Medicare Program; Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs for Contract Year 2013 and Other Changes, 22072-22175 [2012-8071]
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Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Rules and Regulations
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Centers for Medicare & Medicaid
Services
42 CFR Parts 417, 422, and 423
[CMS–4157–FC]
RIN 0938–AQ86
Medicare Program; Changes to the
Medicare Advantage and the Medicare
Prescription Drug Benefit Programs for
Contract Year 2013 and Other Changes
Centers for Medicare &
Medicaid Services (CMS), HHS.
ACTION: Final rule with comment period.
AGENCY:
This final rule with comment
period revises 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. It also
responds to public comments regarding
the long-term care facility conditions of
participation pertaining to pharmacy
services.
DATES: Effective dates: These regulations
are effective on June 1, 2012 unless
otherwise specified in section I.B. of
this final rule with comment period (see
Table 1). Amendments to the definitions
of ‘‘other health or prescription drug
coverage’’ at § 423.2305 and
‘‘supplemental benefits’’ at § 423.100 are
effective January 1, 2013.
Comment date: We will only consider
public comments on the issues specified
in section II.B.5 of this final rule with
comment period, Independence of LTC
Consultant Pharmacists, if we receive
them at one of the addresses specified
in the ADDRESSES section of this final
rule with comment period, on June 11,
2012.
Applicability dates: In section I.B. of
the preamble of this final rule with
comment period, we provide a table
(Table 1) which lists revisions that have
an applicability date other than the
effective date of this final rule with
comment period.
ADDRESSES: In commenting, please refer
to file code CMS–4157–FC. 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
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SUMMARY:
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to https://www.regulations.gov. Follow
the ‘‘Submit a comment’’ instructions.
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–FC, 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 to the
following address only: Centers for
Medicare & Medicaid Services,
Department of Health and Human
Services, Attention: CMS–4157–FC,
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 only to 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.
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Kristy Nishimoto, (206) 615–2367,
Part C and D enrollment and appeals
issues.
Deondra Moseley, (410) 786–4577,
Part C payment issues.
Ilina Chaudhuri, (410) 786–8628, Part
D payment issues.
SUPPLEMENTARY INFORMATION: 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: 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 1–800–743–3951.
Table of Contents
I. Executive Summary, Effective and
Applicability Dates, and Background
A. Executive Summary
B. Effective and Applicability Dates
C. Background
II. Provisions of the Final Regulation and
Analysis of and Responses to Public
Comments
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) Timing and 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
(§ 423.2325)
(1) Obligations of Part D Sponsors; Pointof-Sale Discounts
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(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
(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
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 Certain Dual
Eligible Special Needs Plans (D–SNPs)
(§ 422.102)
3. Application of the Medicare HospitalAcquired Conditions and Present on
Admission Indicator Policy to MA
Organizations
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
(§§ 423.100, 423.104, and 423.153)
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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
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. 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 Medication Review
CMS Centers for Medicare & Medicaid
Services
CMS–HCC CMS Hierarchal Condition
Category
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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
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MSA Metropolitan Statistical Area
MSAs Medical Savings Accounts
MSP Medicare Secondary Payer
MTM Medication Therapy Management
MTMP Medication Therapy Management
Program
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. Executive Summary and Background
A. Executive Summary
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1. Purpose
a. Need for Regulatory Action
We are publishing this final rule with
comment period for the Medicare
Advantage (Part C) and prescription
drug (Part D) programs to make changes
as required by statute, including the
Affordable Care Act, as well as improve
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the program through modifications that
reflect experience we have obtained in
administering the Part C and Part D
programs and/or address requests for
clarification received from stakeholders
such as health plans and Part D
sponsors. The five different sections of
the preamble cover the specific means
by which we believe the final rule will:
(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. Legal Authority
Our authority for this final regulation
stems from the Social Security Act (the
Act). As is discussed in more detail in
section I.C. of this final rule with
comment period, the Balanced Budget
Act of 1997 (BBA) and the Medicare
Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA)
created, respectively, the Medicare
Advantage (MA) program (Part C) and
the Medicare Prescription Drug Benefit
Program (Part D). Congress continues to
amend the Act and change both Parts C
and D, and this final regulation includes
modifications required by, for instance,
the Medicare Improvements for Patients
and Providers Act of 2008 (MIPPA) and
the Affordable Care Act.
2. Summary of the Major Provisions
a. Coverage Gap Discount Program
(§ 423.100, § 423.505(b), § 423.1002, and
Subpart W (§ 423.2300 Through
423.2410))
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). We implemented
the Discount Program through program
instructions due to the January 1, 2011
implementation deadline. Although not
required, we are codifying most of the
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.
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b. Pharmacy Benefit Manager’s
Transparency Requirements (§ 423.501
and § 423.514)
Section 1150A of the Act, as amended
by section 6005 of the Affordable Care
Act, requires Part D sponsors and
entities that provide pharmacy benefits
management services to report various
data elements. The statute further
specifies that this information is
confidential and generally shall not be
disclosed by the government or by a
plan receiving the information, with
certain exceptions that allow the
government to disclose the information
in a non-identifiable form. There are
penalties for those that fail to meet the
requirements of this provision. We are
codifying the reporting requirements,
confidentiality protections, and penalty
provision in this final rule with
comment period.
c. Who May File Part D Appeals With
the Independent Review Entity
(§ 423.600 and § 423.602)
This change to our regulations allows
prescribers to request a reconsideration
on an enrollee’s behalf without
obtaining an appointed representative
form. We believe this change will make
the Part D appeals process more
accessible to beneficiaries. The legal
authority for this policy is section
1860D–4(g) of the Act.
d. Plan Performance Ratings as a
Measure of Administrative and
Management Arrangements and as a
Basis for Termination or Non-Renewal
of a Medicare Contract (§§ 422.510,
423.505, and 423.509)
Each year, we issue performance
quality ratings, using a 5-star system
where 5 stars indicates the highest
quality, of Part C and D plan sponsors.
The plan ratings are based on a series
of measures that correspond to
operational requirements of the Part C
and D programs. We have established
that 3 stars reflects an average level of
performance and is the lowest
acceptable rating for plan sponsors.
Sponsors that fail for three consecutive
years to achieve at least a 3-star rating
have demonstrated that they have
substantially failed to meet the
requirements of the Part C and D
programs and failed to take timely and
effective corrective action. Therefore,
we are adopting the authority to
terminate the contracts of Part C and D
sponsors that fail to achieve at least a 3star plan rating for 3 consecutive years.
The data used to calculate the plan
ratings is plan performance data that
serves as evidence that the sponsor has
reached the substantial failure standard
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that CMS must use, pursuant to section
1857(c)(2) of the Act, to make a contract
termination decision.
e. New Benefit Flexibility for FullyIntegrated Dual Eligible Special Needs
Plans (FIDE SNPs) (§ 422.102)
This provision specifies that, subject
to CMS approval, and as specified
annually by CMS, certain dual eligible
SNPs (D–SNPs) that meet integration
and performance standards may offer
additional supplemental benefits
beyond those CMS currently allows
other MA plans to offer, where CMS
finds that the offering of such benefits
could better integrate care for the dual
eligible population. Such benefits may
include nonskilled nursing services,
personal care services, and other longterm care services and supports
designed to keep dual eligible
beneficiaries out of institutions. We
would require D–SNPs that offer these
additional supplemental benefits to do
so at no additional cost to the
beneficiary. We believe that providing
certain D–SNPs that meet integration
and performance standards the
flexibility to offer additional
supplemental benefits could better
integrate care for the dual eligible
population, help prevent health status
decline, and reduce the quantity and
cost of future health care needs.
f. Clarifying Coverage of Durable
Medical Equipment (§§ 422.100 and
422.111)
This provision permits a Medicare
Advantage plan to limit durable medical
equipment (DME) to specific
‘‘preferred’’ brands and manufacturers
as long as the plan complies with
several requirements intended to ensure
that the enrollee continues to have
access to all categories of DME specified
in the Social Security Act. Beneficiary
protections include access to all
preferred brands, a transition period
permitting enrollees to retain DME
when changing plans, exceptions to
plan limitations based on medical
necessity, the ability to appeal a plan’s
denial of DME based on brand/
manufacturer, and plan disclosure of
DME limitations to enrollees.
g. 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)
The daily cost-sharing rate
requirement provides a financial
incentive to Medicare Part D
22075
beneficiaries to ask their prescribers
whether less than a month’s supply of
a drug would be appropriate because, if
so, the Part D sponsor will apply lower,
pro-rated cost sharing when the
prescription is dispensed, which also
reduces costs and waste. Sponsors will
not be required to provide daily costsharing rates upon request until January
1, 2014.
h. Access to Covered Part D Drugs
Through Use of Standardized
Technology and National Provider
Identifiers (§ 423.120)
Part D sponsors must include an
active and valid prescriber National
Provider Identifier (NPI) on prescription
drug event records (PDEs) that they
submit to CMS, which will assist the
Federal government in fighting possible
fraudulent activity in the Part D
program, because prescribers will be
consistently and uniformly identified.
This policy will not interfere with
beneficiary access to needed
medications because Part D sponsors
must validate the NPI at point of sale,
and if this is not possible, permit the
prescription to be dispensed and obtain
the valid NPI afterwards.
3. Summary of Costs and Benefits
Preamble
section
Provision description
Total 6 year costs
Total 6 year benefits
II.A.1 ........
Coverage
Gap
Discount
Program
(§§ 423.100, 423.505(b), 423.1002, and
Subpart W (§§ 423.2300–423.2410)).
$1.3 billion: Cost to Federal government
$76 M: Cost to Part D sponsors. $29.8
billion: Cost to manufacturers.
II.A.3 ........
Pharmacy Benefit Manager’s Transparency Requirements (§§ 423.501 and
423.514).
Who May File Part D Appeals with the
Independent Review Entity (§ 423.600).
N/A (Nearly all data elements are already
collected for other purposes).
$29.7 billion in manufacturer discounts for
Part D enrollees. Provides additional
health benefits through increased adherence to medication regimens; and
allows beneficiaries to reach the catastrophic coverage phase more quickly.
Promotes PBM transparency to Part D
sponsors and Medicare.
II.B.4 ........
Plan Performance Ratings as a Measure
of Administrative and Management Arrangements and as a Basis for Termination or Non-Renewal of a Medicare
Contract (§§ 422.510, 423.505, and
423.509).
II.D.2 ........
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II.C.2 ........
New Benefit Flexibility for Certain Dual Eligible Special Needs Plans (D-SNPs)
(§ 422.102).
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$5.84 million: Cost to Federal government. $450,000: Cost to Part D sponsors.
N/A .............................................................
$0.36 million to MA organizations .............
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Improves beneficiary access to the Part D
appeals process.
For beneficiaries: Provides assurance that
they are making a plan election from
among only those sponsors that demonstrate a commitment to providing
high quality service.
For CMS: Emphasizes further CMS’ commitment to driving improvement in the
health care and prescription drug benefit markets.
For beneficiaries: The flexibility for certain
D–SNPs to offer additional supplemental benefits is in keeping with our
objective of keeping Medicare-Medicaid
(‘‘dual eligible’’) beneficiaries who are at
risk of institutionalization in the community.
For CMS: $135.1 million in savings that
accrue to the Federal Medicaid program
and the Medicare program.
For States:
$2.62 million in savings to the State Medicaid program.
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Preamble
section
Provision description
Total 6 year costs
II.D.4 ........
Clarifying Coverage of Durable Medical
Equipment (§§ 422.100 and 422.111).
Establishment and Application of Daily
Cost-Sharing Rate as Part of Drug Utilization Management and Fraud, Abuse,
and
Waste
Control
Program
(§§ 423.100, 423.104 and 423.153).
N/A .............................................................
N/A.
$0.5 million: cost to Part D sponsors ........
Access to Covered Part D Drugs Through
Use of Standardized Technology and
National Provider Identifiers (§ 423.120).
$30.7 million: cost to Part D sponsors ......
Over $1.8 billion in estimated savings to
the Part D program.
Savings to beneficiaries who take advantage of option in consultation with their
prescribers through lower cost-sharing
for prescriptions.
Reduction of medication waste.
Improved capability to fight fraud in the
Medicare Part D program.
II.D.6 ........
II.E.11 ......
B. Effective and Applicability Dates
We note that these regulations will be
effective 60 days after the publication of
this final rule with comment period,
except for two regulations whose
effective dates are mandated by statute
and one regulation whose effective date
we are choosing to delay. Section 175(b)
of MIPPA provides that barbiturates for
specified health conditions and
benzodiazepines be considered as Part D
drugs for prescriptions dispensed on or
after January 1, 2013. Similarly, section
10328 of the Affordable Care Act
requires that, for plan years beginning
on or after 2 years after the date of its
enactment, Part D sponsors offer to
targeted beneficiaries annual
comprehensive medication reviews
(CMRs). The Affordable Care Act was
enacted on March 23, 2010; accordingly,
the revision regarding CMRs in LTC
settings will become effective January 1,
2013. Additionally, we have delayed the
effective date of the change to the policy
on who may file Part D appeals with the
Independent Review Entity to clarify
that physicians and other prescribers
may not request reconsiderations on
behalf of beneficiaries until the
beginning of the 2013 plan year (unless
they are the beneficiary’s authorized
representative).
Total 6 year benefits
Unless specified in this final rule with
comment period, the effective date and
the applicability date are the same.
There are some instances in which they
may vary. For instance, because the
health and drug plans under the Part C
and D programs operate under contracts
with CMS that are applicable on a
calendar year basis, some provisions
will not be applicable prior to contract
year January 1, 2013. In Table 1 we
provide a list of revisions whose
applicable dates vary from the effective
date of 60 days after publication of this
final rule with comment period.
TABLE 2—FINALIZED REVISIONS WITH EFFECTIVE AND/OR APPLICABLE DATES OTHER THAN 60 DAYS AFTER PUBLICATION
Preamble
section
Section title
Effective date
applicability date
II.A.1 .................
Coverage Gap Discount Program .............................................
II.A.2 .................
II.B.1 .................
Inclusion of Benzodiazepines and Barbiturates as Part D
Covered Drugs.
Good Cause and Reinstatement into a Cost Plan ...................
II.B.2 .................
Requiring MA plans to disclose Member ID cards ...................
II.B.4 .................
Clarifying Who May File Part D Appeals with the Independent
Review Entity.
CMS Termination of Health Care Prepayment Plans ...............
The definition of ‘‘other health or prescription drug coverage’’
under § 423.2305 and change to the existing definition of
‘‘supplemental benefits’’ under § 423.100 are:
effective 60 days after date of publication applicable 01/01/13
Note: All remaining regulations related to the Coverage Gap
Discount Program remain:
Effective 60 days after date of publication
applicable 60 days after date of publication
effective 01/01/13
applicable 01/01/13
effective 60 days after date of publication
applicable 01/01/13
effective 60 days after date of publication
applicable 01/01/13
effective and
applicable 01/01/13
effective 60 days after date of publication
applicable 01/01/13
effective 60 days after date of publication
applicable 01/01/13
effective 60 days after date of publication
applicable 01/01/13
effective 60 days after date of publication
applicable 01/01/13
effective 60 days after date of publication
applicable 01/01/13
effective 60 days after date of publication
applicable 01/01/14
II.C.1 .................
II.D.1 .................
II.D.4 .................
Cost Contract Plan Public Notification Requirements in Cases
of Non-Renewal.
Flexibilities for Certain Fully-Integrated Dual Eligible Special
Needs Plans.
Clarifying Coverage of Durable Medical Equipment .................
II.D.5 .................
Broker and Agent Requirements ..............................................
II.E.6 .................
Establishment and Application of Daily Cost-Sharing Rate as
Part of Drug Utilization Management and Fraud, Abuse,
and Waste Control Program.
Extending MA and Part D Program Disclosure Requirements
to Section 1876 Cost Contract Plans.
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II.D.2 .................
II.E.2 .................
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TABLE 2—FINALIZED REVISIONS WITH EFFECTIVE AND/OR APPLICABLE DATES OTHER THAN 60 DAYS AFTER
PUBLICATION—Continued
Preamble
section
Section title
II.E.3 .................
Clarification of, and Extension of Regional Preferred Provider
Organization Plan Single Deductible Requirements to,
Local Preferred Provider Plans.
Technical Change to Private Fee-For-Service Plan Explanation of Benefits Requirements.
II.E.4 .................
Effective date
applicability date
II.E.5 .................
Application Requirements for Special Needs Plans .................
II.E.6 .................
Timeline for Resubmitting Previously Denied MA Applications
II.E.7 .................
Clarification of Contract Requirements for First Tier and
Downstream Entities.
Medication Therapy Management Comprehensive Medication
Reviews and Beneficiaries in LTC Settings.
Access to Covered Part D Drugs Through Use of Standardized Technology and National Provider Identifiers.
II.E.9 .................
II.E.11 ...............
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C. 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 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. 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
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effective 60 days after date of publication
applicable 01/01/13
effective 60 days after date of publication
applicable sometime after 2013 application cycle (when EOB
model for all MA plans are finalized)
effective 60 days after date of publication
applicable 01/01/13
effective 60 days after date of publication
applicable 01/01/13
effective 60 days after date of publication
applicable 01/01/13
effective 01/01/13
applicable 01/01/13
effective 60 days after date of publication
applicable 01/01/13
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 then-recent
legislative changes.
The Patient Protection and Affordable
Care Act (Pub. L. 111–148) was enacted
on March 23, 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-
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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 provisions enacted in
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-ofpocket expenses for MA enrollees; and
several revisions to the special needs
plan requirements, including changes
concerning SNP approvals.
In the October 11, 2011 Federal
Register (76 FR 63018), we published a
proposed rule with proposed revisions
to the Medicare Advantage (MA)
program (Part C) and prescription drug
benefit program (Part D). The goals of
this proposed rule were to: Implement
provisions from the Affordable Care Act
(ACA) and the Medicare Improvements
for Patients and Providers Act of 2008
(MIPPA); strengthen beneficiary
protections; exclude plan participants
that perform poorly; improve program
efficiencies; and clarify program
requirements for contract year 2013. The
proposed rule also included
consideration of changes to the long
term care facility (LTC) conditions of
participation relating to pharmacy
services.
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II. Provisions of the Proposed Rule and
Analysis and Response to Public
Comments
We received approximately 516 items
of timely correspondence containing
comments on the proposed rule
published in the October 11, 2011
Federal Register (76 FR 63018).
Commenters included health and drug
plan organizations, insurance industry
trade groups, provider associations,
pharmacists (including consultant
pharmacists) and pharmacy
associations, representatives of hospital
and long term care institutions,
pharmacy benefit managers, drug
manufacturers, mental health and
disease specific advocacy groups,
beneficiary advocacy groups, private
citizens, ombudsmen, and others.
In this final rule with comment
period, we address all comments and
concerns regarding the policies
included in the proposed rule. We also
reference, in the comment and response
sections of this final rule with comment
period, some comments that were
outside the scope of the revisions we
proposed in October 2011. We present
a summary of public comments, as well
as our responses to them in the
applicable subject-matter sections of
this final rule with comment period.
