ 422.111 and § 423.128, respectively, to
cost contract plans. We believe that
extending these provisions would also
be appropriate, given the close
relationship between the marketing
requirements in Subpart V of Parts 422
and 423 and the disclosure
requirements at § 422.111 and § 423.128.
These provisions require MA
organizations and Part D sponsors to
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disclose to enrollees, at the time of
enrollment and annually thereafter (in
the form of an annual notice of change/
evidence of coverage, or ANOC/EOC
mailing), certain detailed information
about plan benefits, service area,
provider and pharmacy access,
grievance and appeal procedures,
quality improvement programs, and
disenrollment rights and
responsibilities. They also require the
provision of certain information and
establish requirements with respect to:
(1) the explanations of benefits notice;
(2) customer service call centers; and (3)
internet Web sites. Thus, these
requirements are closely tied to the
marketing requirements of Subpart V of
Parts 422 and 423. In order to ensure
that cost contract plan enrollees have all
the information they need about their
health care benefits, we believe that cost
contract plans should also be subject to
all the same disclosure requirements as
MA organizations and Part D sponsors.
Therefore, we propose to extend the
disclosure requirements in § 422.111
and § 423.128 to cost contract plans by
adding a new § 417.427.
3. Clarification of, and Extension to
Local Preferred Provider Plans, of
Regional Preferred Provider
Organization Plan Single Deductible
Requirement (§ 422.101)
Section 1858(b) of the Act provides
that, to the extent RPPO plans use a
deductible, any such deductible must be
a single deductible, rather than separate
deductibles for Parts A and Part B
benefits. This single deductible may be
applied differentially for in-network
services and may be waived for
preventive or other items and services.
Our regulations at § 422.101(d)(1) track
the language in the statute closely. They
require that RPPO plans, to the extent
they apply a deductible, apply only a
single deductible related to combined
Medicare Part A and Part B services.
They also allow the single deductible to
be differential for specific in-network
services and to be waived for preventive
services or other items and services, at
the plan’s option. However, both the
statute and our regulations are silent
with respect to any deductible
requirements for local preferred
provider organization (LPPO) plans.
Consequently, in practice, LPPO plans
may have a variety of deductible
designs, including separate in-network
and out of network deductibles.
We propose to make three changes to
our regulations at § 422.101(d)(1) to both
clarify current requirements with
respect to the application of a single
deductible and to level the playing field
between LPPO and RPPO plans by
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extending the RPPO rules to LPPOs.
Specifically, we propose clarifying the
application of the differential of the
single deductible for in-network
services, and modifying our current
regulations to take into account recent
rulemaking under which MA plans
must provide certain Medicare-covered
preventive services at zero cost sharing.
We propose to rely upon our authority
at section 1856(b)(1) of the Act to
establish MA standards by regulation,
and in section 1857(e)(1) of the Act to
impose additional terms and conditions
found necessary and appropriate, to
extend the RPPO single deductible
requirements by regulation to LPPOs.
We believe that having the same rules
for LPPOs and RPPOs supports
transparency and comparability of
options for beneficiaries when they
evaluate and select plans for enrollment.
In previous rulemaking, we have taken
steps to align the plan design
requirements for RPPOs and LPPOs. For
example, in our April 2010 final rule (76
FR 21507 through 21508) that made
revisions to the MA and Part D
programs for CY 2012, we extended the
same maximum out-of-pocket (MOOP)
and catastrophic limits we had
previously codified for LPPOs (75 FR
19709 through 19711) to RPPOs. In the
interest of transparency, alignment in
benefit design between RPPO and LPPO
plans, and comparability for
beneficiaries making health care
coverage elections, we propose to
extend to LPPOs the single deductible
requirements at § 422.101(d)(1). We
would clarify the rules that would now
apply to both LPPO and RPPO plans as
set forth late in this section.
As discussed previously, we propose
to clarify at § 422.101(d)(1) that an LPPO
or RPPO single deductible ‘‘may be
applied differentially for in-network
services,’’ as provided under section
1858(b) of the Act. We currently furnish
interpretive guidance and examples of
the application of the single deductible
in section 50.3 of Chapter 4 of the
Medicare Managed Care Manual,
‘‘Benefits and Beneficiary Protections’’
https://www.cms.gov/manuals/
downloads/mc86c04.pdf). However, we
believe there may still be confusion
with respect to how these requirements
are articulated in our regulations and
therefore propose amending
§ 422.101(d)(1) to add paragraphs (i)
through (iii) clarifying that an RPPO or
LPPO that chooses to apply a deductible
may both—
• Specify different deductibles for
particular in-network Parts A and B
services, provided that all of these
service-specific deductibles are applied
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63057
to the overall, single plan deductible;
and
• Choose to exempt specific plancovered items or services from the
deductible—that is, the LPPO or RPPO
may choose to always cover specific
items or services at plan established
cost-sharing levels whether or not the
deductible has been met. For example,
under our regulations, an LPPO or RPPO
could establish a single combined
deductible of $1,000 but limit the
amount of the deductible that applies to
in-network inpatient hospital services to
$500, and the amount that applies to innetwork physician services to $100.
This RPPO could also exempt
application of the deductible to
particular services—for example, all
home health services (in- and out-ofnetwork).
In our April 2011 final rule (76 FR
21475 and 21476), we established a new
requirement for MA organizations to
provide certain in-network Medicarecovered preventive benefits at zero cost
sharing. As provided under
§ 422.100(k), MA organizations,
including those offering PPO plans, may
not charge deductibles, copayments, or
coinsurance for in-network Medicarecovered preventive services specified in
§ 410.152(l). We are therefore proposing
to eliminate references to the option in
both LPPO and RPPO plans to exclude
preventive services from the single
deductible at § 422.101(d)(1), and are
proposing adding a new paragraph
§ 422.101(d)(1)(iv) to explicitly require
LPPO and RPPO plans to exclude
certain Medicare-covered preventive
services (as defined in § 410.152(l)) from
the single, combined deductible for each
plan.
4. Technical Change to Private Fee-forService Plan Explanation of Benefits
Requirements (§ 422.216)
In our April 15, 2011 final rule (76 FR
21504 through 21507) implementing
changes to the MA and Medicare
Prescription Drug Programs for Contract
Year 2012, we finalized regulations at
§ 422.111(b)(12) giving us the authority
to require MA organizations to furnish
directly to enrollees, in the manner
specified by CMS and in a form easily
understandable to such enrollees, a
written explanation of benefits, when
benefits are provided under this part.
We expressed our intention to work
with MA organizations, Part D sponsors,
and beneficiary advocates to develop an
EOB for Part C benefits and to test the
EOB in CY 2012 through a small,
voluntary pilot program. In our April
2011 final rule (76 FR 21505), we also
stated our intention to finalize a model
EOB in the future, based on the results
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of the pilot program and to require all
MA organizations to periodically send
an EOB to enrollees for Part C benefits.
We did not specifically discuss
private fee-for-service (PFFS) plans in
our April 2010 final rule because
section 1852(k)(2)(c) of the Act and
§ 422.216(d)(1) already require PFFS
plans to provide an EOB to enrollees.
Our current regulations at
§ 422.216(d)(1) specify that PFFS plans
must provide an appropriate EOB to
plan enrollees for each claim filed by
the enrollee or the provider that
furnished the service. The explanation
must include a clear statement of the
enrollee’s liability for deductibles,
coinsurance, copayment, and balance
billing. In the interest of consistency for
beneficiaries and MA organizations, we
propose to amend § 422.216(d)(1) to
state that the EOB requirement for PFFS
plans will be consistent with the MA
EOB requirements of § 422.111(b)(12).
The standard EOB that we are currently
developing and piloting for most other
MA plan types will include the same
information as currently required for
PFFS plans, as well as plan maximum
out-of-pocket (MOOP) cost information.
Adding this cross-reference to
§ 422.216(d)(1) would provide
consistency in EOB requirements as
well as submission and approval of
marketing materials across plan types.
Since the pilot program is in progress
during the CY 2013 rule development
cycle and we would not have finalized
EOB requirements based on the pilot
prior to publication of the CY 2013 final
rule, we propose that PFFS plans would
continue to furnish EOBs as they have
been, in accordance with
§ 422.216(d)(1), until we finalize and
implement EOB models for all MA
plans.
5. Application Requirements for Special
Needs Plans (§ 422.500, § 422.501,
§ 422.502, § 422.641, and § 422.660)
Several of the regulations
implementing section 1859(f) of the Act,
including § 422.101(f), § 422.107, and
§ 422.152(g), establish specific
requirements for Special Needs Plans
(SNPs). Specifically, § 422.101(f)
requires that MAOs offering a SNP
implement an evidence-based model of
care to be evaluated by NCQA as part of
the SNP approval requirement;
§ 422.107 requires that Dual Eligible
SNPs (D–SNPs) have a contract with the
State Medicaid Agencies in the States in
which they operate; and § 422.152(g)
requires that SNPs conduct a quality
improvement program. These SNPspecific requirements have been
incorporated into the MA application
for MAOs that wish to offer a SNP so
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that these MAOs can demonstrate that
they meet CMS’ SNP specific
requirements and are capable of serving
the vulnerable special needs individuals
who enroll in SNPs.
Current regulations on application
procedures for MAOs, found at:
§ 422.500, § 422.501, and § 422.502, are
specific only to an applicant that is
seeking to contract as a MAO offering an
MA plan, and do not specify the rights
and responsibilities of an applicant that
seeks to offer a SNP. Additionally,
regulations on Medicare Contract
Determinations and Appeals, found at
§ 422.641 and § 422.644, also pertain
only to applicants that have been
determined unqualified to enter into an
MA contract, and do not provide for
appeal rights to applicants who have
been determined unqualified to offer a
SNP. Given that every applicant that
seeks to offer a SNP engages in an
intensive application process to
demonstrate that it meets the
requirements unique to SNPs in the
same manner, according to the same
processes and on the same timeline as
applicants seeking to contract as MAOs,
we believe it is important to provide
SNP applicants with the same rights and
responsibilities as applicants applying
to contract as MAOs. We further believe
it important to clarify that each
applicant that has been determined
unqualified to offer a SNP has the same
right to an administrative review
process to each applicant that has been
determined unqualified to enter into an
MA contract.
Therefore, in accordance with section
1859(f) of the Act, we propose to
broaden our regulations on Application
Requirements and Evaluation and
Determination Procedures to also apply
to SNP applicants. Specifically, we
propose to revise the language in
§ 422.500(a) and § 422.501(a) to specify
that the scope of these provisions
include the specific application
requirements for SNPs. We also propose
to add paragraph (iii) to § 422.501(c)(1)
to specify the documentation SNP
applicants must provide to complete an
application. Furthermore, we propose to
revise § 422.502(a) and § 422.502(c) to
specify that our regulations on
application evaluations and
determinations apply to SNP
applications. Additionally, in
accordance with section 1859(f) of the
Act, we propose to provide explicit
appeal rights to each applicant that has
been determined unqualified to offer a
SNP for failure to meet the requirements
in section 1859(f) of the Act and its
implementing regulations. To do so, we
propose adding a new paragraph (d) to
§ 422.641, a new paragraph (a)(5) to
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§ 422.660, and a new paragraph (b)(5) to
§ 422.660. We believe the proposed
changes would ensure that only MA
organizations capable of meeting the
requirements to serve Special Needs
Individuals are able to target their
enrollment to this vulnerable
population, while also affording each
MA organization that has been
determined unqualified to offer a SNP
the opportunity to have this decision
reviewed by an impartial hearing
officer.
6. Timeline for Resubmitting Previously
Denied MA Applications (§ 422.501)
Section 1857(a) of the Act requires
organizations that wish to participate in
the MA program enter into a contract
with the Secretary, under which the
organization agrees to comply with
applicable MA program requirements
and standards. In order for us to
determine whether these program
requirements and standards have been
met, the organization must complete an
application in the manner described at
Subpart K of Part 422. Section 422.501
sets forth the required elements of such
an application. Under § 422.501(e),
entities that are seeking to contract with
the Secretary as an MA organization
may not resubmit an application that
has been denied by CMS for 4 months
following CMS’ denial. This 4-month
prohibition on resubmitting a
previously-denied application is
obsolete and inconsistent with current
agency practices. Presently, we operate
on an annual application cycle whereby
the established submission date for new
applications (February of each year)
occurs well after the specified date by
which we deny the previous contract
year’s applications (May of the previous
year). A literal reading of § 422.501(e)
means that an application that is denied
in May of 1 year could be resubmitted
as early as September (4 months later),
and well before the release of the
application for the following contract
year which typically occurs in
December or January, in advance of the
February submission deadline. In order
to bring § 422.501 up to date, we
propose revising paragraph (e) to clarify
that every organization seeking to
become an MA organization must wait
until the application cycle for the
following contract year to resubmit an
application that has been denied in the
current contract year’s application
cycle.
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7. Clarification of Contract
Requirements for First Tier and
Downstream Entities (§ 422.504 and
§ 423.505)
The regulations at § 422.504(i) and
§ 423.505(i) require MA organizations
and Part D sponsors to require all of the
first tier, downstream, and related
entities to which they have delegated
the performance of certain Part C or D
functions to agree to certain obligations.
In particular, the regulations require
sponsors to have ‘‘contracts or written
arrangements’’ that provide, for
example: (1) For the delegated entity to
carry out its contract in a manner
consistent with the sponsor’s Medicare
contract obligations; (2) that the sponsor
may revoke the contract if the sponsor
determines that the delegated entity has
not performed satisfactorily; and (3) that
the sponsor on an ongoing basis
monitors the performance of the
delegated entity. We believed it was
clear that the language of § 422.504(i)
and § 423.505(i) required that all
contracts governing the relationships
among a sponsor and all of its delegated
entities (that is, those between the
sponsor and its first tier entity; those
between the first tier entity and any
downstream entity; and those between
downstream entities) contain provisions
specifically addressing each of the
required elements stated in the
respective paragraphs. That is, each
contract was required to contain ‘‘flow
down’’ clauses through which each
delegated entity would become legally
obligated to honor the provisions of
§ 422.504(i) and § 423.505(i).
In the solicitations for applications for
qualification of MA organizations and
Part D sponsors, we instructed
applicants that all contracts with
delegated entities provided for our
review must include language
addressing all of the elements stated in
§ 422.504(i) and § 423.505(i). We took
this position because: (1) We believed
that the requirement was clearly stated
in the regulation; and (2) as the sponsor
cannot enforce a contract to which it is
not a party (that is, it has no privity of
contract with its downstream entities),
the only way to give the provisions of
§ 422.504(i) and § 423.505(i) full effect is
to require that each subcontract
specifically describe the delegated
entity’s obligations to the sponsor.
This interpretation was challenged in
2010 by an organization whose Part D
sponsor qualification application was
denied when we determined, among
other things, that the contract between
the applicant’s first tier and downstream
entities incorrectly made reference to
the rights of the first tier entity, rather
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than the applicant, in the contract
sections the applicant intended to meet
the requirements of § 423.505(i). While
the hearing officer upheld CMS’ denial
of the application, in the interest of
providing transparency and clarity for
the healthcare industry, we have
decided to amend the regulation. The
changes to the regulation will help
future applicants avoid confusion about
the requirements related to contracts
with first tier and downstream entities,
thus helping to streamline the
application process.
We believe that the most legally
effective and direct way to ensure that
the MAOs and Part D sponsors retain
the necessary control and oversight over
their delegated entities is by requiring
all contracts among those entities to
specifically reference each party’s
obligations to the sponsor, as
enumerated in § 422.504(i) and
§ 423.505(i). Documents or ‘‘written
arrangements’’ other than contracts can
be ambiguous as to the nature of an
obligation and who has agreed to
perform it. They are unreliable tools for
the protection of the rights of sponsors
with respect to the performance of their
Medicare obligations by their delegated
entities. Assurances from delegated
entities that they will provide necessary
instructions to other downstream
entities should the need arise are
equally ineffective as they provide no
evidence that the downstream entity
could be compelled to follow such
instructions. Therefore, we propose to
make explicit that sponsors can fulfill
the requirements of § 422.504(i) and
§ 423.505(i) only by providing evidence
that the contract of every first tier or
downstream entity contains provisions
stating clearly that the parties have
agreed to recognize and give effect to the
sponsor’s rights as listed in those
subsections. Accordingly, we propose to
delete the term ‘‘written arrangements’’
throughout § 422.504(i) and § 423.505(i)
and in each instance replace it with
‘‘each and every contract.’’
8. Valid Prescriptions (§ 423.100 and
§ 423.104)
Since the inception of the Part D
program, we have consistently
maintained that drugs cannot be eligible
for Part D coverage unless they are
dispensed upon prescriptions that are
valid under applicable State law. Using
our authority in section 1860D–
12(b)(3)(D), we propose to codify this
policy to remove any doubt as to the
appropriate source of law to consult
when determining whether a
prescription is valid.
We propose, first, to add a definition
of the term ‘‘valid prescription’’ to
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§ 423.100 to mean a ‘‘prescription that
complies with all applicable State law
requirements constituting a valid
prescription.’’ This would make clear
the need to consult State law to
determine whether a prescription is
valid.
We would like to underscore that we
do not intend to impose any State law
requirements that do not otherwise
apply. Rather, our proposal is that
prescriptions must comply with
applicable State law requirements; there
is no need to comply with State law
requirements to the extent that they do
not apply. The two following examples
illustrate our intent. Some States require
that insulin syringes be dispensed upon
prescription only, while other States do
not. We would not require prescriptions
for coverage of insulin syringes under
Part D in those States that do not
mandate prescriptions, but would
require prescriptions for Part D coverage
in States that require insulin be
dispensed only upon prescription. The
second example involves the Indian
Health Care Improvement Act (IHCIA),
which: (1) Provides that licensed health
professionals employed by a tribal
health program need not be licensed in
the State in which the program performs
services; and (2) exempts specified
health facilities from obtaining State
licenses provided they otherwise meet
State law requirements. The proposed
changes would not necessitate either
that these licensed professionals obtain
additional State licenses or that the
specified facilities obtain initial State
licenses.
We also propose to add a new
paragraph (h) to § 423.104 stating that,
for every Part D drug that requires a
prescription, Part D sponsors may only
provide benefits when that drug is
‘‘dispensed upon a valid prescription’’.
In tandem with the proposed definition
of the term valid prescription previously
discussed, these changes would ensure
that, for drugs and other items that must
be prescribed (including biological
products and some insulin and
specified associated supplies), Part D
coverage would be limited to those
dispensed upon valid prescriptions
under applicable State law.
At this time, we are not aware of any
State that requires that each electronic
or written prescription include the
prescriber’s individual NPI in order for
that prescription to be valid. But as is
discussed in section II.E.11. of this
proposed rule, Access to Covered Part D
Drugs through Use of Standardized
Technology and National Provider
Identifiers, we believe that linking
individual NPIs to specific prescriptions
may provide law enforcement agencies
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with information that could be essential
to identifying and prosecuting the
particular individuals committing or
abetting fraud, waste, or abuse.
Accordingly, we are taking this
opportunity to encourage States to
require that every prescription include
the individual NPI of the prescriber in
order to be valid under State law.
9. Medication Therapy Management
Comprehensive Medication Reviews
and Beneficiaries in LTC Settings
(§ 423.153)
Section 1860D–4(c)(2) of the Act
requires medication therapy
management (MTM) programs to be
designed to ensure that, with respect to
targeted beneficiaries described in
section 1860D–4(c)(2)(A)(ii) of the Act,
covered Part D drugs are appropriately
used to optimize therapeutic outcomes
through improved medication use and
to reduce the risk of adverse events.
Section 10328 of the Affordable Care
Act further amended section 1860D–
4(c)(2)(ii) of the Act to require
prescription drug plan sponsors to
perform at a minimum, an annual
comprehensive medication review that
may be furnished person-to-person or
via telehealth technologies. The
comprehensive medication review must
include a review of the individual’s
medications, which may result in the
creation of a recommended medication
action plan with a written or printed
summary of the results of the review
provided to the targeted individual.
In the November 2010 proposed rule,
we proposed to revise the regulations at
§ 423.153 to require plan sponsors to
offer an annual comprehensive medical
review (CMR) for targeted beneficiaries,
which must include an interactive,
person-to-person, or telehealth
consultation performed by a pharmacist
or other qualified provider. In response
to the proposal, a commenter indicated
that LTC residents with cognitive
impairments may not have the ability to
interact appropriately with providers or
pharmacists during the CMR when
using telehealth technologies. In the
April 2011 final rule, we responded by
agreeing that the use of telehealth
technologies for conducting CMRs may
not be appropriate for all beneficiaries.
We also recognized and agreed that
beneficiaries residing in LTC facilities
who have cognitive impairments may be
unable to participate in an interactive
CMR. The current regulations at
§ 423.153(d)(1)(vii)(B) reflect this
awareness by exempting sponsors from
offering interactive CMRs to targeted
beneficiaries in LTC settings; however,
the Act, as amended by section 10328 of
the Affordable Care Act, does not
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provide a basis for distinguishing the
offering of MTM services based on
settings. Since the Affordable Care Act
provision for MTM programs was not
effective until 2013, in the April 2011
final rule, we indicated that we would
undertake further rulemaking to clarify
the requirements for MTM programs to
offer CMRs to targeted beneficiaries in
LTC settings.
We generally agree with the
commenter that it is likely that many
patients in LTC settings may not be
lucid enough to participate in the CMRs,
nor might they be able to comprehend
the resulting medication action plan
that is provided as a result. However,
we believe that consistent with
section1860D–4(c)(2)(A)(i) all targeted
beneficiaries in LTC settings must be
offered the opportunity to participate in
the annual CMR, since not all residents
of LTC settings are cognitively impaired.
We also believe that beneficiaries will
still benefit from having a noninteractive CMR performed by a
pharmacist or other qualified provider.
Accordingly, we propose to revise the
regulation at § 423.153 to require
sponsors to offer the annual CMR to
targeted beneficiaries in an LTC facility,
but when the beneficiary cannot accept
the offer to participate, the pharmacist
or other qualified provider must
perform the medication review without
the beneficiary. This provision would
give the pharmacist or provider the
ability to perform the medication review
without the encumbrance of attempting
to communicate with a patient who
cannot make decisions regarding their
medical needs. In such cases, we
recommend that the pharmacist, or
qualified provider, reach out to the
beneficiary’s prescriber, caregiver, or
other authorized individual such as the
residents’ health care proxy or legal
guardian, to take part in the
beneficiary’s CMR.
10. Employer Group Waiver Plans
Requirement To Follow All Part D Rules
Not Explicitly Waived (§ 423. 458)
The Secretary has the statutory
authority to waive or modify
requirements that hinder the design of,
the offering of, or the enrollment in,
employer/union sponsored prescription
drug plans (PDPs). The statutory
authority, set forth in section 1860D–
22(b) of the Act, provides that the
provisions of section 1857(i) of the Act
shall apply with respect to prescription
drug plans in relation to employmentbased retiree health coverage in a
manner similar to the manner in which
they apply to an MA plan in relation to
employers, including authorizing the
establishment of separate premium
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amounts for enrollees in a prescription
drug plan by reason of such coverage
and limitations on enrollment to Part D
eligible individuals enrolled in such
coverage.
Under this statutory authority, in
order to facilitate the offering of PDPs to
employer/union group health plan
sponsors, we may grant waivers and/or
modifications to PDP sponsors. In
general, each waiver or modification
that we grant is conditioned upon the
PDP sponsor meeting a set of defined
circumstances and complying with a set
of conditions. PDP sponsors offering
EGWPs must comply with all Part D
requirements unless those requirements
have been specifically waived or
modified.
It has come to our attention that some
EGWPs that provide Part D benefits to
their members may not be affording
their members appropriate Medicare
beneficiary protections put in place by
CMS regulations or guidance. Based
upon discussions we have had with
sponsors of EGWPs, some sponsors
believe they are exempt from Part D
requirements when providing Part D
benefits because of the CMS waiver of
the requirement that EGWP sponsors
submit plan benefit packages for CMS
review (see section 20.9 of Chapter 12
of the Medicare Prescription Drug
Benefit Manual). Regardless of whether
plan benefit packages are submitted for
review, Part D sponsors of EGWPs must
meet all Part D requirements (regulatory
or legislative) unless such requirements
are specifically waived or modified by
CMS. Therefore, in order to emphasize
the importance of providing EGWP
members with beneficiary protections
put in place by Part D requirements, we
propose to revise § 423.458 to clearly
state that in the absence of a CMS
approved waiver, all Part D
requirements apply and in the case of a
CMS approved waiver that modifies the
application of Part D requirements, such
requirements must be met as modified
by the waiver.
11. Access to Covered Part D Drugs
Through Use of Standardized
Technology and National Provider
Identifiers (§ 423.120)
Every time a beneficiary fills a
prescription under Medicare Part D, a
sponsor must submit to CMS an
electronic summary record called a
prescription drug event (PDE). We
require that Part D sponsors obtain and
submit prescriber identifiers on PDE
records. Every prescriber has at least
one identifier that can be submitted.
These identifiers include the National
Provider Identifier (NPI), Drug
Enforcement Administration (DEA)
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number, uniform provider identification
number (UPIN), or State license number.
In a June 2010 report titled, ‘‘Invalid
Prescriber Identifiers on Medicare Part
D Drug Claims,’’ the OIG reported the
findings of its review of prescriber
identifiers on 2007 Part D PDE records.
The OIG reported finding 18.4 million
PDE records that contained 527,749
invalid identifiers, including invalid
NPIs, DEA registration numbers, and
UPINs. Payments by Part D drug plans
and enrollees for these PDE records
totaled $1.2 billion.
In light of this report, in the
Announcement of Calendar Year (CY)
2012 Medicare Advantage Capitation
Rates and Medicare Advantage and Part
D Payment Policies and Final Letter
issued on April 4, 2011 (CY 2012 Call
Letter), we stated that we will continue
in 2012 to permit Medicare Part D
sponsors to report on PDE records any
one of the above four identifiers.
However, sponsors were instructed to
ensure these identifiers are active and
valid, but not to reject a pharmacy claim
solely on the basis of an invalid
prescriber identifier in order to not
impede Medicare beneficiary access to
needed medications. Thus, if an active
and valid prescriber ID is not included
on the Part D claim for CY 2012, either
the sponsor, or the pharmacy if in
accordance with the contractual terms
of the network pharmacy agreement,
must follow up retrospectively to
acquire a valid ID before the PDE is
submitted to CMS. The only exception
to this guidance is that a foreign
prescriber identifier cannot be
validated, and therefore sponsors are
directed to use the license number
assigned by the foreign jurisdiction and
report it on the PDE without validation
(when prescriptions written by such
prescribers are valid under applicable
State law).
We also signaled in the CY 2012 Call
Letter that we were considering a
regulatory change in the Part D program
that would limit acceptable prescriber
identifiers on claims and PDE records in
2013 to only the individual NPI. We
indicated that since all practitioners
who are authorized to prescribe Part D
drugs under applicable U.S. State laws,
which would include foreign
prescribers whose prescriptions are
valid in certain States, can acquire an
individual NPI from HHS, we do not
believe such a change would present a
significant access barrier to needed Part
D drugs for Medicare beneficiaries, as
we explain more fully in this section of
the proposed rule.
As we noted in the CY 2012 Call
Letter, the consistent use of a single
validated identifier would enable us to
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provide better oversight over possible
fraudulent activities. As a measurable
indicator, we know that approximately
90 percent of Medicare Part D claims as
reported in prescription drugs events
(PDEs) currently submitted to CMS
contain valid individual prescriber
NPIs—a single identifier—even though
CMS permits alternate prescriber IDs at
this time. Thus, while the vast majority
of Medicare Part D claims contain
individual NPIs, 10 percent still do not,
and CMS believes it is important for
prescribers to be identified in a
consistent, verifiable manner in order to
conduct appropriate oversight of the
program.
More specifically, CMS, MEDICs, and
oversight agencies would be able to
more efficiently identify patterns of
unusual prescribing that may be
associated with fraudulent activities.
When multiple prescriber identifiers,
not to mention dummy or invalid
identifiers, are used, authorities must
take an additional step in their data
analysis before even achieving a refined
data set to use for further analysis to
identify possible fraud. For example,
having to cross-reference multiple
databases that update on different
schedules to be certain of the precise
prescribers involved when multiple
identifiers were used, would necessitate
several additional steps of data preanalysis and would also introduce
potential errors in correctly matching
prescribers among databases.
Pursuant to HIPAA, HHS adopted the
NPI as the standard for uniquely
identifying health care providers in
electronic transactions in the final rule
published on January 23, 2004 (69 FR
3434), which was effective May 23,
2005, the date on which all health care
providers, broadly defined in 45 CFR
160.103, became eligible for NPIs. By
Mary 23, 2008, all covered health care
providers, defined in 45 CFR 162.402,
must have obtained an NPI. Covered
health care providers must disclose
their NPI to other entities that need the
NPI for use in standard transactions.
Health care providers who are not
covered entities are not required to
obtain and disclose NPIs, but HHS
encourages them to do so in the NPI
final rule (69 FR 3445, January 23,
2004). Therefore, we believe there are
very few prescribers who do not already
have an individual NPI that they will
disclose to Part D sponsors and/or their
network pharmacies who need it for
standard transactions, with the
exception of foreign prescribers, whom
we discuss in greater detail later in this
section of the proposed rule. In
addition, for those health care providers
who do not already have an NPI,
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obtaining one is not a burdensome
endeavor and is free of charge.
In light of the foregoing, we propose
to amend § 423.120(c) to require,
effective January 1, 2013, that Part D
sponsors must submit an active and
valid individual prescriber NPI on any
PDE record submitted to CMS. This
requirement would enhance our efforts
to use claims data to identify fraud in
furtherance of section 1893 of the Act,
which established the Medicare
Integrity Program and the Secretary’s
obligations with respect thereto. In
addition to supporting CMS fraud and
abuse activities, accurate data on
prescriptions through the consistent use
of valid NPIs on PDEs allows CMS to
serve beneficiaries when using data in
various initiatives whose purpose is to
foster higher quality and more efficient
coordination of care for individuals and
groups of individuals.
In this regard, we are also proposing
to codify our current guidance that
sponsors may not reject a pharmacy
claim solely on the basis of the lack of
a valid prescriber NPI, unless the issue
can be resolved at point-of-sale, in order
to not impede Medicare beneficiary
access to needed medications. In other
words, Part D sponsors may not reject
pharmacy claims at point of sale
without prompt follow-up to ensure that
the claim has been resubmitted with a
corrected and valid individual
prescriber NPI, or new information has
been otherwise received to correct the
sponsor’s information. Once a
prescriber’s NPI is obtained and used in
a Part D claim, it will be in the Part D
sponsor’s and/or network pharmacy’s
patient information database for ongoing
use, so any efforts needed to obtain
corrected or missing NPIs will decrease
over time.
Our proposal means that if a correct
and valid individual prescriber NPI is
not included in the pharmacy claim,
and it is determined that the prescriber
does not have one and the claim is
otherwise payable (for example, no
indication of fraud, the prescription is
not written by a provider excluded from
the Medicare program, or no question
regarding coverage), the sponsor must
pay the claim, but cannot submit the
PDE to CMS. Thus, if an active and
valid prescriber ID is not included on
the Part D claim, either the sponsor, or
the pharmacy if in accordance with the
contractual terms of the network
pharmacy agreement, must follow up
retrospectively to acquire an active and
valid ID before the PDE may be
submitted to CMS. As noted previously,
we believe prescribers’ NPIs will be
widely available to Part D sponsors.
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We remind Part D sponsors that the
requirements proposed here are on
sponsors, whose responsibility it would
be to be able to submit PDEs to CMS
with individual prescriber NPIs.
Therefore, we would expect that
pharmacies will be permitted to correct
any invalid data before payment for a
claim is reversed whether or not a
negotiated contract delegates any
sponsor duties in this regard to the
pharmacy. Additionally, we would
expect that any requirement by a plan
sponsor or its contracted PBM for a
pharmacy to acquire and utilize its own
automated validation capability will be
arrived at only through mutual
agreement, since such a requirement
may be unaffordable for many smaller
pharmacy organizations.
With respect to requests for
reimbursement submitted directly by
Medicare beneficiaries, sponsors were
instructed in the CY 2012 Call Letter
that payment to a beneficiary could not
be made dependent upon the sponsor’s
acquisition of the prescriber ID itself.
We are proposing to codify this
guidance, so that requests for
reimbursement from Medicare
beneficiaries are handled in the same
manner by Part D sponsors as claims
from pharmacies. Thus, if the sponsor is
unable to retrospectively acquire an
active and valid NPI in connection with
a request for reimbursement submitted
by a beneficiary, the sponsor may not
seek recovery of the payment from the
beneficiary solely on that basis, unless
there is an indication of fraud.
We have learned from stakeholders
through a contractor to CMS that a key
barrier to improved NPI reporting on
Part D PDEs is that CMS does not
currently require NPI reporting, and this
proposal is thus responsive to those
observations. In addition, some
pharmacy representatives have offered
that certain States require or accept
other prescriber identifiers, which
impede NPI reporting at the pharmacy
level. It is unclear to us whether the
latter observation was in the context of
States as regulators of prescriptions or
as payers of claims or both, and which
alternate identifiers are required or
accepted by these States. For instance,
it is our understanding that the Drug
Enforcement Administration (DEA) has
discouraged the use of DEA numbers as
prescriber identifiers, and not every
prescriber has one anyway. Therefore,
we seek specific comment on this issue
to assist us in understanding and
confirming any State-imposed barriers
to the standardization of prescriber
identifiers to the individual NPI for the
Medicare Part D program.
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We considered exercising the
discretionary authority granted pursuant
to section 6405(c) of the Affordable Care
Act so that prescriber NPIs would be
required on Part D claims and PDEs.
However, such an approach would
require prescribers to also enroll in the
Medicare program, which is a provider
credentialing process. Thus, we are
concerned that requiring such
enrollment could impede Part D
beneficiary access to needed
medications, because the process
involves more effort on the part of
prescribers, who are not reimbursed for
prescriptions, compared to obtaining an
NPI, which involves a 3-page
application form that primarily seeks
only identifying and location
information and is free of charge. While
we know that prescribers will also be
concerned about beneficiary access to
medications, we believe virtually all
prescribers who do not already have an
NPI would actually obtain one, but we
are not certain this would be the case
with respect to Medicare enrollment.
Regarding foreign prescribers, we
understand that seven States (Arizona,
Florida, Maine, North Dakota, Texas,
Vermont, and Washington) currently
permit pharmacies to fill prescriptions
from foreign prescribers, to varying
degrees. We believe that foreign
prescribers may not have sufficient
incentives in terms of patient base or
familiarity with health care
reimbursement in the United States,
particularly with respect to the
Medicare program and Part D benefits,
to obtain individual NPIs. Thus, unlike
our guidance in the CY 2012 Call Letter,
and unlike our proposal here with
respect to non-foreign prescribers, we
are not proposing to require drugs
dispensed pursuant to prescriptions of
foreign prescribers to be covered by Part
D sponsors when the foreign prescribers
decline to obtain an individual NPI if
they do not already have one. The
motivation for our individual prescriber
NPI proposal stems in large part from
our need for consistent data to conduct
better oversight over possible fraudulent
activities in the Medicare Part D
program. Since the Federal government
has no jurisdiction over foreign
prescribers, we are proposing an
exception to our proposal that the
sponsor must pay a claim for a
prescription, but cannot submit the PDE
to CMS without an individual prescriber
NPI, when the claim involves a foreign
prescriber who does not have an
individual NPI. Thus, a Part D sponsor
could reject a claim involving a foreign
prescriber who does not have an NPI at
point-of-sale.
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In fact, in light of our lack of
jurisdiction over foreign prescribers and
our motivation to conduct better
oversight over possible fraudulent
activities, we are considering whether
this proposal with respect to foreign
prescribers is broad enough and
whether we should instead revise the
Medicare Part D rules to prohibit
sponsors from paying claims that
involve prescriptions written by foreign
prescribers, regardless of whether the
foreign prescribers obtain an individual
NPI. In other words, while certain
prescriptions of foreign prescribers may
be valid under some State laws,
medications dispensed pursuant to
prescriptions written by foreign
prescribers would not be payable under
the Medicare Part D program. Such a
policy would also be consistent with the
direction we have taken with respect to
medical directors, that is, that Part D
sponsors must employ a physician with
a current and unrestricted license to
practice medicine in a State, Territory,
Commonwealth of the United States
(that is, Puerto Rico), or the District of
Columbia. We note that we are not
making such a proposal at this time, but
solicit specific comments on foreign
prescribers and the Part D program.
Section 423.120(c) sets forth the
responsibilities of Part D plan sponsors
with regard to the use of standardized
technologies and compliance with the
HIPAA standards at 45 CFR 162.1102.
We are proposing to add a new
paragraph (5)(A) which would require
Part D plan sponsors to submit to CMS
only PDE records that contain an active
and valid individual prescriber NPI.
However, new paragraph (c)(5)(B)
would codify current guidance and
require that a Part D plan sponsor not
reject a claim from a network pharmacy
solely on the basis that it does not
contain an active and/or valid NPI
unless the issue can be resolved at
point-of-sale, there is an indication of
fraud, or the claim involves a
prescription written by a foreign
prescriber (where permitted by State
law). New paragraph (5)(C) would
prohibit a Part D sponsor, with respect
to requests for reimbursement submitted
directly by Medicare beneficiaries, from
making payment to the beneficiary
dependent upon the sponsor’s
acquisition of the prescriber NPI and
would further prohibit a Part D sponsor
from seeking recovery of the payment
from the beneficiary solely on the basis
that the sponsor was unable to
retrospectively acquire an active and
valid individual prescriber NPI, unless
there is an indication of fraud.
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III. Collection of Information
Requirements
Under the Paperwork Reduction Act
of 1995 (PRA), we are required to
provide 60-day notice in the Federal
Register and solicit public comment
before a collection of information
requirement is submitted to the Office of
Management and Budget (OMB) for
review and approval. In order to fairly
evaluate whether an information
collection should be approved by OMB,
section 3506(c)(2)(A) of the Paperwork
Reduction Act of 1995 requires that we
solicit comment on the following issues:
• The need for the information
collection and its usefulness in carrying
out the proper functions of our agency.
• The accuracy of our estimate of the
information collection burden.
• The quality, utility, and clarity of
the information to be collected.
• Recommendations to minimize the
information collection burden on the
affected public, including automated
collection techniques.
We are soliciting public comment on
each of these issues for the following
sections of this document that contain
information collection requirements
(ICRs):
The following sections of this
document contain paperwork burden
but not all of them are subject to the
ICRs under the PRA for reasons noted.
A. ICRs Regarding the Coverage Gap
Discount Program (§ 423.100,
§ 423.505(b), § 423.1002, and Part 423
Subpart W)
Section 1860D–14A (d)(6) of the Act
exempts this section from PRA
requirements.
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B. ICRs Regarding the Inclusion of
Benzodiazepines and Barbiturates as
Part D Drugs (§ 423.100)
In accordance with section 175 of
MIPPA, which amended section 1860D–
2(e)(2)(A) of the Act, we propose to
revise the definition of Part D drug at
§ 423.100, to include barbiturates when
used for the medical indications of
epilepsy, cancer, or a chronic mental
health disorder, and benzodiazepines,
effective January 1, 2013.
Under this proposal, Part D plan
sponsors would be required to submit
information in their formulary files
indicating that they will cover these
drugs. The collection of information
burden on Part D sponsors imposed by
this proposed regulation is negligible.
Any burden associated with the
requirement on sponsors relates to the
required data entry in the formulary file
software, and would be included in the
PRA package entitled, Formulary
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Submission for Medicare Advantage
(MA) Plans and Prescription Drug Plans
(PDP) for Contract Year (CY) 2013 (OCN
0938–0763).
C. ICRs Regarding Pharmacy Benefit
Manager’s Transparency Requirements
(§ 423.514)
Consistent with the statutory
requirements, our proposal adds an
additional data element to the DIR data
reporting: Aggregate amount of the
difference between the amount the Part
D sponsor pays the PBM and the
amount the PBM pays retail and mail
order pharmacies. This data element is
already available to plans as they are
aware of the amounts they pay to their
contracted PBMs and they currently
report to CMS the amounts paid to retail
and mail order pharmacies on the PDE
records. We do not believe that our
proposal imposes any additional
substantive burden on Part D sponsors
and PBMs, and, therefore, have not
incorporated a burden increase.
We are soliciting comment on
whether any of the following data
elements can be collected using existing
data sources, thereby alleviating
additional reporting burden on Part D
sponsors and PBMs:
• Number of retail prescriptions.
• Number of mail order prescriptions.
• Number of prescriptions dispensed
by independent pharmacies.
• Number of prescriptions dispensed
by chain pharmacies.
• Number of prescriptions dispensed
by supermarket pharmacies.
• Number of prescriptions dispensed
by state-licensed mass merchandisers to
the general public.
D. ICRs Regarding Good Cause and
Reinstatement Into a Cost Plan
(§ 417.460)
Our proposal in § 417.460 extends
reinstatement rights currently in place
for members of MA and Part D plans to
members of cost plans. Because good
cause determinations would be made by
CMS (or its contractor), we believe that
this proposal would not impose any
new information collection
requirements.
E. ICRs Regarding Requiring MA Plans
Issuance of Member ID Cards
(§ 422.111)
Under our authority at section 1852(c)
of the Act to require that MA
organizations disclose MA plan
information upon request, as well as our
authority under section 1857(e) of the
Act to specify additional contractual
terms and conditions the Secretary may
find necessary and appropriate, we
propose to expressly require MA plans
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issue and re-issue as necessary a MA
member ID card that enables enrollees
to access all covered services. While this
requirement is subject to the PRA, we
believe this burden is exempt as defined
in 5 CFR 1320.3(b)(2). That is, the time,
effort, and financial resources necessary
to comply with the requirement would
be incurred by MA organizations in the
normal course of their business
activities.
F. ICRs Regarding Determination of
Actuarially Equivalent Creditable
Prescription Drug Coverage (§ 423.56)
Since we are proposing to amend a
calculation at § 423.56 to be consistent
with the calculation of the actuarial
value of qualified retiree prescription
drug coverage found at § 423.884(d) and
to change the term ‘‘CMS actuarial
guidelines’’ to read ‘‘CMS guidelines’’ to
allow CMS further flexibility in issuing
interpretive guidance on these
requirements, there is no new
information collection burden on
organizations.
G. ICRs Regarding Who May File Part D
Appeals With the Independent Review
Entity (§ 423.600 and § 423.602)
The information collection
requirements referenced in this section
are exempt from the PRA in accordance
with 5 CFR 1320.4(a)(2) which excludes
collection activities during the conduct
of administrative actions, such as
redeterminations, reconsiderations, and/
or appeals.
H. ICRs Regarding CMS Termination of
Health Care Prepayment Plans
(§ 417.801)
This section does not impose any new
information collection requirements.
I. ICRs Regarding Termination or NonRenewal of a Medicare Contract Based
on Consistent Poor Plan Performance
Ratings (§ 422.510 and § 423.509)
It is our position that 3 years’ worth
of low-star ratings constitutes a
sufficient basis for us to terminate a
sponsor’s Part C or D contract under our
authority under section 1857(c)(2) of the
Act. The regulation has been changed to
reflect that.
Regarding ICRs, we are not imposing
any new reporting requirements. We are
merely harnessing and putting to use
internal data that has already been
collected. We do not believe that our
proposal would result in an additional
burden; therefore, we have not
incorporated a burden increase.
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Federal Register / Vol. 76, No. 196 / Tuesday, October 11, 2011 / Proposed Rules
J. ICRs Regarding Denial of Applications
Submitted by Part C and D Sponsors
With a Past Contract Termination or
CMS-Initiated Non-Renewal (§ 422.502
and § 423.503)
We have modified the past
performance review period described in
§ 422.502(b) and § 423.503(b) (by adding
new paragraphs at § 422.502(b)(3) and at
§ 423.503(b)(3) as well as § 422.502(b)(4)
and at § 423.503(b)(4)) to include among
the factors that may support a CMS
denial of a contract application those
CMS-initiated terminations or nonrenewals that became effective within
the 38 months preceding the submission
of a new application.
We are not imposing any new
reporting requirements. We are merely
further refining our intended approach
to using past performance in making
application determinations. We do not
believe that our proposal would result
in an additional burden; therefore, we
have not incorporated a burden
increase.
K. ICRs Regarding New Benefit
Flexibility for Fully Integrated Dual
Eligible Special Needs Plans (FIDE
SNPs) (§ 422.102)
Under proposed § 422.102(e) we
would allow certain FIDE SNPs
participating in the Medicare-Medicaid
Integration Initiative, the flexibility to
offer supplemental benefits beyond
those that we allow for all other MA
plans. We would review each qualified
SNP’s proposed supplemental benefit
offerings as part of our review of plan
bids, and we would approve additional
supplemental benefit offerings for these
qualified SNPs as we deem necessary.
The burden associated with this
proposed requirement is the time and
effort necessary for SNPs to submit their
benefit designs, including cost-sharing
amounts, via the PBP software. While
this proposed requirement is subject to
the PRA, the burden associated with it
is currently approved under OCN 0938–
0763 with a March 31, 2012 expiration
date.
srobinson on DSK4SPTVN1PROD with PROPOSALS3
L. ICRs Regarding Clarifying Payment to
Providers in Instances of HospitalAcquired Conditions (HACs) (§ 422.504)
We propose to require MAOs provide
in their contracts with hospitals that
payments for Part A hospital services
will be reduced for serious events that
could be prevented through evidencebased guidelines, in accordance with
the HACs and POA policy that is
currently required for hospitals paid
under the Original Medicare IPPS. We
believe that plans already have some
operational systems in place to facilitate
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implementation of the requirement. For
example, MAOs are already required to
pay non-contract provider hospitals the
amount that they would receive for
services under original Medicare,
including any applicable reductions for
HACs. Also, beginning January 3, 2012,
MA plans would be required to collect
and submit encounter data for each item
and service provided to MA enrollees in
accordance with risk adjustment
policies required in § 422.310(d). This
information is collected using the
HIPAA 5010, which already in use by
hospital providers for FFS claims and
contains fields for POA indicator
reporting. While this proposed
requirement is subject to the PRA, the
diagnosis, POA indicator information,
and other claims information are
already collected as part of the
encounter data collection process, and
this burden is currently approved under
OCN 0938–1054.
Additionally, we believe that
hospitals will already be familiar with
POA reporting and would not require
additional education. Therefore, the
burden associated with this provision
would be the time and effort necessary
for MA plans to modify their claims
processing to recognize the POA
indicators, if they do not already do so,
and to adjust payment to contracted
hospitals for the HAC events
accordingly. Plans usually update their
claims processing systems regularly for
changes such as, payment logic for new
national and local coverage
determinations, updating HCPCS code
information, and other changes to their
payment calculations. Therefore, we
believe this burden is exempt from the
PRA as defined in 5 CFR 1320.3(b)(2),
because the time, effort, and financial
resources necessary to comply with this
requirement would be incurred by plans
in the normal course of their business
activities.
M. ICRs Regarding Clarifying Coverage
of Durable Medical Equipment
(§ 422.101(a) and § 422.112(a))
Under § 422.100(l) we propose to
permit MA plans to limit coverage of
DME to specific manufacturers’
products or brands. Furthermore, in
order to ensure that MA enrollees have
adequate access to their DME benefits,
our proposed regulatory changes
establish requirements with respect to
access, midyear changes to preferred
DME items and supplies, appeals, and
disclosure of DME coverage limitations
to enrollees. The burden associated with
this requirement is the time and effort
necessary for MA organizations to
submit their benefit designs via the PBP
software. While this requirement is
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subject to the PRA, the burden
associated with it is currently approved
under OCN 0938–0763. With respect to
disclosing DME coverage limitations,
this requirement is captured in the
burden associated with the annual
notice of coverage/evidence of coverage
which must be completed at the time of
the beneficiary’s enrollment and at least
annually thereafter. The MA program
disclosure requirement is at § 422.111
and the burden associated with it is
currently approved under OCN 0938–
0753.
N. ICRs Regarding Broker and Agent
Requirements (§ 422.2274 and
§ 423.2274)
At § 422.2274 and § 423.2274, we are
proposing that plans can choose any
agent/broker compensation amount at or
below the fair market value amount
annually. We require MA organizations
to submit and/or update and attest to
their compensation amount (or range) in
the HPMS. This web-based system in
HPMS allows new plans to submit
information and, for existing plans,
automatically updates, based on
changes in MA payment rates,
organization compensation information.
We are proposing to allow plans to
annually adjust their base compensation
rates to reflect fair market value. Plans
would continue to be required to
annually submit and attest to this
information to CMS through HPMS.
While this proposed requirement is
subject to the PRA, it does not impose
any new information collection
requirement on plans. The burden
associated with the proposed
requirement currently approved under
OMB control number (OCN) 0938–0753.
O. ICRs Regarding the Establishment
and Application of Daily Cost-Sharing
Rate as Part of Drug Utilization
Management and Fraud, Abuse and
Waste Control Program (§ 423.153)
In accordance with section 1860D–
4(c) of the Act, we propose revising
§ 423.153 at paragraph (b)(4) to provide
that a Medicare Part D sponsor’s drug
utilization management program must
establish and apply a daily cost-sharing
rate to a prescription presented by an
enrollee at a network pharmacy for a
covered Part D generic or brand drug
that is dispensed for a supply of less
than 30 days. Under this proposal, the
enrollee and his or her prescriber
generally would decide if a medication
supply of less than 30 days would be
appropriate, and if so, the cost-sharing
for the medication would be prorated by
the Part D sponsor based on the days
supply dispensed.
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Federal Register / Vol. 76, No. 196 / Tuesday, October 11, 2011 / Proposed Rules
The collection of information burden
on Part D sponsors imposed by this
proposed regulation is negligible. Any
burden associated with this proposal on
sponsors related to the required data
entry in the PBP software would be
included in the revised PRA package
entitled Plan Benefit Package (PBP) and
Formulary Submission for Medicare
Advantage (MA) Plans and Prescription
Drug Plans (PDP) for Contract Year (CY)
2013 (OCN 0938–0763). Since obtaining
a supply of a medication for less than
30 days is optional for the enrollee and
his or her prescriber, there is no
collection of information burden
imposed by these proposed regulations
on either Part Medicare D enrollees or
their prescribers.
srobinson on DSK4SPTVN1PROD with PROPOSALS3
P. ICRs Regarding Technical Corrections
to Enrollment Provisions (§ 417.422,
§ 417.432, § 422.60, and § 423.56)
At § 417.422, § 417.432, § 422.60, and
§ 423.56 we are proposing technical
changes that correct cross-references
that should have been updated in
previous rulemaking. These proposals
do not establish any new rules or
requirements for cost or Part D plans.
They merely update regulatory crossreferences that were overlooked in
previous rulemaking. As a result, this
proposal does not impose any new
information collection requirements.
Q. ICRs Regarding Applying MA and
Part D Disclosure Requirements to Cost
Contract Plans (§ 417.427)
We are proposing to extend the
disclosure requirements in § 422.111
and § 423.128 to cost contract plans.
Our regulations at § 422.111 and
§ 423.128 require MA organizations and
Part D sponsors to disclose to enrollees,
at the time of enrollment and annually
thereafter (in the form of an annual
notice of change/evidence of coverage,
or ANOC/EOC mailing), certain detailed
information about plan benefits, service
area, provider and pharmacy access,
grievance and appeal procedures,
quality improvement programs, and
disenrollment rights and
responsibilities. Sections 422.111 and
423.128 also require the provision of
certain information about requests and
establish requirements with respect to
dissemination of explanations of
benefits, customer service call centers,
and Internet websites.
The burden associated with this
requirement is the time and effort
associated with completing an ANOC/
EOC at the time of a beneficiary’s
enrollment and at least annually
thereafter, as specified in § 422.111(a)(2)
of the MA program regulations and
§ 423.128(a)(3) of the Part D program
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regulations. For each entity, we estimate
that it will take 12 hours to develop and
submit the required information. This
includes 1 hour to read CMS’ published
instructions, 6 hours to generate the
standardized document, 1 hour to
submit the materials, 4 hours to print
and disclose to the beneficiaries. This
package is currently approved under
OCN 0938–0753 with a November 30,
2011 expiration date to account for this
burden as detailed in Table 6. We
estimate 20 cost contractors would be
affected annually by this requirement,
resulting in a total annual burden of 240
hours. We estimate, based on a hourly
wage of $29.88 (hourly salary for a
compliance officer/cost estimator
according to Bureau of Labor Statistics)
plus 48 percent for fringe benefits and
overhead, that this requirement will
result in a total annual burden of
$10,613 (240 burden hours multiplied
by $44.22 per hour). We are revising the
PRA package currently approved under
OCN 0938–0753 with a November 30,
2011.
R. ICRs Regarding Clarification of and
Extension of Regional Preferred Provider
Organization Plan Single Deductible
Requirements to Local Preferred
Provider Plans (§ 422.101)
This section does not impose any new
information collection requirements.
S. ICRs Regarding Modifying the Current
PFFS Plan Explanation of Benefits
(EOB) Requirements (§ 422.216(d)(1))
Section 1852(k)(2)(c) of the Act and
§ 422.216(d)(1) require PFFS plans to
provide an EOB to enrollees for each
claim filed by the enrollee or the
provider that furnished the service. In
the interest of consistency for
beneficiaries and MA organizations, we
propose to amend § 422.216(d)(1) to
state that the EOB requirement for PFFS
plans would be consistent with the MA
EOB requirements of § 422.111(b)(12).
The standard EOB that we are currently
developing and piloting in CY 2012 for
most other MA plan types would
include the same information as
currently required for PFFS plans, as
well as plan MOOP cost limit
information. Adding this cross-reference
to § 422.216(d)(1) would provide
consistency in EOB requirements and
submission and approval of marketing
materials across plan types. Since the
pilot program is in progress and we
would not have finalized EOB
requirements during this rulemaking,
we propose that PFFS plans would
continue to furnish EOBs as they have
been, in accordance with
§ 422.216(d)(1), until we finalize and
implement EOB models for all MA
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63065
plans. While this proposed requirement
is subject to the PRA, the information
collection has been approved under
CMS form CMS–10349, the information
collection approved for the Part C EOB
at § 422.111(b)(12).
T. ICRs Regarding Authority To Deny
SNP Applications and SNPs Appeal
Rights (§ 422.500)
Our proposed amendments to
§ 422.500(a), § 422.501(a),
§ 422.501(c)(1)(iii), § 422.502(a) and
§ 422.502(c) would give CMS the
authority to deny SNP applications that
fail to demonstrate that the MAO meets
the requirements of § 422.2,
§ 422.4(a)(1)(iv); § 422.101(f); § 422.107,
if applicable; and § 422.152(g). The
burden associated with this requirement
is the time and effort required by an
MAO offering a SNP to complete a SNP
application. While these requirements
are subject to the PRA, we do not expect
the burden to change from the existing
burden estimate, as currently approved
under OCN 0938–0935, with a January
31, 2012 expiration date.
Our proposed amendments to
§ 422.641 provide the procedures for
making and reviewing certain contract
determinations while our proposed
amendments to § 422.660 establish the
circumstances under which an MA
organization may request a hearing
before a CMS hearing officer. We are
proposing these amendments to our
existing regulations so that each
applicant that we determine not to be
qualified to offer a SNP has the right to
request an administrative review of
CMS’ determination. The burden
associated with these requirements is
the time and effort of the SNP applicant
in developing and presenting their case
to a CMS hearing official, and ultimately
the CMS Administrator, to demonstrate
that they qualify to offer a SNP.
We expect the burden associated with
this provision to be incurred by the
small number of SNP applicants that we
expect would receive application
denials, and the small percentage of
denied applicants that we expect would
appeal our denial decision. We estimate
that the total annual hourly burden for
developing and presenting a case for us
to review is equal to the number of
organizations likely to request an appeal
multiplied by the number of hours for
the attorneys of each appealing SNP to
research, draft, submit, and present their
arguments to CMS. Based on SNP
application denials from contract year
2012, out of the approximately 400 SNP
applications received, 8 of these
applications were denied and all 8
denials were appealed. In contract year
2011, 8 SNP applications were denied
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Federal Register / Vol. 76, No. 196 / Tuesday, October 11, 2011 / Proposed Rules
and none of these denials were
appealed. Taking the average of the last
2 years, we estimate that approximately
4 denied applicants would appeal the
denial of the SNP application. We
further estimate that one attorney
working for 8 hours could complete the
documentation to be submitted for each
application denial, resulting in a total
burden estimate of 32 hours (8 hours x
4 SNP application denials = 32 hours).
The estimated annual cost to an MA
organization that has been denied to
offer a SNP associated with this
provision (assuming an attorney billing
$250 per hour) is $8,000 (32 hours x
$250 = $8,000) as detailed in Table 6.
We are revising the PRA package
currently approved under OCN 0938–
0935, with a January 31, 2012 expiration
date, to account for this burden.
U. ICRs Regarding Timeline for
Resubmitting Previously Denied MA
Applications (§ 422.501)
This section does not impose any new
information collection requirements.
V. ICRs Regarding Contract
Requirements for First Tier and
Downstream Entities (§ 422.504 and
§ 423.505)
We proposed to modify the
regulations at § 422.504(i) and
§ 423.505(i) by deleting the term
‘‘written arrangements’’ throughout and
in each instance replacing it with ‘‘each
and every contract,’’ thus ensuring that
the MAOs and Part D sponsors retain
the necessary control and oversight over
their delegated entities by requiring that
all contracts among those entities
specifically reference their obligations
to the sponsor.
Regarding ICRs, we are not imposing
any new reporting requirements. We are
simply clarifying a requirement with
which MAOs and Part D sponsors must
already comply concerning their
contracts with first tier and downstream
entities. We do not believe that our
proposal would result in an additional
burden; therefore, we have not
incorporated a burden increase in the
PRA section.
W. ICRs Regarding Valid Prescriptions
(§ 423.100 and § 423.104)
Our proposed definition of ‘‘valid
prescription’’ in § 423.100 and
requirement of a ‘‘valid prescription’’ in
§ 423.104 would codify our
longstanding policy of deferring to State
laws when applicable to determine
whether a prescription is valid such that
the drug may be eligible for Part D
coverage. We are not imposing any new
reporting requirements. Prescribers and
pharmacies remain subject to applicable
State laws regarding valid prescriptions.
Furthermore, private contracts regarding
Part D drugs (such as those between
MAOs or Part D sponsors and
pharmacies) likely also require valid
prescriptions. Given these realities, we
do not believe that codifying our
practice of limiting Part D coverage to
items dispensed upon applicable State
law requirements for valid prescriptions
could necessitate any more action than
that already required on the part of
stakeholders—be they prescribers taking
steps to ensure they write valid
prescriptions or MAOs, Part D sponsors,
PBMs, or pharmacies trying to ascertain
that prescriptions are valid.
X. ICRs Regarding Medication Therapy
Management Comprehensive
Medication Reviews and Beneficiaries in
LTC Settings (§ 423.153)
Our current regulation requires that
the comprehensive medication review
must include an interactive, person-toperson, or telehealth consultation
performed by a pharmacist or other
qualified provider, and may result in a
recommended medication action plan.
The proposed change to § 423.153
permits the sponsor to allow the
pharmacist or other qualified provider
to perform the medication review
without the beneficiary in cases when
the beneficiary is in an LTC facility and
cannot accept the sponsor’s offer of a
comprehensive medication review.
The burden associated with the
comprehensive medication reviews was
reflected in the approved 0938–0964
which is due to expire September 30,
2012. We believe this minor revision to
§ 423.153(d)(1)(vii)(B) has no effect on
that burden estimate.
Y. ICRs Regarding Coordination of Part
D Plans with Other Prescription Drug
Coverage (§ 423.458)
Since we are proposing a change to
simply strengthen our policy regarding
EGWP sponsor responsibilities, there is
no additional burden on the part of
sponsors or other entities associated
with the proposed regulation. This
section does not impose any new
information collection.
Z. ICRs Regarding Access to Covered
Part D Drugs Through Use of
Standardized Technology and National
Provider Identifiers (§ 423.120)
Currently, Part D sponsors report any
one of four prescriber identifiers on PDE
records. However, the inconsistent use
of identifiers that have not been
validated has hindered efforts to combat
fraud and abuse. Therefore, we
proposed to require that effective
January 1, 2013, Part D sponsors must
include valid, individual prescriber
NPIs as identifiers in PDEs submitted to
CMS. Since Part D sponsors are already
required to include a prescriber
identifier on Part D PDEs submitted to
CMS, there is no new collection of
information burden imposed by this
proposed regulation. Furthermore, this
proposed regulation does not impose
any new collection of information
burden on Medicare beneficiaries
enrolled in the Part D program with
respect to requests for reimbursement
they may submit.
TABLE 6—ESTIMATED FISCAL YEAR REPORTING RECORDKEEPING AND COST BURDENS
srobinson on DSK4SPTVN1PROD with PROPOSALS3
Regulation
sections
OMB
Control no.
Respondents
Responses
Burden per
response
(hours)
§ 417.427 ............
§ 422.500 ............
0938–0753
0938–0935
20
4
20
4
12
8
Total ............
....................
24
24
Hourly labor
cost of
reporting
($)
Total labor
cost
($)
Total
capital/
maintenance
costs
($)
240
32
44.22
250.00
10,613
8,000
N/A
N/A
10,613
8,000
272
....................
..................
N/A
18,613
Total
annual
burden
(hours)
..................
Total
cost
($)
Note: Estimates of costs and savings reflect scoring by the Centers for Medicare and Medicaid Services, Office of the Actuary, and 2010 wage
data from the U.S. Department of Labor, Bureau of Labor Statistics.
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Federal Register / Vol. 76, No. 196 / Tuesday, October 11, 2011 / Proposed Rules
Additional Information Collection
Requirements
This proposed rule imposes collection
of information requirements as outlined
in the regulation text and specified
above. However, this proposed rule also
makes reference to associated
information collection requirements that
are not discussed in the regulation text
contained in this document. The
following is a discussion of these
information collection requirements.
srobinson on DSK4SPTVN1PROD with PROPOSALS3
Independence of LTC Consultant
Pharmacists
As discussed in Section II.B.5, we are
considering changes which would
require each LTC facility to employ or
obtain the services of a licensed
pharmacist to provide consultation on
all aspects of pharmacy services in a
facility. These changes would further
require an LTC facility to employ or
directly or indirectly contract with a
licensed pharmacist who was
independent of the pharmacy located in
or under contract with the facility.
The changes under consideration
would require an independent licensed
pharmacist to review the drug regimen
of each resident at least once a month
and define independent to mean that
the licensed pharmacist must not be
employed, under contract, or otherwise
affiliated with the facility’s pharmacy, a
pharmaceutical manufacturer or
distributor, or any affiliate of these
entities
LTC facilities commonly contract
with an LTC pharmacy for consultant
pharmacist services. Because the
changes under consideration would
specifically require LTC facilities to
employ or directly or indirectly contract
with licensed pharmacists who are
independent of the pharmacy located in
or under contract with the facility, any
other pharmacy-related organization, or
pharmaceutical manufacturer or
distributor, each facility would need to
engage an independent consultant
pharmacist. The annual burden
associated with this requirement would
relate to developing and executing
contracts with independent consultant
pharmacists. Although all 15,713 LTC
facilities would need to provide the
services of an independent consultant
pharmacist, factors, such as the
existence of nursing home chains and
group purchasing organizations (GPOs),
would affect the actual number of
entities that would be engaged in the
process of employing or contracting the
LTC consultant pharmacists. For
purposes of determining the fiscal year
burden, we will assume that LTC
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facilities would have a contract with
one consultant pharmacist.