In the sections that follow, we discuss
finalized revisions to the regulations in
42 CFR parts 417, 422, and 423 which
govern the MA and prescription drug
benefit programs. We also considered—
but for the present decided against—
making changes to the regulations
setting forth the Medicare conditions of
participation for long-term care
facilities, which are currently codified
at 42 CFR part 483. The preamble for the
final rule will follow the structure of the
October 2011 proposed rule and cover
issues by topic area. Accordingly, our
proposals address the following five
specific goals:
• 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 of the five major
sections of the preamble to this final
rule with comment period, we discuss
provisions in order of appearance in the
associated regulations; a chart at the
beginning of each of the five sections
provides subsection numbers and titles
and the associated regulatory citations.
Although we are not finalizing all the
revisions proposed, discussion
(including comments and responses) of
non-finalized proposals will still appear
in the same order as was the case in the
October 2011 proposed rule.
A. Implementing Statutory Provisions
We are finalizing all three provisions
in this section, two of which implement
sections of the Affordable Care Act and
one which implements a MIPPA
mandate. In this final rule with
comment period, we consolidate and
codify previous guidance regarding the
Coverage Gap Discount Program
mandated by the Affordable Care Act.
We believe this consolidation will
provide stakeholders a central, clear
source of direction. We are also
finalizing regulations under a MIPPA
provision which will provide treatment
for beneficiaries who require
benzodiazepines and, as specified,
barbiturates. Lastly, we are finalizing
regulations implementing section 6005
of the Affordable Care Act, which
contains several reporting requirements
for Part D sponsors and 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 2.
TABLE 2—PROVISIONS TO IMPLEMENT STATUTORY PROVISIONS
Part 423
Provision
II.A.1 .........
Coverage Gap Discount Program ..................................................................................................
II.A.2 .........
II.A.3 .........
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Preamble
section
Inclusion of Benzodiazepines and Barbiturates as Part D Covered Drugs ..................................
Pharmacy Benefit Manager’s Transparency Requirements ..........................................................
Subpart
1. Coverage Gap Discount Program
(§§ 423.100, 423.505(b), 423.1000,
423.1002, and 423.2300 Through
423.2345 (Subpart W))
Section 3301 of 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)
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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 applicable
beneficiaries for all covered brand-name
and generic drugs and biological
products after the deductible 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
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Subpart
Subpart
Subpart
Subpart
Subpart
(new)
Subpart
Subpart
C .........
K .........
T .........
T ..........
W
C .........
K .........
Section(s)
423.100
423.505
423.1000
423.1002
423.2300–
423.2345
423.100
423.501
423.514
50 percent of an amount equal to the
negotiated price of the drug (less any
dispensing fee). In general,
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. We note that we have
authority under section 1860D–43(c) of
the Act to make an exception that
allows coverage without an agreement,
but based on the current level of
participation by manufacturers and the
breadth of applicable drugs covered by
Discount Program Agreements, we do
not anticipate needing to exercise such
authority.
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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
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 have determined that
the Part D sponsor can accurately
provide the discount at point-of-sale.
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 on May 21,
2010, 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
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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 implemented the Discount
Program through program instruction
due to the January 1, 2011
implementation deadline. Although not
required, we are codifying most of
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.
In this section, we summarize the
provisions of subpart W and respond to
public comments.
b. Definitions (§ 423.2305)
Proposed § 423.2305 included
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 final rule with comment period.
(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.
(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
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22079
(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 treats the
product as a 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 requirements
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.
(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
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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
proposed 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.
(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 proposed
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 proposed adding this language to
the definition to track the defined term
in the Discount Program Agreement,
and because we believe this is the only
practical way to define manufacturer
under the Discount Program 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 label, relabel or
repackage drug products and market
them with unique labeler codes. It
would be very difficult, if not
impossible, to track all labeled,
relabeled or repackaged products back
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to the original maker of the drug if we
limited the definition of manufacturer to
the original maker. Therefore, for
purposes of the Discount Program, we
interpret the definition of
‘‘manufacturer’’ in § 423.2305 to mean
any company associated with a unique
labeler code included in the NDCs of the
applicable drugs dispensed by
pharmacies.
Applicable drugs are generally
marketed with labels that include the
product’s NDC number. In any NDC, the
labeler code segment uniquely
corresponds to a single company. 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 proposed 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
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Sfmt 4700
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, we proposed to apply
CMS’s cell-size suppression policy to
the information we would release to
manufacturers when 10 or fewer
beneficiaries with the same applicable
drug (identified as having the same first
2 segments of NDC) have claims at the
same pharmacy (‘‘low-volume claims’’).
Specifically, we proposed to withhold
the pharmacy identifier information for
these claims as an additional safeguard
for preventing manufacturers from
receiving information that could
potentially be used to identify
beneficiaries.
(6) Negotiated Price
We proposed to define negotiated
price for purposes of the Discount
Program consistent with section 1860D–
14A(g)(6) of the Act, 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
proposed 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,
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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 proposed 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 proposed 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
also proposed to make a conforming
change to the definition of supplemental
benefits in § 423.100 to exclude benefits
offered by EGWPs. With respect to
EGWPs, this would mean that a
manufacturer discount always would be
applied before any additional coverage
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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
EGWPs.
Comment: A commenter
recommended that we allow the
determination of ‘‘applicable drug’’
status to be based upon plan formulary
categorization as ‘‘brand name’’ or
‘‘generic’’ as opposed to being based
upon the FDA approved marketing
category.
Response: We disagree with this
commenter. Section 1860D–14A(g)(2) of
the Act clearly defines an applicable
drug based upon its FDA marketing
category as approved under a new drug
application or licensed under a
biologics license application. The
definition proposed in § 423.2305 is
consistent with the statute, and we do
not have the authority to define it
differently based upon formulary
categorization.
Comment: A commenter supported
our exclusion of Part D compounds from
the definition of an applicable drug.
However, another commenter stated that
our exclusion of compounds from the
definition of applicable drug was
inconsistent with including compounds
in the definition of a Part D drug.
Response: We disagree with the
commenter that stated our exclusion of
compounds from the definition of
‘‘applicable drug’’ was inconsistent with
including compounds in the definition
of a Part D drug. Whereas Part D
sponsors can accurately determine that
a compound has at least one Part D
ingredient and the costs associated with
such ingredient(s), we believe there are
additional complexities associated with
trying to accurately determine and
validate discounts on an ingredientlevel basis that require us to consider
the compound as a whole for purposes
of the Discount Program. Moreover,
because a compound as a whole is not
approved by the FDA under a new drug
application or licensed under a
biologics license application, a
compound does not meet the definition
of an applicable drug.
Comment: A few commenters
supported our proposal to withhold
specific data elements from the
Medicare Part D Discount Information
for low-volume claims. However,
several commenters opposed our
proposal. These commenters
emphasized that the Medicare Part D
Discount Information does not include
any identifying beneficiary information
and that under the Discount Program
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Agreement, manufacturers cannot: (1)
link Medicare Part D Discount
Information to any other data; or (2) use
Medicare Part D Discount Information
for purposes unrelated to the Coverage
Gap Discount Program, such as to
identify beneficiaries. They believe that
all of the Medicare Part D Discount
information is necessary to accurately
validate claims and to determine that a
drug was appropriately covered under
Medicare Part D as opposed to Medicare
Part B.
Response: We appreciate all of the
comments and have decided not to
finalize the proposal to withhold
additional data elements for low-volume
claims. This proposal was intended to
codify a prior CMS policy to withhold
certain data elements on low-volume
claims that has since changed and is no
longer applicable.
Comment: A number of commenters
requested that CMS change the
definition of negotiated price under the
Coverage Gap Discount Program to
include dispensing and vaccine
administration fees so that it is
consistent with the other phases of the
benefit. Further, they recommended that
if the definition is not changed, we
require point-of-sale notice that the
dispensing fee or vaccine administration
fee is not discounted and also include
similar language on the explanation of
benefits.
Response: Section 1860D–14A(g)(6) of
the Affordable Care Act defines
‘‘negotiated price’’ for purposes of the
Coverage Gap Discount Program and gap
coverage 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. Since the
statute clearly excludes dispensing fee
from the definition, we do not have the
authority to include it in the definition.
As for vaccine administration fees, we
continue to believe that, for purposes of
the Discount Program, they are
analogous to dispensing fees and,
therefore, do not fall within the
definition of ‘‘negotiated price.’’
We also believe it is neither necessary
nor practical to require beneficiary
notification on every discounted claim
that the beneficiary is responsible for
paying the entire dispensing fee or
vaccine administration fee. Electronic
pharmacy transactions processed under
the Health Insurance Portability and
Accountability (HIPAA) approved
National Council for Prescription Drug
Programs electronic standard do not
provide pharmacies with sufficient
information at point-of-sale to know
whether the beneficiary is paying the
dispensing fee on a claim. Nevertheless,
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we understand there is a need for more
clarification with respect to beneficiary
liability for dispensing and vaccine
administration fees for applicable drugs
in the coverage gap and thus have
provided guidance in the 2013 Advance
Notice clarifying how manufacturer,
beneficiary, and Part D sponsor
liabilities, including dispensing fee
liabilities, for coverage gap claims must
be determined beginning in 2013.
Comment: Several commenters
supported our proposal to define all
supplemental benefits offered by
employer group waiver plans (EGWPs)
as other health or prescription drug
coverage that are not Part D benefits.
However, a few commenters opposed
the proposal and contend that CMS does
not have the authority to adopt this
proposal and that it would be
imprudent to adopt the proposal even if
CMS had the authority to do so. They
state that CMS cannot use its waiver
authority under section 1860D–22(b) of
the Act because it is not a waiver of a
requirement that hinders the design of,
the offering of, or the enrollment in
employer sponsored coverage.
Response: We disagree with the
commenters who believe that we do not
have the authority to exclude any
coverage offered through EGWPs, other
than basic prescription drug coverage as
defined in § 423.100, from the definition
of Part D supplemental benefits and,
therefore, treat them as other health or
prescription drug coverage. Under
current waivers authorized by section
1860D–22(b) of the Act, EGWP sponsors
submit only one formulary and a
standard-defined benefit package for
review by CMS. We waived the
requirement for EGWPs to submit final
benefit packages and formularies
because we believe upholding the
requirement would hinder the design,
offering, or enrollment in employersponsored coverage given the additional
complexity and level of effort that
would be required of EGWPs to submit
all applicable information on all such
benefit packages. Consequently, we
have never reviewed any supplemental
benefits offered through EGWPs as Part
D benefits nor have we provided
guidance that such benefits are
Medicare or non-Medicare benefits. In
the absence of such guidance, we are
aware that some EGWPs previously may
have considered these supplemental
benefits to be Medicare benefits while
others may have considered them to be
non-Medicare benefits.
As discussed in the proposed rule, the
Discount Program now makes it crucial
to be able to distinguish Part D benefits
(which apply before the applicable
discount) from non-Medicare benefits
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(which apply after the applicable
discount). In order to make this
distinction consistently and accurately,
we believe it is necessary to define all
such supplemental benefits as other
health or prescription drug coverage
because requiring submission of benefit
packages would hinder the design of,
the offering of, or the enrollment in
employer-sponsored coverage for the
same reasons that we currently waive
the requirement for EGWPs to submit
final benefit packages and formularies
as well as a high probability that many
of these supplemental benefits are also
governed by other non-Medicare rules
(for example ERISA) and collective
bargaining agreements that could make
it difficult to comply with Part D rules.
Moreover, while the submission
requirement itself would be a
hindrance, the effort required to
restructure benefits to provide all
additional gap coverage as other
coverage in order to maximize
discounts, which we could not prevent,
would add costs and complexity to the
provision of EGWP coverage and,
therefore, additionally hinder the design
and offering of employer sponsored
coverage. Accordingly, we believe it is
necessary to use the waiver authority
under section 1860D–22(b) of the Act to
explicitly exclude any supplemental
benefits offered through EGWPs (which
we do not review and have never
reviewed) from Part D supplemental
benefits and define them as other health
or prescription drug coverage.
Comment: Several commenters
requested that we clarify the effective
date for defining any coverage offered
through EGWPs, other than basic
prescription drug coverage as defined in
§ 423.100, as other health or
prescription drug coverage is January 1,
2013.
Response: We clarify that, beginning
on January 1, 2013, EGWP supplemental
benefits over basic Part D coverage must
be treated as other health or prescription
drug coverage. We are designating
January 1, 2013 as the applicable date of
this requirement in order to avoid
midyear disruptions of operations for
any EGWPs that currently treat
supplemental benefits as Medicare
benefits and therefore, calculate the
discount after applying such benefits.
This will provide them time to align
their systems to meet the January 1,
2013 requirements.
Comment: A commenter requested
that CMS clarify that coverage offered
through EGWPs, other than basic
prescription drug coverage as defined in
§ 423.100, will be defined as other
health or prescription drug coverage
only for purposes of the Coverage Gap
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Discount Program but not for other
purposes such as appeals and
grievances.
Response: Beginning January 1, 2013,
any coverage offered through EGWPs,
other than basic prescription drug
coverage as defined in § 423.100, will be
defined as other health or prescription
drug coverage and not considered
Medicare benefits. This definition
applies to all of Medicare Part D and is
not limited to the Discount Program.
While the Discount Program triggered
our decision to explicitly exclude
supplemental coverage offered through
EGWPs from Part D supplemental
benefits, we believe it is necessary to
apply the exclusion more broadly for
the same reasons it is necessary under
the Discount Program. Specifically,
because we do not receive and review
these benefits we cannot appropriately
oversee their provision and requiring
submission of these benefits needs to be
waived because we believe it would
hinder the design of, offering, or
enrollment in employer sponsored
coverage. Therefore, other Medicare Part
D requirements, such as those related to
appeals and grievances, will not apply
to these non-Medicare benefits.
After consideration of the public
comments received, we are finalizing
these definitions with one modification.
We are not finalizing our proposal to
withhold some of the Medicare Part D
Discount Information from
manufacturers on low-volume claims.
All definitions will be effective and
applicable 60 days after publication of
the rule, except for the definition of
‘‘other health or prescription drug
coverage’’ found in § 423.2305 and the
conforming change to the definition of
supplemental benefits in § 423.100 to
exclude benefits offered by EGWPs,
which definition and change to an
existing definition will on January 1,
2013.
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
contemplates 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
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plainest reading of section 1860D–43(a)
of the Act 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 Discount 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 proposed to codify this policy in
regulations.
Section 1860D–43(c)(1) of the Act
authorizes us to allow coverage for
drugs that are not covered by Discount
Program Agreements if we have made a
determination that the availability of the
drug is essential to the health of
beneficiaries under this part, and we
proposed 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.
Comment: Many commenters
supported our proposal to exclude only
applicable drugs that are not covered by
a signed manufacturer agreement from
Medicare Part D and continue to allow
coverage of other Part D drugs, such as
generic drugs, irrespective of a
manufacturer’s participation in the
Coverage Gap Discount Program.
However, a commenter recommended
that we delay codifying this proposal
until the Discount Program is fully
implemented and until evidence exists
that manufacturers plan to continue
participating in the Discount Program.
Response: We agree with commenters
that supported our proposal and do not
believe it is necessary to delay codifying
it until there has been more experience
with the Discount Program. We believe
it is important to codify this provision
now to provide certainty about our
policy.
After consideration of the public
comments received, we are finalizing
the policies in this section without
modification except for the technical
correction to § 423.2315(b)(7) that
clarifies manufacturers must provide
timely information about discontinued
drugs to enable the publication of
accurate information regarding what
drugs, identified by NDC, are in current
distribution.
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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. In
consultation with manufacturers, we
established the model agreement on
August 1, 2010 and proposed to codify
in § 423.2315 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 in
section II.A.1. of the October 11, 2011
proposed rule) (76 FR 63018) we
proposed to implement this requirement
as set forth in the current Discount
Program Agreement. That is, we
proposed 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 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 in advance with the FDAassigned 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 3 business days after
learning of a new code assigned by 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
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the applicable discount for an
applicable drug and to assist Part D
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 Web site 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 3
business days after learning of a new
code assigned by the FDA.
To permit CMS and Part D sponsors
to accurately identify applicable drugs,
we proposed to codify the requirement
set forth in the Discount Program
Agreement that manufacturers
electronically list and maintain an upto-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. In this final rule with
comment period, we are making a
technical correction to this requirement
by specifying that manufacturers
provide timely information about
discontinued drugs to enable the
publication of accurate information
regarding what drugs, identified by
NDC, are in current distribution. This
language replaces the requirement that
manufacturers timely remove
discontinued NDCs in the FDA NDC
Directory because we realized that it is
the FDA that makes the determination
to remove NDCs based upon
information provided by the
manufacturer.
We also proposed to require
manufacturers to maintain up-to-date
NDC listings with the electronic
database vendors for which they
provide their NDCs for pharmacy claims
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processing. Part D sponsors and the rest
of the pharmacy industry 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 databases is
accurate and up-to-date. Our proposal
would require manufacturers to ensure
that electronic database vendors are
prospectively notified of expiration
dates for NDCs of products that are no
longer 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 Part D
sponsors promptly because it is the
manufacturers that are financially
responsible for payment of applicable
discounts. Given this structure, we
proposed to codify this requirement at
§ 423.2315(b)(3). We further proposed 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 of payment 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
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Part D sponsors in a timely manner and
are not delayed due to disputed
amounts. We address our proposals
with respect to manufacturers’ disputes
later in this section of the final rule with
comment period.
Section 1860D–14A(b)(2) of the Act
requires each manufacturer with an
executed 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 last lot
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. In addition,
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
final rule with comment period.
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 proposed 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 invoiced
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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 claimlevel 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) Timing and Length of Agreement
Section 1860D–14A(b)(1)(C) of the Act
states that in order for an agreement
with a manufacturer to be in effect
under this section with respect to the
period beginning on January 1, 2011,
and ending on December 31, 2011, the
manufacturer shall enter into such
agreement not later than 30 days after
the date of establishment of a model
agreement. It also states that for 2012
and subsequent years the manufacturer
shall enter into such agreement (or such
agreement shall be renewed) not later
than January 30 of the preceding year.
We proposed to codify these
requirements in § 423.23.15(c)(1) and
(c)(2).
Section 1860D–14A(b)(4)(A) of the
Act also 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 1 year each January 1
thereafter, unless the agreement is
terminated in accordance with
§ 423.2345.
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Comment: A commenter requested
that CMS clearly state that the Discount
Program Agreement cannot be modified
through rulemaking. The commenter
argued that the Discount Program
Agreement predates the regulations and
already states, ‘‘the Manufacturer’s full
compliance with the responsibilities
listed * * * in Section II shall
constitute satisfaction of the
Manufacturer’s responsibilities under
the Discount Program.’’ They point out
that the proposed rule generally tracks
the manufacturers obligations set forth
in the Discount Program Agreement but
are not identical in a number of ways.
The commenter recommended that CMS
reaffirm that manufacturers’ obligations
are limited to those listed in Section II
of the Discount Program Agreement.
Response: We disagree with the
commenter that we cannot modify the
Discount Program Agreement through
rulemaking. The Affordable Care Act
required us to establish a model
Discount Program Agreement, in
consultation with manufacturers, and
allow for comment on such model
agreement. Section IX (g) of the model
agreement specifies that CMS retains the
authority to amend the model agreement
after consulting with manufacturers and
allowing for comment on such
amendments. While formal rulemaking
is not the only mechanism for
consulting with manufacturers, we
believe the notice and comment
rulemaking process clearly meets the
requirement for consultation with
manufacturers and allowing for
comment.
In some instances we proposed new
requirements. For example, we
proposed to amend the Discount
Program Agreement by adding a
requirement that manufacturers
maintain up-to-date NDC listings with
the electronic database vendors for
which manufacturers provide NDCs for
pharmacy claims processing. In other
instances, the proposed language was
intended to mirror the current model
Discount Program Agreement
requirement even if the language is not
identical. We will review the language
in the model Discount Program
Agreement and make conforming
changes if we believe it is necessary to
remove any ambiguity between the
regulation and the model agreement.
This is consistent with our approach to
amending Medicare Part C/D
agreements with Part D sponsors
whereby we generally codify
requirements and amend the agreements
during the next contracting cycle, which
in this case will be for calendar year
2014. Nevertheless, these codified
requirements become effective 60 days
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after the date of publication of this final
rule with comment period in the
Federal Register. Finally, we stated in
the proposed rule that we were not
codifying all of the provisions in the
model Discount Program Agreement; we
therefore do not intend to make further
changes to any such provisions without
first consulting with the manufacturers.
Comment: A few commenters
supported our proposal to codify the
requirement that manufacturers
electronically list and maintain up-todate electronic listings of all national
drug codes (NDCs) of the manufacturer,
including the timely removal of
discontinued NDCs, in the FDA NDC
Directory. These commenters also
supported our proposal 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. However, these commenters
do not believe our proposal goes far
enough because it does not specify that
the manufacturer must ensure their
listings are accurate and therefore
recommend that we impose monetary
penalties and sanctions on
manufacturers for inaccurate or out-ofdate information.
Response: We believe that
manufacturers are already required to
provide the FDA with accurate
information. We continue to work with
the FDA on improving the availability of
Part D drug information and could
potentially implement additional
prescription drug event (PDE) measures
in the future to ensure that we only
accept PDEs with NDCs that represent
currently marketed drug products. We
do not believe we have the authority
under the Discount Program to impose
monetary penalties on manufacturers for
inaccurate or out-of-date information
listed with the FDA, but we will
consider other compliance actions
against manufacturers that fail to fulfill
their obligations under the Discount
Program Agreement.
Comment: A commenter requested
that we clarify what information
proposed in § 423.2315(b)(5) would be
required of manufacturers to maintain
regarding FDA approval and NDC
Directory listing information for 10
years. Specifically, this commenter
noted that these two categories are
specified in preamble but are not
specified in the regulatory text or
Discount Program Agreement.
Moreover, the commenter requests that
we further specify precisely what data
CMS believes should be collected, kept
available, and maintained by providing
illustrative examples.
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Response: We specified the FDA
approval and NDC Directory listing
information in the preamble to help
clarify what data related to
manufacturer labeler codes needs to be
collected, kept available, and
maintained. However, for further clarity
we will specify these categories in the
regulatory text. We also clarify that
pertinent NDC expiration dates refers to
last lot expiration dates and have made
this change to the regulation text. We do
not have other examples that further
specify the data manufacturers must
collect, keep available, and maintain
except to specify that such data should
include any information that would be
useful to either dispute or support a
manufacturer’s obligation to pay
discounts for its applicable drug
products under the Discount Program.
Comment: Many commenters raised
concerns with the requirement that a
manufacturer must sign a Discount
Program Agreement by January 30th of
the preceding year because it could
result in new drugs being unavailable
under Medicare Part D for almost 2
years if this deadline is missed. They
point out that some manufacturers may
not have been aware of the deadline
because they previously did not
manufacture any applicable drugs.
These commenters recommend that we
consider additional measures, such as
allowing manufacturers to enter into
provisional agreements to join the
Discount Program pending FDA
approval of a new drug so there would
not be a waiting period before the drug
could be covered. In addition, these
commenters urge CMS to establish a
process for using its authority under
section 1860D–43(c) of the Act to allow
coverage for Part D drugs not covered
under agreements if we determine that
a drug is ‘‘essential to the health of
beneficiaries.’’
Response: We appreciate the concerns
raised by commenters that new drugs
manufactured by companies without
existing Discount Program Agreements
could be excluded from Medicare Part D
until the next opportunity to enter into
the Discount Program. However, the
deadline of January 30th of the
preceding year is a statutory deadline.
But we already allow, and encourage,
manufacturers without drug products
currently on the market to sign Discount
Program Agreements in advance so that
there would be no waiting period if they
do begin marketing an applicable drug;
a number of companies have done so.
We are also aware that some
manufacturers have been successful in
working out licensing arrangements
with other manufacturers that have
existing Discount Program Agreements
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to temporarily include drug products
under such existing agreements and
avoid any delay in access under Part D.
Based on the current level of
participation by manufacturers and the
breadth of applicable drugs covered by
Discount Program Agreements, we do
not believe it is necessary at this time
to establish a detailed process for using
our authority under section 1860D–43(c)
of the Act to allow coverage for
applicable drugs not covered by
Discount Program Agreements.
After consideration of the public
comments received, we are finalizing
the proposals in this section with two
modifications. We added FDA drug
approval data and FDA NDC Directory
listing data to the required information
in § 423.2315(b)(5) and clarified in
§ 423.2315(b)(5) that pertinent NDC
expiration dates refers to NDC last lot
expiration dates.
e. Payment Processes for Part D
Sponsors (§ 423.2320)
We are finalizing our October 11,
2011 proposed rule to provide monthly
interim coverage gap payments to Part D
sponsors in § 423.2320(a). The interim
payments ensure that Part D sponsors
will have the funds available to advance
the manufacturer discounts to
applicable beneficiaries at the point of
sale. We also proposed, and are now
finalizing, a process to reconcile the
estimated interim coverage gap discount
payments with actual Discount Program
costs in § 423.2320(b). Coverage Gap
Discount Reconciliation will occur after
Part D payment reconciliation.
Comment: A number of commenters
raised the issue of dispensing fees and
vaccine administration fees for
applicable drugs in the coverage gap.
One requested that CMS clarify plan
sponsor responsibility in the gap for
applicable drugs. Others noted that the
definition of negotiated price is not the
same in the coverage gap as it is in the
other phases because it excludes the
dispensing fee. Commenters noted that
if beneficiaries must pay dispensing fees
and vaccine administration fees for
brand drugs in the gap, this would
increase their out-of-pocket costs.
Response: We issued proposed
guidance on Part D plan sponsor
liability for dispensing and vaccine
administration fees in the Advance
Notice of Methodological Changes for
Calendar Year (CY) 2013 for Medicare
Advantage (MA) Capitation Rates, Part C
and Part D Payment Policies and 2013
Call Letter, which was published on
February 17, 2012. Based on comments
received in response to the Advance
Notice, we will finalize a policy in the
Final Rate Announcement.
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f. Provision of Applicable Discounts
(§ 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 to beneficiaries at the
point-of-sale. As 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. Working with
industry experts on electronic
transactions, we have determined that
the only entity capable of providing the
discount at point-of-sale is the Part D
sponsor because no other entity would
have all four pieces of information at
that time. Therefore, § 423.2325(a)
would require Part D sponsors to
provide applicable beneficiaries with
applicable discounts on applicable
drugs at point-of-sale on behalf of the
manufacturer. 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
the applicable discount or the
applicable beneficiary’s cost sharing, we
proposed 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 amount from a previous Part D
sponsor, the applicable discount and the
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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 is later
reprocessed in the catastrophic phase as
a result of the receipt of an automated
TrOOP balance transfer amount, 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
1860D14A-(g)(4)(C) of the Act requires
that 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 (ICL) 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,
proposed § 423.2325(b)(3) would have
required 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).
However, as discussed later, we are not
finalizing this proposal at
§ 423.2325(b)(3).
Section 423.2325(b)(4) would require
Part D sponsors to first 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 then notify such beneficiaries.
This situation could occur if
participating manufacturers fail to
timely notify CMS when a new labeler
code becomes available or otherwise fail
to provide us with all of their labeler
codes as required.
In § 423.2325(c) we proposed to
require that 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 the Part D plan. 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
requires provision of the discount at the
point-of-sale, it does not state that
applicable beneficiaries are not entitled
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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. Therefore,
beneficiaries would still receive the
discount in the limited circumstances
when they submit claims for
reimbursement that were not
adjudicated at the point-of-sale, such as
when they needed to obtain a
prescription from an out-of-network
pharmacy or on an emergency basis.
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(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 proposed
to codify the requirement in
§ 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.
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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 and
reimburses that payer and/or the
beneficiary for amounts that the plan
would have paid as the primary payer.
(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 an
individual market 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
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.
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Thus, in the case of either a coinsurance
or copay design for supplemental
benefits, the amount the beneficiary
pays at point-of-sale would generally be
approximately 50 percent of his or her
expected cost-sharing under the plan’s
benefit package. This amount will
change over time as the coinsurance
level in the basic benefit for a
beneficiary is reduced until it reaches
25 percent in 2020. Proposed
§ 423.2325(e)(3) would have required
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 proposed 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
believed that 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 proposed 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.
Finally, we proposed 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.
Comment: A commenter requested
that CMS clearly indicate how Part D
sponsors implement the plan
responsibility for reduced cost-sharing
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in the coverage gap beginning in 2013
when the phase-down of coverage gap
brand drug cost-sharing will begin to
take effect.
Response: We agree that additional
clarification is necessary to explain how
plans need to determine both plan and
beneficiary liabilities for brand-name
drug coverage when the additional
brand-name coverage in the coverage
gap begins to phase in starting in 2013,
but this is beyond the scope of this
regulation. We addressed the issue in
the 2013 Advance Notice by clarifying
how manufacturer, beneficiary, and Part
D sponsor liabilities, including
dispensing fee liabilities, for coverage
gap claims must be determined
beginning in 2013. In light of that
guidance, we will not be finalizing the
requirements in proposed
§ 423.2325(b)(3) and (e)(5) with respect
to dispensing and vaccine
administration fees, and have redesignated proposed § 423.2325(b)(4) as
§ 423.2325(b)(3) in the final rule.
Comment: A few commenters
opposed the requirement under
proposed § 423.2325(b)(4) (redesignated
as § 423.2325(b)(3)) that would require
Part D sponsors to notify affected
beneficiaries whenever CMS specifies a
retroactive effective date for a labeler
code. They contend that such notice
will be less likely to be beneficial to the
beneficiary as the Discount Program
matures. They also believe it often will
be difficult for the Part D sponsor to
accurately identify if an alternative
product had been prescribed and
covered after the initial denial and thus
Part D sponsors will cause more
enrollee confusion by ‘‘over notifying’’
enrollees.
Response: We disagree with the
commenters. We do not believe
manufacturers should be excused from
their obligation to pay a discount
because they failed to timely report a
labeler code for an applicable drug to
CMS. Moreover, and more importantly,
we do not believe the administrative
burden on Part D sponsors, which we do
not anticipate will be significant,
justifies denying a beneficiary access to
a discount for which they are entitled.
As discussed in the proposed rule, Part
D sponsors can minimize any
beneficiary confusion by notifying only
those beneficiaries that it determines
likely still need the drug or who paid for
the drug out-of-pocket.
Comment: A commenter
recommended that we require that the
discount payment be calculated before
any Part D supplemental benefits are
applied by a Part D plan.
Response: The requirement proposed
under § 423.2325(e) is consistent with
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the statutory requirement under section
1860D–14A(c)(2) of the Act. We do not
have the authority to change the
statutory requirement to require the
discount payment to be calculated
before Part D supplemental benefits are
applied by a Part D plan.
Comment: Several commenters
supported our proposal to implement
the pharmacy reimbursement
requirements of section 1860D–
14A(c)(1)(A)(iv) of the Act 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. The
applicable number of calendar days
with respect to claims for
reimbursement submitted electronically
is 14 days, and otherwise, is 30 days.
We proposed that this requirement
would apply to all network pharmacies
including but not limited to long-term
care and home infusion pharmacies.
Other commenters recommended that
we reconsider applying this requirement
to long-term care and home infusion
pharmacies because current billing
practices in these pharmacy settings,
such as once a month billing practices,
could result in Part D sponsors being
out of compliance with the
requirements.
Response: We acknowledge that
current billing practices in long-term
care and home infusion pharmacies
could prevent Part D sponsors from
complying with this provision if they
are not billed by the pharmacy on the
date of service. Therefore, we clarify in
§ 423.2325(g) that for long-term care and
home infusion pharmacies, the date of
dispensing can be interpreted as the
date the pharmacy submits the
discounted claim for reimbursement
and not the actual date the pharmacy
dispensed the medication. After
consideration of the public comments
received, we are with the exception of
the provisions at § 423.2325(b)(3) and
(e)(3) finalizing the policies in this
section with modification to
§ 423.2325(g). We note that we are not
finalizing the proposed provisions for
§ 423.2325(b)(3) and (e)(3) and have
redesignated proposed § 423.2325(b)(4)
as § 423.2325(b)(3) in the final rule.
g. Manufacturer Discount Payment
Audit and Dispute Resolution
(§ 423.2330)
(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
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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 proposed 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.
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 proposed 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
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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 proposed 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
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.
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(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 proposed to codify this
requirement in § 423.2330(b). Similar to
the limitation in § 423.2330(a)(1), we
proposed to define the term periodic in
§ 423.2330(b)(1) as no more often than
annually. In § 423.2330(b)(3) we
proposed 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 proposed in
§ 423.2330(c) a multistage 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)
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a final administrator review when either
a manufacturer or CMS disagrees with
the outcome of the initial appeals
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 proposed 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.
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 proposed this
requirement because the manufacturer
bears the burden of proof that the PDE
data is incorrect. We also proposed 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
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
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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 proposed 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
proposed 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 proposed that this request be made
within 30 days after the manufacturer
receives a decision from the IRE to
facilitate a timely outcome. Finally, we
proposed that the decision of the
Administrator would be final and
binding.
We proposed to codify the policies as
described and welcomed comments on
the dispute and appeals process.
Comment: A few commenters
recommended that we include affected
Part D sponsors in the disputes and
appeals process, and that Part D
sponsors be given appeal rights if
disputes or appeals are upheld.
Response: We do not believe it is
necessary, nor would it be helpful, to
insert Part D sponsors in every step of
every manufacturer dispute and appeal.
This process is specifically designed to
address manufacturer disputes or
appeals and manufacturers have the
burden to demonstrate that an
applicable discount advanced by the
Part D sponsor likely is in error
according to standards established in
CMS guidance. If the manufacturer
satisfies the threshold, the Part D
sponsor will be given the opportunity to
confirm the accuracy of the discount
and if confirmed, the dispute or appeal
will be denied. If the manufacturer
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dispute or appeal does not meet the
standard for demonstrating likely error
in the first place, the dispute or appeal
will be denied without needing Part D
sponsor confirmation. In situations that
involve the determination of applicable
drug status for an NDC based upon its
FDA approval status, CMS will make
those determinations based upon the
information that was available from the
FDA on the date of dispensing. While
Part D sponsors will not have the
opportunity to appeal determinations
that uphold manufacturer disputes or
appeals under this process, Part D
sponsors have appeal rights under the
Part D payment reconciliation process to
redress payment disputes, including
those related to the Discount Program.
After consideration of the public
comments received, we are finalizing
the policies in this section without
modification.
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
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.
Comment: Some commenters
supported CMS’ proposal in § 423.2335
to provide beneficiaries with access to
the existing Part D coverage
determination and appeals process as
described in §§ 423.558 and 423.638 for
disputes involving the availability and
amount of applicable discounts under
the Discount Program. However, a
commenter raised concerns that the
existing process is not well understood
by beneficiaries and therefore we should
require Part D plans to provide explicit,
plain language information on how to
file a dispute.
Response: We agree with commenters
that supported our proposal. The
existing Part D coverage determination
and appeals process provides the best
and most efficient mechanism for
resolving beneficiary disputes involving
the availability and amount of
applicable discounts. We do not believe
it would be beneficial to anyone, most
importantly beneficiaries, to establish
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an entirely separate and duplicative
process. Moreover, we do not believe a
new plain language requirement is
necessary because Part D plans are
already required to use a consumer
tested model Evidence of Coverage
(EOC) that is intended to explain the
existing Part D coverage determination
and appeals process in language that is
appropriate for beneficiaries.
After consideration of the public
comments received, we are finalizing
the policies in this section without
modification.
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 proposed
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
money penalty whenever a
manufacturer fails to make full payment
on its invoice within 38 calendar days
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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) codifies 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
proposed 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
of adverse agency determinations
affecting an array of medical providers,
MA organizations, and Part D sponsors.
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We therefore proposed 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 proposed 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
proposed to codify this requirement in
§ 423.2340(f). We welcomed comments
on this proposal. We did not receive any
comments and we are finalizing these
provisions as proposed.
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 proposed,
consistent with the statutory
requirement as reflected in the Discount
Program Agreement, that the
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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 proposed 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 (5) of this section. Proposed
paragraphs (a)(4) and (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 proposed 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 30
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 hearing officer.
The decision of the CMS Administrator
would be final and binding on either
party. We requested 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
of a calendar year or as of the day after
the end of the succeeding calendar year
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22091
if the termination occurs on or after
January 30 of a calendar year. We
proposed 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
proposed 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.
We did not receive any comments and
we are finalizing these provisions as
proposed.
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 ‘‘used in the
treatment of epilepsy, cancer, or a
chronic mental health disorder’’ and
benzodiazepines. MIPPA further
specified that these amendments apply
to prescriptions dispensed on or after
January 1, 2013. Accordingly, we
proposed to revise the definition of a
Part D drug at § 423.100 to include
barbiturates used for the three specified
medical indications and
benzodiazepines that are dispensed on
or after January 1, 2013. Like any other
prescription drugs under the Part D
benefit program, barbiturates as
specified and benzodiazepines must
meet all other conditions for Part D
drugs found in § 423.100.
As in the proposed rule, we once
again remind sponsors that it is their
responsibility to use the tools (that is,
system edits, quality assurance checks)
at their disposal to ensure barbiturates
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are covered for the conditions specified
in the statute. Also, given the
vulnerability of both barbiturates and
benzodiazepines to misuse and abuse, it
is recommended that Part D sponsors
use their drug utilization review tools to
identify and prevent waste and clinical
abuses/misuses.
Comment: A number of commenters
endorsed the statutory inclusion of
barbiturates as specified and
benzodiazepines as covered Part D
drugs. Some of these commenters
anticipated that the change would result
in better treatment of health conditions
such as mental health conditions, with
a commenter predicting lowered health
care spending would stem from better
quality of life and health care outcomes.
Several supporters opined that the
existing tools in the Part D program
were sufficient to, for instance, address
misuse and protect beneficiaries from
harm.
Response: We appreciate the
commenter support of the statutory
inclusion of these medications.
Comment: Several commenters
suggested that CMS restrict access to the
drugs by, for instance, removing the
medical indications requirements from
the regulation, limiting benzodiazepines
coverage to short-acting agents, or
allowing barbiturates only for seizure
disorders.