Based on our experience with LTC
facilities, we expect that complying
with the requirement under
consideration would primarily require
the involvement of the LTC facility’s
administrator with the assistance of a
facility physician, and the director of
nursing. We expect also that the
facility’s attorney would assist with
drafting the contract and reviewing any
revisions. We estimate that complying
with this requirement would require 16
annual burden hours for each facility to
execute a contract with an independent
consultant pharmacist at an estimated
cost of $1,466. Thus, although we
expect that many contracts will be
negotiated by the facilities’ parent
organizations or through GPOs, were
each LTC facility to directly engage in
the contracting process, it would require
251,408 burden hours per fiscal year (16
annual burden hours per LTC facility ×
15,713 LTC facilities) for all 15,713 LTC
facilities to comply with this
requirement at an estimated cost of
$23,035,258 ($1,466 estimated cost per
LTC facility × 15,713 LTC facilities).
After the first fiscal year, we estimate
that continued compliance with the
requirement under consideration would
require 2 annual burden hours (1 hour
each for the facility administrator and
attorney) for each facility to review the
contract and, if necessary execute an
updated contract with an independent
consultant pharmacist at an estimated
cost of $192. Thus, it would require
31,426 burden hours per fiscal year (2
annual burden hours per LTC facility ×
15,713 LTC facilities) for all 15,713 LTC
facilities to comply with this
requirement at an estimated cost of
$3,016,896 ($192 estimated cost per LTC
facility × 15,713 LTC facilities).
In addition to the LTC facility costs
associated with the direct compensation
of consultant pharmacists, facilities
with existing LTC pharmacy contracts
that include the pharmacy’s provision of
consultant pharmacist services would
potentially need to amend these
contracts. However, we do not know
and cannot estimate the number of LTC
facilities that would need to amend
their LTC pharmacy contracts. We
believe that our consultant pharmacist
contracting cost estimates are likely to
be sufficiently overstated to cover these
costs as well.
Although it is currently common for
LTC consultant pharmacists to perform
approximately 60 drug regimen reviews
in a day, we suspect that this rate may
be too high given our expectation that
independent consultant pharmacists
would conduct more thorough drug
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63067
regimen reviews, monitoring for drug
side effects and effectiveness. Therefore,
in the preamble, we are soliciting public
comment on best practices related to the
conduct of drug regimen reviews.
Pending public response to our
request for comment, we have estimated
the following costs related to the
requirement under consideration based
on an average time of 20 minutes to
perform a drug regimen review. Based
on the total number of LTC facilities
(15,713) and total beds (1.5 million), the
average LTC facility would have 100
residents. Therefore, we anticipate that
it would take each facility’s consultant
pharmacist 2,000 minutes (20 minutes
per review × 100 residents) or 33 hours
each month to perform the residents’
drug regimen reviews. Using an hourly
rate of $51.53 for independent
consultant pharmacist that includes
fringe benefits, we estimate 396 (33
hours per month × 12) annual burden
hours per facility at an annual cost of
$20,406 (396 × $51.53) for a total cost
of $320,637,592 ($20,406 per facility ×
15,713 LTC facilities). (Hourly rate
according to May 2010 wage data from
Bureau of Labor Statistics estimates
from the Occupational Employment
Statistics Survey).
V. Regulatory Impact Analysis
A. Statement of Need
The purpose of this final rule is to
make revisions to the MA Part C and
Part D programs to implement
provisions specified in the statute and
make other changes to the regulations
based on our continued experience in
the administration of the Parts C and
Part D programs. The proposed rule
would—(1) implement statutory
provisions; (2) strengthen beneficiary
protections; (3) exclude plan
participants that perform poorly; (4)
improve program efficiencies; and (5)
clarify program requirements.
B. Overall Impact
We have examined the impacts of this
rule as required by Executive Order
12866 on Regulatory Planning and
Review (September 30, 1993), Executive
Order 13563 on Improving Regulation
and Regulatory Review (January 18,
2011), the Regulatory Flexibility Act
(RFA) (September 19, 1980, Pub. L. 96–
354), section 1102(b) of the Social
Security Act, section 202 of the
Unfunded Mandates Reform Act of 1995
(March 22, 1995, Pub. L. 104–4),
Executive Order 13132 on Federalism
(August 4, 1999), and the Congressional
Review Act (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563
direct agencies to assess all costs and
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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). Executive Order 13563
emphasizes the importance of
quantifying both costs and benefits, of
reducing costs, of harmonizing rules,
and of promoting flexibility. A
regulatory impact analysis (RIA) must
be prepared for major rules with
economically significant effects ($100
million or more in any 1 year). This
proposed rule has been designated an
‘‘economically significant’’ rule under
section 3(f)(1) of Executive Order 12866.
Accordingly, we have prepared a
regulatory impact analysis that details
the anticipated effects (costs, savings,
and expected benefits), and alternatives
considered by proposed requirement.
Details regarding the burden associated
with the requirements of this proposed
regulation are located in the Collection
of Information section of this rule.
The RFA requires agencies to analyze
options for regulatory relief of small
entities, if a rule has a significant impact
on a substantial number of small
entities. For purposes of the RFA, small
entities include small businesses,
nonprofit organizations, and small
governmental jurisdictions. The great
majority of hospitals and most other
health care providers and suppliers are
small entities, either by being nonprofit
organizations or by meeting the SBA
definition of a small business (having
revenues of less than $7.0 million to
$34.5 million in any 1 year). Individuals
and States are not included in the
definition of a small entity. This
proposed rule does not directly impact,
health care providers, suppliers and
State governments since it amends the
current requirements for MA
organizations and Parts D sponsors, and
adds requirements for pharmaceutical
manufacturers consistent with the
statutory requirements of the new
manufacturer drug discount program.
Although this proposed rule requires
MA organizations to extend the IPPS
policy regarding non-payment for HACs
from non-contracted provider hospitals
to contracted and hospitals, we do not
expect this requirement to significantly
impact total hospital costs or revenues.
Part D sponsors and pharmaceutical
manufacturers, the entities that will
largely be affected by the provisions of
this rule, are not generally considered
small business entities. Part D sponsors
must meet minimum enrollment
requirements (5,000 in urban areas and
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1,500 in nonurban areas) and because of
the revenue from such enrollments,
these entities are generally above the
revenue threshold required for analysis
under the RFA. We determined that
there were very few Part D sponsors that
fell below the size thresholds for
‘‘’small’’ businesses established by the
Small Business Administration (SBA).
Currently, the SBA size threshold is $7
million in total annual receipts for
health insurers (North American
Industry Classification System, or
NAICS, Code 524114) and CMS has
confirmed that most Part D sponsors
have Part D receipts above the $7
million threshold. We also determined
that there were very few pharmaceutical
manufacturers participating in the
Medicare prescription program drug
discount program that fell below the
size thresholds for small businesses
using the SBA size threshold of 750
employees (NAICS code 32541). Total
jobs data for manufacturers support the
fact that the pharmaceutical industry is
dominated by large businesses.
While the NAICS lists 1,555 business
in the United States that represent the
pharmaceutical and medicine
manufacturing industry only 237 brand
manufacturers currently participate in
the program, and most exceed the 750
employee threshold. The majority of
smaller manufacturers are either generic
or specialty pharmaceutical
manufacturers that are unlikely to
participate in the Medicare discount
program. We reviewed some of the
employment statistics for the smaller
specialty pharmaceutical manufacturers
that participate in the discount program,
and found that the number of employees
typically exceeds the SBA threshold.
While a very small rural plan could
fall below the threshold, we do not
believe that there are more than a
handful of such plans. Similarly,
manufacturers are not normally
considered small business entities.
However, there are manufacturers that
have minimal revenue, primarily
because their emphasis is on the
development of products rather than
sales or they are not focused on large
markets. A fraction of MA organizations
and sponsors are considered small
businesses because of their non-profit
status. HHS uses as its measure of
significant economic impact on a
substantial number of small entities, a
change in revenue of more than 3 to 5
percent. We do not believe that this
threshold would be reached by the
proposed requirements in this proposed
rule because this proposed rule would
have minimal impact on small entities.
Therefore, an analysis for the RFA will
not be prepared because the Secretary
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has determined that this proposed rule
would not have a significant impact on
a substantial number of small entities.
In addition, section 1102(b) of the Act
requires us to prepare an 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 603 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
proposed rule would not have a
significant impact on the operations of
a substantial number of small rural
hospitals.
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 in any 1 year by State,
local, or tribal governments, in the
aggregate, or by the private sector of
$100 million in 1995 dollars, updated
annually for inflation. In 2011, that
threshold is approximately $136
million. This proposed rule is expected
to reach this spending threshold.
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.
Based on CMS Office of the Actuary
estimates, we do not believe that this
proposed rule imposes substantial direct
requirement costs on State and local
governments, preempts State law, or
otherwise has Federalism implications.
In Table 7, we estimate total costs to
the Federal government, States, Part D
sponsors, MA organizations,
pharmaceutical manufacturers and other
private sector entities as a result of
various provisions of this proposed rule.
The provisions with the most significant
costs (costs greater than $100 million
from FY 2013 through FY 2018) in this
proposed rule are the Medicare
Coverage Gap Discount Program, and
the Inclusion of Benzodiazepines, and
Barbiturates as Covered Part D drugs.
The total costs of the Medicare
Coverage Discount Program for the
periods beginning FY 2013 through FY
2018 are estimated to be $32.7 billion,
and the total costs of the inclusion of
benzodiazepines and barbiturates is $1.9
billion.
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Tables 8, 9, and 10 detail the costs by
cost-bearing entity. Specifically, Table 8
describes costs and savings to the
Federal government, Table 9 describes
costs to MA organizations and/or PDP
sponsors and third party entities, Table
10 describes costs to pharmaceutical
manufacturers, Table 11 describes
savings to States, and Table 12 describes
costs to LTC facilities.
As a result, when considering both
the costs and savings associated with
the provisions of this proposed rule, we
conclude with a net cost estimate of
$32.5 billion for FY 2013 through FY
2018.
C. Anticipated Effects
1. Medicare Coverage Gap Discount
Program
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a. Required Payment of Gap Discounts
We believe there is a cost to
manufacturers to pay the discounts to
beneficiaries who are in the coverage
gap. We estimate that aggregate
discounts from pharmaceutical
manufacturers would be $31.3 billion
during FY 2013 through FY 2018. That
estimate is based upon historical
patterns of claims dispensed during the
coverage gap and the dollar amount of
those claims trended forward by
enrollment growth and price increase.
In addition, the Discount Program
will increase Medicare costs by
additional use of more expensive brand
name drugs because of improved
beneficiary adherence as a result of the
lower out-of-pocket costs and increased
use of brand name rather than generic
drugs. We estimate that the Discount
Program would increase Medicare costs
by $1.4 billion during FY 2013 through
FY 2018.
Note that these estimated Medicare
costs do not include costs related to the
ACA provisions that revised the Part D
benefit structure to close the coverage
gap. These provisions revised the
coinsurance amount and reduced the
growth in the annual out-of-pocket
threshold. The costs to the Federal
government associated with these
provisions, as scored in the April 15,
2011 final rule (76 FR 21432), were
estimated to total $3.6 billion during FY
2011 through FY 2016.
b. Other Manufacturer Costs
We believe that manufacturers would
incur costs as a result of the
Agreement’s requirements for
manufacturers. For example,
manufacturers would need to analyze
and pay quarterly invoices, notify CMS
about labeler code changes, notify FDA
about NDC changes and maintain
records for potential audit by CMS.
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However, manufacturers already have
existing systems and perform these
activities as a result of their experience
with Medicaid and Tricare. We estimate
that analyzing and paying the quarterly
invoices would require 0.5 FTEs. We
estimate that the cost to manufacturers
would be $73,380 (annual salary for a
Pharmaceutical Manufacturing
Compliance Officer according to Bureau
of Labor Statistics) plus 48 percent for
fringe benefits and overhead × 0.5 FTE
× 240 manufacturers × 6 years for a total
cost of $78.2 million over the complete
period FY 2013 through FY 2018.
2. Payment Processes for Part D
Sponsors
We believe that there would be a
minor impact on Part D sponsors from
receiving and reconciling estimated
rebates advanced by CMS with
subsequent payments by manufacturers.
Part D sponsors have experience and
existing systems to accept and reconcile
funds with CMS, including a LICS
subsidy and a reinsurance subsidy. We
believe that there would be a marginal
increase in resources focused on
accounting and computer system
operations and maintenance. We
estimate that the additional resources
required would be 0.5 FTEs, on average,
per Part D sponsor. We estimate that the
total cost to Part D sponsors would be
$63,360 (annual salary for insurance
carrier compliance officer according to
Bureau of Labor Statistics) plus 48
percent for fringe benefits and overhead
× 0.5 FTE per Part D sponsor × 270 Part
D sponsors × 6 years for a total of $76.0
million over the complete period FY
2013 through FY 2018.
3. Provision of Applicable Discounts for
Applicable Drugs for Applicable
Beneficiaries
We believe that there would be a
minor impact on Part D sponsors as a
result of this provision. Part D sponsors
already implement systems to
adjudicate pharmacy claims. With the
exception of calculating and accounting
for gap discounts, those systems include
similar, if not identical, tasks as the
requirements in the proposed rule.
Further, we believe that the carrying
cost of distributing the discounts to
beneficiaries would be offset by
prospective payments from us as
previously described.
We believe that the additional
workload associated with this proposed
regulation would involve modifications
to existing computer programming to
account for the differences between the
Discount-related systems and the
traditional Part D program. In addition,
we expect there to be additional
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63069
reporting and recordkeeping. We
estimate that Part D sponsors would
increase resources the equivalent of 0.5
additional FTEs to accomplish these
tasks. We estimate the cost to Part D
sponsors would be at $63,360 (annual
salary for insurance carrier compliance
officer according to Bureau of Labor
Statistics) plus 48 percent for fringe
benefits and overhead × 270 Part D
sponsors × 6 years for a total cost of
$76.0 million over the complete period
FY 2013 through FY 2018.
4. Manufacturer Discount Payment
Audits and Dispute Resolution
The proposed regulation would
permit manufacturers to undertake
audits of the data used to calculate
quarterly invoices and to dispute the
invoices themselves. We believe that the
activities necessary for disputing
invoices and conducting data audits
would be accommodated by the
additional resources that we earlier
linked to the Medicare Coverage Gap
Agreement. Therefore, we are not
estimating an additional economic
impact to manufacturers from this
provision.
5. Beneficiary Dispute Resolution
The proposed rule would create the
right of beneficiaries to dispute gap
discounts using preexisting Part D
sponsor beneficiary dispute resolution
mechanisms. We believe that the
potential increase in beneficiary dispute
volume would not require additional
Part D sponsor resources. We have made
significant efforts to ensure that the data
used to calculate the discounts are
accurate. We believe that the accuracy
of the data, coupled with the
automation of the dispute calculation,
would result in accurate discounts that
would generate few beneficiary appeals
and would be accommodated within
existing resources.
6. Compliance Monitoring and Civil
Money Penalties
The proposed regulations would
allow CMS to impose penalties if a
manufacturer does not pay gap
discounts that are owed according to the
terms of the Agreement. We believe that,
in general, manufacturers would pay the
quarterly invoice according to the terms
within the agreement and other
guidance. Therefore, we believe that
there would be few instances where
manufacturers are levied a civil money
penalty. We assume that monetary
penalties could be levied on
approximately 0.03 percent of discounts
with $9.64 million of penalties over the
period FY 2013 through FY 2018.
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7. Termination of Discount Program
Agreement for Part D Program
We believe that we would rarely find
it necessary to terminate an agreement.
Upon termination, covered Part D drugs
of the manufacturers would be excluded
from the Part D program and the
manufacturer potentially would suffer a
significant reduction in revenue. We
have experience with similar programs
and believe that the potential reduction
of revenue would encourage
manufacturers to resolve our concerns.
This would tend to avoid terminations
and the associated fiscal effects.
Consequently, we estimate that there
would be no material costs to
manufactures due to potential
agreement terminations during the
period FYs 2013 through 2018.
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8. Inclusion of Benzodiazepines and
Barbiturates as Part D Drugs
In accordance with section 175 of the
MIPPA that amended section 1860D–
2(e)(2)(A) of the Act (42 U.S.C. 1395w–
102(e)(2)(A)),we propose to revise the
definition of Part D drug at § 423.100, by
including barbiturates when used for
the medical indications of epilepsy,
cancer, or a chronic mental health
disorder, and benzodiazepines class
drugs as covered under Part D effective
January 1, 2013.
Under this proposal, Part D plan
sponsors would be required to submit
information in their formulary files
indicating that they would cover these
drugs. We estimate that the cost to the
Federal Government to be $1.9 billion
over the 2013 through 2018 period. We
assumed the cost of benzodiazepines
and barbiturates as 0.4 percent of total
drug cost, and that the inclusion of both
these drugs would increase proportional
to the current overall Part D level.
9. Good Cause and Reinstatement Into a
Cost Plan
At § 417.460(c)(3) we are proposing to
allow beneficiaries enrolled in cost
plans the opportunity to be reinstated
into their plan if they can establish good
cause for nonpayment of cost-sharing.
CMS (or its contractor) would evaluate
cost-plan enrollees’ requests for
reinstatement based on good cause and
make the ‘‘good cause’’ determinations.
We anticipate that there would be no
cost impact on cost plans.
10. Determination of Actuarially
Equivalent Creditable Prescription Drug
Coverage
We are proposing to clarify our
regulations at § 423.884 to ensure that
other insurers or organizations
providing creditable prescription drug
coverage to their members calculate the
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actuarial value in accordance with the
RDS actuarial value calculation. Since
this requirement is a clarification to an
existing calculation already being
utilized by organizations providing
creditable coverage, we anticipate that
there would be no cost impact on these
organizations.
11. Who May File Part D Appeals With
the Independent Review Entity
The proposed changes to § 423.600
would allow prescribing physicians and
other prescribers to request IRE
reconsiderations on behalf of Part D
plan enrollees and the corresponding
proposed change to § 423.602(a)
specifies that the IRE must also notify
the prescribing physician or other
prescriber of its decision when the
prescriber makes the request on behalf
of the enrollee. The quantifiable burden
associated with these provisions is the
cost of processing Part D
reconsiderations (which includes
providing notice of the decision). While
this provision is expected to increase
the number of reconsiderations
processed and completed by the IRE, it
would also significantly reduce the
number of appeals that have to be
dismissed because the AOR form would
no longer be required in cases when a
prescriber is requesting a
reconsideration on behalf of an enrollee.
In 2010, the IRE dismissed
approximately 2,500 reconsideration
requests submitted by prescribers due to
the lack of a properly executed AOR
form, at an estimated cost of $215,000.
We estimate the cost of issuing a
substantive reconsideration decision in
cases that are currently subject to
dismissal to be $540,000, assuming an
estimated cost of about $216 per case.
However, this added cost would be
offset by the reduction in dismissed
cases, for an estimated annual cost
increase of $325,000 ($540,000 less
$215,000).
We also believe that eliminating the
AOR requirement will result in about a
15 percent increase in the total number
of IRE reconsiderations requests. Based
on the percentage of plan level appeals
currently filed by prescribers on behalf
of enrollees (approximately 85 percent),
we estimate an increase in prescriberinitiated IRE appeals, which would be
partially offset by a decrease in enrolleeinitiated IRE appeals. Based on 2010
reconsideration data, we estimate there
would be an additional 3,000
reconsideration requests, with an
estimated increase in annual costs of
about $648,000. The estimated
increased cost associated with issuing
substantive reconsideration decisions
(as opposed to dismissals) and the
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increased cost associated with the
increase in the reconsideration
workload, results in total estimated
annual increased costs to the Federal
government of approximately $973,000
or a total of $5.84 million from FYs 2013
through 2018.
The increase in reconsideration
requests would result in additional costs
to plan sponsors based upon additional
time and effort to assemble case files
and documentation associated with
these requests and shipping to the IRE
for processing. We assume a cost of
approximately $25.00 per
reconsideration to print, copy, compile,
and mail the case file to the IRE. This
results in an additional annual cost to
plan sponsors of approximately $75,000,
or a total of $450,000 from FYs 2013
through 2018.
12. Termination for Continued LowerThan-3-Star-Ratings
We have the authority under section
1857(c)(2) of the Act to terminate
contracts with a MAOs or a Medicare
PDP sponsor when we determine that
the organization has failed substantially
to carry out the contract or is carrying
out the contract in a manner
inconsistent with the efficient and
effective administration of the Part C or
D program. We believe that a sponsor
that fails to achieve a good rating for 3
consecutive years has demonstrated
consistently that it is unable or
unwilling to take corrective action to
improve its Part C or D performance.
Therefore, we are proposing to revise
the regulation to reflect our position that
3 years’ worth of low star ratings
constitutes a sufficient basis for CMS to
terminate a sponsor’s Part C or D
contract.
The changes made to this regulation
would not result in any additional costs.
MA organizations and Part D sponsors
already incur costs as a result of needing
to be in compliance with existing
regulatory requirements. This change
merely clarifies our authority to use
sustained poor performance rating
results (which are already being
produced annually) as a basis for
termination.
13. Exclusion for Sponsors of Contracts
Terminated for Cause
We have modified the past
performance review period described in
§ 422.502(b) and § 423.503(b) (by adding
new paragraphs at § 422.502(b)(3) and at
§ 423.503(b)(3) as well as § 422.502(b)(4)
and at § 423.503(b)(4)) to include among
the factors that may support a CMS
denial of a contract application those
CMS-initiated terminations or nonrenewals that became effective within
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the 38 months preceding the submission
of a new application.
The changes made to this regulation
would not result in any additional costs
since we are not imposing any new
requirements. Rather, we are merely
extending the period of time that we can
review for purposes of application
qualification determinations when an
organization has had a prior contract
terminated or non-renewed by CMS.
Thus, there are no additional costs
involved.
14. Independence of Long Term Care
Consultant Pharmacists
LTC facilities commonly contract
with an LTC pharmacy for consultant
pharmacist services, and it is our
understanding that LTC pharmacies
typically have been providing
consultant pharmacists to LTC facilities
at rates below fair market value. Because
the changes we are considering would
specifically require LTC facilities to
employ or directly or indirectly contract
with independent licensed pharmacists,
each facility would need to engage an
independent consultant pharmacist at
market rates. We understand that the
subsidized rates are typically $1 per
resident per month for the conduct of
each resident’s drug regimen review.
The cost for the independent consultant
pharmacists, therefore, would be
substantially higher that the subsidized
rates LTC facilities currently pay to the
LTC pharmacies. As a result, the cost
associated with complying with the
requirement under consideration would
be the increase in cost for the LTC
facility to pay the full market value for
an independent consultant pharmacist.
However, the increased costs would
be offset by the amount currently paid
by the 15,713 facilities to the LTC
pharmacies for the provision of
consultant pharmacist services. Based
on the rate of $1 per resident per month
and 1.5 million beds, we estimate the
total annual savings to be $18 million.
We estimate that although all 15,713
LTC facilities would need to provide the
services of an independent consultant
pharmacist, factors, such as the
existence of nursing home chains and
GPOs, would affect the actual number of
entities that would be engaged in the
process of employing or contracting the
LTC consultant pharmacists. For
purposes of determining the impact, we
will assume that LTC facilities would
have a contract with one consultant
pharmacist.
Based on our experience with LTC
facilities, we expect that complying
with the requirement under
consideration would primarily require
the involvement of the LTC facility’s
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administrator with the assistance of a
facility physician, and the director of
nursing. We expect also that the
facility’s attorney would assist with
drafting the contract and reviewing any
revisions. We estimate that complying
with this requirement would require 16
annual burden hours for each facility to
execute a contract with an independent
consultant pharmacist at an estimated
cost of $1,466. Thus, although we
expect that many contracts would be
negotiated by the facilities’ parent
organizations or through GPOs, were
each LTC facility to directly engage in
the contracting process, it would require
251,408 burden hours per fiscal year (16
annual burden hours per LTC facility ×
15,713 LTC facilities) for all 15,713 LTC
facilities to comply with the
requirement under consideration at an
estimated cost of $23,035,258 ($1,466
estimated cost per LTC facility × 15,713
LTC facilities).
After the first fiscal year, we estimate
that continued compliance with this
requirement would require 2 annual
burden hours (1 hour each for the
facility administrator and attorney) for
each facility to review the contract and,
if necessary execute an updated contract
with an independent consultant
pharmacist at an estimated cost of $192.
Thus, it would require 31,426 burden
hours per fiscal year (2 annual burden
hours per LTC facility × 15,713 LTC
facilities) for all 15,713 LTC facilities at
an estimated cost of $3,016,896 ($192
estimated cost per LTC facility × 15,713
LTC facilities).
In addition to the LTC facility costs
associated with the direct compensation
of consultant pharmacists, facilities
with existing LTC pharmacy contracts
that include the pharmacy’s provision of
consultant pharmacist services would
potentially need to amend these
contracts. However, we do not know
and cannot estimate the number of LTC
facilities that would need to amend
their LTC pharmacy contracts. However,
we believe that our consultant
pharmacist contracting cost estimates
are likely to be sufficiently overstated to
cover these costs as well.
Further, although it is currently
common for LTC consultant
pharmacists to perform approximately
60 drug regimen reviews in a day, we
suspect that this rate may be too high
given our expectation that independent
consultant pharmacists would conduct
more thorough drug regimen reviews,
monitoring for drug side effects and
effectiveness. Therefore, earlier in the
preamble, we solicited public comment
on best practices related to the conduct
of drug regimen reviews.
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63071
Pending public response to our
request for comment, we have estimated
the following costs related to the
requirement under consideration based
on an average time of 20 minutes to
perform a drug regimen review. Based
on the total number of LTC facilities
(15,713) and total beds (1.5 million), the
average LTC facility would have 100
residents. Therefore, we anticipate that
it would take each facility’s consultant
pharmacist 2,000 minutes (20 minutes
per review × 100 residents) or 33 hours
each month to perform the residents’
drug regimen reviews. Using an hourly
rate of $51.53 for independent
consultant pharmacist that includes
fringe benefits, we estimate 396 (33
hours per month × 12) annual burden
hours per facility at an annual cost of
$20,406 (396 × $51.53) for a total cost
of $320,639,478 ($20,406 per facility ×
15,713 LTC facilities). (Hourly rate
according to May 2010 wage data from
Bureau of Labor Statistics estimates
from the Occupational Employment
Statistics Services). As noted
previously, we expect that this amount
would be reduced by the $18 million
that the facilities would no longer pay
to the LTC pharmacies for consultant
pharmacist services. We recognize the
limitations associated with these
estimates and solicit public comment on
more detailed costs for this provision.
We expect that requiring independent
consultant pharmacists would result in
more appropriate prescribing, leading to
reductions in all of the following:
absolute number of drugs prescribed;
unnecessary use of high price, brand
name drugs; and use of antipsychotics
and other drugs that should be generally
avoided among older LTC residents.
One outcome of the use of fewer drugs
and fewer brand name drugs would be
lower drugs costs for LTC residents. For
residents whose cost of care is covered
by Medicare Part A per diem payments,
the lower drug costs would result in
direct savings to the facility. For LTC
residents whose drug costs are covered
by Medicaid, the savings from lower
drug costs would accrue to the Medicaid
programs for drug costs reimbursed on
a fee-for-service basis and/or to the
facility if drug costs are included in the
LTC per diem payment. For those
residents enrolled in a Medicare Part D
prescription drug plan, the savings
would be realized by the Part D
sponsors and Medicare.
To estimate the potential savings, we
used a comparison of the risk-adjusted
costs for community and LTC
beneficiaries. We found that LTC
beneficiary costs were 23 percent higher
than the costs for beneficiaries in the
community. We believe some of the cost
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differential is related to factors, such as
differences in dosage forms, which
would contribute to legitimately higher
LTC costs. However, we estimate that 50
percent of the difference in cost is
attributable to the overprescribing and
unnecessary use of higher cost, brand
name drugs resulting from the
contractual arrangements between the
LTC pharmacies and pharmaceutical
manufacturers. An analysis of 2008 Part
D data shows LTC beneficiary drug costs
in that year averaged $4520.9 Using the
23 percent differential, this average
would be $845 higher than the average
cost for a community beneficiary. We
expect the regulatory change we are
considering would reduce LTC costs by
50 percent of the differential or $423 per
beneficiary per year for a total reduction
of $360,396,000 ($423 per beneficiary ×
852,000 LTC beneficiaries).
Lower LTC drug costs would result in
lower LTC pharmacy revenues. We
would likewise expect that the LTC
pharmacies would experience a
reduction in rebates from the
pharmaceutical manufacturers;
however, we cannot quantify this loss.
We believe it is reasonable to presume
that the incentives present in nonindependent relationships with
pharmacies can influence prescribing
practices. As a result, we expect the
independent drug regimen reviews
under consideration would decrease
unnecessary use of antipsychotic drugs
and, therefore, save lives, although we
cannot quantify the number of lives that
would be saved. In addition to saving
lives, we expect more appropriate
prescribing and improved medication
oversight would lead to fewer
hospitalizations and treatments for
drug-related problems (such as
confusion, balance disorders and
complications caused by
pharmacological interactions), as well as
improved quality of life for LTC facility
residents. We cannot quantify the
number of hospitalizations or treatments
that would be averted or the associated
savings that would be realized.
However, we believe the benefits to
Medicare, Medicaid, other payers, and
the LTC residents that would result
from these changes are clear. Although
the specific information to reliably
quantify the all the costs and savings
associated with this requirement is not
available, we believe the benefits and
costs are offsetting. Again, given the
uncertainty surrounding these
estimates, we are soliciting comment
9 CMS, March 18, 2010 Part D Data Symposium
Presentations, LTC Pharmacy Price Index. Accessed
online at: https://www.cms.gov/PrescriptionDrugCov
GenIn/09_ProgramReports.asp#TopOfPage on June
17, 2010.
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regarding more detailed information on
the costs and savings associated with
this provision.
15. New Benefit Flexibility for Fully
Integrated Dual Eligible Special Needs
Plans (FIDE SNPs) (§ 422.102)
We estimate that our proposal
proposed at § 422.102(e) to allow certain
FIDE SNPs to offer additional
supplemental benefits beyond those
other MA plans—subject to CMS
approval, and as specified annually by
CMS—will result in aggregate savings to
both States and the Federal government
of approximately $19.0 million between
FY 2013 and FY 2018. These Federal
and State savings estimates are based on
our assumption that based on the
eligibility standards CMS establishes
approximately 34 FIDE SNPs will
qualify to participate in this initiative,
representing a total of approximately
115,000 enrollees in 2011.
While we acknowledge that
§ 1859(f)(1) of the Act extends the
authority for all SNPs, including FIDE
SNPs, to restrict enrollment to special
needs individuals through the 2013 MA
contract year, to be consistent with our
scoring of other provisions in this rule,
we report the impact of this proposed
provision from FYs 2013 through 2018.
We note that this impact may vary
depending on Congressional action.
We are basing our analysis of the
potential cost impacts of the FIDE SNP
benefit flexibility initiative on our
experience with HMO integrated care
model demonstrations for MedicareMedicaid dual eligibles and on our
observation of enrollment increases that
resulted from these demonstrations.