Response: We lack the authority to
restrict drugs through any of the
modifications suggested by these
commenters because of the clear
statutory mandate found in section 175
of MIPPA, which amends section
1860D–2(e)(2)(A) of the Act to include
as Part D drugs both barbiturates used
in the ‘‘treatment of epilepsy, cancer, or
a chronic mental condition’’ and
benzodiazepines. Accordingly, our
proposed revisions must include as Part
D drugs barbiturates for the three
medical indications, as well as
benzodiazepines.
That we track the statutory language
does not, however, mean that there are
no restrictions on the availability of
barbiturates as specified and
benzodiazepines—statutory and
regulatory requirements apply to restrict
availability. As is the case for all Part D
drugs, a barbiturate as specified or a
benzodiazepine may only be a Part D
drug if it falls within the definition of
Part D drug at § 423.100, which would
mean that it must—
• Be used for a medically accepted
indication;
• Be dispensed only upon a
prescription;
• Meet requirements described in
section 1927(k)(2)(A)(i) through (iii) of
the Act; and
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• Not be otherwise excluded from
Part D coverage on the basis that
payment for such drug, as so prescribed
and dispensed or administered to an
individual, is available for that
individual under Part A or Part B (even
though a deductible may apply, or even
though the individual is eligible for
coverage under Part A or Part B but has
declined to enroll in Part A or Part B).
Additionally, for any barbiturates as
specified or benzodiazepines that meet
the definition of an applicable drug
under section 1860D–14A(g)(2) of the
Act, in order for coverage to be available
under Part D, the manufacturers of the
brand drug must participate in the
Medicare Coverage Gap Discount
Program.
Comment: A number of commenters,
many of which endorsed the inclusion,
voiced concerns with utilization control
issues—with the vast majority of these
commenters questioning whether the
available Part D utilization tools would
be effective enough in restricting access
to barbiturates for the specified
indications and benzodiazepines as to
prevent misuse. In contrast, a few
commenters voiced concern that CMS is
‘‘encouraging’’ plans to apply utilization
management tools to therapies for
chronic conditions, such as mental
illnesses. Stating that utilization
management tools had impeded
beneficiary access to medications in the
past, these commenters requested that
CMS remove the language about these
tools from the preamble.
Response: We do not agree with the
commenters who suggested we remove
language from the preamble of the
proposed rule that discusses the
availability of drug management tools.
We see no justification to treat
barbiturates and benzodiazepines any
differently from how we treat all other
Part D drugs.
Comment: Many commenters
requested more direction and
instructions regarding the use of drug
utilization tools. A commenter
requested that CMS implement
restrictions such as a specific quantity
limit per year, while the two
commenters requested that CMS
provide instructions that would, for
instance, prevent step therapy and fail
first policies for individuals already on
these medications. Several commenters
indicated that they wanted to use prior
authorization (PA) to ensure that
barbiturates would be prescribed only
when used in the treatment of epilepsy,
cancer, or chronic mental health
disorders. A few others indicated that
when used for certain indications (for
instance, barbiturates for uses listed in
the statute and benzodiazepines for
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epilepsy), barbiturates and
benzodiazepines might be part of a
protected class—with a commenter
stating that in such instances the drugs
must be made available to members and
another asserting that the drugs must be
denied protected class status.
Response: These comments are
beyond the scope of the proposed rule.
We did not propose to implement any
special rules with regard to these drugs;
rather, we proposed merely to codify the
statutory requirement set forth in
section 175 of MIPPA. To the extent we
believe additional guidance about these
products is necessary or appropriate, we
will provide such guidance in the
future.
Comment: A commenter requested
guidance on the issues as soon as
possible, but no later than January 2012,
to provide plans enough time for
appropriate utilization management as
part of the 2013 formulary submissions.
Response: Although this comment is
beyond the scope of the proposed rule,
we would like to note that we believe
our current formulary guidance
provides Part D sponsors with the
information they need to make such
determinations.
Comment: A commenter suggested
that the inclusion would impact the
accuracy of the current risk adjustment
formula because the new drugs would
be available only to members with the
three specified medical conditions. The
commenter accordingly requested that,
after January 1, 2013, the risk
adjustment factors associated with these
specified conditions be increased to
reflect the increased costs expected from
covering these drugs.
Response: In the calibration of the
original Part D risk adjustment model
and in subsequent versions, we
reasoned that benzodiazepines and
barbiturates were substitutable drugs
and included the costs of these drugs as
a proxy for their substitutes. Given that
we never removed either barbiturates or
benzodiazepines from our Part D model
calibration, the mandated inclusion will
not impact the accuracy of the current
risk adjustment model. In a discussion
in our 2006 Advanced Notice on
removing non-covered Part D drugs
from the calibration of the risk
adjustment, we stated, ‘‘Other noncovered drugs, benzodiazepines and
barbiturates, were intentionally left in
the file because their costs proxy for the
costs of substitutes. This was deemed
preferable to removing the claims and
costs altogether.’’ See Advance Notice of
Methodological Changes for Calendar
Year (CY) 2006 Medicare Advantage
(MA) Payment Rates, Attachment II,
Risk Adjustment Model, page 45.
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Comment: A commenter questioned
whether CMS had conducted an
analysis to determine if all
manufacturers of barbiturates and
benzodiazepines were currently
participating, or would be offered the
opportunity to participate in the
Coverage Gap Discount Program,
because they may have not sought
participation when the drugs were
excluded.
Response: Given that the Coverage
Gap Discount Program only applies to
brand drugs and that most barbiturates
and benzodiazepines are available as
generics, we believe that Part D coverage
will be available for most—if not all—
types of barbiturates that treat the
specified indications and
benzodiazepines. Indeed, at this time,
we are not aware of any barbiturates as
specified or benzodiazepines that will
not be covered on the basis that a
manufacturer is not participating in the
program.
Comment: Several commenters
expressed concerns that, because the
High Risk Medication (HRM) Part D
Plan Rating measure incorporates the
Beers list, which identifies
benzodiazepines and barbiturates as
potentially harmful for the elderly, plan
ratings will suffer resulting in lower
bonus payments. While a commenter
requested that CMS deny Part D
coverage of drugs on the Beers list,
others requested changes to the rating
system itself such as excluding the
medications from the HRM measure
calculation to give the industry time to
understand the impact on the safety of
beneficiaries or adjusting the 4-star
threshold.
Response: As we noted in our
discussion of the Part D High-Risk
Medication (HRM) measure in our draft
2013 Call Letter published on February
17, 2012 (page 63), we will continue to
explore changes to this measure.
Modifications may result from
specification changes made by the
Pharmacy Quality Alliance (PQA) or
National Committee for Quality
Assurance (NCQA) as they consider
modifying the specifications and
medication list based on the American
Geriatrics Society’s (AGS) update to the
Beers List. We will consider applying
these updates to future Plan Ratings and
changes to the measure medication list
will not be retroactively applied for the
2013 Plan Ratings. Rather, we will apply
changes to the medication list when
evaluating sponsors’ CY 2012 or CY
2013 PDE data for the 2014 or 2015 Plan
Ratings, respectively. At that time, we
will also evaluate the inclusion or
exclusion of benzodiazepines and
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specified barbiturates in the measure
calculation.
After considering the public
comments received, we are finalizing
the proposed language in § 423.100,
with a grammatical clarifying
modification. Pursuant to section 175(b)
of MIPPA, this revision will be effective
January 1, 2013.
3. Pharmacy Benefit Manager’s
Transparency Requirements (§§ 423.501
and 423.514)
We proposed implementing the
provisions of section 1150A of the Act,
as amended by section 6005 of the
Affordable Care Act, with respect to Part
D sponsors and the entities that manage
prescription drug coverage under a
contract with a Part D sponsor. We now
codify the various reporting
requirements from the proposed rule to
promote transparency of financial
transactions involving Part D sponsors
and pharmacy benefits managers (PBMs)
or other entities that provide pharmacy
benefit management services at
§ 423.514, with a minor, technical
correction to the language of
§ 423.514(e) regarding confidentiality of
pharmacy benefits manager data. In
addition, we are finalizing with
modification the proposed definition of
‘‘bona fide service fees’’ in our
regulations at § 423.501.
Comment: A commenter
recommended that CMS define
‘‘pharmacy benefits manager’’ to
encompass any entity or division of an
entity, including a Part D sponsor itself,
that performs any of the functions or
activities for which reporting is required
in order to clarify the scope of the
regulation.
Response: We believe that we were
clear in the proposed rule when we
stated that this provision applies to both
Part D sponsors and to entities that
provide pharmacy benefits management
services to Part D sponsors, for which
we use the shorthand term of PBM.
Further, section 1150A of the Act makes
clear that a health benefits plan or any
entity that provides pharmacy benefits
management services on behalf of a
health benefits plan is subject to all
requirements and protections under this
provision. Thus, we decline to
introduce a definition of PBM in this
regulation, but take this opportunity to
emphasize that the entity’s function is
more important than the form of its
name.
Comment: A number of commenters
requested additional details regarding
the proposed reporting requirements
under paragraph (d)(3) of § 423.514.
This provision would require reporting
of the percentage of prescriptions for
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which a generic drug was available and
dispensed by pharmacy type, which
includes an independent, chain,
supermarket, or mass merchandiser
pharmacy that is licensed as a pharmacy
by the State and that dispenses
medication to the general public. Most
commenters requested clarification on
how to distinguish the various
pharmacy types. A few commenters
noted that neither plan sponsors, PBMs,
nor pharmacy groups themselves
differentiate among these pharmacy
types. Several suggested ways for CMS
either to provide crosswalks for PBMs
and sponsors to help categorize the
pharmacy types or to derive the data
from available data sources.
Response: We agree that consistent
definitions of independent, chain,
supermarket, and mass merchandiser
pharmacies are necessary for accurate
reporting of this data element. We
explored the ideas commenters
submitted for CMS to provide
crosswalks or to derive the data from
existing data sources and determined
that we could crosswalk National
Provider Identifiers with a file from the
National Council for Prescription Drug
Programs to determine the data element
in § 423.514(d)(2) (the percentage of all
prescriptions that were provided
through retail pharmacies as compared
to mail order pharmacies). However,
this approach cannot be used to
categorize independent, chain,
supermarket, and mass merchandiser
pharmacies because they are not
standard pharmacy classifications
captured in industry databases or files.
Thus, while we are finalizing
§ 423.514(d)(3) as proposed, we will
issue further subregulatory guidance
regarding this reporting requirement
before requiring Part D sponsors to
submit this information.
Comment: We received a number of
comments regarding § 423.514(d)(4),
under which we proposed to require
reporting of the aggregate amount and
type of rebates, discounts, or price
concessions (excluding bona fide
service fees) that a PBM negotiates that
are attributable to patient utilization
under the plan. In the proposed rule, we
sought comment regarding whether
there are differences between direct and
indirect remuneration (DIR) under the
Part D program and rebates, discounts,
and price concessions ‘‘attributable to
patient utilization.’’ Most commenters
believed that there is no difference, with
a couple of commenters mentioning that
DIR under the Part D program is already
based on price concessions for
prescription drugs that are provided to
Medicare Part D beneficiaries. Another
commenter suggested that DIR under the
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Part D program is broader than DIR
attributable to patient utilization, and
thus CMS should scale back the
definition in the DIR reporting
requirements.
Response: We agree that there is no
substantive difference between the
aggregate amount of rebates, discounts,
and price concessions ‘‘attributable to
patient utilization’’ and DIR under the
Part D program. Per § 423.308 and our
annual DIR reporting guidance, DIR is
any and all rebates, subsidies, or other
price concessions from any source
(including manufacturers, pharmacies,
enrollees, or any other person) that
serve to decrease the costs incurred by
the Part D sponsor (whether directly or
indirectly) for the Part D drug. Costs are
incurred by the Part D sponsor when
patients utilize Part D drugs, and thus
we believe that ‘‘rebates, discounts, and
price concessions that are attributable to
patient utilization’’ are substantively the
same as DIR under the Part D program.
Further, rebates, discounts, and price
concessions would not be negotiated
unless Part D plan sponsors were
purchasing prescription drugs from the
manufacturer for use by their enrollees.
Thus, we believe even rebates,
discounts, and price concessions for
things such as formulary placement for
a particular product, administrative
services, or generic dispensing
incentives are indirectly attributable to
patient utilization, such that they would
be subject to the reporting requirements
under § 423.514(d)(4).
Comment: One commenter requested
that we clarify the authority under
which we collect DIR and that Part D
sponsors have no additional reporting
requirements for DIR attributable to
patient utilization.
Response: In the 2010 DIR reporting
requirements, we collected PBM spread
amounts aggregated to the plan benefit
package level. We believe that with the
addition of PBM spread amounts for
retail pharmacies and PBM spread
amounts for mail order pharmacies to
the existing DIR reporting requirements,
Part D sponsors will meet the
requirements to report the elements in
§ 423.514 (d)(4), (5), and (6). Beyond
this change, no additional DIR reporting
will be required to comply with section
1150A of the Act. We clarify that
sections 1150A and 1860D–15(f)(1)(A)
of the Act provide us with the authority
to collect DIR data.
Comment: Several commenters
recommended that instead of requiring
the percentage of prescriptions for
which a generic drug was available and
dispensed (generic dispensing rate) by
independent, chain, supermarket, and
mass merchandiser pharmacy types, we
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allow the data to be reported by
different and/or more general categories,
such as mail order or retail pharmacy
types.
Response: Consistent with
1150A(b)(1) of the Act, we believe that
we must collect the percentage of
prescriptions for which a generic drug
was available and dispensed (generic
dispensing rate) by independent, chain,
supermarket, and mass merchandiser
pharmacy types. Because reporting of
this information is expressly required
under the statute, we do not believe we
have the authority to limit or change the
scope of the reporting requirements. We
note, however, that in implementing
this requirement and all of the other
reporting requirements under section
1150A of the Act, we have sought to
minimize administrative burden where
possible by relying on existing reporting
mechanisms and avoiding duplicative
reporting.
Comment: Some commenters favored
greater transparency of prescription
drug cost information than we
proposed. Suggestions ranged from
requesting that the proposed data
elements under § 423.514(d) be reported
with greater granularity to proposing
additional reporting requirements
beyond those proposed. Examples
include requiring maximum allowable
cost (MAC) lists for pharmacy
reimbursement, requiring transparency
regarding pharmacy network design,
requiring reporting of a dispensing rate
for when a lower cost drug could have
appropriately been dispensed, requiring
reporting of prompt payment rates, and
requiring PBMs to report how patient
data is used and disclosed.
Response: These suggestions are
beyond the scope of the current
rulemaking, which implements the
specific reporting requirements of
section 1150A. We note that some of the
commenters’ requests may be more
appropriate as suggestions for revisions
to prompt payment and pricing standard
update requirements already codified at
§§ 423.505(b)(21) and 423.520. Should
we determine that the reporting of
additional or more detailed information
or disclosure of aggregated data is
necessary and appropriate for the Part D
program, we may consider some of the
commenters’ suggestions in the future.
Comment: Some commenters
expressed concern about maintaining
confidentiality of PBM-related data.
Response: We agree that maintaining
the confidentiality of PBM-related data
is important and are finalizing
§ 423.514(e) regarding the
confidentiality of PBM data. The
confidentiality protections under this
provision are nearly identical to those in
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section 1150A, and specify that
information disclosed by a Part D
sponsor or PBM is confidential, and
shall not be disclosed by the Secretary
or by a plan receiving the information.
The statute and the regulation recognize
limited exceptions allowing the
Secretary to disclose information
disclosed by a Part D sponsor or PBM
for certain limited purposes. These
purposes are as the Secretary
determines necessary to carry out
section 1150A of the Act or Part D of
Title XVIII, to permit the Comptroller
General to review the information
provided, or to permit the Director of
the Congressional Budget Office to
review the information provided.
(Section 1150A of the Act also permits
disclosure of the information to States to
carry out section 1311 of the Affordable
Care Act. We have not incorporated this
exception into § 423.514(e) because it is
applicable to qualified health benefits
plans offered through an exchange
established by a State under section
1311 of the Affordable Care Act and is
addressed in separate rulemaking.)
Consistent with the statute, any
disclosures pursuant to these
exceptions, must be in a form which
does not disclose the identity of a
specific PBM, plan, or prices charged for
drugs.
Comment: A few commenters were
concerned that the proposed definition
of ‘‘bona fide service fee’’ in § 423.501
was too broad; for example, a
commenter thought that the term
‘‘patient care programs’’ has no
boundaries or limitations. Another
suggested that we not qualify the
definition of bona fide service fees with
specific examples, while another would
like us to provide not only examples of
what is included in the definition of
bona fide service fees but also examples
of what is excluded from the definition.
Response: After considering these
comments, we are modifying the
proposed definition of bona fide service
fees in § 423.501 by omitting the
examples of bona fide services listed in
the proposed definition. Bona fide
services are subject to change as new
ones are developed or other bona fide
services are discontinued. Thus, we
believe it is appropriate to elaborate on
the definition of bona fide service fees
in subregulatory guidance, as we have
typically done in our DIR reporting
guidance. We expect to provide such
guidance to help Part D plan sponsors
determine what is included in or
excluded from the definition of bona
fide service fees. We also note that by
not including specific examples of such
fees in the regulation, the definition of
bona fide service fees in § 423.501 is
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consistent with the definition of bona
fide service fees used in the Medicare
Part B and Medicaid programs.
Comment: A few commenters
questioned how CMS will monitor
compliance with reporting requirements
(for example, accurate reporting of bona
fide service fees) and whether we intend
to audit PBMs. A commenter asked for
flexibility in CMS’ policy on collecting
PBM transparency data until sponsors
have completed their next contract
negotiations with PBMs.
Response: We intend to explore
whether auditing PBMs will be
necessary to ensure compliance with
this provision. However, we do not
believe it is necessary or appropriate to
delay implementation of these reporting
requirements because the statute, which
was effective upon enactment, directs
each PBM to provide to the Part D
sponsor the data elements required by
this rulemaking.
Comment: A commenter urged CMS
to differentiate between PBM-owned
mail order pharmacies and PBMs that
contract for mail order pharmacy
services because they believe that the
Affordable Care Act should not be
interpreted as requiring PBMs that own
mail order pharmacies to disclose drug
acquisition costs. Another commenter
recommended that CMS clarify the
reporting requirement with respect to
PBM-owned mail order facilities in
which there is no aggregate difference in
the amount collected and the amount
paid to the pharmacy. A commenter
claimed that Medicare contracts
between PBMs and sponsors must be
100 percent pass-through.
Response: If there is no difference
between the amount the Part D sponsor
pays the PBM and the amount that the
PBM pays mail order pharmacies (that
is, if Part D sponsors use pass-through
pricing for their mail order pharmacies),
then the amount should be reported
under § 423.514(d)(6) as zero. Thus, for
the purpose of collecting this data
element, we do not believe that PBMowned mail order pharmacies present
unique challenges relative to PBMs that
contract for mail order pharmacy
services. Moreover, because only the
aggregate amount of the difference
between the amount the Part D sponsors
pays the PBM and the amount the PBM
pays retail pharmacies is reported, the
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PBM’s drug acquisition costs drugs will
not be disclosed.