From 1997 through 2006, we
conducted demonstrations that pooled
Medicare and Medicaid payments to the
Minnesota Senior Health Options
(MSHO), Wisconsin Health Partnership
Program (WPP) and Massachusetts
Senior Care Organization (MSCO)
HMOs to deliver Medicare and
Medicaid-covered primary, acute, and
long-term care services to voluntarily
enrolled elderly dual eligibles. The
plans participating in the demonstration
were responsible for delivering
Medicaid community care services,
developing managed care coordination
models, and arranging for the delivery
of the full range of acute and long-term
care services and developing care
coordination models—characteristics
that we believe are essential for the
provision of comprehensive, integrated
care. The demonstrations also used
Medicaid funds to cover community
care services (for example, personal
care, homemaking, transportation,
personal emergency response systems,
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home-delivered meals, adaptive
equipment, home modifications,
incontinence supplies, and respite care
that support independence and avoid
inappropriate institutionalization). At
the start of the demonstrations, concern
that marketing additional supplemental
benefit offerings would attract a
significant number of new enrollees-led
us to cap enrollment in the
demonstration. However, States in the
demonstration never came close to
reaching this enrollment cap. The only
major enrollment increase was in 2006,
when the demonstration programs were
converted to D–SNPs, and the D–SNPs
were able to passively enroll enrollees.
The MSHO program, the most
extensively analyzed integrated care
demonstration program for dual eligible
enrollees, received a Medicare and a
Medicaid capitation payment for the
provision of acute and long-term care
services, but reimbursed providers
directly for nursing home services on a
fee-for-service basis. Therefore, Federal
and State government costs under this
capitated program were not related to
actual utilization, with the exception of
fee-for-service nursing home costs.
Utilization data from the MSHO
demonstration show that MSHO
enrollees had significantly fewer shortstay nursing home admissions as
compared to dual eligibles both within
and outside of the MSHO demonstration
area.
We believe that plans have incentives
to generate higher rebates to fund these
extra supplemental benefits and have
assumed that they will reduce their
margins by 1 percent. Taking into
account expected growth rates in bids
and benchmarks, and projected rebate
shares, we expect that FIDE SNPs will
reduce their bids by 2 percent on
average—1 percent medical and 1
percent margin—as a result of our
proposed changes to § 422.102(e).
Applying the per-capita savings to the
projected FIDE SNP enrollment, we
project $17.1 million savings to the
Medicare program for the 6-year period
between FY 2013 and FY 2018.
We also believe that, when delivered
in a prudent manner, the additional
benefits that FIDE SNPs would be
permitted to offer under our proposed
changes to § 422.102(e) would allow
some high risk patients to remain in
their home and out of institutions. We
estimate that the new flexibility will
generate modest reductions in Medicare
program expenditures, due to a 1
percent savings of Medicare-covered
medical benefits stemming from these
enhanced flexibilities.
Additionally, based on the evidence
from the studies in Massachusetts,
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Minnesota, and Wisconsin
demonstrations, we believe that the
flexibility for FIDE SNPs to offer
additional supplemental benefits will
modestly impact nursing facility
utilization rates and Medicaid costs.
Our assumptions regarding the
effectiveness of these services in
preventing nursing facility entry are
consistent with assumptions we have
used for other legislative and regulatory
proposals aimed at reducing nursing
facility use and encouraging home and
community based long term care.
Applying the per-capita savings to the
projected FIDE SNP enrollment, we
estimate Federal and State Medicaid
savings of $1.79 million for the 6-year
period between FY 2013 and FY 2018 as
a result of this proposed provision.
16. Application of the Medicare
Hospital-Acquired Conditions and
Present on Admission Indicator Policy
to MA Organizations (§ 422.504)
We propose to require MAOs to
reduce reimbursements for Part A
hospital services for contract provider
hospitals for serious events that could
be prevented through evidence-based
guidelines, in accordance with the
HACs and POA policy that is currently
required for hospitals paid under the
Original Medicare IPPS. MA
organizations are already required to
pay non-contract provider hospitals the
amount that they would receive for
services under Original Medicare,
including any applicable reductions for
HACs. This requirement is outlined in
the MA Payment Guide for Out of
Network Payments. We do not believe
that extending this requirement would
impose any new administrative burden
on MA plans because plans already
have the operational systems in place
that would facilitate implementation of
the requirement. In the FY 2009 IPPS
final rule, published August 19, 2008
(73 FR 49075), we estimated a total
savings for Medicare of $21 million for
FYs 2009, 2010 and 2011, and $22
million for FYs 2012 and 2013. These
estimates already included savings that
would accrue to the MA program as a
result of reductions in annual MA
payment rates. We do not expect a
significant amount of new savings to be
derived as a result of the requirements
under this proposed rule. Therefore, we
estimate that this provision would have
negligible impact.
17. Establishment and Application of
Daily Cost-Sharing Rate as Part of Drug
Utilization Management and Fraud,
Abuse, and Waste Control Program
A previous review of 2009 PDE data
suggested that just under 32 percent of
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approximately 78.6 million first fills for
maintenance medications are not
refilled by Medicare Part D enrollees.
Maintenance medications are used for
diseases when the duration of therapy
can reasonably be expected to exceed 1
year, and we assume for purposes of
estimating savings to the Part D program
that the lack of refills indicates the
prescribed medications were
discontinued. The estimated total cost
of these discontinued medications was
approximately $1.6 billion (70 percent
for brands and 30 percent for generics).
However, this analysis did not
distinguish between community and
institutional settings. Thus, to
determine the costs of discontinued
medications in community settings
only, we reduced the total costs by
approximately13 percent in accordance
with CMS data on gross drug costs in
the Part D program in 2009 in the
community and institutional settings to
remove a proportion representing longterm care expenses. Consequently, the
adjusted total estimated cost of 2009
community-based discontinued first
fills of chronic medications was
estimated at roughly $1.4 billion.
In light of the cost of discontinued
medications, and in accordance with
section 1860D–4(c) of the Act, we are
proposing to revise § 423.153(b)(4) to
provide that a Medicare Part D sponsor’s
drug utilization management program
must establish and apply a daily costsharing rate . Under this proposal, the
enrollee and his or her prescriber
generally would decide if a medication
supply of less than 30 days would be
appropriate, and if so, the copayment
for the medication would be prorated by
the Part D sponsor based on the days
supply dispensed.
Specifically, we propose to define
‘‘daily cost-sharing rate’’ in § 423.100.
‘‘Daily cost-sharing rate’’ would mean,
as applicable, the established monthly—
• Copayment under the enrollee’s
Part D plan divided by 30 or 31 and
rounded to the nearest lower dollar
amount or to another amount but in no
event to an amount which would
require the enrollee to pay more for a
month’s supply of the prescription than
the enrollee would have paid if a
month’s supply had been dispensed; or
• Coinsurance rate under the
enrollee’s Part D plan applied to the
ingredient cost of the prescription for a
month’s supply divided by 30 or 31.
In addition, we are specifically
proposing to revise § 423.104 by adding
a paragraph (i) to state that a Part D
sponsor is required to provide its
enrollees access to daily cost-sharing
rate in accordance with § 423.154(b)(4).
We also propose adding paragraph (4)(i)
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63073
to § 423.153(b) to require a Part D
sponsor to establish and apply a daily
cost-sharing rate to a prescription
presented by an enrollee at a network
pharmacy for a covered Part D generic
or brand drug that is dispensed for a
supply of less than 30 days, multiplied
by the days supply actually dispensed,
plus any dispensing fee in the case of
coinsurance. We further propose adding
paragraph (4)(i)(A) to limit the
requirement to drugs that are in the
form of solid oral doses paragraph
(b)(4)(i)(B) would further limit the
requirement to a prescription that is for
an initial fill of a new medication, is
intended to allow the enrollee to
synchronize refill dates of multiple
drugs, or the prescription is dispensed
in accordance with § 423.154 (which
sets forth the requirements placed upon
Part D sponsors with respect to
dispensing of prescription drugs in
long-term care facilities effective
January 1, 2013). Paragraph (b)(4)(ii)
would state that the requirements of
(b)(4)(i) would not apply to antibiotics
or drugs dispensed in their original
container as indicated in the Food and
Drug Administration Prescribing
Information or are customarily
dispensed in their original packaging to
assist patients with compliance.
Potential savings of a daily costsharing rate requirement on Part D
sponsors would come from a reduction
of the estimated $1.4 billion in costs
previously noted which would be offset
by some additional dispensing fees. In
order to estimate the savings, we must
make assumptions about how many first
fills would be dispensed in quantities of
less than a 30 day supply, and what the
average quantity of such first fills would
be. It should be pointed out that these
assumptions are highly uncertain
because it is very difficult to predict the
beneficiaries’ behavioral response.
Having noted this caveat, we assume 20
percent of first fills in 2013 will be for
a supply of less than 30 days, trending
to 50 percent by 2018, and that the
average of such fills would be for a 15
day supply. Assuming 32 percent of
these first fills are discontinued, we
estimate the potential savings to the Part
D program to be $140 million in 2013
alone, and over $2.4 billion by 2018.
The additional dispensing fees
previously noted are associated with
medications that begin with a trial fill
and are continued therapeutically. For
instance, an enrollee who receives less
than a month’s supply, but continues
taking the medication, would be
expected to obtain ongoing refills of 30
to 90 days. Over the course of a year, the
expectation is that there will be up to 13
dispensing events over a period of 1
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year of refills related to such enrollee
with respect to the medication initially
begun with a trial fill. However, for
those enrollees who discontinue a
medication, there will be savings for the
enrollee by not having paid the full
monthly copayment for that particular
medication, as well as for sponsors and
the Federal government to the extent
that a full month’s supply of medication
was not covered by the Part D program.
With respect to more initial fills of
brand drugs, we believe there may be
additional but less significant costs for
more initial fills of brand drugs that
enrollees previously declined to try due
to the cost of a full month’s supply,
when the brand drugs are known for
significant side effects and/or to be
frequently poorly tolerated.
Aside from these additional costs, we
expect the other regulatory impact costs
imposed by the proposed provisions to
be the one-time costs for the industry to
reprogram PBM systems to apply a daily
cost-sharing rate. In this regard, we
estimate that the number of hours for 28
PBMs and 12 plan organizations to
reprogram their systems to establish and
apply a daily copayment rate is 80 hours
per processor or plan organization, for a
total one-time burden of 3,200 hours (40
× 80). The estimated cost associated
with such reprogramming is the
estimated number of hours multiplied
by the estimated hourly rate of $145.37,
which equals $465,184.
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18. Technical Corrections to Enrollment
Provisions
We are proposing technical changes
that correct cross-references that should
have been updated in previous
rulemaking. These proposals are
technical corrections and do not
represent a burden for small businesses,
rural hospitals, States, or the private
sector.
19. MA and Part D Disclosure
Requirements to Cost Contract Plans
We are proposing to extend the
disclosure requirements in § 422.111
and § 423.128 to cost contract plans.
Our regulations at § 422.111 and
§ 423.128 require MA organizations and
Part D sponsors to disclose to enrollees,
at the time of enrollment and annually
thereafter (in the form of an annual
notice of change/evidence of coverage,
or ANOC/EOC mailing), certain detailed
information about plan benefits, service
area, provider and pharmacy access,
grievance and appeal procedures,
quality improvement programs, and
disenrollment rights and
responsibilities. They also require the
provision of certain information about
request and establish requirements with
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respect to dissemination of explanations
of benefits, customer service call
centers, and Internet websites.
For each entity, we estimate that it
will take 12 hours to develop and
submit the required information. This
includes 1 hour to read CMS’ published
instructions, 6 hours to generate the
standardized document, 1 hour to
submit the materials, and 4 hours to
print and disclose information to the
beneficiaries. We estimate 20 cost
contractors would be affected annually
by this requirement, resulting in a total
annual burden of 240 hours. We
estimate, based on an hourly wage of
$29.88 (hourly salary for a compliance
officer/cost estimator according to
Bureau of Labor Statistics) plus 48
percent for fringe benefits and overhead,
that this requirement would result in a
total annual burden of $10,613 rounded,
approximately $0.01 million per year.
20. Denials of SNP Applications and
SNP Appeal Rights
We estimate that this proposed
provision would have a minimal impact
resulting from administrative costs
incurred by the small number of SNP
applicants that we expect will receive
application denials and the small
percentage of denied applicants that we
expect would appeal our denial
decision. For those organizations that do
appeal the denial of their SNP
application, a minimal number of
professional staff working over a short
period of time would be required to
prepare and present the organization’s
appeal.
We estimate that the total annual
hourly burden for developing and
presenting a case for us to review is
equal to the number of organizations
likely to request an appeal multiplied by
the number of hours for the attorneys of
each appealing SNP to research, draft,
submit, and present their arguments to
CMS. Based on SNP application denials
from contract year 2012, out of the
approximately 400 SNP applications
received, 8 of these applications were
denied and all 8 denials were appealed.
In contract year 2011, 8 SNP
applications were denied and none of
these denials were appealed. Taking the
average of the last two years, we
estimate that approximately 4 denied
applicants would appeal the denial of
the SNP application. We further
estimate that 1 attorney working for 8
hours could complete the
documentation to be submitted for each
application denial, resulting in a total
burden estimate of 32 hours (8 hours ×
4 SNP application denials). The
estimated annual cost to an MA
organization that has been denied to
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offer a SNP associated with this
provision (assuming an attorney billing
$250 per hour) is $8,000 (32 hours ×
$250) or when rounded, to
approximately $ 0.01 million per year.
21. Contract Requirements for First Tier
and Downstream Entities in
Subcontracts
The regulations at § 422.504(i) and
§ 423.505(i) require MA organizations
and Part D sponsors to require all of the
first tier, downstream, and related
entities to which they have delegated
the performance of certain Part C or D
functions to agree to certain obligations.
We believe that the most legally
effective and direct way to ensure that
the MAOs and Part D sponsors retain
the necessary control and oversight over
their delegated entities is by requiring
all contracts among those entities to
specifically reference each party’s
obligations to the sponsor, as
enumerated in § 422.504(i) and
§ 423.505(i). Thus, the regulation has
been changed to address this need.
Specifically, we deleted the term
‘‘written arrangements’’ throughout
§ 422.504(i) and § 423.505(i) and in each
instance replace it with ‘‘each and every
contract.’’
The proposed changes would not
result in any additional costs since these
types of contracts are already in use and
required by regulation. Thus, the
strengthening of the language to ensure
that the sponsor is responsible for
downstream entities is merely clarifying
an existing requirement and eliminating
potential loopholes.
22. Valid Prescriptions
In the § 423.100 proposed definition
of ‘‘valid prescription’’ and the
§ 423.104 requirement of a ‘‘valid
prescription,’’ we would codify our
longstanding policy of deferring, when
applicable, to State law to determine
whether a prescription is valid such that
the prescribed drug may be eligible for
Part D coverage.
The changes made to this regulation
would not result in any additional costs.
Not only have we expected that
prescriptions would be valid under
applicable State law since the beginning
of the Part D program, but also
prescribers and pharmacies remain
subject to applicable State laws
regarding valid prescriptions.
Furthermore, private contracts regarding
Part D drugs (such as those between
MAOs or Part D sponsors and
pharmacies) likely also require valid
prescriptions. In light of the above
realities, it is not unreasonable to
presume that MAOs, Part D sponsors,
PBMs, and pharmacies are already
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taking steps to write prescriptions that
are valid under applicable State law.
Accordingly, we do not believe
codifying the valid prescription
requirement would change current
practices.
23. Medication Therapy Management
Comprehensive Medication Reviews
and Beneficiaries in LTC Settings
Current regulations require that
unless a beneficiary is in an LTC setting,
the comprehensive medication review
must include an interactive, person-toperson, or telehealth consultation
performed by a pharmacist or other
qualified provider, and may result in a
recommended medication action plan.
Section 10328 of the Affordable Care
Act amended section 1860D–4(c)(2) of
the Act to require that all targeted
beneficiaries be offered an interactive
CMR. Accordingly, the proposed change
to § 423.153 permits the sponsor to
allow the pharmacist or other qualified
provider to perform the medication
review without the beneficiary in cases
when the beneficiary is in an LTC
facility and is cognitively impaired and
thus, cannot accept the sponsor’s offer
of an interactive CMR . We anticipate
that the impact of this proposed revision
will clarify the CMR process for
sponsors by allowing pharmacists and
other qualified providers to ascertain
whether the patient is willing and able
to participate in an interactive CMR
before administering it. We do not
anticipate any costs or savings
associated with this change.
24. Coordination of Part D Plans With
Other Prescription Drug Coverage
The proposed regulation would be
explicit that sponsors, when providing
Part D benefits to enrollees of EGWPs,
are subject to the same requirements as
sponsors providing Part D coverage in
the individual market unless such
requirements are explicitly waived.
Since this change is being made to
clarify an existing policy, we do not
anticipate any effect on costs or savings
on any specific entity.
25. Access to Covered Part D Drugs
Through Use of Standardized
Technology and National Provider
Identifiers (NPIs)
The inconsistent use of identifiers by
prescribers on Part D claims has
hindered some of our efforts to combat
fraud and abuse activities. Therefore, we
propose to require, effective January 1,
2013, that Part D sponsors include only
valid, individual prescriber NPIs as
identifiers in PDEs submitted to CMS.
Specifically, § 423.120(c) sets forth the
responsibilities of Part D plan sponsors
with regard to the use of standardized
technologies and compliance with the
HIPAA standards at 45 CFR 162.1102.
We propose to add a new paragraph
(5)(A) that would require Part D plan
sponsors to submit PDE records to CMS
that contain an active and valid
individual prescriber NPI. Proposed
new paragraph (c)(5)(B) would also
codify current guidance and require that
a Part D plan sponsor not reject a claim
from a network pharmacy solely on the
basis that it does not contain an active
and/or valid NPI. With respect to
requests for reimbursement submitted
directly by Medicare beneficiaries,
proposed paragraph (5)(C) would
prohibit a Part D sponsor from making
reimbursement payment to the
beneficiary dependent upon the
sponsor’s acquisition of the prescriber
NPI, and would further prohibit a Part
D sponsor from seeking recovery of the
payment from the beneficiary if the
sponsor were unable to retrospectively
acquire an active and valid individual
NPI.
The impact associated with these
proposed regulations is: (1) the annual
cost for PBMs and plan organizations to
conduct or contract with a commercial
vendor or with network pharmacies to
provide prescriber ID validation
services; or (2) the annual cost required
for PBMs and plan organizations to
build their own databases of current,
valid prescriber NPIs, and to recontract
with network pharmacies to support
retroactive review of the prescription to
obtain the current, valid prescriber ID.
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We estimate a one-time burden for an
estimated 28 PBMs and 12 plan
organizations to negotiate and execute a
contract with a commercial vendor to
provide prescriber ID validation services
to be negligible, particularly since PBMs
and plan organizations typically have
in-house counsel or law firms on
retainer. The estimated annual cost of
such a contract is $160,000, which is the
mid-point of estimates we have seen for
such a contract. Therefore, the estimated
annual cost of such a contract for 40
PBMs and plan organizations is
$6,400,000 (40 × 160,000). However,
preliminary results of an analysis of
2011 PDEs submitted to date conducted
by a contractor to CMS indicate that
approximately 90 percent contain valid
individual NPIs. Therefore, this
estimation should be reduced to reflect
that a certain amount of cost associated
with prescriber ID validation has
already been absorbed by the industry.
Therefore, we assume that 80 percent of
the industry needs to acquire additional
prescriber ID validation capacity in
order to submit only PDEs that contain
active and valid individual prescriber
NPIs to CMS. Thus, the estimated
annual cost to PBMs and plan
organizations of a contract with a
commercial vendor to perform
prescriber NPI validation services is
$5,120,000 (6,400,000 × 0.8).
With respect to PBMs and plan
organizations that decide to contract
with network pharmacies for prescriber
validation services or build their own
databases of valid prescriber NPIs, we
assume that they will only do so if the
cost is equal to or less than contracting
with a commercial vendor for such
services, and therefore, no estimation of
the costs to do so is necessary.
Since approximately 90 percent of
PDEs currently submitted to CMS
already contain valid individual NPIs,
and an estimated 95 percent of
physicians have an NPI, we estimate
negligible costs associated with any PDE
that cannot be submitted to CMS for
lack of an NPI.
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TABLE 7—ESTIMATED AGGREGATED COSTS TO THE HEALTH CARE SECTOR BY PROVISION FOR FISCAL YEARS 2013
THROUGH 2018
Medicare Coverage Gap Agreement.
Payment Processes for Part D
Sponsors.
Provision of Applicable Discounts
Compliance and Civil Money Penalties.
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Fiscal year ($ in millions)
Total
($ in millions)
FYs 2013–2018
Regulation
section(s)
Provision(s)
2013
2014
2015
2016
2017
2018
§ 423.2315 ...
3,990.00
4,520.00
5,090.00
5,710.00
6,350.00
7,050.00
32,710.00
§ 423.2320 ...
12.66
12.66
12.66
12.66
12.66
12.66
75.96
§ 423.2325 ...
§ 423.2340 ...
12.66
1.18
12.66
1.32
12.66
1.48
12.66
1.67
12.66
1.88
12.66
2.11
75.96
9.64
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Federal Register / Vol. 76, No. 196 / Tuesday, October 11, 2011 / Proposed Rules
TABLE 7—ESTIMATED AGGREGATED COSTS TO THE HEALTH CARE SECTOR BY PROVISION FOR FISCAL YEARS 2013
THROUGH 2018—Continued
Regulation
section(s)
Provision(s)
Fiscal year ($ in millions)
2013
2014
2015
2016
2017
2018
Total
($ in millions)
FYs 2013–2018
Other Manufacturer Costs .............
Inclusion of Benzodiazepines and
Barbiturates as Part D Covered
Drugs.
Who May File Part D Appeals with
the Independent Review Entity.
Benefit Flexibility for Fully Integrated Dual Eligible Special
Needs Plans (FIDE SNPs).
Establishment and Application of
Daily Cost-Sharing Rate as Part
of Drug Utilization Management
and Fraud, Abuse and Waste
Control Program.
Add language specific to SNP applications to give CMS the clear
authority to deny SNP applications and to give SNPs appeal
rights.
Apply MA and Part D disclosure
requirements to cost contract
plans.
Access to covered Part D drugs
through the use of standardized
technology and NPIs.
Developing and executing contracts with independent consultant pharmacists.
§ 423.2315 ...
§ 423.100 .....
13.03
200.00
13.03
280.00
13.03
310.00
13.03
340.00
13.03
370.00
13.03
410.00
78.18
1,910.00
§ 423.600 .....
1.05
1.05
1.05
1.05
1.05
1.05
6.30
§ 422.102 .....
¥5.97
¥3.48
¥2.30
¥2.41
¥2.32
¥2.41
¥18.89
¥139.50
¥240.00
¥330.00
¥430.00
¥550.00
¥690.00
¥2,379.50
§ 422.500 .....
0.01
0.01
0.01
0.01
0.01
0.01
0.06
§ 417.427 .....
0.01
0.01
0.01
0.01
0.01
0.01
0.06
§ 423.120 .....
5.12
5.12
5.12
5.12
5.12
5.12
30.72
§ 483.60 .......
23.03
3.02
3.02
3.02
3.02
3.02
38.13
Total Impact ($ in millions) .....
......................
4,113.28
4,605.40
5,116.74
5,666.82
6,217.12
6,817.26
32,536.62
§ 423.104
§ 423.153.
Note: Estimates of costs and savings reflect scoring by the Centers for Medicare and Medicaid Services, Office of the Actuary, and 2010 wage
data from the U.S. Department of Labor, Bureau of Labor Statistics.
TABLE 8—ESTIMATED COSTS AND SAVINGS TO THE FEDERAL GOVERNMENT BY PROVISION FOR FYS 2013 THROUGH
2018
Regulation
section(s)
Provision(s)
Fiscal year ($ in millions)
2013
2014
2015
2016
2017
2018
Total
($ in millions)
(FYs 2013–2018)
srobinson on DSK4SPTVN1PROD with PROPOSALS3
Medicare Coverage Gap Agreement.
Inclusion of Benzodiazepines and
Barbiturates as Part D Covered
Drugs.
Who May File Part D Appeals with
the Independent Review Entity.
Establishment and Application of
Daily Cost-Sharing Rate as Part
of Drug Utilization Management
and Fraud, Abuse and Waste
Control Program.
Benefit Flexibility for Fully Integrated Dual Eligible Special
Needs Plans (FIDE SNPs).
§ 423.2315 ...
180.00
200.00
230.00
270.00
280.00
280.00
1,440.00
§ 423.100 .....
200.00
280.00
310.00
340.00
370.00
410.00
1,910.00
§ 423.600 .....
0.97
0.97
0.97
0.97
0.97
0.97
5.84
¥140.00
¥240.00
¥330.00
¥430.00
¥550.00
¥690.00
¥2,380.00
§ 422.102 .....
¥5.85
¥3.36
¥2.17
¥2.28
¥2.18
¥2.28
¥18.12
Total ($ in millions) .................
......................
235.12
237.61
208.8
178.69
98.79
¥1.31
957.7
§ 423.104
§ 423.153.
Note: Estimates of costs and savings reflect scoring by the Centers for Medicare and Medicaid Services, Office of the Actuary, and 2010 wage
data from the U.S. Department of Labor, Bureau of Labor Statistics.
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Federal Register / Vol. 76, No. 196 / Tuesday, October 11, 2011 / Proposed Rules
TABLE 9—ESTIMATED COSTS TO MA ORGANIZATIONS AND PART D SPONSORS BY PROVISION FOR FYS 2013 THROUGH
2018
Regulation
section(s)
Provision(s)
Costs per fiscal year ($ in millions)
2013
2014
2015
2016
2017
Total
(FYs 2013–2018)
($ in millions)
2018
Payment Processes for Part D
Sponsors.
Provision of Applicable Discounts
Who May File Part D Appeals with
the Independent Review Entity.
Establishment and Application of
Daily Cost-Sharing Rate as Part
of Drug Utilization Management
and Fraud, Abuse and Waste
Control Program.
Apply MA and Part D Disclosure
Requirements to Cost Contract
Plans.
Add language specific to SNP applications to give CMS the clear
authority to deny SNP applications and to give SNPs appeal
rights.
Access to covered Part D drugs
through the use of standardized
technology and NPIs.
§ 423.2320 ...
12.66
12.66
12.66
12.66
12.66
12.66
75.96
§ 423.2325 ...
§ 423.600 .....
12.66
0.08
12.66
0.08
12.66
0.08
12.66
0.08
12.66
0.08
12.66
0.08
75.96
0.48
§ 423.104
§ 423.153.
0.5
0
0
0
0
0
0.5
§ 417.427 .....
0.01
0.01
0.01
0.01
0.01
0.01
0.06
§ 422.500 .....
0.01
0.01
0.01
0.01
0.01
0.01
0.06
§ 423.120 .....
5.12
5.12
5.12
5.12
5.12
5.12
30.72
Total ($ in millions) .................
......................
31.04
30.54
30.54
30.54
30.54
30.54
183.74
Note: Estimates of costs and savings reflect scoring by the Centers for Medicare and Medicaid Services, Office of the Actuary, and 2010 wage
data from the U.S. Department of Labor, Bureau of Labor Statistics.
TABLE 10—ESTIMATED COSTS TO MANUFACTURERS BY PROVISION FOR FISCAL YEARS 2013 THROUGH 2018
Cost per fiscal year
($ in millions)
Regulation
section(s)
Provision(s)
2013
2014
2015
2016
2017
2018
Total
(FYs 2013–2018)
($ in millions)
Medicare Coverage Gap Agreement.
Other Manufacturer Costs .............
Compliance and Civil Money Penalties.
§ 423.2315 ...
3,810.00
4,320.00
4,860.00
5,440.00
6,070.00
6,770.00
31,270.00
§ 423.2315 ...
§ 423.2340 ...
13.03
1.18
13.03
1.32
13.03
1.48
13.03
1.67
13.03
1.88
13.03
2.11
78.19
9.64
Total ($ in millions) .................
......................
3,824.31
4,334.35
4,874.51
5,454.70
6,084.91
6,785.14
31,357.83
Note: Estimates of costs and savings reflect scoring by the Centers for Medicare and Medicaid Services, Office of the Actuary, and 2010 wage
data from the U.S. Department of Labor, Bureau of Labor Statistics.
TABLE 11—ESTIMATED SAVINGS TO STATES BY PROVISION FOR FISCAL YEARS 2013 THROUGH 2018
Regulation
section(s)
Provision(s)
Benefit Flexibility for Fully Integrated Dual Eligible Special
Needs Plans.
§ 422.102 .....
Savings per fiscal year ($ in millions)
2013
0.12
2014
2015
0.12
0.13
2016
2017
0.13
0.14
2018
Total Savings
(FYs 2013–2018)
($ in millions)
0.13
0.77
Note: Estimates of costs and savings reflect scoring by the Centers for Medicare and Medicaid Services, Office of the Actuary, and 2010 wage
data from the U.S. Department of Labor, Bureau of Labor Statistics.
srobinson on DSK4SPTVN1PROD with PROPOSALS3
TABLE 12—ESTIMATED COSTS TO LTC FACILITIES BY PROVISION FOR FISCAL YEARS 2013 THROUGH 2018
Regulation
section(s)
Provision(s)
Developing and executing contracts with independent consultant pharmacists.
§ 483.60 .......
Cost per fiscal year ($ in millions)
2013
23.03
2014
2015
3.02
3.02
2016
3.02
2017
3.02
2018
3.02
Total
(FYs 2013–2018)
($ in millions)
38.13
Note: Estimates of costs and savings reflect scoring by the Centers for Medicare and Medicaid Services, Office of the Actuary, and 2010 wage
data from the U.S. Department of Labor, Bureau of Labor Statistics.
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Federal Register / Vol. 76, No. 196 / Tuesday, October 11, 2011 / Proposed Rules
D. Expected Benefits
1. Medicare Coverage Gap Discount
Program Agreement
The proposed agreement would
codify many of the operational
parameters of the Discount Program.
The intention of the agreement and the
parameters within is to guide the
distribution of an approximately 50
percent discount in beneficiary OOP
cost for prescriptions filled while the
beneficiary is in the coverage gap. We
believe that a well-implemented
Discount Program would increase
beneficiary adherence to medication
regimens that can improve their health
and lower their pharmaceutical costs.
2. Payment Processes for Part D
Sponsors
The proposed rule would require
CMS to facilitate distribution of the gap
discount to beneficiaries by requiring
that CMS provide an interim discount
payment to Part D sponsors. That
interim discount payment would be
subsequently reconciled against
manufacturer payments for discounts
provided to beneficiaries. This
provision would help Part D sponsors
maintain operations with minimal, if
any, effect on cash flow. This would
help Part D sponsors distribute the gap
discount to beneficiaries.
3. Provision of Applicable Discounts on
Applicable Drugs for Applicable
Beneficiaries
The proposed rule would require Part
D sponsors to calculate the discount that
should be provided to beneficiaries in
the coverage gap. Beneficiaries would,
therefore, have minimal need to
determine when they qualify for the gap
discount and when they are no longer
in the gap. In addition, Part D sponsors
would likely automate discount
calculations, potentially reducing errors
and the need for beneficiaries to file an
appeal that challenges the discount
amount.
srobinson on DSK4SPTVN1PROD with PROPOSALS3
4. Manufacturer Discount Payment
Audits and Dispute Resolution
We believe that the audit and dispute
programs would both contribute to the
stable operation of the Discount
Program. Both programs are intended to
provide an equitable means to resolve
manufacturer concerns, enhance
program integrity and, therefore,
program stability. A predictable
discount program would help
beneficiaries plan their finances and
health care costs over time.
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5. Beneficiary Dispute Resolution
The traditional Medicare program
provides a means for beneficiaries to
challenge Medicare decisions to ensure
they receive needed benefits. We believe
that beneficiaries would gain the same
benefit from a dispute resolution
program associated with the Discount
Program. Further, extending the existing
Part D beneficiary dispute resolution
process to the Discount Program would
reduce the need for beneficiaries to
learn a new set of dispute procedures.
6. Compliance Monitoring and Civil
Money Penalties
Our expectation is that manufacturers
would generally comply with the terms
of the agreement and the Discount
Program. We understand that
manufacturers may still err and that
such errors can disrupt program
operations. Our intention is to use
compliance actions, including penalties,
to encourage reduced manufacturer
errors and maintain a predictable
program for beneficiaries.
7. Termination of Agreement
We believe that CMS’ ability to
terminate the Agreement upon extreme
non-compliance by manufacturers will
likely encourage manufacturers to
address issues quickly. We believe that
prompt resolution of significant
concerns would create minimal
disruption to the program and
inconvenience of beneficiaries.
8. Inclusion of Benzodiazepines and
Barbiturates as Part D Covered Drugs
Part D coverage of Benzodiazepines
and Barbiturates potentially improves
beneficiary access to these drugs and
reduces beneficiary out-of-pocket costs
for non-Part D covered drugs. In
addition, State costs are reduced in
those States that have been paying for
these drugs.
9. Determination of Actuarially
Equivalent Creditable Prescription Drug
Coverage
By changing the actuarial value
calculation for creditable coverage to
not include the additional value of gap
coverage consistent with the RDS
actuarial value, this provision protects
Medicare beneficiaries from being
subject to a LEP when they leave RDS
and other forms of prescription drug
coverage and enroll into a Part D plan.
10. Who May File Part D Appeals With
the Independent Review Entity
The proposed changes to § 423.600
would allow physicians and other
prescribers to request IRE
reconsiderations on behalf of Part D
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plan enrollees. This provision would
reduce the burden on enrollees and
their prescribers because they will no
longer have to submit a properly
executed AOR form in cases where the
prescriber wishes to request a
reconsideration on behalf of a Part D
plan enrollee. Additionally, physicians
and prescribers are in the best position
to anticipate and provide the
appropriate medical documentation
needed to support coverage for Part D
enrollees’ medications. We believe that
by allowing a physician or other
prescriber to request a reconsideration
on the enrollee’s behalf, it will further
improve an enrollee’s access to the Part
D appeals process and assist enrollees in
obtaining coverage of medically
necessary medications.
11. Termination for Lower-Than-3-StarPerformance Ratings
The benefit of this change is that we
would leverage the annual performance
ratings to remove from the MA and Part
D programs poor performing
organizations, thereby strengthening the
programs and protecting Medicare
beneficiaries.
12. Exclusion for Sponsors of Contracts
Terminated for Cause
The benefit of this change is that we
would ensure that organizations that
demonstrated extremely poor
performance have their performance
history reviewed as part of the
application process for an appropriate
amount of time, thereby strengthening
the programs and protecting Medicare
beneficiaries.
13. Independence of Long Term Care
Consultant Pharmacists
The various contractual arrangements
that are common among LTC facilities,
LTC pharmacies, LTC consultant
pharmacists these pharmacies provide
to nursing facilities, and pharmaceutical
manufacturers and/or distributors may
create incentives for the LTC consultant
pharmacist to recommend
overprescribing, thus creating health
and safety risks for residents. We expect
that an LTC consultant pharmacist who
is independent of any affiliations with
the nursing facilities’ LTC pharmacies,
pharmaceutical manufacturers and
distributors, or any affiliates of these
entities would be better able to comply
with the changes we are considering
that would require objective and
unbiased consultant pharmacist
monitoring and evaluation. That is,
nursing facilities would use a qualified
professional pharmacist to conduct drug
regimen reviews and make medication
recommendations based solely on what
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is in the best interests of the resident.
We believe the change under
consideration—severing the relationship
between the consultant pharmacist and
the LTC pharmacy, pharmaceutical
manufacturers and distributors, and any
affiliated entities—would protect the
safety of all LTC residents and improve
the quality of their care and their well
being.
We expect that the Medicare program,
State Medicaid programs, as well as
other payers, would realize savings as a
result of independent pharmacists
performing drug regimen reviews that
would be uncompromised by any
financial incentives. By reducing
overprescribing and unnecessary use of
high cost brand name drugs, the
requirement we are considering would
result in lower drug costs to Medicare,
Medicaid and other payers. We
anticipate that this requirement would
likewise curb the use of drugs that are
inappropriate and should generally be
avoided among older LTC residents,
leading to further savings to all payers
from fewer hospitalizations and
treatments for drug-related problems,
such as pharmacologic interactions.
14. Benefit Flexibility for Fully
Integrated Dual Eligible Special Needs
Plans (FIDE SNPs)
Part D-SNPs that fully integrate all
Medicare and Medicaid covered
services, including long-term care
services, can enable dual eligible
beneficiaries to remain in their homes
and avoid Medicaid-financed stays in
LTC institutions. We believe that
allowing certain FIDE SNPs to offer
supplemental benefits beginning
contract year 2013 would advance our
overall goal of better integrating care for
dual eligible beneficiaries, keeping
beneficiaries at risk of
institutionalization in their homes,
lowering dual eligible beneficiaries’
utilization of health services, and
lowering costs for the Medicaid and
Medicare programs.
srobinson on DSK4SPTVN1PROD with PROPOSALS3
15. Application of the Medicare
Hospital-Acquired Conditions and
Present on Admission Indicator Policy
to MA Organizations
Although we do not expect a
significant amount of new savings to
result from this requirement under this
proposed rule, the benefit for Medicare
Advantage enrollees and to Medicare
will come from increased quality,
efficiency of care, and continued
incentives for hospitals to eliminate
medical errors and reduce Medicare
expenditures for poor quality or
unnecessary care.
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16. Establishment and Application of
Daily Cost-Sharing Rate as Part of Drug
Utilization Management and Fraud,
Abuse, and Waste Control Program
Requiring Part D sponsors to establish
and apply a daily cost-sharing rate as
previously described facilitates the
ability of Medicare Part D enrollees to
obtain trial fills of medications,
particularly those with higher costsharing and that are known to
frequently be poorly tolerated. As noted
previously, we believe trial fills would
result in the avoidance of unused drugs,
reduce drug costs, diminish the
environmental issue caused by disposal
of unused medications, and reduce
opportunities for criminal and
substance abuse caused by diversion of
unused medications, all of which are
growing concerns in the United States.
While there may be additional waste
generated by multiple fills when
medications are continued after a trial
fill or synchronized (for example, more
plastic bottles and paper inserts,
additional trips to pharmacies), we
believe the harmful effects on the
environment from unused drugs,
particularly the biological implications,
likely have a much greater impact on
the environment than additional
recyclables.
With respect to synchronization of
medication refills specifically, we also
note that at least one study supports the
notion that synchronization may assist
enrollees in adhering to prescription
treatment regimens that involve
multiple prescriptions. In addition, we
believe the ability to synchronize
medications would be convenient for
those enrollees who take advantage of
the opportunity and their prescribers, by
enabling fewer trips to the pharmacy
and fewer prescription requests of
prescribers by enrollees through the
ability to consolidate pharmacy trips
and prescriber office visits and phone
calls.
63079
them make best choices for their health
care needs.
18. Denial of SNP Applications and
SNPs Appeal Rights
Our intent in proposing this provision
is to give us the explicit authority to
deny SNP applications that demonstrate
that the applicant does not meet the
requirements to operate a SNP, which
have been incorporated into the MA
application. This proposed change
would ensure that the only MAOs that
are able to offer a SNP are those that
meet CMS’ SNP specific requirements
and are capable of serving the
vulnerable special needs individuals
who enroll in SNPs, thereby
strengthening the program and
protecting Medicare beneficiaries.
Additionally, to ensure a fair and
comprehensive review of these SNP
applications, we propose to allow
applicants who have been determined
unqualified to offer a SNP the right to
an administrative review process.
19. Clarification of Contract
Requirements for First Tier and
Downstream Entities
This clarification ensures that the
MAOs and Part D sponsors retain the
necessary control and oversight over
their delegated entities, thereby
strengthening the programs and
protecting Medicare beneficiaries.
20. Valid Prescriptions
By removing any doubt as to the
appropriate source of law to consult
when determining whether a
prescription is valid, this regulation
would benefit federal law enforcement
agencies. We do not believe, however,
that there is a quantifiable monetary
value to easing prosecutions in this
manner.
17. Apply MA and Part D Disclosure
Requirements to Cost Contract Plans
21. Medication Therapy Management
Comprehensive Medication Reviews
and Beneficiaries in LTC Settings
We believe that our requirement that
cost contract plans disclose to enrollees,
at the time of enrollment and annually
thereafter (in the form of an annual
notice of change/evidence of coverage,
or ANOC/EOC mailing), certain detailed
information about plan benefits, service
area, provider and pharmacy access,
grievance and appeal procedures,
quality improvement programs, and
disenrollment rights and
responsibilities, and an explanation of
benefits would ensure that the
beneficiaries have information to help
The expected benefits of the proposed
revisions to § 423.153 are that Part D
sponsors will continue to be required to
offer all targeted beneficiaries in LTC
facilities the opportunity to participate
in an interactive CMR, but in the event
the beneficiary is cognitively impaired
and unable either to respond to the offer
or to participate in an interactive CMR,
the pharmacist or qualified provider
may proceed with a CMR that is
informative for the beneficiary’s
prescriber and/or caregiver without
interacting with the beneficiary .
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Federal Register / Vol. 76, No. 196 / Tuesday, October 11, 2011 / Proposed Rules
22. Coordination of Part D Plans With
Other Prescription Drug Coverage
We are clarifying the regulation at
§ 423.458 regarding the application of
waivers to EGWPs. We expect that this
clarification will benefit Medicare
beneficiaries enrolled in such plans by
ensuring the same protections as those
Medicare beneficiaries enrolled in
individual market Part D plans where
such protections have not been
explicitly waived.
23. Access to covered Part D Drugs
Through Use of Standardized
Technology and National Provider
Identifiers (NPIs)
In addition to supporting our fraud
and abuse activities, accurate data on
prescriptions through the consistent use
of valid NPIs on PDEs allows us to serve
beneficiaries when using data in various
initiatives whose purpose is to foster
higher quality and more efficient
coordination of care for individuals and
groups of individuals.
E. Alternatives Considered
srobinson on DSK4SPTVN1PROD with PROPOSALS3
1. Affordable Care Act and MIPPA
Provisions
We did not consider alternatives for
the following provisions, as their
implementation was mandated by the
Affordable Care Act and MIPPA:
• Inclusion of Benzodiazepines and
Barbiturates
• Pharmacy Benefit Manager’s
Transparency Requirements
2. Coverage Gap Discount Program
The Affordable Care Act mandated
implementation of the Coverage Gap
Discount Program and further specified
that the associated manufacturer
discounts had to be made available at
point-of-sale. An alternative model for
point-of-sale administration of the
discount would involve a third party
administrator directly adjudicating the
discount payment to pharmacies. In this
model, the pharmacy would submit the
Part D claim to the Part D sponsor and
receive information on the response that
would direct the pharmacy to bill the
third party for applicable claims.
However, while this model initially
showed promise, neither the current
HIPAA electronic pharmacy claims
billing standard nor the next HIPAA
approved version of the billing standard
could support the transfer of
information from the Part D sponsor that
would be necessary to specify the
appropriate claims and appropriate
discount amounts to be billed to the
third party administrator, or allow for
accurate coordination of benefits among
payers.
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3. Determination of Actuarially
Equivalent Creditable Prescription Drug
Coverage
The alternative would be to continue
to calculate the actuarial value of
creditable prescription drug coverage
including the value of additional
coverage provided in the coverage gap.
However, this approach would mean
Medicare beneficiaries enrolled in
programs receiving RDS may be subject
to a late enrollment penalty because the
value of their RDS coverage would be
less than the actuarial value of
creditable coverage that includes the
value of additional coverage in the gap.
4. Who May File Part D Appeals With
the Independent Review Entity
As previously mentioned, the
proposed changes to § 423.600 and
§ 423.602 would allow physicians and
other prescribers to request IRE
reconsiderations on behalf of Part D
plan enrollees. We considered
maintaining the status quo, which
would require physicians and other
prescribers to obtain an AOR form in
order to request a reconsideration with
the IRE on behalf of their enrollees.
However, given our program experience
since the inception of the Part D
program, we realize that this approach
results in an undue burden on both
enrollees and their physicians or
prescribers and can create an
unintended barrier to enrollees
accessing the appeals process.
Consequently, we are proposing the
change previously highlighted in this
proposed rule.
5. Termination or Non-Renewal of a
Medicare Contract Based on Poor Plan
Performance Ratings
We did not consider alternatives for
this regulation since it is necessary to
ensure compliance.
6. Exclusion for Sponsors of Contracts
Terminated for Cause
We considered keeping the look-back
period at 14 months, but we determined
it would be insufficient to accomplish
our needs and thus a longer look-back
period was necessary. We also
considered longer look-back periods,
but we deemed them to be to excessive.
7. New Benefit Flexibility for Fully
Integrated Dual Eligible Special Needs
Plans (FIDE SNPs)
We considered whether limiting the
application of the flexibilities afforded
under our proposed § 422.102(e) to FIDE
SNPs would be the most appropriate
way of implementing this proposed
benefits flexibility, or whether we
should extend the additional
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supplemental benefit flexibility to other
SNP types. Because FIDE SNPs are
required to offer LTC supports and
services, a regulatory approach that
limits benefits flexibility to FIDE SNPs,
as opposed to all D–SNP types, may be
more consistent with the objective of
keeping beneficiaries in their homes and
lowering costs for the Medicare and
Medicaid programs. We also considered
whether we should consider extending
these flexibilities to all qualified FIDE
SNPs, or whether we should limit these
flexibilities to those qualified FIDE
SNPs that currently enroll only fullbenefit dual eligible beneficiaries. We
believe that dual eligible beneficiaries
who receive full State Medicaid benefits
would have the most to gain from fullyintegrated Medicare-Medicaid plan
benefit offerings that include additional
Medicare supplemental benefits.
8. Establishment and Application of
Daily Cost-Sharing Rates as Part of Drug
Utilization Management and Fraud,
Abuse, and Waste Control Program
We considered proposing a
requirement similar to the Fifteen Day
Initial Script program introduced in
Maine in the summer of 2009. In this
program, specific medications that were
identified by the MaineCare program
with high side effect profiles, high
discontinuation rates, or frequent dose
adjustments, were phased in by class
and must be dispensed in a 15-day
initial script to ensure cost effectiveness
without ‘‘wasting’’ or ‘‘discarding’’ of
used medications. We have learned
through representatives of the program
that MaineCare has achieved overall
savings for the two consecutive state
fiscal years with respect to both brand
and generic drugs through this program,
despite the additional dispensing fees.
The representatives have also reported
that there was very good acceptance of
the program and very little confusion
upon implementation. While we
acknowledge the savings benefits of the
MaineCare approach, we believe that
leaving the decision to obtain less than
a month’s supply of a prescription with
the enrollee and his or her prescriber
and pharmacist may be better suited for
the Medicare Part D program, but we
seek specific comment on this belief.
9. Clarification of Contract
Requirements for First Tier and
Downstream Entities
We did not consider alternatives for
this regulation since it is necessary to
ensure compliance and is the most
effective ‘‘no-cost’’ means to achieving
it.
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10. Valid Prescriptions
We did not consider alternatives for
this regulation as it reflects existing
State laws.
a non-interactive CMR performed by a
pharmacist or other qualified provider.
11. Medication Therapy Management
Comprehensive Medication Reviews
and Beneficiaries in LTC Settings
The alternative to this revision would
be to have the pharmacist or provider
attempt to perform an interactive CMR
with an LTC resident who is not capable
of participating. However, by requiring
an interactive CMR to be offered to all
targeted beneficiaries residing in LTC
our proposal gives these beneficiaries,
who typically have chronic conditions
that are managed by medication, the
opportunity to participate in the CMR
and comprehend the medication action
plan as a result of the CMR. In cases
when the beneficiary is unable to accept
the offer of a non-interactive CMR, the
beneficiary will still benefit from having
We considered the alternative, which
was to remain silent in regulation.
However, we believe that in order to
facilitate beneficiary protections it is
better to be clear that, unless waived,
the same Medicare rules apply to
sponsors of EWGPs as they do to
sponsors of individual market plans.
This ensures Medicare beneficiaries
enrolled in EGWPs receive the same
patient protections as beneficiaries
enrolled in individual market plans.
12. Coordination of Part D Plans with
Other Prescription Drug Coverage
13. Access to Covered Part D drugs
Through Use of Standardized
Technology and National Provider
Identifiers (NPIs)
We considered requiring prescribers
to enroll in Medicare in order for their
prescriptions to be covered by the Part
D program, but are concerned about the
potential impact of such a requirement
on enrollee access to needed
medications. We also considered
permitting any 1 of 4 types of prescriber
identifiers to be submitted on PDEs, but
we believe this option as not in line
with Congressional intent regarding the
use of NPIs as provider identifiers.
F. Accounting Statement
As required by OMB Circular A–4
(available at https://
www.whitehouse.gov/omb/circulars/
a004/a-4.pdf), in Table 13, we have
prepared an accounting statement
showing the classification of the
expenditures, costs, and savings
associated with the provisions of this
proposed rule for FY 2013 through
2014.
TABLE 13—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED COSTS AND SAVINGS, FROM FY 2013 TO FY 2018
[$ in Millions]
Units discount rate
Category
Year dollar
Period covered
7%
3%
TRANSFERS
Annualized Monetized Transfers .....................................................................
From Whom To Whom? ..................................................................................
2011
$168.6
$163.6
FYs 2013–2018.
Federal Government to MA Organizations and Part D Sponsors
Annualized Monetized Transfers .....................................................................
2011
From Whom To Whom? ..................................................................................
¥$0.1
¥$0.1
FYs 2013–2018.
States to MA Organizations
COSTS (All other provisions)
Annualized Costs to MA organizations and Part D Sponsors ........................
Annualized Costs to Manufacturers .................................................................
Annualized Costs to LTC Facilities ..................................................................
2011
2011
2011
In accordance with the provisions of
Executive Order 12866, the Office of
Management and Budget reviewed this
proposed rule.
Reporting and recordkeeping
requirements.
List of Subjects
Administrative practice and
procedure, Emergency medical services,
Health facilities, Health maintenance
organizations (HMO), Health
professionals, Medicare, Penalties,
Privacy, Reporting and record keeping
requirements.
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42 CFR Part 417
Administrative practice and
procedure, Grant programs-health,
Health care, Health insurance, Health
maintenance organizations (HMO), Loan
programs-health, Medicare, and
Reporting and recordkeeping
requirements.
42 CFR Part 422
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$25.9
4,126.6
6.6
FYs 2013–2018.
FYs 2013–2018.
FYs 2013–2018.
PART 417—HEALTH MAINTENANCE
ORGANIZATIONS, COMPETITIVE
MEDICAL PLANS, AND HEALTH CARE
PREPAYMENT PLANS
42 CFR Part 423
For the reasons set forth in the
preamble, the Centers for Medicare &
Medicaid Services proposes to amend
42 CFR chapter IV as set forth below:
Administrative practice and
procedure, Health facilities, Health
maintenance organizations (HMO),
Medicare, Penalties, Privacy, and
$26.4
4,162.1
6.9
1. The authority citation for part 417
continues to read as follows:
Authority: Sec. 1102 and 1871 of the Social
Security Act (42 U.S.C. 1302 and 1395hh),
secs. 1301, 1306, and 1310 of the Public
Health Service Act (42 U.S.C. 300e, 300e–5,
and 300e–9), and 31 U.S.C. 9701.
Subpart K—Enrollment, Entitlement,
and Disenrollment under Medicare
Contract
2. Section § 417.422 is amended by
revising paragraph (d) to read as
follows:
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Eligibility to enroll in an HMO or
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(d) During an enrollment period of the
HMO or CMP, completes the HMO’s or
CMP’s application form or another
CMS-approved election mechanism and
gives whatever information is required
for enrollment;
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3. Subpart K is amended by adding a
new § 417.427 to read as follows:
§ 417.427 Extending MA and Part D
Program Disclosure Requirements to
Section 1876 Cost Contract Plans.
(a) The procedures and requirements
relating to disclosure in § 422.111 and
§ 423.128 apply to Medicare contracts
with HMOs and CMPs under section
1876 of the Act.
(b) In applying the provisions of
§ 422.111 and § 423.128, references to
part 422 and part 423 of this chapter
must be read as references to this part,
and references to MA organizations and
Part D sponsors as references to HMOs
and CMPs.
4. Section 417.432 is amended by
revising paragraph (d) to read as
follows:
such reinstatement is a change in the
individual’s circumstances subsequent
to the involuntary disenrollment for
non-payment of premiums.
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Subpart L—Medicare Contract
Requirements
§ 417.492
[Amended]
6. Section 417.492 is amended as
follows:
A. In paragraph (a)(1)(i) the ‘‘;’’ is
removed and a ‘‘; and’’ is added in its
place.
B. In paragraph (a)(1)(ii) the ‘‘;’’ is
removed and a ‘‘.’’ is added in its place.
C. Removing paragraph (a)(1)(iii).
D. Removing paragraph (b)(1)(iii).
Subpart U—Health Care Prepayment
Plans
7. Section 417.801 is amended by
revising paragraph (d)(ii) to read as
follows:
§ 417.801 Agreements between CMS and
health care prepayment plans.
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(d) Application form. The individual
who is converting must complete an
application form or another CMSapproved election mechanism as
described in § 417.430(a).
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5. Section 417.460 is amended by
adding new (c)(3) and (c)(4) to read as
follows:
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(d) * * *
(ii) The HCPP is not in substantial
compliance with the provisions of the
agreement, applicable CMS regulations,
or applicable provisions of the Medicare
law, including the following:
(A) Provision and documentation of
adequate access to providers.
(B) Compliance with CMS
requirements concerning provision of
data and maintenance of records.
(C) Compliance with financial
requirements specified at § 417.806; or
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§ 417.460 Disenrollment of beneficiaries
by an HMO or CMP.
PART 422—MEDICARE ADVANTAGE
PROGRAM
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8. The authority citation for part 422
continues to read as follows:
§ 417.432
Conversion of enrollment.
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(c) * * *
(3) Good cause and reinstatement.
When an individual is disenrolled for
failure to pay premiums or other charges
imposed by the HMO or CMP for
deductible and coinsurance amounts for
which the enrollee is liable, CMS may
reinstate enrollment in the plan,
without interruption of coverage, if the
individual shows good cause for failure
to pay and pays all overdue premiums
within 3 calendar months after the
disenrollment date. The individual must
establish by a credible statement that
failure to pay premiums was due to
circumstances for which the individual
had no control, or which the individual
could not reasonably have been
expected to foresee.
(4) Exception for reinstatement. A
beneficiary’s enrollment in the plan will
not be reinstated if the only basis for
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Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and
1395hh).
Subpart B—Eligibility, Election, and
Enrollment
§ 422.60
[Amended]
9. In § 422.60, paragraph (c)(1) is
amended by removing the crossreference ‘‘§ 422.80’’ and adding in its
place the cross-reference ‘‘§ 422.2262’’.
Subpart C—Benefits and Beneficiary
Protections
10. Section 422.100 is amended by
adding a new paragraph (l) to read as
follows:
§ 422.100
General requirements.
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(l) Coverage of DME. MA
organizations—
(1) Must cover and ensure enrollees
have access to all categories of DME
covered under Part B; and
(2) May, within specific categories of
DME, limit coverage to certain preferred
DME products or brands, provided the
MA organization ensures all of the
following:
(i) Its contracts with DME suppliers
ensure that enrollees have access to all
preferred DME products or brands.
(ii) Its enrollees have access to all
medically necessary non-preferred DME
products or brands.
(iii) It provides for an appropriate
transition process for new enrollees
during the first 90 days of their coverage
under its MA plan, during which time
the MA organization will do the
following:
(A) Ensure the provision of a
transition supply of non-preferred DMEsupplies.
(B) Provide for the repair of nonpreferred DME-items.
(iv) It makes no negative changes to
its preferred DME products or brands
during the plan year.
(v) It treats denials of non-preferred
DME products or brands as organization
determinations subject to § 422.566.
(vi) It discloses DME coverage
limitations and beneficiary appeal rights
in the case of a denial of a non-preferred
DME product or brand as part of the
description of benefits required under
§ 422.111(b)(2) and § 422.111(h).
11. Section 422.101 is amended by
revising paragraph (d)(1) to read as
follows:
§ 422.101
benefits.
Requirements relating to basic
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(d) * * *
(1) Single deductible. MA regional
and local PPO plans, to the extent they
apply a deductible as follows:
(i) Must have a single deductible
related to all in-network and out-ofnetwork Medicare Part A and Part B
services.
(ii) May specify separate deductible
amounts for specific in-network
Medicare Part A and Part B services, to
the extent these deductible amounts
apply to the single deductible amount
specified in paragraph (d)(1)(i) of this
section.
(iii) May waive from the single
deductible described in paragraph (i) for
other plan-covered items and services.
(iv) Must waive from the single
deductible described paragraph (d)(1)(i)
all Medicare-covered preventive
services (as defined in § 410.152(l)).
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12. Section 422.102 is amended by
adding a new paragraph (e) to read as
follows.
§ 422.102
Supplemental benefits.
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(e) Supplemental benefits for certain
fully-integrated dual eligible special
needs plans. Subject to CMS approval,
and as specified annually by CMS,
certain fully-integrated dual eligible
special needs plans may offer additional
supplemental benefits, consistent with
the requirements of this part, beyond
those other MA plans may offer where
CMS finds that the offering of such
benefits could better integrate care for
the dual eligible population.
13. Section 422.111 is amended by
adding a new paragraph (i) to read as
follows:
§ 422.111
Disclosure requirements.
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(i) Provision of information required
for access to covered services. MA plans
must issue and reissue (as appropriate)
a member identification card that its
enrollees may use to access covered
services under the plan. The card must
comply with standards established by
CMS, and must include, at a minimum
the following:
(1) For a MA PPO or PPFS plan, a
statement that Medicare Limiting
Charges apply.
(2) Web link to plan’s website.
(3) Customer service number.
(4) Individual identification number
for each enrollee, to clearly identify that
they are a member of the plan.
Subpart E—Relationships with
Providers
14. Section 422.216 is amended by
revising paragraph (d)(1) to read as
follows:
§ 422.216 Special rules for MA private feefor-service plans.
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(d) * * *
(1) General information. An MA
organization that offers an MA private
fee-for-service plan must provide to
plan enrollees, an appropriate
explanation of benefits consistent with
the requirements of § 422.111(b)(12).
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Subpart K—Application Procedures
and Contracts for Medicare Advantage
Organizations
15. Section 422.500 is amended by
revising paragraph (a) to read as follows:
§ 422.500
Scope and definitions.
(a) Scope. This subpart sets forth
application requirements for entities
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seeking a contract as a Medicare
organization offering an MA plan,
including MA organizations offering a
specialized MA plan for special needs
individuals. MA organizations offering
prescription drug plans must, in
addition to the requirements of this part,
follow the requirements of part 423 of
this chapter specifically related to the
prescription drug benefit.
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16. Section 422.501 is amended as
follows:
A. Revising paragraph (a).
B. In paragraph (c)(1)(ii) removing ‘‘;
or’’ and adding in its place ‘‘.’’.
C. Adding new paragraph (c)(1)(iii).
D. Revising paragraph (e).
The addition and revision read as
follows:
§ 422.501
Application requirements.
(a) Scope. This section sets forth
application requirements for entities
that seek a contract as an MA
organization offering an MA plan and
additional application requirements for
MA organizations seeking to offer a
Specialized MA Plan for Special Needs
Individuals.
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(c) * * *
(1) * * *
(iii) For Specialized MA Plans for
Special Needs Individuals,
documentation that the entity meets the
requirements of § 422.2;
§ 422.4(a)(1)(iv); § 422.101(f); § 422.107,
if applicable; and § 422.152(g) of this
part.
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(e) Resubmittal of an application. An
application that has been denied by
CMS for a particular contract year may
not be resubmitted until the beginning
of the application cycle for the
following contract year.
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17. Section 422.502 is amended as
follows:
A. In paragraph (a)(1), removing the
phrase ‘‘MA contract solely’’ and adding
in its place the phrase ‘‘MA contract or
for a Specialized MA Plan for Special
Needs Individuals solely’’.
B. In paragraph (b)(1), removing the
phrase ‘‘If an MA organization’’ and
adding in its place ‘‘Except as provided
in paragraphs (b)(2) through (b)(4) of
this section, if an MA organization’’.
C. Adding paragraphs (b)(3) and
(b)(4).
D. In paragraph (c) introductory text,
removing the phrase ‘‘MA contract
under this part’’ and adding in its place
the phrase ‘‘MA contract or to be
designated a Specialized MA Plan for
Special Needs Individuals under this
part’’.
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63083
E. Revising paragraphs (c)(2)(i)
through (iii).
F. Revising paragraph (c)(3)(i).
The additions and revision read as
follows:
§ 422.502 Evaluation and determination
procedures.
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(b) * * *
(3) If CMS has terminated, under
§ 422.510, or non-renewed, under
§ 422.506(b), an MA organization’s
contract, effective within the 38 months
preceding the deadline established by
CMS for the submission of contract
qualification applications, CMS may
deny an application based on the
applicant’s substantial failure to comply
with the requirements of the Part C
program even if the applicant currently
meets all of the requirements of this
part.
(4) During the same 38-month period
as specified in (b)(3) of this section,
CMS may deny an application where
the applicant’s covered persons also
served as covered persons for the
terminated or non-renewed contract. A
’’covered person’’ as used in this
paragraph means one of the following:
(i) All owners of terminated
organizations who are natural persons,
other than shareholders who have an
ownership interest of less than 5
percent.
(ii) An owner in whole or part interest
in any mortgage, deed of trust, note or
other obligation secured (in whole or in
part) by the organization, or any of the
property or assets thereof, which whole
or part interest is equal to or exceeds 5
percent of the total property, and assets
of the organization.
(iii) A member of the board of
directors or board of trustees of the
entity, if the organization is organized as
a corporation.
(c) * * *
(2) Intent to deny. (i) If CMS finds that
the applicant does not appear to be able
to meet the requirements for an MA
organization or Specialized MA Plan for
Special Needs Individuals, CMS gives
the applicant notice of intent to deny
the application for an MA contract or for
a Specialized MA Plan for Special
Needs Individuals a summary of the
basis for this preliminary finding.
(ii) Within 10 days from the intent to
deny, the applicant must respond in
writing to the issues or other matters
that were the basis for CMS’ preliminary
finding and must revise its application
to remedy any defects CMS identified.
(iii) If CMS does not receive a revised
application within 10 days from the
date of the notice, or if after timely
submission of a revised application,
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CMS still finds that the applicant does
not appear qualified or has not provided
CMS enough information to allow CMS
to evaluate the application, CMS will
deny the application.
(3) * * *
(i) That the applicant is not qualified
to contract as an MA organization under
Part C of title XVIII of the Act and/or is
not qualified to offer a Specialized MA
Plan for Special Needs Individuals;
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17. Section 422.504 is amended as
follows:
A. Adding new paragraphs (a)(17),
(a)(18), and (i)(3)(iv).
B. Revising paragraphs (i)(3)
introductory text and (i)(3)(iii), (i)(4)(i)
through (iv), and (i)(5).
The additions and revisions red as
follows:
(iii) Each and every contract must
specify that the performance of the
parties is monitored by the MA
organization on an ongoing basis.