Consistent with the discussion in our
January 12, 2009 final rule, we also
clarify that sponsors may use either the
lock-in pricing or pass-through pricing
approach when contracting with PBMs,
but they must use the price ultimately
received by the pharmacy (or other
dispensing provider) as the basis for
calculating beneficiary cost sharing,
total drug spend, and cost reporting to
CMS. (See § 423.100 for the definition of
negotiated price and 74 FR 1505
through 1511 for more details.)
Comment: A commenter requested
that CMS clarify whether the total
number of prescriptions dispensed
reported under § 423.514(d)(1) is based
on PDEs or actual claims. If it is based
on PDEs, the commenter believed CMS
should clarify that it would still be the
Part D sponsor’s responsibility to hire a
data validation auditor to evaluate the
validity of the reports, as opposed to
passing this responsibility to the PBM.
Response: We do not plan to institute
a new requirement on plan sponsors or
PBMs to collect this data element as
they already report it on PDEs. We
remind plan sponsors that they must
maintain audit trails to PDE source data.
We expect that the plan will be able to
directly link any PDE to the individual
claim transactions from which the PDE
was extracted, and will conduct audits
of PDE data to ensure the accuracy of
payment. Part D sponsors have the
discretion to negotiate terms with each
PBM that obligate the PBM to
participate in maintaining audit trails.
Also, consistent with § 423.505(k), each
year Part D sponsors must certify that
their PDEs and DIR reports, among other
data, are accurate, complete, and
truthful. While Part D sponsors remain
accountable for their certifications, they
have the discretion to negotiate with
their first tier and downstream entities
concerning the entities’ participation in
the data validation activities that must
support each certification.
Comment: A commenter suggested
that CMS should provide an annual
report on the best and worst plans with
respect to the reporting requirements in
paragraph (d).
Response: We believe that this
comment is out of scope as section
1150A of the Act addresses PBM
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reporting requirements, confidentiality
of PBM-related data, and penalties for
failure to provide pharmacy benefits
manager data.
After considering the comments
received, we are finalizing the policy as
proposed with one modification to the
definition of ‘‘bona fide service fees’’ in
§ 423.501. We have also made a minor,
technical correction to the language of
§ 423.514(e).
B. Strengthening Beneficiary Protections
This section includes provisions
aimed at strengthening beneficiary
protections under Parts C and D. 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 finalizing this provision
will result in uninterrupted plan
coverage for eligible beneficiaries and
thereby improve access to healthcare for
individuals such as those with chronic
conditions requiring continual
monitoring and medication. Similarly,
we expect that requiring sponsors to
provide enrollees in MA plans with
uniform ID cards which all providers
will be able to easily recognize will
facilitate access to health care for those
beneficiaries. We also believe that
calculating creditable coverage by
excluding the value of additional
coverage in the coverage gap and the
manufacturers discount—the standard
that qualifies retiree drug coverage for
the retiree drug subsidy—will mean a
beneficiary receiving retiree drug
coverage will be less likely to be
assessed a late enrollment penalty if he
or she subsequently decides to enroll in
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 appointment of
representative forms will, in our
opinion, lessen the burden faced by
providers seeking to assist enrollees
with appeals and will encourage more
health care professionals to help
beneficiaries access this level of the
appeals process. The foregoing
proposals and the changes considered
are set forth in Table 3.
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TABLE 3—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 ........
II.B.4 ........
Subpart
Part 423
Part 483
17:36 Apr 11, 2012
417.460
Section
Section
N/A ...........
Subpart
Section
Subpart
Section
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 ...........
423.600
423.602
N/A ...........
N/A
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 plan for
deductible and coinsurance amounts.
The cost plan must demonstrate that it
made reasonable efforts to collect the
unpaid amount (for example, the plan
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 cost-sharing. A plan may
adopt either policy and must apply it
consistently to all members in the plan.
Individuals who are disenrolled from
an MA or Part D plan for failure to pay
premiums are generally ineligible to
regain MA or Part D coverage until the
next Annual Election Period. However,
in some of these cases, there may be
extenuating circumstances that would
make reinstatement appropriate. Thus,
in the April 2011 final rule (76 FR
21511), we established provisions at
§§ 422.74 and 423.44 that allow
individuals, who are disenrolled from
MA and Part D plans for failure to pay
premiums, to request reinstatement into
their former plan based on good cause
and the ability to pay all arrearages.
These MA and Part D rules provide
alignment with the existing Part B
policy regarding delinquent Medicare
Part B premium payments.
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N/A
Subpart M
In the October 11, 2011 proposed rule
(76 FR 63036), we proposed to extend
the right to request reinstatement for
good cause to beneficiaries enrolled in
cost plans. Specifically, we proposed to
amend § 417.460(c) to allow
reinstatement of enrollment for good
cause following involuntary
disenrollment, based on failure to pay
premiums or other cost-sharing
amounts, to a cost plan. Section
417.460(c) provides that—
• To be eligible for reinstatement, the
enrollee would have to pay all
outstanding arrearages, including
premiums that accrued during the
period of disenrollment;
• The standard for good cause would
be similar to the standard established
under MA and Part D (for example,
unexpected, prolonged hospitalization
or loss of home or severe impact by fire);
and
• An individual who is involuntarily
disenrolled within the same timeframe
from both his or her cost plan and a
standalone PDP (not affiliated with the
cost plan), would have to seek separate
good cause determinations for
reinstatement into each plan.
Comment: CMS received several
comments on this proposal, all of which
expressed broad support and
concurrence with our intent to mirror
the existing MA and Part D
requirements. A commenter expressed
regret with our determination that good
cause would not exist if the sole basis
for requesting reinstatement is a change
in an individual’s financial
circumstances. The commenter
suggested that such an individual might
eventually find the means to afford the
plan’s premiums, in which case, she or
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he should not be prohibited from
reinstatement and the opportunity to
reestablish relationships with previous
providers. In addition, the commenter
believes that beneficiaries should be
able to appeal a denial of reinstatement.
Response: The intent behind this
provision was to give cost plan enrollees
the same protections that we currently
extend to MA and Part D plan enrollees.
As such, we do not believe that it would
be appropriate to expand these
protections to include either additional
factors that meet the good cause
standard or appeal rights when a request
for reinstatement is denied. It is
important to note that denying a
beneficiary’s request for reinstatement
does not result in the loss of Medicare
coverage. Instead, individuals who are
involuntarily disenrolled from a cost
plan revert back to Original Medicare
and are free to maintain their
relationships with established
providers. In addition, if an individual’s
financial circumstances improve over
time, she he can re-enroll during the
cost plan’s next period of open
enrollment.
We appreciate the comments that
were submitted on this provision and
will be finalizing this proposal without
modification.
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, common industry practice as
described in the Medicare Marketing
Guidelines (https://www.cms.gov/
ManagedCareMarketing/03_FinalPartC
MarketingGuidelines.asp), Part D
sponsors must issue and re-issue as
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appropriate a card or other technology
that enrollees can use to access
negotiated prices for Part D covered
drugs. While we have made
recommendations with respect to
member identification (ID) cards for
Medicare Advantage (MA) Preferred
Provider Organization and Private Feefor-Service products through our
Medicare Marketing Guidelines (https://
www.cms.gov/ManagedCareMarketing/),
we have issued no related regulatory
requirements. Many MA organizations
issue ID cards to their enrollees, but,
absent such a requirement in regulation,
we cannot ensure that all MA
organizations issue cards to their
members or that the cards contain
certain information at a minimum and
other information necessary for
consistency of information across such
documents. Thus, we believe it is
important to establish requirements for
the MA member ID cards to ensure that
key information (such as the plan’s
customer service number and the
member ID number) is on the card so
that enrollees can access care.
Specifically, we proposed 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 Web site; (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.
We indicated that implementation of
these provisions would 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), at section
1856(b)(1) of the Act (to establish
standards by regulation) and section
1857(e) of the Act (to specify additional
contractual terms and conditions the
Secretary may find necessary and
appropriate), we proposed to amend
§ 422.111 by adding a new paragraph (i)
to expressly require that MA plans issue
and re-issue, as necessary, a card that
contains certain information and
enables enrollees to access all covered
services.
Comment: Several commenters
expressed support for the proposal to
require MA plans to issue ID cards.
Additionally, they offered suggestions
for specific ID card requirements: (1)
add an identifier to the card for
individuals who receive Medicaid or are
QMBs; and (2) adopt the Workgroup on
Electronic Data Interchange (WEDI)
standards for medical ID cards. In
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addition, one commenter said that we
should exclude the Medicare Limiting
Charges statement because of card
crowding.
Response: We appreciate the
thoughtful comments. In light of the
recommendations that we add more
information to the ID card, and realizing
that there is limited space in which to
include such information, we will be
issuing further guidance in this area
based on accepted industry practice. In
developing such guidance, we will also
consider the commenter’s concern about
the possible lack of space on the card if
we were to include our proposed
statement regarding Medicare Limiting
Charges.
Comment: A commenter questioned
whether this requirement applies to
section 1876 cost plans.
Response: Yes. With the final
publication of these regulations,
§ 417.427 will be amended to require
section 1876 cost plans to follow the
disclosure requirements contained in
§ 422.111. As the ID provision is part of
these disclosure requirements, as of the
publication of these regulations, section
1876 cost plans will be required to issue
ID cards.
After consideration of the public
comments received, we are finalizing
the policy with the following
modification: We are removing the
specific information requirements from
the ID card provision (§ 422.111(i)).
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 that
changed the formula for determining the
actuarial equivalence of retiree
prescription drug coverage to the
defined standard coverage. Consistent
with this provision, qualified retiree
prescription plans, in their attestation of
actuarial equivalence, must disregard
the value of any discount or coverage
provided during the coverage gap
provided under standard prescription
drug coverage. Thus, in the April 2011
final rule (76 FR 21478), we amended
§ 423.884(d) to remove the value of any
discount or coverage provided during
the coverage gap from the valuation of
standard prescription drug coverage
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when comparing the value of the retiree
drug subsidy (RDS) calculation to
determine valuation of the RDS
coverage.
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. This provision requires the cost
of prescription drug coverage to have an
actuarial value that equals or exceeds
the actuarial value of the standard
Medicare prescription drug benefit (as
determined under section 1860D–11(c)
of the Act). The Affordable Care Act
established two standard Medicare
prescription drug benefits. Thus, there
are now two calculated actuarial values
for the standard prescription drug
benefit—one value that would apply for
standard prescription drug coverage
when establishing the low-income
subsidy and another value that would
apply to applicable beneficiaries. As a
result, we needed to clarify which
actuarial equivalence standard is used
for the valuation of creditable
prescription drug coverage. Retiree
prescription drug coverage is the most
common source of creditable coverage,
therefore we proposed 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
values for both determinations, we
ensure that RDS individuals, who are
enrolled in plans that meet 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 if they
subsequently enroll in a Part D plan.
To this end, we proposed to amend
§ 423.56(a) to exclude the value of gap
discounts or coverage, so that the
definition of creditable coverage is
consistent with the calculation of the
actuarial value of RDS coverage in
§ 423.884(d). We also proposed to revise
the reference to ‘‘CMS actuarial
guidelines’’ in § 423.56(a) to read ‘‘CMS
guidelines,’’ to provide additional
flexibility in issuing interpretive
guidance on the definition of creditable
coverage.
Comment: All commenters who
addressed this issue were in favor of the
proposal. Commenters indicated that
CMS’ changes would ensure that more
employer-sponsored plans will be
determined creditable, so enrollees will
not be subject to the Part D late
enrollment penalty if they choose to
switch from employer-sponsored
coverage to Part D coverage.
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Response: We appreciate the
commenters’ support of the proposal
and agree with their position that this
approach will enable beneficiaries who
switch from employer-sponsored
creditable prescription drug coverage to
a Part D plan to do so without incurring
a late enrollment penalty.
Comment: A commenter indicated
support to exclude the late enrollment
penalty (LEP) from the calculation of
creditable coverage and requested that
CMS provide employer-sponsored plans
with the LEP amounts to effectuate the
proper calculation.
Response: The calculation for
creditable coverage for qualified retiree
prescription drug plans does not
include the LEP. Further, because the
LEP is not part of the formula to
determine and attest creditable
coverage, we do not believe it is
necessary to share the LEP amounts
with employer-sponsored plans.
We appreciate the comments that
were submitted on this provision and
will be finalizing this proposal without
modification.
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 sets of
regulations to strengthen enrollee access
to the Part C and Part D appeals
processes. 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 prescribing
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 later in
this section. Consequently, we proposed
to revise the Part D regulations at
§ 423.600 to allow prescribing
physicians and other prescribers to
request Independent Review Entity
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(IRE) reconsiderations on behalf of
enrollees. We also proposed making 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
independent review of their cases which
creates the potential for delays in
prescription drug access. Furthermore,
given a prescriber’s 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 rule will
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 will enhance
beneficiary access to the appeals process
and better ensure prompt IRE decisions
on whether requested drugs are covered
under Part D.
Under this final rule with comment
period, the regulations will continue to
require a Part D enrollee, or a prescriber
acting on his/her behalf, to request IRE
review; adverse redeterminations will
not be automatically forwarded to the
IRE. We considered requiring autoforwarding of adverse redetermination
requests under the Part D program, but
we continue to believe that in order to
obtain IRE review, the statute requires
the enrollee (or someone acting on the
enrollee’s behalf) to 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 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
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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
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 change 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 change
will 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, including the right to
bring appeals at any level. 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 change 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 also making 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 also
receive a written decision notice from
the IRE, thereby ensuring that enrollees
are fully informed about the review
process and able to participate if they
choose to do so.
As in §§ 422.582 and 423.580,
prescribers must notify enrollees
whenever they request IRE review on
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their behalf. We intend to issue
additional operational guidance with
respect to how this requirement may be
satisfied. Finally, we make clear that
this final rule with comment period
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 an appeal must continue to do so
as the enrollee’s representative.
Comment: Most commenters
expressed support for the proposal,
noting that allowing prescribers to file
IRE appeal requests on behalf of
enrollees without becoming that
enrollee’s appointed representative
would reduce administrative burdens
on prescribers, limit dismissals of
reconsideration requests, make the
appeals processes under Parts C and D
more similar, and enhance beneficiary
access to the Part D appeals process.
Response: We appreciate the
commenters’ support and are finalizing
the proposed revisions without
modification.
Comment: A few commenters
expressed concerns that the proposed
change may negatively affect plan
sponsors’ quality ratings because it will
likely result in an increase in the
number of IRE appeal requests and
potentially result in a higher IRE
overturn rate.
Response: We agree that this change
is likely to increase the number of IRE
reconsideration requests, as discussed
in the regulatory impact analysis for this
provision. To the extent that a plan
sponsor’s IRE reversal rate increases as
a result of this change, plan sponsors
may wish to review their internal
policies and procedures to ensure
compliance with CMS subregulatory
guidance instructing them to conduct
reasonable and diligent outreach efforts
to prescribers and enrollees when
supporting statements or clinical
information necessary to make a
coverage decision are absent or
incomplete.
Comment: A few commenters believe
that allowing prescribers to file IRE
appeals may violate section 1860D–4(h)
of the Act, which specifically states that
only the enrollee can bring an appeal to
the IRE. The commenters note that the
statutory language differs from the
language related to Part C IRE appeals,
and further suggest that Congressional
intent was to limit the Part D IRE
appeals process to individuals acting on
behalf of enrollees, disallowing
individuals other than the enrollee from
initiating IRE appeals absent an AOR
form.
Response: We disagree with the
commenters. This provision does not
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give prescribers appeal rights; it merely
allows them to file an appeal with the
IRE on behalf of an enrollee. We believe
that an enrollee’s prescribing physician
or other prescriber is in the best position
to provide the necessary medical
rationale and documentation to support
a favorable coverage decision. As we
stated in the proposed rule, the revised
regulation will require prescribers to
notify enrollees that the request is being
made. We intend to issue additional
operational guidance with respect to
how this requirement may be satisfied
in a manner similar to the notification
requirements for prescriber-initiated
redeterminations.
Comment: A few commenters
recommended that CMS limit IRE
review to include only the information
provided by the prescriber at the
coverage determination and
redetermination levels. These
commenters believe that prescribers
often delay providing full clinical
information until an appeal reaches the
IRE level and the IRE solicits it.
Commenters note that if plans received
the same information they may reach
the same conclusion as the IRE in less
time and at a lower cost.
Response: We strongly disagree with
the commenters. The proposed rule was
not intended to modify the IRE review
process itself in any way; it only
proposed to modify who may initiate an
IRE appeal. We are retaining existing
regulatory and subregulatory guidance
regarding the requirement that the IRE
solicit the views of the prescriber and
retain a written account of those views
in the IRE’s record.
Additionally, we have not seen any
indication that prescribers are
intentionally withholding applicable
clinical information in either the Part D
coverage determination or appeals
processes. As we noted in the proposed
rule, prescribers do not have
independent standing in Part D appeals,
and generally are not entitled to
payment from the enrollee, pharmacy,
or plan for the drug being requested and
therefore do not have a financial interest
in the outcome of Part D appeals. In
these cases, the prescriber is merely
trying to assist the enrollee in obtaining
coverage for a drug the prescriber
believes is medically necessary.
Prescribers have no incentive to
withhold information that would
support coverage. To the extent that the
IRE routinely solicits and obtains
information from a prescriber that was
not provided during the initial coverage
determination or redetermination, plan
sponsors may wish to review their
internal policies and procedures to
ensure compliance with our
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subregulatory guidance, which instructs
plan sponsors to conduct reasonable
and diligent outreach efforts to
prescribers and enrollees when
necessary supporting statements or
clinical information are absent or
incomplete.
Comment: CMS received several
comments related to enrollee
notification of a prescriber-initiated IRE
appeal requests. Some commenters
recommended that CMS issue guidance
requiring prescribers to notify enrollees
when they file an appeal on the
enrollee’s behalf. One commenter
expressed a belief that, under the
proposed change, plan sponsors would
need to exercise additional oversight
such as contacting enrollees to ensure
that prescribers are appropriately
notifying enrollees and review any form
or document the prescriber uses to make
the IRE appeal request. Another
commenter recommended that CMS not
require plan sponsors or the IRE to
obtain proof from the prescriber that the
enrollee was notified of the requested
IRE review made on their behalf.
Finally, one commenter stated that a
prescriber must obtain the enrollee’s
consent in order to file an appeal with
the IRE.
Response: We do not require and do
not expect plan sponsors to conduct any
type of review or oversight to determine
whether prescribers have notified
enrollees that they are initiating an IRE
appeal on their behalf. We intend to
issue guidance to the IRE with respect
to making a reasonable determination of
whether the enrollee has notice of the
prescriber’s request for a
reconsideration on the enrollee’s behalf.
This provision merely eliminates the
requirement that a prescriber obtain an
enrollee’s express consent (through a
properly executed AOR form) in order
to initiate an IRE appeal on behalf of the
enrollee.
Comment: A commenter requested
that plan sponsors be informed of all
IRE submissions and determinations so
that they can evaluate their internal
processes and provide oversight of
delegated entities.
Response: We agree with the
commenter. In accordance with current
processing requirements, the IRE will
continue to request the plan sponsors’
case files subsequent to all valid
requests for IRE reconsideration. The
proposed change to § 423.602(a) does
not change the requirement that the IRE
notify all parties, including the plan
sponsor, of the reconsideration decision.