(iv) Each and every contract must
specify that either—
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(5) If the MA organization delegates
selection of the providers, contractors,
or subcontractor to another
organization, the MA organization’s
contract with that organization must
state that the CMS-contracting MA
organization retains the right to
approve, suspend, or terminate any such
arrangement.
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§ 422.504
18. Section 422.510 is amended by
adding a new paragraph (a)(14) to read
as follows:
Contract provisions.
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(a) * * *
(17) To maintain administrative and
management capabilities sufficient for
the organization to organize, implement,
and control the financial, marketing,
benefit administration, and quality
improvement activities related to the
delivery of Part C services.
(18) To maintain a Part C summary
plan rating score of at least 3 stars. A
Part C summary plan rating is calculated
by taking an average of a contract’s Part
C performance measure scores.
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(i) * * *
(3) Each and every contract governing
MA organizations and first tier,
downstream, and related entities, must
contain the following:
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(iii) A provision requiring that any
services or other activity performed by
a first tier, downstream, and related
entity in accordance with a contract are
consistent and comply with the MA
organization’s contractual obligations.
(iv) A provision requiring that
payment will not be made to hospitals
for serious preventable events and
hospital-acquired conditions in
accordance with section 1886(d)(4)(D) of
the Act and all applicable Medicare
policies.
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(4) * * *
(i) Each and every contract must
specify delegated activities and
reporting responsibilities.
(ii) Each and every contract must
either provide for revocation of the
delegation activities and reporting
requirements or specify other remedies
in instances where CMS or the MA
organization determine that such parties
have not performed satisfactorily.
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if applicable; and § 422.152(g) of this
part.
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Subpart V—Medicare Advantage
Marketing Requirements
21. Section 422.2274 is amended as
follows:
A. Revising paragraph (a)(1)(i).
B. Removing and reserving paragraph
(a)(1)(ii).
C. Revising paragraph (a)(1)(iii).
D. Adding a new paragraph (f).
The revisions and addition read as
follows:
§ 422.2274
Subpart K—Application Procedures
and Contracts for Medicare Advantage
Organizations
§ 422.510
Termination of contract by CMS.
(a) * * *
(14) Achieves a Part C summary plan
rating of less than 3 stars for 3
consecutive contract years. Plan ratings
issued by CMS before September 1,
2012 are not included in the calculation
of the 3-year period.
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Subpart N—Medicare Contract
Determinations and Appeals
19. Section 422.641 is amended by
adding a new paragraph (d) to read as
follows:
§ 422.641
Contract determinations.
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(d) A determination that an entity is
not qualified to offer a Specialized MA
Plan for Special Needs Individuals as
defined in § 422.2 and § 422.4(a)(1)(iv).
20. Section § 422.660 is amended by
adding new paragraphs (a)(5) and (b)(5)
to read as follows:
§ 422.660 Right to a hearing, burden of
proof, standard of proof, and standards of
review.
(a) * * *
(5) An applicant that has been
determined to be unqualified to offer a
Specialized MA Plan for Special Needs
Individuals.
(b) * * *
(5) During a hearing to review a
determination as described at
§ 422.641(d) of this subpart, the
applicant has the burden of proving by
a preponderance of the evidence that
CMS’ determination was inconsistent
with the requirements of § 422.2;
§ 422.4(a)(1)(iv); § 422.101(f); § 422.107,
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Broker and agent requirements.
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(a) * * *
(1) * * *
(i) The compensation amount paid by
plan sponsors to an independent broker
or agent:
(A) For an initial enrollment of a
Medicare beneficiary into an MA plan,
must be at or below the fair market
value (FMV) cut-off amounts published
annually by CMS.
(B) For renewals, must be an amount
equal to 50 percent of the initial
compensation in paragraph (a)(1)(i)(A)
of this section.
(ii) [Reserved].
(iii) The independent broker or agent
is paid a renewal compensation for each
of the next 5 years that the enrollee
remains in the plan in an amount equal
to 50 percent of the initial year
compensation amount (creating a 6-year
compensation cycle).
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(f) A plan sponsor must report
annually, as directed by CMS—
(1) Whether it intends to use
independent agents or brokers or both in
the upcoming plan year; and
(2) If applicable, the specific amount
or range of amounts independent agents
or brokers or both will be paid.
PART 423—MEDICARE PROGRAM;
MEDICARE PRESCRIPTION DRUG
PROGRAM
22. The authority citation for part 423
continues to read as follows:
Authority: Secs. 1102, 1860D–1 through
1860D–42, and 1871 of the Social Security
Act (42 U.S.C. 1302, 1395w–101 through
1395w–152, and 1395hh).
Subpart B—Eligibility and Enrollment
23. Section 423.56 is amended by
revising paragraphs (a) and (f)(3) to read
as follows:
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§ 423.56 Procedures to determine and
document creditable status of prescription
drug coverage.
(a) Definition. Creditable prescription
drug coverage means any of the
following types of coverage listed in
paragraph (b) of this section only if the
actuarial value of the coverage equals or
exceeds the actuarial value of defined
standard prescription drug coverage
under Part D in effect at the start of such
plan year, not taking into account the
value of any discount or coverage
provided during the coverage gap, and
demonstrated through the use of
generally accepted actuarial principles
and in accordance with CMS guidelines.
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(f) * * *
(3) Prior to the commencement of the
Annual Coordinated Election Period as
defined in § 423.38(b); and
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Subpart C—Benefits and Beneficiary
Protections
24. Section 423.100 is amended as
follows:
A. Adding the definition of ‘‘Daily
cost-sharing rate.’’
B. Revising paragraph (2)(iii) of the
definition of ‘‘Incurred costs.’’
C. In paragraph (2)(ii) of the definition
of ‘‘Part D drug,’’ the phrase ‘‘smoking
cessation agents’’ is removed and
adding in its place the phrase ‘‘smoking
cessation agents, benzodiazepines, and
barbiturates when used to treat epilepsy,
cancer, or chronic mental health
disorder.’’
D. Revising the definition of
‘‘Supplemental benefits’’.
E. Adding the definition of ‘‘Valid
prescription’’
The additions and revision read as
follows:
§ 423.100
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Daily cost-sharing rate means, as
applicable, the established monthly—
(1) Copayment under the enrollee’s
Part D plan divided by 30 or 31 and
rounded to the nearest lower dollar
amount or to another amount but in no
event to an amount which would
require the enrollee to pay more for a
month’s supply of the prescription than
the enrollee would have paid if a
month’s supply had been dispensed; or
(2) Coinsurance rate under the
enrollee’s Part D plan applied to the
ingredient cost of the prescription for a
month’s supply divided by 30 or 31.
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Incurred costs
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§ 423.104 Requirements related to
qualified prescription drug coverage.
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(h) Valid prescription. A Part D
sponsor may only provide benefits for
Part D drugs that require a prescription
if those drugs are dispensed upon a
valid prescription.
(i) Daily cost-sharing rate. A Part D
sponsor is required provide its enrollees
access to a daily cost-sharing rate in
accordance with § 423.153(b)(4).
26. Section 423.120 is amended by
adding a new paragraph (c)(5) to read as
follows:
§ 423.120
Use of standardized technology.
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Definitions.
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(ii) Under State Pharmaceutical
Assistance Program (as defined in
§ 423.464); by the Indian Health Service,
an Indian tribe or tribal organization, or
urban Indian organization (as defined in
section 4 of the Indian Health Care
Improvement Act) or under an AIDS
Drug Assistance Program (as defined in
part B of title XXVI of the Public Health
Service); or by a manufacturer as
payment for an applicable discount (as
defined in § 423.2305) or under the
Medicare Coverage Gap Discount
Program (as defined in § 423.2305); or
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Supplemental benefits means benefits
offered by Part D plans, other than
employer group health or waiver plans,
that meet the requirements of
§ 423.104(f)(1)(ii).
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Valid prescription means a
prescription that complies with all
applicable State law requirements
constituting a valid prescription.
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25. Section 423.104 is amended by
adding new paragraphs (h) and (i) to
read as follows:
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(c) * * *
(5)(i) Part D sponsor must submit to
CMS only a prescription drug event
(PDE) record that contains an active and
valid individual prescriber NPI.
(ii) Notwithstanding paragraph
(c)(5)(i) of this section, a Part D sponsor
may not reject a claim from a network
pharmacy solely on the basis that it does
not contain an active and/or valid NPI
unless the issue can be resolved at
point-of-sale, there is an indication of
fraud, the prescription was written by a
provider excluded from the Medicare
program or the claim involves a
prescription written by a foreign
prescriber (where permitted by State
law).
(iii) With respect to non-standard
requests for reimbursement submitted
by Medicare beneficiaries, a Part D
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sponsor may not make payment to a
beneficiary dependent upon the
sponsor’s acquisition of the prescriber
NPI. If the sponsor is unable to
retrospectively acquire an active and
valid individual prescriber NPI, the
sponsor may not seek recovery of the
payment from the beneficiary solely on
the basis that the non-standard request
did not include a valid individual
prescriber NPI.
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Subpart D—Cost Control and Quality
Improvement Requirements
27. Section 423.153 is amended as
follows:
A. In the introductory text for
paragraph (b), the phrase ‘‘that -’’ is
removed and the phrase ‘‘that address
all of the following:’’ is added in its
place.
B. In paragraph (b)(1) removing ‘‘;’’
and adding in its place ‘‘.’’.
C. In paragraph (b)(2) removing ‘‘;
and’’ and adding in its place ‘‘.’’.
D. Adding a new paragraph (b)(4).
E. Revising paragraphs (d)(1)(vii)(B),
and (d)(2).
The addition and revision read as
follows:
§ 423.153 Drug utilization management,
quality assurance, and medication therapy
management programs (MTMPs).
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(b) * * *
(4)(i) Establishes and applies a daily
cost-sharing rate to a prescription
dispensed by a network pharmacy for a
covered Part D generic or brand drug
that is dispensed for a supply less than
30 days, multiplied by the days supply
actually dispensed, plus any dispensing
fee in the case of coinsurance—
(A) If the drug is in the form of a solid
oral dose, subject to paragraph (b)(4)(ii)
of this section; and
(B) The prescription is—
(1) For an initial fill of a new
medication;
(2) Intended to allow the enrollee to
synchronize refill dates of multiple
drugs; or
(3) Dispensed in accordance with
§ 423.154.
(ii) The requirements of paragraph
(b)(4)(i) of this section do not apply to
either of the following:
(A) Solid oral doses of antibiotics.
(B) Solid oral doses that are dispensed
in their original container as indicated
in the Food and Drug Administration
Prescribing Information or are
customarily dispensed in their original
packaging to assist patients with
compliance.
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(d) * * *
(1) * * *
(vii) * * *
(B) Annual comprehensive
medication review with written
summaries. (1) The beneficiary’s
comprehensive medication review—
(i) Must include an interactive,
person-to-person, or telehealth
consultation performed by a pharmacist
or other qualified provider; and
(ii) May result in a recommended
medication action plan.
(2) If a beneficiary residing in an LTC
setting is offered the annual
comprehensive medication review and
cannot accept the offer to participate,
the pharmacist or other qualified
provider must perform the medication
review without the beneficiary’s
participation.
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Subpart J—Coordination of Part D
Plans with Other Prescriptions Drug
Coverage
28. Section 423.458 is amended by
adding a new paragraph (c)(3) to read as
follows:
§ 423.458 Application of Part D rules to
certain Part D plans on or after January 1,
2006.
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(c) * * *
(3) Employer-sponsored group
prescription drug plans must comply
with all applicable requirements under
this part that are not specifically waived
or modified in accordance with in
paragraph (c)(2) of this section.
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Subpart K—Application Procedures
and Contracts with Part D Plan
Sponsors
29. Section 423.501 is amended by
adding the definition of ‘‘Bona fide
service fees’’ to read as follows:
§ 423.501
Definitions.
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Bona fide service fees means fees paid
by a manufacturer to an entity that
represent fair market value for a bona
fide, itemized service actually
performed on behalf of the manufacturer
that the manufacturer would otherwise
perform (or contract for) in the absence
of the service arrangement, and that are
not passed on in whole or in part to a
client or customer of an entity, whether
or not the entity takes title to the drugs.
Bona fide service fees include, but are
not limited to distribution service fees,
inventory management fees, product
stocking allowances, and fees associated
with administrative services agreements
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and patient care programs (such as
medication compliance programs and
patient education programs).
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30. Section 423.503 is amended as
follows:
A. In paragraph (b)(1), removing the
phrase ‘‘If a Part D’’ and adding in its
place ’’ Except as provided in
paragraphs (b)(2), (b)(3), and (b)(4) of
this section, if a Part D’’.
B. Adding new paragraphs (b)(3) and
(b)(4).
The additions read as follows:
§ 423.503 Evaluation and determination
procedures for applications to be
determined qualified to act as a sponsor.
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(b) * * *
(3) If CMS has terminated, under
§ 423.509, or non-renewed, under
§ 423.507(b), a Part D plan sponsor’s
contract, effective within the 38 months
preceding the deadline established by
CMS for the submission of contract
qualification applications, CMS may
deny an application based on the
applicant’s substantial failure to comply
with the requirements of the Part D
program even if the applicant currently
meets all of the requirements of this
part.
(4) During the same 38-month period
as specified in (b)(3) of this section,
CMS may deny an application where
the applicant’s covered persons also
served as covered persons for the
terminated or non-renewed contract. A
‘‘covered person’’ as used in this
paragraph means one of the following:
(i) All owners of terminated
organizations who are natural persons,
other than shareholders who have an
ownership interest of less than 5
percent.
(ii) An owner in whole or part interest
in any mortgage, deed of trust, note or
other obligation secured (in whole or in
part) by the organization, or any of the
property or assets thereof, which whole
or part interest is equal to or exceeds 5
percent of the total property, and assets
of the organization.
(iii) A member of the board of
directors or board of trustees of the
entity, if the organization is organized as
a corporation.
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31. Section 423.505 is amended to
read as follows:
A. Adding new paragraphs (b)(24)
through (b)(26).
B. Revising paragraphs (i)(3)
introductory text, (i)(3)(iii), (i)(3)(v), and
(i)(4)(i) through (iv).
§ 423.505
Contract provisions.
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(b) * * *
(24) Provide applicable beneficiaries
with applicable discounts on applicable
drugs in accordance with the
requirements in subpart W of Part 423.
(25) Maintains administrative and
management capabilities sufficient for
the organization to organize, implement,
and control the financial, marketing,
benefit administration, and quality
assurance activities related to the
delivery of Part D services.
(26) Maintains a Part D summary plan
rating score of at least 3 stars. A Part D
summary plan rating is calculated by
taking an average of a contract’s Part C
performance measure scores.
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(i) * * *
(3) Each and every contract governing
Part D sponsors and first tier,
downstream, and related entities, must
contain the following:
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(iii) A provision requiring that any
services or other activity performed by
a first tier, downstream, and related
entity in accordance with a contract are
consistent and comply with the Part D
sponsor’s contractual obligations.
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(v) Each and every contract must
specify that first tier, downstream, and
related entities must comply with all
applicable Federal laws, regulations,
and CMS instructions.
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(4) * * *
(i) Each and every contract must
specify delegated activities and
reporting responsibilities.
(ii) Each and every contract must
either provide for revocation of the
delegation activities and reporting
responsibilities described in paragraph
(i)(4)(i) of this section or specify other
remedies in instances when CMS or the
Part D plan sponsor determine that the
parties have not performed
satisfactorily.
(iii) Each and every contract must
specify that the Part D plan sponsor on
an ongoing basis monitors the
performance of the parties.
(iv) Each and every contract must
specify that the related entity,
contractor, or subcontractor must
comply with all applicable Federal
laws, regulations, and CMS instructions.
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32. Section 423.509 is amended by
adding a new paragraph (a)(13) to read
as follows:
§ 423.509
Termination of Contract by CMS.
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(a) * * *
(13) Achieves a Part D summary plan
rating of less than 3 stars for 3
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consecutive contract years. Plan ratings
issued by CMS before September 1,
2012 are not included in the calculation
of the 3-year period.
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33. Section 423.514 is amended as
follows:
A. Redesignating paragraphs (d)
through (g) as paragraphs (g) through (j),
respectively.
B. Adding new paragraphs (d), (e),
and (f).
The additions read as follows:
§ 423.514 Validation of Part D reporting
requirements.
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(d) Reporting requirements for
pharmacy benefits manager data. Each
entity that provides pharmacy benefits
management services must provide to
the Part D sponsor, and each Part D
sponsor must provide to CMS, in a
manner specified by CMS, the
following:
(1) The total number of prescriptions
that were dispensed.
(2) The percentage of all prescriptions
that were provided through retail
pharmacies compared to mail order
pharmacies.
(3) The percentage of prescriptions for
which a generic drug was available and
dispensed (generic dispensing rate), by
pharmacy type (which includes an
independent pharmacy, chain
pharmacy, supermarket pharmacy, or
mass merchandiser pharmacy that is
licensed as a pharmacy by the State and
that dispenses medication to the general
public), that is paid by the Part D
sponsor or PBM under the contract.
(4) The aggregate amount and type of
rebates, discounts, or price concessions
(excluding bona fide service fees as
defined in § 423.501) that the PBM
negotiates that are attributable to patient
utilization under the plan.
(5) The aggregate amount of the
rebates, discounts, or price concessions
that are passed through to the plan
sponsor, and the total number of
prescriptions that were dispensed.
(6) The aggregate amount of the
difference between the amount the Part
D sponsor pays the PBM and the
amount that the PBM pays retail
pharmacies, and mail order pharmacies.
(e) Confidentiality of pharmacy
benefits manager data. Information
disclosed by a Part D sponsor or PBM
as specified in paragraph (d) of this
section is confidential must not be
disclosed by the Secretary or by a plan
receiving the information, except that
the Secretary may disclose the
information in a form which does not
disclose the identity of a specific PBM,
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plan, or prices charged for drugs, for the
following purposes:
(1) As the Secretary determines
necessary to carry out section 1150A of
the Act or Part D of Title XVIII.
(2) To permit the Comptroller General
to review the information provided.
(3) To permit the Director of the
Congressional Budget Office to review
the information provided.
(f) Penalties for failure to provide
pharmacy benefits manager data. The
provisions of section 1927(b)(3)(C) of
the Act are applicable to a Part D
sponsor or PBM that fails to provide the
required information on a timely basis
or knowingly provides false information
in the same manner as such provisions
apply to a manufacturer with an
agreement under section 1927 of the
Act.
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Subpart M—Grievances, Coverage
Determinations, Redeterminations, and
Reconsiderations
34. Section 423.600 is amended by
revising paragraphs (a) through (c) to
read as follows:
§ 423.600 Reconsideration by an
independent review entity (IRE).
(a) An enrollee who is dissatisfied
with the redetermination of a Part D
plan sponsor has a right to a
reconsideration by an independent
review entity that contracts with CMS.
The prescribing physician or other
prescriber (acting on behalf of an
enrollee), upon providing notice to the
enrollee, may request an IRE
reconsideration. The enrollee, or the
enrollee’s prescribing physician or other
prescriber (acting on behalf of the
enrollee) must file a written request for
reconsideration with the IRE within 60
calendar days of the date of the
redetermination by the Part D plan
sponsor.
(b) When an enrollee, or an enrollee’s
prescribing physician or other
prescriber (acting on behalf of the
enrollee) files an appeal, the IRE is
required to solicit the views of the
prescribing physician or other
prescriber. The IRE may solicit the
views of the prescribing physician or
other prescriber orally or in writing. A
written account of the prescribing
physician’s or other prescriber’s views
(prepared by either the prescribing
physician, other prescriber, or IRE, as
appropriate) must be contained in the
IRE record.
(c) In order for an enrollee or a
prescribing physician or other
prescriber (acting on behalf of an
enrollee) to request an IRE
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reconsideration of a determination by a
Part D plan sponsor not to provide for
a Part D drug that is not on the
formulary, the prescribing physician or
other prescriber must determine that all
covered Part D drugs on any tier of the
formulary for treatment of the same
condition would not be as effective for
the individual as the non-formulary
drug, would have adverse effects for the
individual, or both.
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35. Section 423.602 is amended by
revising paragraph (a) to read as follows:
§ 423.602 Notice of reconsideration
determination by the independent review
entity.
(a) Responsibility for the notice. When
the IRE makes its reconsideration
determination, it is responsible for
mailing a notice of its determination to
the enrollee and the Part D plan
sponsor, and for sending a copy to CMS.
When the prescribing physician or other
prescriber requests the reconsideration
on behalf of the enrollee, the IRE is also
responsible for notifying the prescribing
physician or other prescriber of its
decision.
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Subpart T—Appeal Procedures for
Civil Money Penalties
36. Section 423.1000 is amended by
adding paragraph (a)(3) to read as
follows:
§ 423.1000
Basis and scope.
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(a) * * *
(3) Section 1860D–14A(e)(2) of the
Act specifies that the Secretary must
impose a civil money penalty on a
manufacturer that fails to provide
applicable beneficiaries discounts for
applicable drugs of the manufacturer in
accordance with its Discount Program
Agreement. Section 1860D–14A(e)(2)(B)
of the Act makes certain provisions of
section 1128A of the Act applicable to
such civil money penalties imposed on
manufacturers.
37. Section 423.1002 is amended by
revising the definition of ‘‘Affected
party’’ to read as follows:
§ 423.1002
Definitions.
Affected party means any Part D
sponsor or manufacturer (as defined in
§ 423.2305) impacted by an initial
determination or if applicable, by a
subsequent determination or decision
issued under this part, and ‘‘party’’
means the affected party or CMS, as
appropriate.
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Subpart V—Part D Marketing
Requirements
Subpart W—Medicare Coverage Gap
Discount Program
38. Section § 423.2274 is amended to
read as follows:
A. Revising paragraph (a)(1)(i).
B. Removing and reserving paragraph
(a)(1)(ii).
C. Revising paragraph (a)(1)(iii).
D. Adding a new paragraph (f).
The revisions and addition read as
follows:
§ 423.2300
§ 423.2274
Broker and agent requirements.
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(1) * * *
(i) The compensation amount paid by
plan sponsors to an independent broker
or agent—
(A) For an initial enrollment of a
Medicare beneficiary into a PDP must be
at or below the fair market value (FMV)
cut-off amounts published annually by
CMS; or
(B) For renewals, must be an amount
equal to 50 percent of the initial
compensation in paragraph (a)(1)(i)(A)
of this section.
(ii) [Reserved].
(iii) The independent broker or agent
is paid a renewal compensation for each
of the next 5 years that the enrollee
remains in the plan in an amount equal
to 50 percent of the initial year
compensation paid (creating a 6-year
compensation cycle).
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(f) Plan sponsor must report annually,
as directed by CMS the following:
(1) Whether it intends to use
independent agents or brokers or both in
the upcoming plan year.
(2) If applicable, the specific amount
or range of amounts independent agents
or brokers or both will be paid.
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39. Part 423 is amended by adding a
new subpart W to read as follows:
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Subpart W—Medicare Coverage Gap
Discount Program
Sec.
423.2300 Scope.
423.2305 Definitions.
423.2310 Condition for coverage of drugs
under Part D.
423.2315 Medicare Coverage Gap Discount
Program Agreement.
423.2320 Payment processes for Part D
sponsors.
423.2325 Provision of applicable discounts
on applicable drugs for applicable
beneficiaries.
423.2330 Manufacturer discount payment
audit and dispute resolution.
423.2335 Beneficiary dispute resolution.
423.2340 Compliance monitoring and civil
money penalties.
423.2345 Termination of Discount Program
Agreement.
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Scope.
This subpart implements provisions
included in sections 1860D–14A and
1860D–43 of the Act. This subpart sets
forth requirements regarding the
following:
(a) Condition for coverage of
applicable drugs under Part D.
(b) The Medicare Coverage Gap
Discount Program Agreement.
(c) Coverage gap discount payment
processes for Part D sponsors.
(d) Provision of applicable discounts
on applicable drugs for applicable
beneficiaries.
(e) Manufacturer audit and dispute
resolution processes.
(f) Resolution of beneficiary disputes
involving coverage gap discounts.
(g) Compliance monitoring and civil
money penalties.
(h) The termination of the Discount
Program Agreement.
§ 423.2305
Definitions.
As used in this subpart, unless
otherwise specified—
Applicable discount means 50 percent
of the portion of the negotiated price (as
defined in § 423.2305) of the applicable
drug of a manufacturer that falls within
the coverage gap and that remains after
such negotiated price is reduced by any
supplemental benefits that are available.
Applicable number of calendar days
means, with respect to claims for
reimbursement submitted electronically,
14 days, and otherwise, 30 days.
Date of dispensing means the date of
service.
Labeler code means the first segment
of the Food and Drug Administration
national drug code (NDC) that identifies
a particular manufacturer.
Manufacturer means any entity which
is engaged in the production,
preparation, propagation, compounding,
conversion or processing of prescription
drug products, either directly or
indirectly, by extraction from
substances of natural origin, or
independently by means of chemical
synthesis, or by a combination of
extraction and chemical synthesis. For
purposes of the Discount Program, such
term does not include a wholesale
distributor of drugs or a retail pharmacy
licensed under State law, but includes
entities otherwise engaged in
repackaging or changing the container,
wrapper, or labeling of any applicable
drug product in furtherance of the
distribution of the applicable drug from
the original place of manufacture to the
person who makes the final delivery or
sale to the ultimate consumer or use.
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Medicare Coverage Gap Discount
Program (or Discount Program) means
the Medicare coverage gap discount
program established under
section1860D–14A of the Act.
Medicare Coverage Gap Discount
Program Agreement (or Discount
Program Agreement) means the
agreement described in section 1860D–
14A(b) of the Act.
Medicare Part D discount information
means the information sent from CMS
or the TPA to the manufacturer along
with each quarterly invoice that is
derived from applicable data elements
available on prescription drug events as
determined by CMS.
National Drug Code (NDC) means the
unique identifying prescription drug
product number that is listed with the
Food and Drug Administration (FDA)
identifying the product and package
size.
Negotiated price for purposes of the
Discount Program, means the price for
a covered Part D drug that—
(1) The Part D sponsor (or other
intermediary contracting organization)
and the network dispensing pharmacy
or other network dispensing provider
have negotiated as the amount such
network entity will receive, in total, for
a particular drug;
(2) Is reduced by those discounts,
direct or indirect subsidies, rebates,
other price concessions, and direct or
indirect remuneration that the Part D
sponsor has elected to pass through to
Part D enrollees at the point-of-sale; and
(3) Excludes any dispensing fee or
vaccine administration fee for the
applicable drug. In connection with
applicable drugs dispensed by an out-ofnetwork provider in accordance with
the applicable beneficiary’s Part D plan
out-of-network policies, the negotiated
price means the plan allowance as set
forth in § 423.124, less any dispensing
fee or vaccine administration fee.
Other health or prescription drug
coverage means any coverage or
financial assistance under other health
benefit plans or programs that provide
coverage or financial assistance for the
purchase or provision of prescription
drug coverage on behalf of applicable
beneficiaries, including, in the case of
employer group health or waiver plans,
other than basic prescription drug
coverage as defined in § 423.100.
Third Party Administrator (TPA)
means the CMS contractor responsible
for administering the requirements
established by the CMS to carry out
section 1860D–14A of the Act.
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§ 423.2310 Condition for coverage of
drugs under Part D.
(a) Covered Part D drug coverage
requirement. Except as specified in
paragraph (b) of this section, in order for
coverage to be available under Medicare
Part D for applicable drugs of a
manufacturer, the manufacturer must do
all of the following:
(1) Participate in the Discount
Program.
(2) Have entered into and have in
effect an agreement described in
§ 423.2315(b).
(3) Have entered into and have in
effect, under terms and conditions
specified by CMS, a contract with the
TPA.
(b) Exception to covered drug
coverage requirement. Paragraph (a) of
this section does not apply to an
applicable drug if CMS has made a
determination that the availability of the
applicable drug is essential to the health
of beneficiaries enrolled in Medicare
Part D.
srobinson on DSK4SPTVN1PROD with PROPOSALS3
§ 423.2315 Medicare Coverage Gap
Discount Program Agreement.
(a) General rule. The Medicare
Coverage Gap Discount Program
Agreement (or Discount Program
Agreement) between the manufacturer
and CMS must contain, the provisions
specified in paragraph (b) of this
section, and may contain such other
provisions as are established in a model
agreement consistent with section
1860D–14A (a)(1) of the Act.
(b) Agreement requirements. The
manufacturer agrees to the following:
(1) All the applicable requirements
and conditions set forth in this part and
general instructions.
(2) Reimburse all applicable discounts
provided by Part D sponsors on behalf
of the manufacturer for all applicable
drugs having NDCs with the
manufacturer’s FDA-assigned labeler
code(s) invoiced to the manufacturer
within a maximum of 3 years of the date
of dispensing based upon information
reported to CMS by Part D sponsors.
(3) Pay each Part D sponsor in the
manner specified by CMS within 38
calendar days of receipt of the invoice
and Medicare Part D Discount
Information for the applicable discounts
included on the invoice, except as
specified in § 423.2330(c)(3).
(4) Provide CMS with all labeler codes
for all the manufacturer’s applicable
drugs and to promptly update such list
with any additional labeler codes for
applicable drugs no later than 3
business days after having received
written notification of the codes from
the FDA.
(5) Collect, have available, and
maintain appropriate data, including
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data related to manufacturer’s labeler
codes, NDC expiration dates, utilization
and pricing information relied on by the
manufacturer to dispute quarterly
invoices and any other data CMS
determines are necessary to carry out
the Discount Program for a period of not
less than 10 years from the date of
payment of the invoice.
(6) Comply with the audit and dispute
resolution requirements in § 423.2330.
(7) Electronically list and maintain
up-to-date electronic FDA listings of all
NDCs of the manufacturer, including the
timely removal of discontinued NDCs in
the FDA NDC Directory.
(8) Maintain up-to-date NDC listings
with the electronic database vendors for
which the manufacturer provides NDCs
for pharmacy claims processing.
(9) Enter into and have in effect,
under terms and conditions specified by
CMS, an agreement with the TPA that
has a contract with CMS under section
1860D–14(A)(d)(3) of the Act.
(10) Pay quarterly invoices directly to
accounts established by Part D sponsors
via electronic funds transfer, or other
manner if specified by CMS, within the
time period specified in paragraph (b)(3)
and within 5 business days of the
transfer to provide the TPA with
electronic documentation of such
payment in a manner specified by CMS.
(11) Use information disclosed to the
manufacturer on the invoice, as part of
the Medicare Part D Discount
Information, or upon audit or dispute
only for purposes of paying the discount
under the Discount Program.
(c) Timing and length of agreement.
(1) For 2011, a manufacturer must enter
into a Discount Program Agreement not
later than 30 days after the date of
establishment of the model Discount
Program Agreement.
(2) For 2012 and subsequent years, for
a Discount Program Agreement to be
effective for a year, a manufacturer must
enter into a Discount Program
Agreement not later than January 30th
of the preceding year.
(3) Unless terminated in accordance
with § 423.2345, the initial period of a
Discount Program Agreement is 24
months and the agreement is
automatically renewed for a one year
period on January first each year for a
period of 1 year thereafter.
(d) Compliance with requirements for
administration of the Program. Each
manufacturer with an agreement in
effect under this subpart must comply
with the requirements imposed by CMS
or the third party administrator (as
defined in § 423.2305) for purposes of
administering the program.
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Sfmt 4702
§ 423.2320
sponsors.
63089
Payment processes for Part D
(a) Interim payments. CMS provides
monthly interim coverage gap discount
program payments as necessary for Part
D sponsors to advance coverage gap
discounts to beneficiaries.
(b) Coverage Gap Discount
Reconciliation. CMS reconciles interim
payments with invoiced manufacturer
discount amounts made available to
each Part D plan’s enrollee under the
Discount Program.
§ 423.2325 Provision of applicable
discounts on applicable drugs for
applicable beneficiaries.