Thus, processes for communication
with and notification to plan sponsors
with respect to prescriber-initiated
reconsiderations will be identical to the
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current processes for enrollee-initiated
reconsiderations.
Comment: Several commenters
recommended that CMS require autoforwarding of all adverse
redeterminations to the Part D IRE, as is
currently done with adverse plan
reconsiderations in the MA program.
Response: While we understand that
auto-forwarding all adverse
redeterminations to the IRE would
enhance enrollee access to the Part D
appeals process, we believe that this
practice would be inconsistent with the
statute. As we stated in the proposed
rule, we interpret the statutory language
related to Part D appeals to require the
enrollee (or someone acting on his or
her behalf) to affirmatively request IRE
review.
Comment: A commenter
recommended that CMS include
information on who may file appeals
with the IRE on the Medicare Web site,
in Medicare & You and in plan
communications to increase awareness
of appeal options.
Response: We agree with the
commenter and will ensure that all
relevant CMS materials are updated to
reflect this change after the final rule
has been published. Part D plan
sponsors are also required to maintain
current information regarding the Part D
appeals process on their plan Web sites
and in annual enrollment materials.
Comment: A commenter requested
that notification of IRE decisions for
appeals initiated by prescribers be
provided to the enrollee either by the
provider or the IRE.
Response: We agree with the
commenter that enrollees must receive
written notification of IRE appeal
decisions. As stated previously, we are
finalizing the proposed corresponding
change to § 423.602(a), which specifies
that in all cases the IRE is responsible
for notifying the enrollee (as well as the
prescriber) of its decision, including
when a prescriber makes a request on
behalf of the enrollee.
Comment: A commenter sought
clarification on whether a prescriber
still needs to be appointed by the
enrollee to file a request for IRE
reconsideration.
Response: The purpose of the
proposed change is to eliminate the
need for a prescriber to obtain
representative status in order to initiate
an IRE appeal on the enrollee’s behalf.
Therefore, we are finalizing the
proposed regulation text to state that,
upon providing notice to the enrollee,
the prescribing physician or other
prescriber may request an IRE
reconsideration on behalf of the
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enrollee. An ‘‘appointment’’ is no longer
required.
Comment: A commenter noted that a
prescription may be denied by a Part D
plan at the point of sale for a variety of
reasons, and that a coverage
determination should be required before
proceeding to the IRE as a majority of
appeals could be resolved through plan
adjudication.
Response: We agree with the
commenter. The proposed change
allowing prescribers to file IRE appeals
on behalf of an enrollee does not
eliminate the requirement to exhaust
plan level reviews before requesting IRE
review. Under the proposed change,
enrollees, their representatives and
physicians or other prescribers may
make a request for IRE review only after
the Part D plan sponsor has made an
adverse redetermination decision.
Comment: A commenter requested
clarification that ‘‘prescriber’’ refers
only to the physician, PA or NP who
wrote the order for the drug in dispute.
Response: Under our proposed change
to § 423.600, the ‘‘prescribing physician
or other prescriber’’—the individual
who wrote the order for the drug in
dispute—will be the only person
authorized to make an IRE appeal
request on behalf of an enrollee (absent
an authorized or appointed
representative).
Comment: A commenter
recommended that IRE appeal requests
be limited to prescribing physicians and
not to a physician designee.
Response: We agree that the proposed
change only allows prescribing
physicians and other prescribers to
initiate IRE appeals on behalf of
enrollees. However, we understand that
medical and administrative staffs
perform various functions for
physicians (such as calling in
prescriptions or responding to requests
for medical records) these same staff
should be allowed to assist prescribers
in submitting Part D IRE appeal requests
and providing any necessary clinical
documentation. We will develop
additional subregulatory guidance
around this process.
Comment: A commenter stated that
allowing prescribers to initiate IRE
appeals on behalf of enrollees will
contribute to the increasing problem of
overutilization of medications caused by
prescribers who continue to prescribe
drugs that are not medically necessary.
Response: We understand the
commenters concerns, but disagree with
the suggestion that the proposed
provision will lead to overutilization.
We are only allowing prescribers to
request coverage at the IRE level. The
decision whether to overturn the
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adverse redetermination will continue
to be made by the IRE based on statutory
and regulatory guidelines and
applicable clinical documentation.
Comment: A commenter encouraged
CMS to ensure that prescriber requests
for IRE reconsideration are consistent
throughout the Part D and MA
programs.
Response: We are seeking to make the
Part D and MA programs more similar
through this regulatory change.
However, as noted previously, we
believe the statutory differences with
respect to IRE reconsiderations do not
allow for these processes to be identical.
Comment: CMS received a number of
comments related to fees charged by
prescribers who assist enrollees with
Part D appeals. Several commenters
urged CMS to reexamine the policy
surrounding ‘‘allowable extra fees,’’
stating that Part D and MA program
appeals are rarely successful without
physician support and allowing
physicians to charge fees for providing
letters of medical necessity or producing
medical records creates an unnecessary
tension in the doctor-patient
relationship. Some commenters
requested that CMS prohibit physicians
or other prescribers who file IRE appeals
on behalf of enrollees, from charging
enrollees any fee for assistance unless
an enrollee has agreed to the fee in
writing. Other commenters requested
that CMS issue guidance related to
reasonable fees. A number of
commenters also noted that CMS rules
related to appointment of
representatives include a provision that
a physician representative may waive a
fee for representing a beneficiary.
Response: Subpart M does not address
fees charged by physicians or other
prescribers; therefore, we believe these
comments are outside the scope of the
proposed regulation.
As stated previously, we are finalizing
the proposed changes without
modification. However, we are,
changing the effective date of this
provision from 60 days after the
publication of this rule to January 1,
2013, to clarify that prescribers may not
begin requesting reconsiderations on
behalf of the beneficiary until the 2013
plan year.
5. Independence of LTC Consultant
Pharmacists (§ 483.60)
In our October 11, 2011 proposed rule
(76 FR 63038), we noted that 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
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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. We explained that, as
a result of their role in LTC facilities,
LTC consultant pharmacists may
exercise significant influence over the
drugs that LTC facility residents receive.
We noted that nursing homes
commonly 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. We indicated that, in
verbal conversations with industry
representatives, we had been informed
that some LTC pharmacies provide the
consultant pharmacists to nursing
homes at rates that may be below the
LTC pharmacy’s cost and below fair
market value.
We expressed our concern with the
potential effect on patient safety and
quality of care for nursing home
residents regarding the various
contractual arrangements involving LTC
facilities, LTC pharmacies,
pharmaceutical manufacturers and/or
distributors, and the LTC consultant
pharmacists that may be provided
through LTC pharmacies directly or
indirectly to LTC facilities. We noted
these arrangements may take many
forms and mentioned the practice of
LTC pharmacies’ providing consultant
pharmacists to nursing homes at below
cost or fair market value as one such
type of arrangement. We noted also that
any such arrangements have the
potential to directly or indirectly
influence consultant pharmacist drug
regimen recommendations. We
indicated our concern that the lack of
independence of the consultant
pharmacist from the interests of the LTC
pharmacy or other LTC pharmacyrelated organization may lead to
recommendations that steer nursing
homes to recommend or use certain
drugs for their residents. We noted this
could result in the overprescribing of
medications, the prescribing of drugs
that may be inappropriate for LTC or
geriatric residents, or the use of
unnecessary or inappropriate
therapeutic substitutions. We remarked
that such potential outcomes could pose
serious health-related consequences to
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some nursing home residents’ health
and safety.
In our October 11, 2011 proposed rule
(76 FR 63039), we referenced the claims
brought by qui tam relators under the
False Claims Act and cited research
findings, HHS Office of Inspector
General review findings, and nursing
home survey and certification data to
demonstrate that our concerns were not
merely theoretical. We acknowledged
that our findings did not directly
connect LTC pharmacy relationships
with consultant pharmacists to the
research findings and survey results;
however, we believed it was reasonable
to presume that the incentives present
in the relationships among some
consultant pharmacists, LTC
pharmacies, and drug manufacturers
could influence the prescribing
practices reflected in the data. As a
result, we expressed our belief that
requiring the independence of
consultant pharmacists was necessary
and appropriate and were considering
making such a change. We solicited
comments on our understanding in this
matter.
In our October 11, 2011 proposed rule
(76 FR 63040), we stated that we
believed 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
would ensure that financial
arrangements would not influence the
consultant pharmacist’s clinical
decision making to the detriment of LTC
residents. Therefore, we indicated that
we were 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 and believed such a requirement
would be necessary to ensure that
consultant pharmacist decisions were
objective, unbiased, and in the best
interest of nursing home residents. LTC
facilities would use a qualified
professional pharmacist to conduct drug
regimen reviews and make medication
recommendations based on the best
interests of the resident. We expressed
our belief that this could be achieved
only if the consultant pharmacist were
working without the influence of
conflicting financial interests that might
otherwise encourage overprescribing
and overutilization, which creates
health and safety risks for residents.
We noted the changes we were
considering would use the authority
available under sections 1819(d)(4)(B)
and 1919(d)(4)(B) of the Act to require
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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 wellbeing of residents * * *.’’ We stated we
were considering requiring that LTC
facilities employ or directly or
indirectly contract the services of a
licensed pharmacist who is
independent. We also noted we were
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.
Finally, we noted our understanding
that some LTC consultant pharmacists
may perform approximately 60 drug
regimen reviews in a day. We indicated
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 did not propose to codify
changes to the drug regimen review
requirements, we solicited public
comment on best practices related to the
conduct of drug regimen reviews and
stated we would use these comments to
inform possible future rulemaking
regarding the drug regimen review
requirements.
Comment: CMS received many
responses to our request for comment on
our understanding of the problems
associated with conflict of interest
involving LTC consultant pharmacists.
A significant number of commenters
who identified themselves as current or
former consultant pharmacists either
acknowledged they had experienced
conflict of interest in the past or
confirmed our understanding that
conflict of interest were an on-going
problem. Several of these commenters
claimed that conflicts of interest have
been widespread and alleged that
patient care suffers because of it. A
number of these commenters wrote
anonymously stating they feared
retribution from their pharmacy
employers. A commenter asserted that
the rules LTC pharmacies placed on
their employee consultant pharmacists
strongly influenced utilization. This,
they note, often resulted in a higher
number of medications per resident and
use of inappropriate drugs. Commenters
who had witnessed or experienced
conflict of interest described practices
associated with it that included the
following:
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• Several commenters indicated their
LTC pharmacy gave consultant
pharmacists a list of ‘‘preferred’’ drugs;
that is, drugs for which the LTC
pharmacy receives preferred pricing or
higher rebates from the pharmaceutical
manufacturer, to be used for making
their medication recommendations.
• A few commenters described their
LTC pharmacy’s therapeutic interchange
program, which involves the consultant
pharmacist recommending a change
from a prescribed non-preferred drug to
one of the pharmacy’s preferred drugs.
A commenter characterized therapeutic
interchange to rebated drugs as ‘‘big
business’’ for the pharmacy. Another
commenter explained that, once a
change recommendation was made by
the consultant pharmacist, the LTC
pharmacy automatically generated a fax
notice to the prescriber requesting the
he or she sign the notice to approve the
therapeutic interchange. An additional
commenter indicated that the consultant
pharmacists’ medication change
recommendations were communicated
in the form of letters to the prescriber
prepared by the corporate clinical
department of the pharmacy.
• Several commenters explained that
consultant pharmacists’ performance
evaluations and bonuses were based on
the market share of particular brand
name drugs in the LTC facility. Thus, as
the commenters noted, consultant
pharmacists had financial incentives to
make medication recommendations that
enabled the facility market-share targets
to be met.
• Many commenters stated that they
had first-hand knowledge that LTC
pharmacies continue to charge belowmarket rates for the LTC consultant
services as a means of acquiring the LTC
facility’s pharmacy business, noting that
this remains a common practice. Some
of these commenters charged that the
pharmacies recovered their costs for the
consultant pharmacist services by
requiring the consultant pharmacists to
recommend drugs that generated the
highest profit for the pharmacy.
• Many commenters charged that the
consultant pharmacists’ drug regimen
review quotas were so high that
sufficient time was not available to
perform a thorough review of the
residents’ medication regimens and
make good recommendations. One
commenter cited a minimum drug
regimen review quota of 1,500 reviews
per month. Another commenter
reported that, when a large LTC
pharmacy organization acquired the
pharmacy at which the commenter had
been employed, the new management
required that the commenter perform
the same number of drug regimen
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reviews as the commenter had been
performing previously, but also that the
commenter spend 2 days per week
dispensing. As a result, the time
available for the commenter to perform
the same number of medication reviews
was decreased by 40 percent.
• Some commenters asserted that by
limiting the time available to conduct
them, the drug regimen reviews were
perfunctory. Others described how the
drug regimen review requirements were
subverted. For example, a commenter
contended that the consultant
pharmacists employed by an LTC
pharmacy were performing the
medication reviews at the pharmacy
rather than the facility and, thus, had no
access to medication administration
records, physician and nursing
assessment notes, lab results, or other
information available in the residents’
medical records. Another asserted that
an LTC pharmacy organization had its
consultant pharmacists review the
residents’ medication administration
records, not the entire medical record,
thus missing lab values and other
assessments and notes.
• Many commenters agreed that
consultant pharmacists should be free
from conflict of interest and their
medication recommendations should be
based solely on the residents’ best
interests. Finally, however, many other
commenters stated that they never
experienced any pressure in the conduct
of their consultant pharmacist activities,
nor had they seen others pressured, and
thus they believed that conflict of
interest is not an issue for consultant
pharmacists.
Response: We appreciate the
confirmation of our understanding that
conflict of interest may be a problem for
many LTC consultant pharmacists. We
recognize that a significant number of
commenters disagreed with our
understanding and, thus, the problem
may not be universal. We believe the
comments suggest that the problem has
been addressed in some places and not
in others, is more widespread in some
places and therefore more evident, or is
associated with a particular LTC
pharmacy or pharmacies, particular LTC
facilities or chains or pharmaceutical
manufacturers or manufacturer
representatives.
However, the reports of conflict of
interest are sufficient to indicate it
continues to exist and our concerns
regarding its impact on the quality of
care in LTC facilities are well-founded.
We believe that this demonstrates that
change is necessary to ensure that all
LTC consultant pharmacists are free
from conflicts of interest, are able to
base their professional medication
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recommendations on the best interest
and clinical needs of LTC facility
residents, and are able to advocate for
the Medicare beneficiary.
Comment: CMS received a large
number of comments from advocates
and advocacy organizations, long term
care ombudsmen, LTC consultant
pharmacists, and others supporting a
requirement for LTC consultant
pharmacists to be independent and
noting that such a policy was needed
and long overdue. These commenters
asserted that independence is essential
to ensure that drug regimen reviews are
impartial and the consultant pharmacist
is able to act as an advocate for the
resident without fear of financial
repercussions. A commenter agreed
with an independence requirement,
noting that removing the financial
incentives between the consultant
pharmacists and the LTC pharmacy
would increase transparency.
CMS also received many comments
opposing a requirement that would
separate LTC pharmacy consulting from
dispensing services. Many of these
commenters claimed the requirement
would be seriously disruptive, asserting
that communication and collaboration
between the dispensing pharmacy and
the consultant pharmacist would be
diminished, consultant pharmacists
would be deprived of access to
proprietary LTC pharmacy systems, data
and other resources critical to the
performance of consultant pharmacists’
activities. Opposing commenters noted
the requirement would also deprive
consultant pharmacists of the significant
advantages derived from pharmacy
employment, including health,
retirement and other benefits, and
would increase costs to both the LTC
facilities and consultant pharmacists. A
significant number of these commenters
expressed concern that independence
would decrease the quality of patient
care accordingly.
Many commenters requested that we
finalize the requirement and not yield to
those who argued against it. CMS
received several comments from
independent consultant pharmacists
noting that, although others have argued
otherwise, working independently has
neither hindered access to residents’
prescription or medical information, nor
diminished the residents’ quality of
care.
Response: We appreciate these
comments, as well as the concerns
expressed by those commenters
opposed to the requirement for
independent consultant pharmacists.
The comments supporting the
independence requirement have
sustained our concerns about conflict of
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interest and its impact on the quality of
long term care. Also, the significant
advantages associated with employment
described in the opposing comments
serve to highlight the strong influence
such financial ties can exert on
pharmacy-employed consultant
pharmacists and reinforce the
importance of an independence
requirement to ensure unbiased
medication reviews. As a result, we
remain convinced of the need for
changes to ensure that the consultant
pharmacists’ recommendations are
based solely on the residents’ best
interests and clinical needs. However,
we acknowledge that an independence
requirement could be highly disruptive
to the industry overall, including the
LTC facilities and those consultant
pharmacists with current industry
affiliations, and would result in higher
costs to the facilities and consultant
pharmacists.
Comment: A few commenters claimed
we do not have the statutory authority
to impose an independence
requirement. These commenters
asserted that we cannot use the
Secretary’s authority under sections
1819(d)(4)(B) and 1919(d)(4)(B) of the
Act, because consultant pharmacist
independence has no direct relationship
to resident health and safety. Therefore,
for us to require consultant pharmacists
to be independent would require
Congressional authorization.
Response: We disagree. We believe
that the conflict of interest inherent in
the employment relationship between a
consultant pharmacist and an LTC
facility’s pharmacy undermines the
ability of the consultant pharmacist to
make unbiased medication
recommendations that are solely in the
best interests of the residents. Many of
the comments previously discussed
corroborate our belief.
Recommendations made on other bases,
such as those reflecting the financial
interests of the consultant pharmacist or
the consultant pharmacist’s employer,
pose health and safety risks for the
residents. Even in those situations in
which the consultant pharmacist is able
to make unbiased medication
recommendations because there are no
pressures to do otherwise, if the drug
regimen review quota established by the
consultant pharmacist’s employer is so
high as to permit the consultant
pharmacist to perform only the most
perfunctory medication reviews, then
resident health and safety are at risk.
Comment: Many commenters agreed
with the definition of ‘‘independence’’
we indicated we were considering.
Some commenters disagreed with the
definition, indicating that consultant
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pharmacists should not be permitted to
be employees of the LTC facility in
order to avoid the potential conflict of
interest inherent in an employment
relationship. Other commenters
requested that consultant pharmacists
be permitted to affiliate with
pharmaceutical manufacturers and
distributors. These commenters argued
that affiliations with these entities
permit the exchange of scientific and
educational information on topics, such
as medications and product benefits and
risks, and much of this exchange occurs
at educational programs supported by
the industry at professional meetings
and trade shows. They noted that
consultant pharmacists frequently serve
on industry advisory boards and are
engaged as speakers and researchers
with industry financial support and
contended that HHS Office of Inspector
General guidance for pharmaceutical
manufacturers and industry guidelines
related to the healthcare professionals’
decision-making provide sufficient
oversight. One other commenter
requested that we define the terms
‘‘affiliates’’ and ‘‘affiliated.’’
Response: We acknowledge that there
may be potential conflicts of interest in
an employment relationship between
consultant pharmacists and LTC
facilities, but note that both the LTC
facility and its residents have a common
interest in the facility meeting CMS
standards for unnecessary drug use in
the facility. We do not agree with the
commenters who advocated that we
allow consultant pharmacist
relationships with pharmaceutical
manufacturers and distributors. The
relationships that these commenters
describe cause us substantial concern,
as we believe they represent a basis for
the conflicts of interest that we seek to
eliminate. We believe that consultant
pharmacists who receive remuneration
from pharmaceutical manufacturers/
distributors for activities, such as
research and speaking engagements or
for serving on advisory boards, may be
influenced by these relationships in the
performance of their consultant
pharmacist activities. Thus, if the
consultant pharmacists’
recommendations are to be based solely
on the LTC residents’ best interests,
these affiliations should be prohibited.
Comment: We received many
comments from those supporting the
independence requirement for LTC
consultant pharmacists as well as from
those opposing it, noting that consultant
pharmacist independence would not
solve the entire problem of conflict of
interest, because other agents contribute
to drug overutilization and
inappropriate drug use in LTC facilities.
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Contributors specifically cited by
commenters were LTC facility medical
directors, nurse practitioners and
physician assistants and the residents’
attending physicians. A few
commenters noted that family members,
influenced by pharmaceutical
advertisements, could request
antipsychotics as adjuncts for
depression and the prescriber could
accede to these requests. Other
commenters noted the LTC facilities’
role citing serious understaffing, high
staff turnover, and the lack of
specialized staff trained in meeting the
needs of dementia patients as factors
contributing to inappropriate drug use
in LTC facilities. Another commenter
observed that others also play a
contributing role, noting that a
considerable number of residents
admitted into LTC facilities from their
homes, hospitals, and assisted living
facilities are already on potentially
unnecessary drugs.
Many commenters pointed out that
the ultimate decision regarding what
medications to prescribe and whether to
accept or reject a consultant
pharmacist’s recommendation lies with
the physician. Therefore, the
commenters asserted prescribers, not
consultant pharmacists, should be held
accountable for overuse or inappropriate
use of drugs in LTC facilities.
Commenters claimed LTC residents’
physicians, as well as the facility’s
medical director, rarely see or examine
the residents and medications are
reordered without the physician
reviewing the residents’ condition.
According to another commenter, if a
resident’s behavior problem escalates,
such as in the case of a resident with
dementia, facility staff would call the
physician to increase the medication
dosage, and the physician would
commonly comply without seeing the
resident. Several other commenters
noted that prescribers, aware of
potential bias, ignore the consultant
pharmacists’ recommendations due to
uncertainty that the recommendations
are in the residents’ best interests.
Many of the commenters in
opposition to the consultant pharmacist
independence requirement noted that
conflicts of interest pervade the LTC
industry, affecting the facility (which
imposes its own formulary requirement
to contain costs for the drugs it covers),
facility staff (who can encourage the use
of chemical restraints to manage
residents with behavioral problems),
and the residents’ physicians and LTC
facility-based prescribers (who may
have their own financial ties to the
pharmaceutical industry). For these
reasons, the commenters objected to a
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requirement that would single out only
one group of actors that contribute to
this problem. Several commenters
recommended that we require that all
clinicians in an LTC facility be
independent, or that we at least
consider the role of the physicians who
prescribe medications when
determining how best to solve the
problem. Other commenters agreed with
the independence requirement, but
indicated that it was only a partial
solution and a more comprehensive
approach would be necessary to
respond effectively to the whole
problem.
Response: We appreciate the many
comments noting that others in the LTC
industry, including facility staff and
residents’ attending physicians,
contribute significantly to
overutilization. Commenters not only
implicated others as contributing to
overuse of drugs in LTC facilities, but
also described other factors that
contribute to the problem. Therefore, we
recognize that requiring consultant
pharmacists to be independent will not
solve the entire problem. As a result of
these comments, we are better aware
that the independence requirement we
specifically described in the October 11,
2011 proposed rule would
disproportionately target consultant
pharmacists and leave the other actors
to continue to operate as they do
currently. This suggests that, unless the
industry on its own implements steps to
curtail overutilization and inappropriate
drug use in LTC facilities, we must
consider requiring broader changes than
independence only for consultant
pharmacists and propose those changes
in future notice and comment
rulemaking.
Comment: Several commenters
mentioned the recent investigations of
nursing homes conducted by the
California Department of Public Health
which found that LTC consultant
pharmacists failed to identify and report
the misuse of antipsychotic medications
in 90 percent of the cases identified by
investigators as involving inappropriate
and potentially lethal doses of these
drugs. We also received comments from
an LTC pharmacy reporting that over
the past 5 years its consultant
pharmacists have made over 700,000
recommendations to prescribers
regarding antipsychotic drug use and
that more than 99 percent were
recommendations to reduce dosage,
discontinue or question use or
recommend monitoring for side effects.
(We note this commenter did not
provide information on whether these
recommendations were followed.)
Citing these data from the LTC
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pharmacy, another commenter noted
that, if (as the level of antipsychotic
drug use suggests) prescribers are
ignoring the consultant pharmacist
recommendations, it raises the question
of the effectiveness of the drug regimen
reviews. A commenter suggested that,
over time, conflict of interest can
diminish prescribers’ confidence in the
consultant pharmacists, eroding their
effectiveness. This suggestion was
supported in the comments of another
who claimed that prescribers who have
been practicing in LTC facilities are
sensitive to the ethical conflicts faced by
consultant pharmacists and are
skeptical of their recommendations
because of the prescribers’ uncertainty
as to whether the recommendations are
in the residents’ best interests.
Response: These comments and the
data reported by the commenters
suggest that the required monthly drug
regimen reviews are not yielding the
intended outcomes nor are they
providing the expected beneficiary
protections. If perceived conflict of
interest has potentially eroded
confidence in the recommendations of
the consultant pharmacists that
prescribers are ignoring them and the
reviews have become merely
perfunctory exercises, then we may
consider changing the requirements in
§ 483.60(c) and explore alternative
requirements and approaches. In
determining whether a regulatory
change is necessary, we will continue to
evaluate the number of deficiency
citations for unnecessary medication
use and will monitor two new
performance measures on the use of
antipsychotics in LTC facilities. These
new performance measures, based on
resident assessment information
reported in the Minimum Data Set (MDS
3.0), will reflect antipsychotic drug use
by short-term stay and by long-term stay
facility residents and will be available
later in 2012 on the CMS nursing home
compare Web site at https://www.
medicare.gov/NHcompare/home.asp.
Comment: We received extensive
comments expressing serious concerns
about the level of overuse and
inappropriate use of antipsychotic drugs
in LTC facilities. A commenter stated
that, ‘‘On any given day, over 350,000
nursing home residents receive
powerful antipsychotics, despite FDA
warnings that the drugs increase the risk
of death and studies that show the drugs
do not work and have terrible side
effects.’’ Many commenters noted the
vast majority of those receiving these
drugs are residents with dementia who
are being chemically restrained when
there are safe, effective, and less
expensive nonpharmacological methods
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to care for these residents. Another
commenter stated that studies show that
compassionate, person-centered care
can minimize anxiety and depression
and minimize the need for psychotropic
medications.
Response: We share the grave
concerns expressed by the commenters
concerning the level of antipsychotic
drug use in LTC facilities. We believe
these comments also call into question
the effectiveness of the consultant
pharmacists’ drug regimen reviews in
curtailing the use and misuse of
antipsychotic drugs, regardless of
whether the ineffectiveness is caused by
inadequate medication reviews by
consultant pharmacists or prescribing
physicians ignoring the recommended
changes. As we indicated previously,
we agree that consultant pharmacist
independence will not solve the whole
problem. Therefore, we challenge the
entire LTC industry to do what is in the
best interests of our most vulnerable
beneficiaries and implement the
necessary and appropriate changes to
address this serious situation.
We expect that through the
implementation of changes, such as
placement of greater emphasis on the
use of nonpharmacological methods of
care as an alternative to
pharmacological treatment for the
behaviors associated with dementia, the
industry will achieve substantial
improvement in the appropriate use of
these medications. Although not all
non-pharmacological treatments are
appropriate for all patients, some
nonpharmacological interventions may
have potential benefits for residents
with the behavior symptoms associated
with dementia, such as agitation or
aggression, wandering and sleeping
disturbances. These interventions
include, for example, music therapy,
massage therapy, behavior management
techniques, and animal-assisted
therapy.
Comment: A number of commenters
offered recommendations for increasing
transparency in order to address
conflicts of interest issues in LTC
facilities. Some commenters
recommended that we require LTC
facilities to separate contracts for LTC
consulting services from contracts for
other services, including drug
dispensing, and require LTC facilities
pay a fair market rate for consultant
pharmacist services. Some commenters
suggested either that we require
consultant pharmacists to disclose to
the facility any affiliations that would
pose a potential conflict of interest or
require consultant pharmacists to sign
an integrity agreement. Several
commenters recommended that LTC
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pharmacies ensure that consultant
pharmacists are empowered to make
independent judgments and affirm this
in a statement to the facility. One
commenter suggested that, should the
implementation of a requirement for
consultant pharmacists to be
independent be delayed, we require
consultant pharmacists to disclose their
affiliations and potential conflicts of
interest.
Response: We continue to believe that
requiring independent consultant
pharmacists is part of the right approach
to address our concerns regarding
conflict of interest and quality of care in
LTC facilities. It is an approach that was
strongly supported by some consultant
pharmacists who confirmed our belief
that LTC pharmacies do exert pressure
on the consultant pharmacists in their
employ to influence the medication
recommendations. It was also supported
by individual commenters, advocates
and advocacy organizations, Part D plan
sponsors and PBMs, and consultant
pharmacist organizations. However, we
acknowledge that others in the industry,
including LTC facility staff and
prescribers, are likewise implicated in
the problem of overprescribing and
inappropriate drug use. Thus, an
independence requirement solely for
consultant pharmacists would not solve
overutilization and would single out
one party, but leave the others to
continue unaffected. We agree with
commenters that the requirement would
be highly disruptive to both LTC
facilities and consultant pharmacists
with current industry affiliations.
Because the proposed requirement does
not address the role of facility staff and
prescribers in driving overutilization
and inappropriate use, it is unlikely to
result in substantially reducing these
problems that would, in our view,
outweigh the costs of industry
disruption.
Comment: We received several
comments that noted the lack of
empirical evidence linking
overutilization of drugs in LTC facilities
to consultant pharmacists’ possible
conflicts of interest. Numerous
commenters suggested that we study the
recommendations, drug utilization and
outcomes data for independent and
pharmacy employed consultant
pharmacists and many of these
commenters also recommended that we
consult with stakeholders to better
define and scope the problem and
formulate a more appropriate approach
for addressing it.
Response: If, as suggested by other
commenters, consultant pharmacist
recommendations are rarely acted upon,
this calls into question the very purpose
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of the consultant pharmacists’
medication reviews. We expect the
industry to demonstrate the value of
these reviews to the LTC residents’
quality of care. Therefore, we believe
the industry should collect data on the
number and type of interventions
recommended by the consultant
pharmacists and on the outcomes of
those recommendations. We expect
some, if not all, of these data are already
being collected and we recommend the
industry work with such entities as the
Pharmacy Quality Alliance (PQA) and
other consensus gathering organizations,
to develop performance measures to
assess consultant pharmacist
effectiveness. Further, since the
consultant pharmacists are not the only
group with responsibility for ensuring
the safety and efficacy of care in the
LTC facility, we expect the LTC
provider and medical industry to also
implement changes to address the
problem of overuse and misuse of
medications in LTC so that we will see
inappropriate prescribing of all
medications, but particularly
antipsychotics, decrease. Should
marked improvement not occur, we will
use future notice and comment
rulemaking to propose requirements to
address our concerns. In determining
whether marked improvement has been
made, we will continue to evaluate the
number of deficiency citations for
unnecessary medication use and will
monitor the two new performance
measures on the use of antipsychotics in
LTC facilities.
Comment: We received comments
recommending that LTC pharmacies be
required to disclose their rebates and
several other comments recommending
the elimination of manufacturer rebates
to LTC pharmacies based on utilization.
Response: Although we agree that
market-share-moving rebates may
provide incentives that are not in the
LTC residents’ best interests, we believe
that these suggestions are beyond the
scope of this proposal, and we are not
in a position to respond to these
recommendations at this time.
Comment: Several commenters
recommended a requirement that
facilities use qualified professional
consultant pharmacists for LTC
consulting services and strictly enforce
compliance with that requirement.
Another commenter suggested that, as
an alternative, we establish an audit or
other oversight process to review and
evaluate all medication changes
recommended by LTC consultant
pharmacists and all contractual
agreements that pose potential conflict
of interest risk.
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Response: We appreciate these
comments and will consider the
recommendations in the process of
future rulemaking on this issue.
However, as noted above, we believe the
LTC industry should collect data on the
number and type of interventions
recommended by the consultant
pharmacists and on the outcomes of
those recommendations and we
recommend the industry work with
such entities as the PQA and other
consensus gathering groups, to develop
performance measures to assess
consultant pharmacist effectiveness.
Since the consultant pharmacists are not
the only group with responsibility for
ensuring the safety and efficacy of care
in the LTC facility, we expect the LTC
provider and medical industry to also
implement changes to address the
problem of overuse and misuse of
medications in LTC so that we will see
inappropriate prescribing of all
medication.
Comment: Many commenters
responded to our request for comment
on permitting exceptions for unique
situations involving minimal conflict of
interest risk or waiving the
independence requirement to permit
other alternate approaches. Some
commenters recommended that we
grant no waivers or exceptions, arguing
that there should be a level playing field
and that no employment relationship
was free from conflicts of interest. Other
commenters agreed with allowing
exceptions or waivers for alternate
approaches for IHS/Tribal facilities and
facilities in rural or other ‘‘hardship
areas’’. Several commenters suggested
we monitor the exception and waiver
processes to ensure they are fair and
equitable. Other commenters requested
either exceptions or alternate
approaches for facilities with in-house
pharmacies, VA, and State Veterans
nursing homes, and various other
situations.
Response: We appreciate these
comments and will consider them in the
process of future rulemaking on this
issue.
Comment: Several commenters
recommended either coordination
between consultant pharmacists’ drug
regimen reviews and medication
therapy management (MTM) services in
order to eliminate overlap/duplication
between the two reviews.
Response: We agree that the potential
overlap between the drug regimen
reviews required in LTC and Part D
MTM reviews could possibly result in
conflicting reviews. As a result, in the
provision on MTM in LTC facilities
discussed elsewhere in this rule, we
encourage plan sponsors to consider
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making arrangements that include the
LTC consultant pharmacist in
conducting Part D MTM services for
targeted beneficiaries in LTC facilities.
We note such arrangements could
include direct contracts between the
sponsor and consultant pharmacists (or
their intermediaries), or indirect
contracts between the sponsor’s MTM
vendor or PBM and consultant
pharmacists (or their intermediaries).
Comment: Several commenters
recommended we establish a January 1,
2013 effective date, and other
commenters requested either a delay in
implementation or suggested a later
effective date. Commenters provided
recommendations for phasing in the
requirement and for implementing the
requirement initially as a demonstration
program. Commenters also noted that
these latter approaches would enable us
to benefit from lessons learned and
identify best practices for future
implementation.
Response: We appreciate these
comments, but, as discussed further
later in this section, we are not
finalizing this provision at this time.
Comment: We received numerous
comments in response to our request for
information concerning best practices in
the conduct of drug regimen reviews. A
few commenters suggested that we
require consultant pharmacists be
afforded adequate time for the monthly
drug regimen reviews. Another
suggested that we refer to the American
Society of Consultant Pharmacists
‘‘Guidelines for Assessing the Quality of
Drug Regimen Review in Long Term
Care Facilities’’ which the commenter
noted provides standards to evaluate the
quality of the drug regimen review and
to improve the process. Several other
commenters asserted that establishing a
specific rate would be inappropriate
because the facility’s case-mix could
affect the rate. However, other
commenters specified what they
believed would be the optimal rate per
day; the suggested rates varied from a
low of 20 to a high of 64 per day.
Response: We appreciate the
comments and suggestions and will use
them to inform possible future
rulemaking regarding the drug regimen
review requirements.
Comment: Many commenters noted
that the services performed by LTC
consultant pharmacists are more
extensive than the drug regimen reviews
and include activities, such as
destroying unused medications,
checking storage areas, conducting exit
conferences, providing in-service
education to nursing staff, observing
medication distribution, and attending
meetings. Commenters stated all the full
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range of consultant pharmacist services
need to be considered in evaluating the
impact of any new requirements.
Response: We appreciate these
comments and, as we indicated in the
October 11, 2011 proposed rule, we will
use them to inform possible future
rulemaking regarding the LTC
consultant pharmacist requirements.
As a result of considering the
comments we received on this issue, we
now believe a more targeted and less
disruptive approach, at least initially, is
warranted. We considered the
possibility of finalizing several of the
requirements recommended by these
commenters to increase transparency
around current contractual
arrangements and incentives. We agree
with the recommendation that LTC
facilities pay a fair market rate for
consultant pharmacist services; we note
that the OIG has stated that provision of
consultant pharmacists’ services by LTC
pharmacies at below market rates
‘‘present[s] a heightened risk of fraud
and abuse’’ (OIG Supplemental
Guidance Program for Nursing
Facilities, 73 FR 56832, 56838, note 53,
September 30, 2008). However, we do
not believe it is within our statutory
authority to require provision of such
services at market rates. We also
considered requiring that LTC facilities
separately contract for consultant
pharmacist services from other
pharmacy services and that consultant
pharmacists disclose to the LTC facility,
the medical director, ombudsmen, and
residents upon request any affiliations
that would pose a potential conflict-ofinterest risk.
However, due to the notice and
comment provisions of the
Administrative Procedure Act (5 U.S.C.
553) and section 1871(a)(4) of the Act,
and their respective requirements that a
final rule be the logical outgrowth of a
proposed rule, we believe that any such
requirements cannot be finalized in this
final rule with comment period, since
we did not propose them initially. As a
result, since a requirement for
independent consultant pharmacists
will not solve the entire problem, but
would be significantly disruptive for
much of the LTC industry, we are not
finalizing this provision at this time.
Instead, we are soliciting additional
comments to help us determine a more
comprehensive approach to eliminate
overprescribing and the use of chemical
restraints in LTC.
In the meantime, given our continuing
conflict of interest concerns, we strongly
encourage the LTC industry in general
to voluntarily adopt the following
changes to increase transparency:
separate contracting for LTC consulting
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services from dispensing and other
pharmacy services; payment by LTC
facilities of a fair market rate for
consultant pharmacist services; and
disclosure by the consultant
pharmacists to the LTC facility of any
affiliations that would pose potential
conflicts of interest; or the execution by
the consultant pharmacists of an
integrity agreement. We expect the
industry to use this opportunity to
collect data on the number and type of
interventions recommended by the
consultant pharmacists and on the
outcomes of those recommendations.
We believe that LTC pharmacies may
already collect some, if not all, of these
data and would be able to work with
such entities as the Pharmacy Quality
Alliance (PQA) and other consensus
gathering organizations, to develop
performance measures to assess
consultant pharmacist effectiveness.