(a) General rule. On behalf of the
manufacturers, Part D sponsors must
provide applicable beneficiaries with
applicable discounts on applicable
drugs at the point-of-sale.
(b) Discount determination. (1) Part D
sponsors must determine the following:
(i) Whether an enrollee is an
applicable beneficiary (as defined in
§ 423.100).
(ii) Whether a Part D drug is an
applicable drug (as defined in
§ 423.100).
(iii) The amount of the applicable
discount (as defined in § 423.2305) to be
provided at the point-of-sale.
(2) Part D sponsors must make
retroactive adjustments to the applicable
discount as necessary to reflect changes
to the claim or beneficiary eligibility
determined after the date of dispensing.
(3) In determining whether an
enrollee is entitled to an applicable
discount and the amount of the
applicable discount, the Part D sponsor
must apply any dispensing fee or
vaccine administration fee for a claim
that straddles the coverage gap and
either the initial coverage limit or
annual out-of-pocket threshold (or both)
such that the dispensing fee or vaccine
administration fee is within the initial
coverage limit or the catastrophic phase
of coverage to the maximum extent
possible, and then determines the
amount of the applicable discount based
on the negotiated price (as defined in
§ 423.2305).
(4) Part D sponsors must determine
whether any affected beneficiaries need
to be notified by the Part D sponsor that
an applicable drug is eligible for Part D
coverage whenever CMS specifies a
retroactive effective date for a labeler
code and notify such beneficiaries.
(c) Exception to point-of-sale
requirement. Part D sponsors must
provide an applicable discount for
applicable drugs submitted by
applicable beneficiaries via paper
claims, including out-of-network and innetwork paper claims, if such claims are
payable under Part D.
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Federal Register / Vol. 76, No. 196 / Tuesday, October 11, 2011 / Proposed Rules
(d) Collection of data. Part D sponsors
must provide CMS with appropriate
data on the applicable discounts
provided by the Part D sponsors in a
manner specified by CMS.
(e) Supplemental benefits. (1) An
applicable discount must be applied to
beneficiary cost-sharing after
supplemental benefits (as defined in
§ 423.100) have been applied to the
claim for an applicable drug.
(2) No applicable discount is available
if supplemental benefits (as defined in
§ 423.100) eliminate the coverage gap so
that a beneficiary has zero cost-sharing.
(3) In determining whether an
enrollee is entitled to an applicable
discount and the amount of the
applicable discount, the Part D sponsor
applies any dispensing fee or vaccine
administration fee for a claim such that
the dispensing fee or vaccine
administration fee is within the
supplemental benefits to the maximum
extent possible, and then determines the
amount of the applicable discount based
on the negotiated price (as defined in
§ 423.2305).
(f) Other health or prescription drug
coverage. An applicable discount must
be applied to beneficiary cost-sharing
when Part D is the primary payer before
any other health or prescription drug
coverage is applied.
(g) Pharmacy prompt payment. Part D
sponsors must reimburse a network
pharmacy (as defined in § 423.100) the
amount of the applicable discount no
later than the applicable number of
calendar days after the date of
dispensing of an applicable drug.
srobinson on DSK4SPTVN1PROD with PROPOSALS3
§ 423.2330 Manufacturer discount
payment audit and dispute resolution.
(a) Third-party Administration (TPA)
audits. (1) Manufacturers participating
in the Discount Program may conduct
periodic audits, no more often than
annually, directly or through third
parties as specified in this section.
(2) The manufacturer must provide
the TPA with 60 days notice of the
reasonable basis for the audit and a
description of the information required
for the audit.
(3) The manufacturer must have the
right to audit a statistically significant
sample of data and information held by
the TPA that were used to determine
applicable discounts for applicable
drugs having NDCs with the
manufacturer’s FDA-assigned labeler
code(s). Such data and information will
be made available on-site, and with the
exception of work papers, such
information cannot be removed from the
audit site.
(4) The auditor for the manufacturer
may release only an opinion of the audit
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results and is prohibited from releasing
other information obtained from the
audit, including work papers, to its
client, employer, or any other party.
(b) Manufacturer audits. (1) A
manufacturer is subject to periodic audit
by CMS no more often than annually,
directly or through third parties, as
specified in this section.
(2) CMS provides the manufacturer
with 60 days notice of the audit and a
description of the information required
for the audit.
(3) CMS has the right to audit
appropriate data, including data related
to a manufacturer’s FDA-assigned
labeler codes, expiration date of NDCs,
utilization, and pricing information
relied on by the manufacturer to dispute
quarterly invoices, and any other data
CMS determines are necessary to carry
out the Discount Program.
(c) Dispute resolution. (1)
Manufacturers may dispute applicable
discounts invoiced to the manufacturer
on quarterly invoices by providing
notice of the dispute to the TPA in a
manner specified by CMS within 60
days of receipt of the information that
is the subject of the dispute.
(2) Such notice must be accompanied
by supporting evidence that is material,
specific, and related to the dispute in a
manner specified by CMS.
(3) The manufacturer must not
withhold any invoiced discount
payments pending dispute resolution
with the sole exception of invoiced
amounts for applicable drugs that do not
have labeler codes provided by the
manufacturer to CMS in accordance
with § 423.2306(b)(4) of this subpart. If
payment is withheld in accordance with
this paragraph, the manufacturer must
notify the TPA and applicable Part D
sponsors within 38 days of receipt of the
applicable invoice that payment is being
withheld for this reason.
(4) If the manufacturer receives an
unfavorable determination from the
TPA, or the dispute is not resolved
within 60 calendar days of the TPA’s
receipt of the notice of dispute, the
manufacturer may request review by the
independent review entity contracted by
CMS within—
(i) Thirty calendar days of the
unfavorable determination; or
(ii) Ninety calendar days after the
TPA’s receipt of the notice of dispute if
dispute is not resolved within 60 days,
whichever is earlier.
(5) The independent review entity
must make a determination within 90
calendar days of receipt of the
manufacturer’s request for review.
(6)(i) CMS or a manufacturer that
receives an unfavorable determination
from the independent review entity may
PO 00000
Frm 00074
Fmt 4701
Sfmt 4702
request review by the CMS
Administrator within 30 calendar days
of receipt of the notification of such
determination.
(ii) The decision of the CMS
Administrator is final and binding.
(7) CMS adjusts future invoices (or
implements an alternative
reimbursement process if determined
necessary by CMS) if the dispute is
resolved in favor of the manufacturer.
§ 423.2335
Beneficiary dispute resolution.
The Part D coverage determination
and appeals process as described in
§ 423.558 through § 423.638 applies to
beneficiary disputes involving the
availability and amount of applicable
discounts under the Discount Program.
§ 423.2340 Compliance monitoring and
civil money penalties.
(a) General rule. CMS monitors
compliance by a manufacturer with the
terms of the Discount Program
Agreement.
(b) Basis for imposing civil money
penalties. CMS imposes a civil money
penalty (CMP) on a manufacturer that
fails to provide applicable beneficiaries
applicable discounts for applicable
drugs of the manufacturer in accordance
with the Discount Program Agreement.
(c) Determination of the civil money
penalty amounts. CMS imposes a CMP
for each failure by a manufacturer to
provide an applicable discount in
accordance with the Discount Program
Agreement equal to the sum of the
following:
(1) The amount of applicable discount
the manufacturer would have paid
under the Discount Program Agreement,
which will then be used to pay the
applicable discount that the
manufacturer had failed to provide.
(2) Twenty-five percent of such
amount.
(d) Procedures for imposing civil
money penalties. (1) If CMS makes a
determination to impose a CMP
described in paragraph (c) of this
section, CMS sends a written notice of
its decision to impose a CMP to include
the following:
(i) A description of the basis for the
determination.
(ii) The basis for the penalty.
(iii) The amount of the penalty.
(iv) The date the penalty is due.
(v) The manufacturer’s right to a
hearing (as specified in § 423.1006).
(vi) Information about where to file
the request for hearing.
(e) Collection of civil money penalties
imposed by CMS. (1) When a
manufacturer does not request a
hearing, CMS initiates the collection of
the CMP following the expiration of the
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Federal Register / Vol. 76, No. 196 / Tuesday, October 11, 2011 / Proposed Rules
timeframe for requesting an ALJ hearing
as specified in § 423.1020.
(2) If a manufacturer requests a
hearing and the Administrator upholds
CMS’ decision to impose a CMP, CMS
may initiate collection of the CMP once
the Administrator’s decision is final.
(f) Other applicable provisions. The
provisions of section 1128A of the Act
(except subsections (a) and (b)) apply to
CMPs under this subpart to the same
extent that they apply to a CMP or
procedure under section 1128A(a) of the
Act.
§ 423.2345 Termination of Discount
Program Agreement.
srobinson on DSK4SPTVN1PROD with PROPOSALS3
(a)(1) CMS may terminate the
Discount Program Agreement for a
knowing and willful violation of the
requirements of the agreement or other
good cause shown in relation to the
manufacturer’s participation in the
Discount Program.
(2) The termination must not be
effective earlier than 30 days after the
date of notice to the manufacturer of
such termination and must not be
effective prior to resolution of timely
appeal requests received in accordance
with paragraphs (a)(4) and (a)(5) of this
section.
(3)(i) CMS provides the manufacturer
with an opportunity to cure any ground
for termination for cause or to show the
manufacturer is in compliance with the
Discount Program Agreement within 30
calendar days of receipt of the written
termination notice.
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21:42 Oct 07, 2011
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(ii) If the manufacturer cures the
violation, or establishes that it was in
compliance within the cure period,
CMS repeals the termination notice by
written notice.
(4) CMS provides upon request a
manufacturer with a hearing with the
hearing officer concerning such
termination if requested in writing
within 15 calendar days of receiving
notice of the termination. The hearing
takes place prior to the effective date of
the termination with sufficient time for
such effective date to be repealed if
CMS determines appropriate.
(5)(i) CMS or a manufacturer that has
received an unfavorable determination
from the hearing officer may request
review by the CMS Administrator
within 30 calendar days of receipt of the
notification of such determination.
(ii) The decision of the CMS
Administrator is final and binding.
(b)(1) The manufacturer may
terminate the Discount Program
Agreement for any reason.
(2) Such termination is effective as of
the day after the end of the calendar
year if the termination occurs before
January 30 of a calendar year, or as of
the day after the end of the succeeding
calendar year if the termination occurs
on or after January 30 of a calendar year.
(c) Any termination does not affect
the manufacturer’s responsibility to
reimburse Part D sponsors for applicable
discounts incurred before the effective
date of the termination.
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Fmt 4701
Sfmt 9990
63091
(d) Upon the effective date of
termination of the Discount Program
Agreement, CMS ceases releasing data
to the manufacturer except as necessary
to ensure that the manufacturer
reimburses applicable discounts for
previous time periods in which the
Discount Program Agreement was in
effect, and notifies the manufacturer to
destroy data files provided by CMS
under the Discount Program Agreement.
(e) Manufacturer reinstatement is
available only upon payment of any and
all outstanding applicable discounts
incurred during any previous period
under the Discount Program Agreement.
The timing of any such reinstatement is
consistent with the requirements for
entering into a Discount Program
Agreement under § 423.2315(c) of this
subpart.
Authority: (Catalog of Federal Domestic
Assistance Program No. 93.773, Medicare—
Hospital Insurance; and Program No. 93.774,
Medicare—Supplementary Medical
Insurance Program)
Dated: August 25, 2011.
Donald M. Berwick,
Administrator, Centers for Medicare &
Medicaid Services.
Approved: September 16, 2011.
Kathleen Sebelius,
Secretary, Department of Health and Human
Services.
[FR Doc. 2011–25844 Filed 10–3–11; 4:15 pm]
BILLING CODE 4120–01–P
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]]>Agencies
[Federal Register Volume 76, Number 196 (Tuesday, October 11, 2011)]
[Proposed Rules]
[Pages 63018-63091]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-25844]
[[Page 63017]]
Vol. 76
Tuesday,
No. 196
October 11, 2011
Part V
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 417, 422, 423 et al.
Medicare Program; Proposed Changes to the Medicare Advantage and the
Medicare Prescription Drug Benefit Programs for Contract Year 2013 and
Other Proposed Changes; Considering Changes to the Conditions of
Participation for Long Term Care Facilities; Proposed Rule
Federal Register / Vol. 76 , No. 196 / Tuesday, October 11, 2011 /
Proposed Rules
[[Page 63018]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 417, 422, 423, and 483
[CMS-4157-P]
RIN 0938-AQ86
Medicare Program; Proposed Changes to the Medicare Advantage and
the Medicare Prescription Drug Benefit Programs for Contract Year 2013
and Other Proposed Changes; Considering Changes to the Conditions of
Participation for Long Term Care Facilities
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The proposed rule would revise the Medicare Advantage (MA)
program (Part C) regulations and prescription drug benefit program
(Part D) regulations to implement new statutory requirements;
strengthen beneficiary protections; exclude plan participants that
perform poorly; improve program efficiencies; and clarify program
requirements. We are also considering changes to the long term care
facility conditions of participation pertaining to pharmacy services.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on December 12,
2011.
ADDRESSES: In commenting, please refer to file code CMS-4157-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed):
1. Electronically. You may submit electronic comments on this
regulation to https://www.regulations.gov. Click on the link ``Submit
electronic comments on CMS regulations with an open comment period.''
(Attachments should be in Microsoft Word, WordPerfect, or Excel;
however, we prefer Microsoft Word.)
2. By regular mail. You may mail written comments to the following
address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-4157-P, P.O. Box 8013, Baltimore, MD
21244-8013.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-4157-P, Mail Stop C4-26-05, 7500
Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. Alternatively, you may deliver (by hand or
courier) your written comments (one original and two copies) to one of
the following addresses prior to the close of the comment period:
a. For delivery in Washington, DC--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, Room 445-G, Hubert
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC
20201.
(Because access to the interior of the Hubert H. Humphrey Building
is not readily available to persons without Federal government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing
by stamping in and retaining an extra copy of the comments being
filed.)
b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
call telephone number (410) 786-1066 in advance to schedule your
arrival with one of our staff members.
Comments erroneously mailed to the addresses indicated as
appropriate for hand or courier delivery may be delayed and received
after the comment period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Christian Bauer, (410) 786-6043, and
Kathryn Jansak, (410) 786-9364, General information.
Christopher McClintick, (410) 786-4682, Part C issues.
Deborah Larwood, (410) 786-9500, Part D issues.
Kristy Nishimoto, (206) 615-2367, Part C and D enrollment and appeals
issues.
Deondra Moseley, (410) 786-4577, Part C and D payment issues.
SUPPLEMENTARY INFORMATION:
Submitting Comments: We welcome comments from the public on all
issues set forth in this rule to assist us in fully considering issues
and developing policies. You can assist us by referencing the file code
CMS-4157-P.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received at: https://www.regulations.gov. Follow the search instructions on that Web site to
view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments,
phone at 1-800-743-3951.
Table of Contents
I. Background
II. Provisions of the Proposed Regulation
A. Implementing Statutory Provisions
1. Coverage Gap Discount Program (Sec. 423.100, Sec. 423.505,
Sec. 423.1000, Sec. 423.1002, and Subpart W (Sec. 423.2300-
423.2410))
a. Scope (Sec. 423.2300)
b. Definitions (Sec. 423.2305)
(1) Applicable Beneficiary
(2) Applicable Drug
(3) Incurred Costs
(4) Manufacturer
(5) Medicare Part D Discount Information
(6) Negotiated Price
(7) Other Health or Prescription Drug Coverage
c. Condition for Coverage of Drugs under Part D (Sec. 423.2305)
d. Medicare Coverage Gap Discount Program Agreement (Sec.
423.2315)
(1) Obligations of the Manufacturer
(2) Length of Agreement
e. Payment Processes for Part D Sponsors (Sec. 423.2320)
(1) Interim Payments
(2) Coverage Gap Discount Reconciliation
f. Provision of Applicable Discounts on Applicable Drugs for
Applicable Beneficiaries (Sec. 423.2325)
(1) Obligations of Part D Sponsors; Point-of-Sale Discounts
(2) Collection of Data
(3) Other Health or Prescription Drug Coverage
(4) Supplemental Benefits
(5) Pharmacy Prompt Payment
g. Manufacturer Discount Payment Audit and Dispute Resolution
(Sec. 423.2330)
(1) Third Party Administrator Audits
(2) Manufacturer Audits
[[Page 63019]]
(3) Dispute Resolution
h. Beneficiary Dispute Resolution (423.2335)
i. Compliance Monitoring and Civil Money Penalties (Sec.
423.2340)
j. Termination of Agreement (Sec. 423.2345)
2. Inclusion of Benzodiazepines and Barbiturates as Part D
Covered Drugs (Sec. 423.100)
3. Pharmacy Benefit Manager's Transparency Requirements (Sec.
423.501 and Sec. 423.514)
B. Strengthening Beneficiary Protections
1. Good Cause and Reinstatement into a Cost Plan (Sec. 417.460)
2. Requiring MA Plans to Issue ID Cards (Sec. 422.111)
3. Determination of Actuarially Equivalent Creditable
Prescription Drug Coverage (Sec. 423.56)
4. Who May File Part D Appeals with the Independent Review
Entity (Sec. 423.600 and Sec. 423.602)
5. Independence of LTC Consultant Pharmacists (Sec. 483.60)
C. Excluding Poor Performers
1. CMS Termination of Health Care Prepayment Plans (Sec.
417.801)
2. Plan Performance Ratings as a Measure of Administrative and
Management Arrangements and as a Basis for Termination or Non-
Renewal of a Medicare Contract (Sec. 422.504, Sec. 422.510, Sec.
423.505, and Sec. 423.509)
3. Denial of Applications Submitted by Part C and D Sponsors
with a Past Contract Termination or CMS-Initiated Non-Renewal (Sec.
422.502 and Sec. 423.503)
D. Improving Program Efficiencies
1. Cost Contract Plan Public Notification Requirements in Cases
of Non-Renewal (Sec. 417.492)
2. New Benefit Flexibility for Fully-Integrated Dual Eligible
Special Needs Plans (FIDE SNPs) (Sec. 422.102)
3. Application of the Medicare Hospital-Acquired Conditions and
Present on Admission Indicator Policy to MA Organizations (Sec.
422.504)
4. Clarifying Coverage of Durable Medical Equipment (Sec.
422.100 and Sec. 422.111)
a. Access to Preferred DME Items and Supplies
b. Medical Necessity Requirements for DME Items and Supplies
c. Transition Period for Coverage of Non-Preferred DME Items and
Supplies
d. Midyear Changes to Preferred DME Items and Supplies
e. Appeals
f. Disclosure of DME Coverage Limitations
5. Broker and Agent Requirements (Sec. 422.2274 and Sec.
423.2274)
6. Establishment and Application of Daily Cost-Sharing Rate as
Part of Drug Utilization Management and Fraud, Abuse, and Waste
Control Program (Sec. 423.104 and Sec. 423.153)
E. Clarifying Program Requirements
1. Technical Corrections to Enrollment Provisions (Sec.
417.422, Sec. 417.432, Sec. 422.60, and Sec. 423.56)
2. Extending MA and Part D Program Disclosure Requirements to
Section 1876 Cost Contract Plans (Sec. 417.427)
3. Clarification of, and Extension to Local Preferred Provider
Plans, of Regional Preferred Provider Organization Plan Single
Deductible Requirement (Sec. 422.101)
4. Technical Change to Private Fee-For-Service Plan Explanation
of Benefits Requirements (Sec. 422.216)
5. Application Requirements for Special Needs Plans (Sec.
422.500, Sec. 422.501, Sec. 422.502, Sec. 422.641, and Sec.
422.660)
6. Timeline for Resubmitting Previously Denied MA Applications
(Sec. 422.501)
7. Clarification of Contract Requirements for First Tier and
Downstream Entities (Sec. 422.504 and Sec. 423.505)
8. Valid Prescriptions (Sec. 423.100 and Sec. 423.104)
9. Medication Therapy Management Comprehensive Medication
Reviews and Beneficiaries in LTC Settings (Sec. 423.153)
10. Employer Group Waiver Plans Requirement to Follow All Part D
Rules Not Explicitly Waived (Sec. 423.458)
11. Access to Covered Part D Drugs Through Use of Standardized
Technology and National Provider Identifiers (Sec. 423.120)
III. Collection of Information Requirements
IV. Response to Public Comments
V. Regulatory Impact Analysis
Regulations Text
Acronyms
AO Accrediting Organization
ADS Automatic Dispensing System
AEP Annual Enrollment Period
AHFS American Hospital Formulary Service
AHFS-DI American Hospital Formulary Service-Drug Information
AHRQ Agency for Health Care Research and Quality
ALJ Administrative Law Judge
ANOC Annual Notice of Change
AOR Appointment of Representative
BBA Balanced Budget Act of 1997 (Pub. L. 105-33)
BBRA [Medicare, Medicaid and State Child Health Insurance Program]
Balanced Budget Refinement Act of 1999 (Pub. L. 106-113)
BIPA [Medicare, Medicaid, and SCHIP] Benefits Improvement Protection
Act of 2000 (Pub. L. 106-554)
BLA Biologics License Application
CAHPS Consumer Assessment Health Providers Survey
CAP Corrective Action Plan
CCIP Chronic Care Improvement Program
CC/MCC Complication/Comorbidity and Major Complication/Comorbidity
CCS Certified Coding Specialist
CDC Centers for Disease Control
CHIP Children's Health Insurance Programs
CMR Comprehensive Medical Review
CMS Centers for Medicare & Medicaid Services
CMS-HCC CMS Hierarchal Condition Category
CTM Complaints Tracking Module
COB Coordination of Benefits
CORF Comprehensive Outpatient Rehabilitation Facility
CPC Certified Professional Coder
CY Calendar year
DEA Drug Enforcement Administration
DIR Direct and Indirect Remuneration
DME Durable Medical Equipment
DMEPOS Durable Medical Equipment, Prosthetic, Orthotics, and
Supplies
D-SNPs Dual Eligible SNPs
DOL U.S. Department of Labor
DRA Deficit Reduction Act of 2005 (Pub. L. 109-171)
DUM Drug Utilization Management
EGWP Employer Group/Union-Sponsored Waiver Plan
EOB Explanation of Benefits
EOC Evidence of Coverage
ESRD End-Stage Renal Disease
FACA Federal Advisory Committee Act
FDA Food and Drug Administration
FEHBP Federal Employees Health Benefits Plan
FFS Fee-For-Service
FIDE Fully-integrated Dual Eligible
FIDE SNPs Fully-integrated Dual Eligible Special Needs Plans
FMV Fair Market Value
FY Fiscal year
GAO Government Accountability Office
HAC Hospital-Acquired Conditions
HCPP Health Care Prepayment Plans
HEDIS HealthCare Effectiveness Data and Information Set
HHS [U.S. Department of] Health and Human Services
HIPAA Health Insurance Portability and Accountability Act of 1996
(Pub. L. 104-191)
HMO Health Maintenance Organization
HOS Health Outcome Survey
HPMS Health Plan Management System
ICD-9-CM Internal Classification of Disease, 9th, Clinical
Modification Guidelines
ICEP Initial Coverage Enrollment Period
ICL Initial Coverage Limit
ICR Information Collection Requirement
ID Identification
IPPS [Acute Care Hospital] Inpatient Prospective Payment System
IRE Independent Review Entity
IVC Initial Validation Contractor
LEP Late Enrollment Penalty
LIS Low Income Subsidy
LPPO Local Preferred Provider Organization
LTC Long Term Care
MA Medicare Advantage
MAAA Member of the American Academy of Actuaries
MA-PD Medicare Advantage-Prescription Drug Plan
MIPPA Medicare Improvements for Patients and Providers Act of 2008
(Pub. L. 110-275)
MOC Medicare Options Compare
MOOP Maximum Out-of-Pocket
MPDPF Medicare Prescription Drug Plan Finder
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (Pub. L. 108-173)
MS-DRG Medicare Severity Diagnosis Related Group
MSA Metropolitan Statistical Area
MSAs Medical Savings Accounts
MSP Medicare Secondary Payer
MTM Medication Therapy Management
MTMP Medication Therapy Management Program
[[Page 63020]]
NAIC National Association Insurance Commissioners
NCPDP National Council for Prescription Drug Programs
NCQA National Committee for Quality Assurance
NDA New Drug Application
NDC National Drug Code
NGC National Guideline Clearinghouse
NIH National Institutes of Health
NOMNC Notice of Medicare Non-coverage
NPI National Provider Identifier
OIG Office of Inspector General
OMB Office of Management and Budget
OPM Office of Personnel Management
OTC Over the Counter
PART C Medicare Advantage
PART D Medicare Prescription Drug Benefit Program
PBM Pharmacy Benefit Manager
PDE Prescription Drug Event
PDP Prescription Drug Plan
PFFS Private Fee for Service Plan
POA Present on Admission (Indicator)
POS Point-of-Sale
PPO Preferred Provider Organization
PPS Prospective Payment System
P&T Pharmacy & Therapeutics
QIO Quality Improvement Organization
QRS Quality Review Study
PACE Programs of All Inclusive Care for the Elderly
RADV Risk Adjustment Data Validation
RAPS Risk Adjustment Payment System
RHIA Registered Health Information Administrator
RHIT Registered Health Information Technician
RPPO Regional Preferred Provider Organization
SEP Special Enrollment Periods
SHIP State Health Insurance Assistance Programs
SNF Skilled Nursing Facility
SNP Special Needs Plan
SPAP State Pharmaceutical Assistance Programs
SSA Social Security Administration
SSI Supplemental Security Income
TPA Third Party Administrator
TrOOP True Out-of-Pocket
U&C Usual and Customary
UPIN Uniform Provider Identification Number
USP U.S. Pharmacopoeia
SUPPLEMENTARY INFORMATION:
I. Background
The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) created a
new ``Part C'' in the Medicare statute (sections 1851 through 1859 of
the Social Security Act (the Act)) which established what is now known
as the Medicare Advantage (MA) program. The Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173),
enacted on December 8, 2003, added a new ``Part D'' to the Medicare
statute (sections 1860D-1 through 1860D-42 of the Act) entitled the
Medicare Prescription Drug Benefit Program, and made significant
changes to the existing Part C program, which it named the Medicare
Advantage (MA) Program. The MMA directed that important aspects of the
Part D program be similar to, and coordinated with, regulations for the
MA program. Generally, the provisions enacted in the MMA took effect
January 1, 2006. The final rules implementing the MMA for the MA and
Part D prescription drug programs appeared in the January 28, 2005
Federal Register (70 FR 4588 through 4741 and 70 FR 4194 through 4585,
respectively).
Since the inception of both Parts C and D, we have periodically
revised our regulations either to implement statutory directives or to
incorporate knowledge obtained through experience with both programs.
For instance, in September 2008 and January 2009, we issued Part C and
D regulations (73 FR 54226 and 74 FR 1494, respectively) to implement
provisions in the Medicare Improvement for Patients and Providers Act
(MIPPA) (Pub. L. 110-275). We promulgated a separate interim final rule
in January 2009 to address MIPPA provisions related to Part D plan
formularies (74 FR 2881). In April 2010, we issued Part C and D
regulations (75 FR 19678) which strengthened various program
participation and exit requirements; strengthened beneficiary
protections; ensured that plan offerings to beneficiaries included
meaningful differences; improved plan payment rules and processes;
improved data collection for oversight and quality assessment;
implemented new policies; and clarified existing program policy.
In a final rule that appeared in the April 15, 2011 Federal
Register (76 FR 21432), we continued our process of implementing
improvements in policy consistent with those included in the April 2010
final rule, and also implemented changes to the Part C and Part D
programs made by recent legislative changes. The Patient Protection and
Affordable Care Act (Pub. L. 111-148) was enacted on March 23, 2010, as
passed by the Senate on December 24, 2009, and the House on March 21,
2010. The Health Care and Education Reconciliation Act (Pub. L. 111-
152), which was enacted on March 30, 2010, modified a number of
Medicare provisions in Pub. L. 111-148 and added several new
provisions. The Patient Protection and Affordable Care Act (Pub. L.
111-148) and the Health Care and Education Reconciliation Act (Pub. L.
111-152) are collectively referred to as the Affordable Care Act. The
Affordable Care Act included significant reforms to both the private
health insurance industry and the Medicare and Medicaid programs.
Provisions in the Affordable Care Act concerning the Part C and D
programs largely focused on beneficiary protections, MA payments, and
simplification of MA and Part D program processes. These provisions
affected implementation of our policies regarding beneficiary cost-
sharing, assessing bids for meaningful differences, and ensuring that
cost-sharing structures in a plan are transparent to beneficiaries and
not excessive. In the April 2011 final rule, we revised regulations on
a variety of issues based on the Affordable Care Act and our experience
in administering the MA and Part D programs. The rule covered areas
such as marketing, including agent/broker training; payments to MA
organizations based on quality ratings; standards for determining if
organizations are fiscally sound; low income subsidy policy under the
Part D program; payment rules for non-contract health care providers;
extending current network adequacy standards to Medicare medical
savings account (MSA) plans that employ a network of providers;
establishing limits on out-of-pocket expenses for MA enrollees; and
several revisions to the special needs plan requirements, including
changes concerning SNP approvals.
II. Provisions of the Proposed Regulations
In the sections that follow, we discuss the proposed changes to the
regulations in 42 CFR parts 417, 422, and 423 governing the MA and
prescription drug benefit programs. We also are considering changes to
the regulations setting forth Medicare conditions of participation for
long-term care facilities, which are currently codified at 42 CFR part
483. To better frame the discussion, we have structured the overall
preamble narrative by topic area rather than by subpart order.
Accordingly, our proposals address the following five specific topic
areas:
Implementing provisions of MIPPA and the Affordable Care
Act.
Strengthening beneficiary protections.
Excluding poor performers.
Improving program efficiencies.
Clarifying program requirements.
Several of the proposed revisions and clarifications affect both
the MA and prescription drug programs, while a few affect cost
contracts under section 1876 of the Act. Within each topic area, we
provide a chart that lists the associated regulatory citations and we
discuss the provisions in order of appearance in the proposed
regulations. We are also considering changing the long term care
facility conditions of participation
[[Page 63021]]
pertaining to pharmacy services and, accordingly, cover that issue
under the appropriate topic in the preamble section, in order of
regulation location under consideration.
We note that these regulations would be effective 60 days after the
publication of the final rule that would finalize the proposed changes
discussed in this proposed rule, except where otherwise noted in the
preamble. Only one proposed item would have a different effective date:
section 175(b) of MIPPA provides that the proposed amendments requiring
that benzodiazepines and, for specified health conditions, barbiturates
be considered as Part D drugs apply to prescriptions dispensed on or
after January 1, 2013.
A. Implementing Statutory Provisions
This section contains three provisions, two of which would
implement sections of the Affordable Care Act and one which would
implement a MIPPA mandate. We propose to consolidate and codify
previous guidance regarding the Coverage Gap Discount Program mandated
by the Affordable Care Act. Through this consolidation we aim to
provide stakeholders a central, clear source of direction. Regulations
under a MIPPA provision would provide first line treatment for
beneficiaries with certain health conditions who require
benzodiazepines and, as specified, barbiturates. We believe that
implementing section 6005 of the Affordable Care Act, which requires us
to collect Pharmacy Benefit Manager (PBM) spread amounts, would
establish necessary transparency related to entities that provide
pharmacy benefits management services to Part D sponsors. The changes
based on provisions in the Affordable Care Act and MIPPA are detailed
in Table 1.
Table 1--Provisions To Implement Statutory Provisions
----------------------------------------------------------------------------------------------------------------
Part 423
Preamble section Provision -------------------------------------------------------
Subpart Section(s)
----------------------------------------------------------------------------------------------------------------
II.A.1......................... Coverage Gap Discount Subpart C.................... Sec. 423.100
Program. Subpart K.................... Sec. 423.505
Subpart T.................... Sec. 423.1000
Subpart T.................... Sec. 423.1002
Subpart W (new).............. Sec. 423.2300-Sec.
423.2345
II.A.2......................... Inclusion of Subpart C.................... Sec. 423.100
Benzodiazepines and
Barbiturates as Part D
Covered Drugs.
II.A.3......................... Pharmacy Benefit Subpart K.................... Sec. 423.501
Manager's Transparency Sec. 423.514
Requirements.
----------------------------------------------------------------------------------------------------------------
1. Coverage Gap Discount Program (Sec. 423.100, Sec. 423.505(b),
Sec. 423.1000, Sec. 423.1002, and Sec. 423.2300 through Sec.
423.2345 (Subpart W))
The Medicare Prescription Drug Benefit was enacted into law on
December 8, 2003, in section 101 of the MMA and codified in sections
1860D-1 through 1860D-42 of the Act. Section 101 of the MMA amended
Title XVIII of the Act by redesignating Part D as Part E and inserting
new Part D, which establishes the voluntary Prescription Drug Benefit
Program (Part D). The Part D program is available to individuals who
are entitled to Medicare Part A or enrolled in Medicare Part B. We
contract with private companies referred to as Part D sponsors to
administer the Part D program via stand alone prescription drug plans
(PDPs) and prescription drug plans offered by Medicare Advantage
Organizations (MA-PDs). The Part D program became effective January 1,
2006.
The MMA established standard Part D prescription drug coverage that
consists of coverage subject to an annual deductible, 25 percent
coinsurance (or an actuarially equivalent cost-sharing design) up to
the initial coverage limit (ICL), and catastrophic coverage for
individuals who exceed the annual maximum true out-of-pocket (TrOOP)
threshold with cost-sharing equal to the greater of a $2/$5 copayment
or coinsurance of 5 percent. Prior to the enactment of the Affordable
Care Act, under standard coverage, individuals that did not receive
additional cost-sharing subsidies from CMS or additional coverage by
other secondary payers (for example, State Pharmaceutical Assistance
Programs) were responsible for paying one hundred percent of the Part D
negotiated price for covered Part D claims above the ICL until their
TrOOP costs exceed the annual threshold amount.
The Affordable Care Act made several amendments to Part D of Title
XVIII of the Act, including adding sections 1860D-43 and 1860D-14A of
the Act, and amending section 1860D-2(b) of the Act. Beginning on
January 1, 2011, these amendments started phasing out the Part D
coverage gap, or ``donut hole'' for Medicare beneficiaries who do not
already receive low-income subsidies from CMS by establishing the
Medicare Coverage Gap Discount Program (Discount Program) and gradually
increasing coverage in the coverage gap for both generic drugs
(beginning in 2011) and brand name drugs and biological products
(beginning in 2013). By 2020, beneficiary cost-sharing for all covered
brand-name and generic drugs and biological products will equal 25
percent until they reach catastrophic coverage.
The Discount Program makes manufacturer discounts available at the
point-of-sale to applicable Medicare beneficiaries receiving applicable
drugs while in the coverage gap. In general, the discount on each
applicable drug is 50 percent of an amount equal to the negotiated
price of the drug (less any dispensing fee). Manufacturers must agree
to provide these discounts by signing an agreement with CMS in order
for their applicable drugs to continue to be covered under Medicare
Part D, unless we use our authority under section 1860D-43(c) of the
Act to make an exception that allows coverage without an agreement.
While manufacturer discounts under the Discount Program must be
made available at point-of-sale, the Affordable Care Act does not
specify how this should be done. At the same time, it prohibits us from
receiving or distributing any funds of the manufacturer under the
program. In order to provide point-of-sale discounts, we determined
that an entity must have the information necessary to determine at that
point in time that the drug is discountable, the beneficiary is
eligible for the discount, the claim is wholly or partly in the
coverage gap, and the amount of the discount, taking into consideration
negotiated plan prices and that plan supplemental benefits must pay
before the discount amount can be determined. We determined that
[[Page 63022]]
the only entities that have the information necessary to provide point-
of-sale discounts under the Discount Program are Part D sponsors. Only
the Part D sponsor knows which Part D drugs are on its formulary and
which enrollees have obtained an exception to receive a non-formulary
Part D drug. The Part D sponsor has the low-income subsidy (LIS)
information for beneficiaries that is necessary to exclude such claims
from the Discount Program. The Part D sponsor tracks gross drug spend
and TrOOP costs, which are necessary for determining when the
beneficiary enters and exits the coverage gap. In addition, only the
Part D sponsor knows which portion of the claim is in the coverage gap.
For these reasons, we believe only the Part D sponsor can accurately
provide the discount at point-of-sale.
We explored the viability of a model whereby a third party
administrator (TPA) could directly adjudicate the discount payment to
pharmacies. In this hypothetical model, the pharmacy would submit the
Part D claim to the Part D sponsor and receive information on the
response that would direct the pharmacy to bill the third party for
applicable claims. While this model initially showed promise, our
discussions with industry through National Council of Prescription Drug
Program (NCPDP) workgroups revealed that neither the current Health
Insurance Portability and Accountability Act (HIPAA) electronic
pharmacy claims billing standard nor the next HIPAA approved version of
the billing standard could support the transfer of information from the
Part D sponsor that would be necessary to specify the appropriate
claims and appropriate discount amounts to be billed to the third party
administrator, or allow for accurate coordination of benefits among
payers. Consequently, we determined that this model cannot be used to
implement the Discount Program in the foreseeable future.
Section 1860D-14A(d)(5) of the Act authorizes us to implement the
Discount Program through program instruction. We used this authority to
issue program guidance to Part D sponsors, with an abbreviated notice
and comment period, instructing them to provide applicable discounts on
applicable drugs to applicable beneficiaries at point-of-sale beginning
on January 1, 2011. The guidance also specified that Part D sponsors
would report discount amounts to us, that we would invoice
manufacturers on a quarterly basis for these discounts, and that the
manufacturers would repay each Part D sponsor directly for the invoiced
discount provided on the manufacturers' behalf. We determined that this
model was necessary because Part D sponsors needed to provide the
discounts at point-of-sale (as explained previously) and we needed to
coordinate the discount payments between manufacturers and Part D
sponsors to ensure discounts were appropriately provided by the Part D
sponsors and reimbursed by the manufacturers without directly receiving
or distributing manufacturer funds (which we are prohibited from doing
by section 1860D-14A(d)(2)(A) of the Act).
We needed to implement the Discount Program through program
instruction because of the January 1, 2011 implementation deadline.
Although not required, we are now proposing to codify most existing
Discount Program requirements (that is, those that we have previously
implemented through the relevant Agreements and guidance) through full
notice and comment rulemaking to provide additional transparency and a
formal framework for operating the Discount Program and enforcing its
requirements.
a. Scope (Sec. 423.2300)
Subpart W of part 423 implements provisions included in sections
1860D-14A and 1860D-43 of the Act. This subpart sets forth requirements
as follows:
Condition of coverage of drugs under Part D.
The Medicare Coverage Gap Discount Program Agreement.
Coverage gap discount payment processes for Part D
sponsors.
Provision of applicable discounts on applicable drugs for
applicable beneficiaries.
Manufacturer audit and dispute resolution processes.
Resolution of beneficiary disputes involving coverage gap
discounts.
Compliance monitoring and civil money penalties.
The termination of the Discount Program Agreement.
b. Definitions (Sec. 423.2305)
Proposed Sec. 423.2305 includes definitions for terms that are
frequently used in this subpart. Those terms we believe need additional
clarification are described separately in this section of the proposed
rule.
(1) Applicable Beneficiary
Applicable beneficiary is defined in Sec. 423.100. We clarify that
enrollees in employer-sponsored group prescription drug plans (as
defined in Sec. 423.454) may qualify as applicable beneficiaries.
(2) Applicable Drug
Applicable drug is defined in Sec. 423.100. We clarify that
applicable drugs include all covered Part D drugs marketed under a new
drug application (NDA) or biologics license application (BLA) (other
than a product licensed under section 351(k) of the Public Health
Service Act). This means that such drugs and biological products would
be subject to an applicable discount in the coverage gap even if a Part
D sponsor otherwise considers the product to be generic under its
benefit. Conversely, covered Part D drugs that are marketed under trade
names and generally thought of as brand-name drugs or biological
products, but are not approved under an NDA or licensed under a BLA
(other than a product licensed under section 351(k) of the Public
Health Service Act), are not applicable drugs that would be subject to
an applicable discount in the coverage gap. Finally, drugs excluded
from Part D under section 1860D-2(e)(2)(A) of the Act are not covered
Part D drugs and therefore, such drugs would not be applicable drugs
subject to an applicable discount even if covered by the Part D sponsor
under an enhanced benefit. Part D sponsors would need to make these
determinations on a National Drug Code (NDC) by NDC basis.
The second part of the definition provides that an applicable drug
is either available on-formulary if a Part D sponsor uses a formulary,
or available under the benefits provided by a Part D sponsor that does
not use a formulary, or available to a particular beneficiary through
an exception or appeal for that particular beneficiary. Applicable
drugs covered under transition and emergency fill policies are
considered covered through an exception and, therefore, would be
subject to applicable discounts.
In addition, we interpret the definition of an applicable drug for
purposes of the Discount Program to exclude Part D compounds. While
Part D sponsors may cover compounds with at least one Part D drug
ingredient, and that ingredient would be an applicable drug if
dispensed on its own, in light of the operational difficulty in
accurately determining which portion(s) of a Part D compound represents
the Part D drug, we believe that the applicable drug determination must
be made with respect to the compound as a whole. Given that a compound
as a whole is not approved under an NDA or BLA, a compound does not
meet the definition of an applicable drug.
[[Page 63023]]
(3) Incurred Costs
Section 3301 of the Affordable Care Act amends section 1860D-
2(b)(4) of the Act by adding subparagraph (E) when applying
subparagraph (A) to include the negotiated price (as defined in
paragraph (6) of section 1860D-14A(g) of the Act) of an applicable drug
of a manufacturer that is furnished to an applicable beneficiary under
Medicare Coverage Gap Discount Program regardless of whether part of
such costs were paid by a manufacturer under such program, except that
incurred costs shall not include the portion of the negotiated price
that represents the reduction in coinsurance resulting from the
application of paragraph (2)(D) (that is, gap coverage). Therefore, we
propose to revise the definition of incurred costs in Sec. 423.100 by
adding the following language to paragraph (2)(ii) of such definition--
``or by a manufacturer as payment for an applicable discount (as
defined Sec. 423.2305) under the Medicare Coverage Gap Discount
Program (as defined in Sec. 423.2305)''. This would mean that all
applicable discounts paid by manufacturers would be treated as incurred
costs for purposes of calculating the beneficiary's TrOOP.
(4) Manufacturer
Section 1860D-14A(g)(5) of the Act defines manufacturer under the
Discount Program as any entity which is engaged in the production,
preparation, propagation, compounding, conversion or processing of
prescription drug products, either directly or indirectly, by
extraction from substances of natural origin, or independently by means
of chemical synthesis, or by a combination of extraction and chemical
synthesis. Such term does not include a wholesale distributor of drugs
or a retail pharmacy licensed under State law. We propose to adopt this
statutory language in Sec. 423.2305 and also add the following
clarifying language ``but includes entities otherwise engaged in
repackaging or changing the container, wrapper, or labeling of any
applicable drug product in furtherance of the distribution of the
applicable drug from the original place of manufacture to the person
who makes the final delivery or sale to the ultimate consumer for
use.'' We propose adding this language to the definition to be
consistent with the definition of the term ``manufacturer'' in section
510 for the Federal Food Drug and Cosmetic Act as well as to track the
defined term in the Discount Program Agreement.
Moreover, we believe this is the only practical way to define
manufacturer so that we can accurately assign responsibility for the
discounts. While applicable drugs may actually be made by a limited
number of companies, many more companies commonly repackage or relabel
drug products and market them with their own labeler codes. Registered
drug establishments are required by law to provide the FDA with a
current list of all drugs manufactured, prepared, propagated,
compounded, or processed by it for commercial distribution. (See
section 510 of the Federal Food, Drug, and Cosmetic Act 921 U.S.C.
360.) Each listed product is identified by a unique NDC, which
identifies the labeler, product, and trade package size. The first
segment, the labeler code, identifies the firm that manufactures
(including repackers and relabelers) or distributes (under its own
name) the drug. Therefore, we can accurately identify the company
responsible for labeling the product and require this company to pay
the discount. Alternatively, it would be very difficult, if not
impossible, to track such relabeled or repackaged products back to the
original maker of the drug if we limited the definition of manufacturer
to the original maker. We would interpret ``entities otherwise engaged
in repackaging or changing the container, wrapper, or labeling * * *''
to mean the companies associated with the unique labeler codes that are
included in the NDCs of the applicable drugs dispensed by pharmacies,
therefore these companies would be considered manufacturers under the
Discount Program.
Applicable drugs are marketed with labels that include a labeler
code identifying the company that labels the product. While the same
applicable drug may be marketed by multiple companies, only one company
is linked to a unique labeler code. All manufacturers of applicable
drugs, meaning all companies that label applicable drugs with unique
labeler codes, would be required to sign an agreement for any
applicable drugs with such labeler codes to be covered under Medicare
Part D as of January 1, 2011. Only one manufacturer would be identified
with each labeler code and, therefore, only one manufacturer would be
responsible for paying applicable discounts associated with that
labeler code at any given time.
(5) Medicare Part D Discount Information
In accordance with section 1860D-14A(d)(3)(C) of the Act, we
require the TPA to provide adequate and timely information to
manufacturers, consistent with the Discount Program Agreement with the
manufacturers, as necessary for the manufacturer to fulfill its
obligations under the Discount Program. Accordingly, we require the TPA
to invoice each manufacturer each quarter on behalf of Part D sponsors
for the applicable discounts advanced by the Part D sponsors to
applicable beneficiaries and reported to CMS on the prescription drug
event (PDE) records. The TPA also provides information to the
manufacturer along with each quarterly invoice that is derived from
applicable data elements available on PDE records as determined by CMS.
We propose to define this information in Sec. 423.2305 as Medicare
Part D Discount Information.
Generally, the Medicare Part D Discount Information would include
certain claim-level detail derived from the PDE record. Information
such as applicable drug NDC, dispensing pharmacy, quantity dispensed,
date of service, days supply, prescription and fill number, and
reported gap discount would be provided. We would provide this
information so that a manufacturer could evaluate the accuracy of
claimed discounts and resolve disputes concerning the manufacturer's
payment obligations under the Discount Program.
Under the current Medicare Coverage Gap Discount Program Agreement
with manufacturers, ``Medicare Part D Discount Information'' refers to
the information derived from applicable data elements available on PDEs
and set forth in Exhibit A of the Agreement that will be sent from the
TPA to the manufacturer along with each quarterly invoice. However,
section III(f) of the Agreement generally prohibits us from disclosing
any identifying beneficiary information under the Discount Program.
Although the ``Medicare Part D Discount Information'' does not include
specific beneficiary identifiers, an issue arises when the volume of
claims for an applicable drug is so low that the data provided as
``Medicare Part D Discount Information'' could be used to identify a
Medicare beneficiary.
In order to protect the identity of Medicare beneficiaries, we have
a cell-size suppression policy that prohibits disclosure of data if the
data cell contains 10 or fewer individuals. In applying this policy to
the Discount Program, CMS would be unable to disclose all the data
elements currently specified as ``Medicare Part D Discount
Information'' when 10 or fewer beneficiaries with the same applicable
drug (identified as having the same first two segments of NDC) have
claims at the same pharmacy. This threshold is based on all Part D
claims for an applicable drug (identified as having the
[[Page 63024]]
same first two segment of the NDC) at the same pharmacy, not 10 or
fewer applicable beneficiaries with coverage gap claims.
When we agreed to provide the data elements specified in Exhibit A
of the current Medicare Coverage Gap Discount Program Agreement, we did
not take into consideration this issue that arises if claims volume is
so low that this information could reasonably be used to identify a
beneficiary. Consequently, we believe we would need to further limit
the information that could be provided to manufacturers based upon the
prohibition on releasing beneficiary identifying information. We
propose withholding the Service Provider Identifier information when a
claim qualifies as low volume (that is, 10 or fewer beneficiaries
receiving the same drug product at the same pharmacy). This would mean
that the remaining claims-level detail would be provided, but it would
not specify the service provider for each claim. By doing this, we
would comply with the CMS cell size suppression policy while still
providing claims-level detail that would be helpful to manufacturers
for evaluating the accuracy of the invoiced discount payments. We seek
comments on this proposal.
(6) Negotiated Price
We propose to define negotiated price for purposes of the Discount
Program consistent with section 1860D-14A(g)(6), which defines
``negotiated price'' in terms of its meaning in Sec. 423.100 as of the
date of enactment of the section (that is, as of March 23, 2010),
except that such definition does not include dispensing fees. Part D
vaccine administration fees would be excluded from the definition of
negotiated price for purposes of the Discount Program because we
believe that, for purposes of the Discount Program, they are analogous
to dispensing fees, which are explicitly excluded from the definition
of negotiated price for purposes of determining the applicable
discount. Unlike sales tax, dispensing fees and vaccine administration
fees pay for services apart from the applicable drug itself. This is
made clear by the fact that a vaccine administration fee may be billed
separately from the dispensing of the vaccine. Sales tax remains
included in the definition of negotiated price under the Discount
Program. Thus, we are proposing to define ``negotiated price'' for
purposes of the Discount Program and this subpart as: the price for a
covered Part D drug that-- (1) the Part D sponsor (or other
intermediary contracting organization) and the network dispensing
pharmacy or other network dispensing provider have negotiated as the
amount such network entity will receive, in total, for a particular
drug; (2) is reduced by those discounts, direct or indirect subsidies,
rebates, other price concessions, and direct or indirect remuneration
that the Part D sponsor has elected to pass through to Part D enrollees
at the point-of-sale; and (3) excludes any dispensing fee or vaccine
administration fee for the applicable drug.
Further, although the statutory definition speaks only to the
negotiated price with respect to a network pharmacy, given that there
is no limitation on an applicable beneficiary's entitlement to
applicable discounts on applicable drugs obtained out-of-network, we do
not believe Congress intended to exclude these discounts from the
Discount Program. Therefore, we propose to specify in Sec. 423.2305
that the negotiated price also means, for purposes of out-of-network
claims, the plan allowance as determined under Sec. 423.124, less any
dispensing fee and vaccine administration fee.
(7) Other Health or Prescription Drug Coverage
Section 1860D-14A(c)(1)(A)(v) of the Act requires that the
applicable discount get applied before any coverage or financial
assistance under other health benefit plans or programs that provide
coverage or financial assistance for the purchase or provision of
prescription drug coverage on behalf of applicable beneficiaries.
Section 423.2305 of the proposed rule would define the term ``other
health or prescription drug coverage'' as any coverage or financial
assistance under other health benefit plans or programs that provide
coverage or financial assistance for the purchase or provision of
prescription drug coverage on behalf of applicable beneficiaries. This
would include any programs that provide coverage or financial
assistance outside of Part D. Thus, the applicable discount would apply
before any ``other health or prescription drug coverage'' such as state
pharmaceutical assistance programs (SPAPs), Aids Drug Assistance
Programs (ADAPs), Indian Health Service, or supplemental coverage
required by the Commonwealth of Puerto Rico.
In addition, we propose to include in the definition of ``other
health or prescription drug coverage'' any coverage offered through
employer group health or waiver plans (EGWPs) other than basic
prescription drug coverage as defined in Sec. 423.100. We would also
propose to make a conforming change to the definition of supplemental
benefits in Sec. 423.100 to exclude benefits offered by EGWPs. Our
proposal with respect to EGWPs would mean that a manufacturer discount
always would be applied before any additional coverage beyond Part D,
whether offered by the EGWP itself or by another party. We believe a
clear standard in this regard is necessary to ensure we can properly
administer the Discount Program for EGWP enrollees in light of our
existing policies and procedures with respect to EGWP plans.
Under current waivers authorized by section 1860D-22(b) of the Act,
EGWP sponsors submit only one formulary and standard-defined benefit
package for review by CMS. EGWP sponsors may then customize actual
formularies and benefit packages for specific employer or union
clients, for example, by adding drugs to their formularies that are not
covered under the basic benefit and/or reducing enrollee cost-sharing.
Until now, we have allowed EGWP sponsors to determine whether any
benefits offered under the EGWPs were Medicare (Part D) or non-Medicare
(non-Part D) benefits because we did not collect information about or
otherwise oversee specific EGWP benefit packages. However, with the
implementation of the Discount Program, determining whether such
benefits are supplemental Part D benefits (which would be applied
before the applicable discount) or non-Medicare benefits (which would
apply after the discount) is significant. We believe that many EGWP
sponsors have already restructured their benefits so that the EGWP
provides only basic Part D coverage (with full coverage gap) and
considers any additional benefits as non-Medicare benefits. Given that
we do not receive or review the final benefit packages and formularies
offered to EGWP enrollees, we propose to exercise our waiver authority
under section 1860D-22(b) of the Act to exclude all benefits offered by
EGWPs from the definition of supplemental benefits and, therefore,
these benefits, other than basic prescription drug coverage (as defined
in Sec. 423.100), would be considered ``other health or prescription
drug coverage'' for purposes of the Discount Program. We seek comments
on this proposal.
As an alternative to this proposal, we considered requiring EGWP
sponsors to submit their final benefit packages for review and
approval. Under this option, we would have limited EGWPs to offering
only supplemental benefits that meet the requirements of Sec.
423.104(f)(1)(ii). However, in addition to the significant challenges
associated with expanding our review process to
[[Page 63025]]
accommodate another 25,000 to 50,000 benefit packages, this ultimately
would not prevent employers or unions from offering separate benefits
that would not be overseen or regulated by us; and therefore, would not
provide the clear standard for distinguishing supplemental benefits
from other health or prescription drug coverage for purposes of
determining the applicable discount. Moreover, this alternative
approach could adversely affect EGWP enrollees to the extent it would
require EGWPs to make significant changes in order to bring their
supplemental benefits in line with Part D rules--because it might
prompt EGWPs to drop those supplemental benefits altogether or
otherwise reduce coverage. Consequently, we believe it is better to
clearly remove all employer sponsored benefits, other than basic
prescription drug coverage as defined in Sec. 423.100, from our
purview, which we believe would leave EGWP enrollees in the same place
they are today, while, as noted above, providing all participants in
the Discount Program a bright line test for determining when the
applicable discount applies.
c. Condition for Coverage of Drugs Under Part D (Sec. 423.2310)
Section 1860D-43(a) of the Act specifies that in order for coverage
under Part D to be available for the covered Part D drugs (as defined
in section 1860D-2(e) of the Act)) of a manufacturer, that manufacturer
must agree to participate in the Discount Program, enter into a
Discount Program Agreement, and enter into an agreement with the TPA.
Although the statute appears to plainly contemplate that all
manufacturers of covered Part D drugs must sign Discount Program
Agreements in order for coverage under Part D to be available for such
drugs, when read in context with the other provisions governing the
Discount Program, we believe the plainest reading of section 1860D-
43(a) is both inappropriate and infeasible. Thus, in implementing the
Discount Program last year, we specified in program guidance that the
exclusion from Part D coverage applies only to the applicable drugs of
a manufacturer that fails to sign the Agreement and participate in the
Program. We currently apply the exclusion from Part D coverage only to
a manufacturer's applicable drugs. Other Part D drugs, such as generic
drugs (as defined in Sec. 423.4) of a manufacturer continue to be
covered under Medicare Part D irrespective of the manufacturer's
participation in the Discount Program. We propose to codify this policy
in regulations.
The rationale for our narrower interpretation of section 1860D-
43(a) of the Act is based on concern about beneficiary access to
generic drugs and consideration of other contemporaneous provisions
governing the Discount Program. First, given that the purpose of the
Discount Program is to reduce financial burdens on beneficiaries in the
coverage gap, we do not think that the requirements of section 1860D-
43(a) of the Act were intended to potentially limit the availability of
less expensive generic Part D drugs (which would occur if the generic
products of a non-participating manufacturer were excluded). Rather,
they were intended to ensure that manufacturers of brand name drugs had
a strong incentive to participate in the Discount Program. When we were
implementing the Discount Program last year, we were particularly
concerned, in light of the short timeframe provided by the Affordable
Care Act for collecting signed agreements from participating
manufacturers for 2011, that a strict reading of the exclusion would
have had the unintended consequence of negatively affecting the
availability of generic drugs under Part D beginning January 1, 2011.
As noted above, we further believe that section 1860D-43(a) of the
Act must be read in its proper context--in other words, it must coexist
with all of the other requirements of the Discount Program, which are
set forth in section 1860D-14A of the Act. Section 1860-D-14A of the
Act requires manufacturers to provide discounts on applicable drugs at
the point-of-sale, to provide appropriate data to CMS, and to comply
with other requirements imposed by us or the TPA. Further, as described
in more detail below, manufacturers with an agreement are subject to
periodic audits by CMS and civil money penalties. Finally, section
1860D-14A of the Act specifies that, beginning with 2012, a
manufacturer must enter into a Discount Program Agreement for a year no
later than January 30 of the previous year--in other words, for a
manufacturer to participate in the Discount Program for 2012, it would
have had to have signed a Discount Program Agreement by January 30,
2011. In addition to these statutory requirements, there are
administrative aspects of the Discount Program that include, but are
not limited to, establishing connectivity with the TPA and with CMS,
establishing electronic fund transfer accounts with more than 700 Part
D sponsors, maintaining labeler code information with CMS, and
reviewing file layouts and records for quarterly invoicing and payment
reconciliation.
None of these statutory or administrative requirements is relevant
to manufacturers of non-applicable drugs. Indeed, it would be
impossible for a manufacturer with no applicable drugs to
``participate'' in the Discount Program (as a strict reading of section
1860D-43(a)(1) would require). Further, it would be wasteful and
burdensome to require manufacturers of non-applicable drugs to
undertake all of the administrative requirements set forth in the
Discount Program Agreement with respect to drugs that are not subject
to the requirements of section 1860D-14A of the Act.
With that in mind, we next turn to the issue of manufacturers with
applicable drugs that also have non-applicable drugs. In our view, the
same rationale applies to these manufacturers--although they can
participate in the Discount Program with respect to their applicable
drugs, they cannot do so with respect to their non-applicable drugs. We
believe it would be both unfair and potentially very disruptive to
beneficiaries to treat manufacturers of non-applicable drugs
differently based on whether they also happen to make applicable drugs.
For example, suppose that a manufacturer with no applicable drugs
declines to participate in the Discount Program because it is literally
unable to comply with the statutory requirements of section 1860D-14A
of the Act. This manufacturer then acquires or begins to manufacture an
applicable drug on February 1. If this manufacturer then was subject to
the broader exclusion in section 1860D-43(a) of the Act arguably all of
its drugs--both generic and applicable--would be non-covered for a
period of almost two years. We do not believe that Congress intended
such a disruptive result. Rather, we believe it is more appropriate to
consider section 1860D-43(a) of the Act as excluding the applicable
drugs of a manufacturer that fails to participate in the Discount
Program.
In light of all of these considerations, we believe the a
reasonable interpretation of 1860D-43(a) of the Act--one that preserves
Congressional intent both to ensure manufacturer participation in the
Discount Program and to alleviate financial burden for beneficiaries--
is that the exclusion from Part D coverage applies only to the
applicable drugs of manufacturers that fail to enter into a Discount
Program Agreement and participate in the Discount Program. We seek
comments on this proposal.
[[Page 63026]]
Section 1860D-43(c)(1) of the Act authorizes CMS to allow coverage
for drugs that are not covered by Discount Program Agreements if CMS
has made a determination that the availability of the drug is essential
to the health of beneficiaries under this part, and we propose to
codify this requirement in Sec. 423.2310(b) of our proposed rule.
However, we believe it is highly unlikely that we will need to exercise
this authority given the strong participation by manufacturers in the
Discount Program since 2011 and the likely availability of therapeutic
alternatives for any Part D drugs.
d. Medicare Coverage Gap Discount Program Agreement (Sec. 423.2315)
Section 1860D-14A of the Act requires us to enter into agreements
with manufacturers that participate in the Discount Program and to
establish a model agreement in accordance with terms specified under
section 1860D-14A(b) of the Act that provides for the performance of
duties required under section 1860D-14A(c)(1) of the Act. We
established the model agreement on August 1, 2010 and propose to codify
in Sec. 423.2315 those provisions that we believe must be included in
the model agreement in order to meet the statutory requirements in
these sections.
(1) Obligations of the Manufacturer
Section 1860D-14(A)(b)(1) of the Act specifies that the Discount
Program Agreement between CMS and the manufacturers shall require
manufacturers to provide applicable beneficiaries access to applicable
discounts for applicable drugs of the manufacturer at the point-of-
sale. In light of how the Discount Program has been structured (see the
discussion section II.A.1. of this proposed rule), we would propose to
implement this requirement as set forth in the current Discount Program
Agreement; that is, we would propose in Sec. 423.2315(b)(2) to require
manufacturers to reimburse all applicable discounts provided by Part D
sponsors on behalf of the manufacturer for all applicable drugs having
NDCs with the manufacturer's FDA-assigned labeler code(s) that were
invoiced to the manufacturer within a maximum of 3 years of the date of
dispensing based upon information reported to CMS by Part D sponsors
and used by CMS or the TPA to calculate the invoice.
In order for CMS and Part D sponsors to determine which applicable
drugs are covered by Discount Program Agreements, the manufacturers
must provide CMS with the FDA-assigned labeler code(s) for all
applicable drug NDCs covered by their Discount Program Agreement. Under
the current Discount Program Agreement, manufacturers must provide all
of their labeler codes to CMS and must promptly update CMS with any
additional labeler codes for applicable drugs no later than three
business days after having received written notification of the codes
from the FDA. We included this requirement in the Discount Program
Agreement because, for the reasons previously described, it is the most
efficient and accurate way to track which manufacturer is responsible
for paying the applicable discount for an applicable drug and to assist
plan sponsors in determining which drugs are applicable drugs. We
maintain an up-to-date listing of the labeler codes covered under the
Discount Program Agreements on the CMS website so that Part D sponsors
can determine which labeler codes are covered by a Discount Program
Agreement. To ensure that we have up-to-date information for this
purpose, Sec. 423.2315(b)(4) would require manufacturers to provide
CMS with all labeler codes for all the manufacturer's applicable drugs
and promptly update CMS with additional labeler codes for applicable
drugs no later than three business days after having received written
notification of the codes from the FDA.
To permit CMS and Part D sponsors to accurately identify applicable
drugs, we propose to codify the requirement set forth in the Discount
Program Agreement that manufacturers electronically list and maintain
up-to-date electronic listing of all NDCs of the manufacturer,
including the timely removal of discontinued NDCs, in the FDA NDC
Directory. We believe this requirement will help ensure that all
currently marketed applicable drugs are subject to the applicable
discount and that only currently marketed applicable drugs are subject
to the discount. Because manufacturers know the regulatory and
marketing status of their products, they are in the best position to
make this information available to Part D sponsors and CMS. We believe
maintaining an up-to-date FDA electronic listing provides the most
efficient, timely, and authoritative mechanism to accomplish this
purpose while placing little additional burden on manufacturers that
already must use the FDA electronic registration and listing system to
comply with other FDA requirements.
We also propose to require manufacturers to maintain up-to-date NDC
listings with the electronic database vendors for which they provide
their NDCs for pharmacy claims processing. Part D sponsors rely upon
these databases for adjudication of pharmacy claims at the point-of-
sale, including discounting applicable drugs, and, therefore it is
imperative that the information in these