Until the next opportunity for us to
propose a regulatory change, we will
closely evaluate the number of
deficiency citations for unnecessary
drug use and will monitor the two new
performance measures to track the use
of antipsychotics in LTC facilities and
expect to see significant improvement.
We will also continue to participate in
a Department of Health and Human
Services (DHHS) initiative focused on
the use of antipsychotics for persons
with Alzheimer’s disease. As part of this
effort, we are seeking to eliminate the
inappropriate use of antipsychotic drugs
in LTC facilities for residents with
Alzheimer’s disease through updated
guidance on the use of these
medications and stricter enforcement of
current requirements. In partnership
with the Alzheimer’s Disease Education
and Referral Center, we will work to
better educate LTC facilities, prescribers
and the resident’s families. We believe
that effort focused on eliminating the
use of inappropriate chemical restraints
for LTC facility residents with
Alzheimer’s disease may also serve to
improve the quality of care for the LTC
facility residents with the behavior
symptoms associated with dementia.
Our expectation is that the industry
will implement changes to address the
problem and we will see inappropriate
prescribing decrease. Should marked
improvement in inappropriate
utilization not occur, we will use future
notice and comment rulemaking to
propose requirements to address these
concerns. After considering the public
comments received, we are not
finalizing this provision. However, we
are soliciting further comment to assist
us to better define the problem and
frame a more comprehensive solution to
address our concerns regarding
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medication management and quality in
LTC. Specifically, we solicit comment
related to the following three issues:
• Enhancing medication management
and the effectiveness of medication
review.
We noted in the previous comment
summary and responses that many
commenters pointed out that besides
consultant pharmacists, other parties
and factors contribute to overprescribing
and inappropriate drug use in LTC
facilities. These commenters charged
that prescribers, including facility
medical directors, nurse practitioners
and physician assistants as well as the
residents’ attending physicians, are
major contributors. Others described
how pharmaceutical representatives and
advertising, family members, and the
LTC facility’s understaffing, high staff
turnover, and lack of specialized staff
trained in meeting the needs of
dementia patients contribute to the
problem. We noted, too, that
commenters questioned the
effectiveness of the consultant
pharmacists’ medication reviews,
charging that drug regimen review
quotas were so high that the reviews
had become perfunctory and that others
had described how the review
requirements were subverted. Other
commenters suggested that the
consultant pharmacists’
recommendations were being ignored by
prescribers due to their lack of
confidence that the recommendations
were in the best interests of the
residents. As a result of these
comments, we are not only aware that
requiring consultant pharmacists to be
independent will not solve the entire
problem, but also that the drug regimen
reviews may not be yielding the
intended outcomes or providing the
expected beneficiary protections,
Therefore, we seek comment in
response to the following questions:
++ What actions/steps should be
taken to strengthen attending physician
(and other prescribers) medication
management and prescribing practices
to ensure the best quality of care for the
nursing home resident?
++ What is and should be the role of
the nursing home medical director in
overseeing the attending physician (or
other prescribers) medication
management activities?
++ What actions, if any, should the
medical director take when attending
physicians (or other prescribers) fail to
engage in appropriate/adequate
medication management activities?
++ What actions/steps could be
undertaken to establish and ensure the
independence and effectiveness of a
consultant pharmacist in conducting
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their medication reviews on behalf of
nursing home residents?
++ What training and best practice
models would assist all nursing home
staff to better understand behavior signs
and symptoms and respond
appropriately and effectively in
assisting and caring for nursing home
residents?
• Data collection and use.
As we indicated previously, in
commenting on this provision, several
commenters noted the lack of empirical
evidence linking overuse and
inappropriate use of drugs in LTC
facilities to consultant conflict of
interest. Numerous commenters
recommended CMS conduct further
study and consult with stakeholders to
better define the problem and formulate
a more appropriate approach for
addressing it. As a result, we solicit
comment in response to the following
questions:
++ What data are needed to enable
and support the Medicare and Medicaid
programs and others in monitoring the
appropriateness and adequacy of
medication management activities,
including the use of antipsychotics
drugs?
++ What data are needed to enable
CMS to study the effectiveness of
consultant pharmacist medication
reviews?
++ What data are needed to create
public performance metrics regarding
the independence of consultant
pharmacists and prescribers from
pharmacies and drug manufacturers/
distributors?
++ Are data needed on the number
and type of interventions recommended
by consultant pharmacists and on the
outcomes of those recommendations? If
so, how could such data be used and by
whom?
• Increasing transparency.
Finally, as noted previously, a
number of commenters offered
recommendations for increasing
transparency in order to address conflict
of interest in LTC. Many commenters on
this provision charged that conflict of
interest was pervasive in LTC, affecting
the facility which imposed its own
formulary requirements to contain costs
for the drugs it covered, facility staff
who encouraged the use of chemical
restraints to manage residents with
behavioral problems, and residents’
attending physicians and facility
prescribers who may have had their
own ties to the pharmaceutical industry.
We expressed our interest in several of
the recommendations, but due to the
notice and comment provisions of the
Administrative Procedure Act and
section 1871(a)(4) of the Act, and their
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22107
respective requirements regarding
logical outgrowth, we believe that any
such requirements cannot be finalized
in this rule. Thus, we solicit comment
in response to the following questions:
++ What specific details regarding the
financial (and other) arrangements
between LTC facilities, consultant
pharmacists, and LTC pharmacies
providing consulting and/or dispensing
services should be disclosed, and to
whom should this information be
available?
++ Should the public be informed of
the financial and other arrangements
between LTC facilities, consultant
pharmacists, and LTC pharmacies
providing consulting and/or dispensing
services? If so, what metrics could be
used?
++ What information is needed to
assess the independence and adequacy
of physician (and other prescriber)
medication management and oversight
on behalf of nursing home patients?
What metrics could be used to assess
the adequacy and appropriateness of
prescriber response to consultant
pharmacist recommendations?
++ What metrics could be used to
describe the adequacy and
appropriateness of a LTC facility’s
medication management program?
++ Describe the incentives and other
arrangements that create the conflict of
interest in LTC that contributes to
overutilization and inappropriate drug
use in LTC facilities. How can the
conflict of interest stemming from these
incentives and arrangements be
contained or eliminated?
C. Excluding Poor Performers
We are finalizing three proposals
designed to strengthen our ability to
remove poor performers from
participation in the Part C and D
Medicare programs. Beneficiaries will
be protected through the first provision,
which enables CMS to terminate or nonrenew any health care prepayment plan
(HCPP) which does not adhere to
specified financial, reporting, and
access requirements.
The next two regulatory changes we
are finalizing give entities that want to
administer benefits to Medicare
beneficiaries strong incentives 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 4 for details of these
proposals. Specifically, we are finalizing
a regulation which will provide CMS
the authority to terminate MA
organizations and Part D sponsors that
have failed to achieve, over a period of
3 years, at least a 3-star plan rating. This
authority will enable us to utilize the
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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 are also finalizing a regulation
that provides CMS the authority to deny
applications submitted by MA
organizations and Part D sponsors that
have performed so poorly that CMS has
terminated or non-renewed a contract
with the organization in the past. We
anticipate that this regulation will
directly enable us to protect
beneficiaries from poor care.
TABLE 4—PROVISIONS TO EXCLUDE POOR PERFORMERS
Part 417
Preamble
section
II.C.1 ........
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.
Denial of Applications Submitted by Part C
and D Sponsors with a Past Contract Termination or CMS-Initiated Non-Renewal.
II.C.2 ........
II.C.3 ........
Subpart
1. CMS Termination of Health Care
Prepayment Plans (§ 417.801)
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Part 422
Part 423
Provision
Section 1833(a)(10)(A) of the Act
authorizes arrangements with HCPPs,
but specifies only what type of benefits
are to be provided (Part B), the method
of payment (reasonable cost), and limits
on cost-sharing (20 percent of
reasonable cost). In implementing
section 1833(a)(1)(A) of the Act, we
have in regulations set forth
requirements relating to these three
areas that parallel those imposed under
section 1876 cost contracts. In addition,
since section 1833(a)(1)(A) of the Act
does not address appeals, and the
appeals procedures in section 1869 of
the Act involve specific claims
payments that do not exist for HCPP
enrollees, 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 for specified
reasons, we proposed to codify
additional specified grounds for HCPP
termination in § 417.801(d) to
strengthen our oversight and
enforcement capabilities. 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
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Subpart U
Section
417.801
Subpart
N/A ...........
Frm 00038
N/A
Subpart
N/A ...........
Section
N/A
N/A ...........
N/A
Subpart K
422.504
422.510
Subpart K
423.505
423.509
N/A ...........
N/A
N/A ...........
422.502
Subpart K
423.503
in ownership. We proposed to retain
these bases for termination but to
modify § 417.801(d)(ii) to include three
specific circumstances in which
‘‘substantial non-compliance,’’ that
relate to the CMS contract, applicable
CMS regulations, or applicable
provision of the Act may be found. As
we stated in the proposed rule, we
believe that specifying instances of
substantial non-compliance through
notice-and-comment rulemaking will
ensure that all HCPPs are aware that
their failure to comply with such
requirements may lead to termination of
their contracts.
First, in their agreements with us,
HCPPs agree to provide adequate access
to providers and to document such
access. Accordingly, we proposed that
failure to provide adequate access to
providers, and provide CMS with
documentation of such access, is a basis
for determining that an HCPP is not in
substantial compliance with applicable
regulatory requirements. We proposed
to expressly identify this violation as an
adequate justification for termination or
non-renewal in a 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
stated in the proposed rule that we
would specify, in new paragraph
(d)(1)(ii)(B), that failure to provide such
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data and/or to maintain records
appropriately is another violation
indicating 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
proposed that a new paragraph at
(d)(1)(ii)(C) would specify that failure to
report costs to CMS will constitute yet
another basis for determining that an
HCPP is not in substantial compliance.
Comment: A commenter supported
the provision as specified in our
proposed rule.
Response: We thank the commenter
for their support.
After consideration of the public
comment received, we are finalizing the
policy without modification. We would
also clarify that this new list is not
exhaustive and CMS may still make a
determination that a HCPP is not in
substantial compliance absent the
existence of any of these individual
violations.
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
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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
PDP sponsors, member satisfaction, 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 MA organization 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 MA
organization or Part D sponsor, an
organization remains obligated to
maintain satisfactory administrative and
management arrangements, a point we
proposed to clarify by adding
paragraphs § 422.504(a)(17) and
§ 423.505(b)(25) to the list of required
elements in CMS’ contracts with MA
organizations 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 proposed
adding paragraphs § 422.504(a)(18) and
§ 423.505(b)(26) to require an
organization to demonstrate that it
maintains satisfactory administrative
and management arrangements by
achieving a summary plan rating of at
least 3 stars each year.
We also proposed 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
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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 MA organization 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 at least an ‘‘average’’ 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
MA organization 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 MA organization or Part
D 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 proposed 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 MA organization
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 D to calculate the
Part D summary rating. (The Part C and
D technical notes may be found on the
CMS Web site at https://www.cms.gov/
PrescriptionDrugCovGenIn/
06_PerformanceData.asp.)
Organizations that offer both Part C and
Part D benefits receive an overall rating
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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 proposed to establish as
a requirement that organizations must
achieve a summary plan rating of at
least three stars for each of Part C and
Part D each year by adding paragraphs
§ 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 thus giving CMS an
inaccurate picture of the effectiveness of
a sponsor’s administrative and
management arrangements.
The star ratings may also be used as
a basis for contract enforcement actions
(for example, termination/non-renewal
or intermediate sanctions). We have the
authority under section 1857(c)(2) of the
Act to terminate CMS’ contract with an
MA organization 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 ‘‘average’’ or
better quality services to their members.
Accordingly, we proposed to amend
the bases upon which CMS may
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terminate an MA organization or Part D
sponsor contract under § 422.510(a) and
§ 423.509(a) to include a sponsor’s
failure to achieve at least a 3-star
summary plan performance rating for 3
consecutive contract years. We believe
that 3 years is sufficient time for a
sponsor 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 plan
ratings issued in September 2010
(referred to as the CY 2011 plan ratings)
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 CY 2011 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
MA organizations 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 MA
organizations provided screenings to
their members for conditions such as
breast cancer, colorectal cancer,
elevated cholesterol, glaucoma, and
osteoporosis, as well as 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 MA organizations have known over
that same timeframe that we would rate
them on quality improvement projects
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designed to address the identified
conditions and that they should take
action to improve their scores for this
measure. Moreover, we have clearly
fulfilled our obligation under
§ 422.152(a)(2) to identify areas that MA
organizations need to address for this
purpose by annually publishing the
methodology, providing private
previews for MA organizations to
review their own results, and releasing
the results publicly through the CMS
Web site. As a result, an MA
organization’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 MA
organizations 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 MA organizations 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 MA
organization’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 MA organization affords its members
their coverage determination appeal
rights under the Part C program. The
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Part C regulations at Part 422, Subpart
M, require MA organizations to adhere
to standards and timeframes for issuing
timely and accurate determinations
concerning the coverage of health
services for their 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 MA
organization meets the regulatory
deadlines for issuing responses to
member appeals while the ‘‘Reviewing
Appeals Decisions’’ rating measures the
frequency with which the MA
organization determinations were
overturned by the Independent Review
Entity (IRE). The analysis for these
measures was conducted by Maximus,
Inc., with 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 MA
organization’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 MA organization’s
operations. The CAP measure reflects
the number and type of findings made
by us during an audit of an MA
organization’s performance. Thus, these
two measures provide a snapshot of the
MA organization’s compliance with a
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 MA
organizations 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 MA
organization 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 CY 2011 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
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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 and 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
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
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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
of its 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, pursuant to
§ 423.505(f)(2), 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 assign
stars for measures based on evaluating
the maximum score possible for that
measure, and testing initial percentile
star thresholds with the actual data. The
contract-level scores are grouped using
statistical techniques to minimize the
distance between scores within a
grouping (or ‘‘cluster’’) and maximize
the distance between scores in different
groupings. Most databases that are
utilized are not normally distributed,
requiring further adjustments to the star
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22111
thresholds to account for gaps in the
data. CMS does not force the Plan
Ratings data into 5-star categories for
every measure. For some measures,
based on the distribution of the data,
there may only be 3. 4, or 5 stars, while
for other measures there may only be 1,
2, or 3 stars. 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
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 MA organizations 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 proposed 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. The issuance of the 2015
ratings, expected in September 2014,
will present the first opportunity for
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sponsors to have accumulated three
consecutive years of low plan ratings
that could subject them to contract
termination. We invited 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.
Comment: Several commenters
expressed opposition to the proposed
addition of the failure to achieve 3 stars
for 3 consecutive years to the list of
bases upon which CMS may terminate
an MA organization or PDP sponsor
contract. They maintain that the plan
rating system is not sufficiently mature
or stable to provide a reliable basis for
determining that an organization has
substantially failed to comply with its
contract. The commenters maintain that
the number and type of measures have
changed each year that CMS has
released plan ratings. These annual
changes undermine the proposed
termination authority in two ways. First,
the variable measures and weighting
over a 3-year period mean that CMS
cannot fairly evaluate a sponsor’s plan
rating performance over 3 years because
it has not applied a consistent standard
of review during that period. Second,
low-rated sponsors’ efforts to take
corrective action to raise their ratings
over 3 years are impeded by CMS’
annual changes to its methodology for
calculating those ratings.
Response: The Medicare plan rating
system and its component measures
have been in place for a sufficient
period of time for plan sponsors to
become familiar with the correlation
between their operations and the plan
ratings they have achieved. MA
organizations have been measured on a
star system since 2008 and Part D plans
since 2007. In addition, the vast
majority of measures, which come from
HEDIS and CAHPS, have been required
of MA organizations since the late
1990s.
While we have made some changes in
each of the past 3 years to the plan
rating methodologies, these changes
have been relatively minor and have not
affected sponsors’ ability to achieve and
maintain at least a 3-star summary
rating over a 3-year period. This history
suggests that organizations have had
ample time to adjust their efforts toward
achieving higher quality outcomes. For
the 2010 Part C ratings through the 2012
ratings, 30 of the measures remained
constant, while the 2010 ratings
featured a total of 33 measures, 37 in
2011, and 36 in 2012. For the Part D
ratings during the same period, 13
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measures remained constant, out of 19
total in 2010 and 2011 and 17 total for
2012. We have also made low-rated
sponsors aware, through the issuance of
compliance notices beginning in 2010,
of the risk their low plan ratings pose to
their status as Medicare Part C and D
sponsoring organizations and the urgent
need for them to take corrective action.
Comment: Several commenters
expressed their strong support for the
proposed provision. They also suggested
ways to strengthen the termination
authority by making it effective
immediately upon publication of the
final rule rather than after the release of
the CY 2015 plan ratings in late 2014 as
we had proposed. They also
recommended that any reinstatement of
a sponsor’s contract be accompanied by
a probationary period during which the
sponsor’s contract could be terminated
if it fails in one year to achieve a 3-star
rating. The commenters also urged CMS
to apply our existing sanction and
termination authority against low-rated
plans, improve outreach to beneficiaries
about the meaning and usefulness of the
plan rating system to encourage their
participation in HEDIS and CAHPS
surveys, and to conduct ongoing
evaluations of performance measures to
make sure they truly drive improvement
in areas important to beneficiaries.
Response: We appreciate the
expressions of support for our proposal.
We also appreciate the advocates’
recommendation that we strengthen the
termination authority, but we believe
that our draft provision allows for a
reasonable transition period during
which sponsors can take steps, in light
of the increased consequences of low
plan ratings (that is, contract
termination), to focus their attention
and resources on quality improvement.
Of course, as we have stated in recent
call letters, during the transition period
(that is, from the date on which this rule
becomes final until CMS’ publication of
the CY 2015 plan ratings in late 2014)
we will continue to apply a heightened
scrutiny to consistently low rated
contracts to determine whether they are
substantially failing to meet Part C or D
program requirements.
We appreciate the concern expressed
by the commenters that sponsors that reenter the Part C and D programs after a
termination for consistently low plan
ratings not be permitted to ‘‘game’’ the
system by immediately repeating their
previous poor level of performance. We
believe, however, that our proposal
already provides a sufficient safeguard
against that type of conduct without
requiring re-entering sponsors to operate
under a probationary period during
which even one year of poor
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performance would be a sufficient basis
for termination. In section II.C.3. of the
proposed rule, we stated our intent to
adopt the regulatory authority to
disapprove an application for
qualification as a Part C or D contract
submitted by an organization for which
CMS had terminated a Medicare
contract within the previous 3 years.
This authority, which we finalize in this
rule, will apply to all terminated
sponsors, including those terminated
based on consistently low plan ratings.
We believe the 3-year period of
ineligibility for Part C or D program
participation, combined with the
forfeiture of their entire set of plan
members, is sufficient to provide an
incentive for returning sponsors to
achieve 3-star ratings upon their return
to the Medicare program. We also note
that consistently low plan ratings will
not become the exclusive basis for
contract termination. We retain the
authority to terminate a sponsor based
on its performance within only one year
if its performance during that period
fails substantially to meet Medicare
requirements, and we will exercise that
authority where justified.
The comments concerning outreach to
beneficiaries discussing participation in
the survey tools whose results are used
to calculate plan ratings are outside the
scope of this proposal. We believe this
is also true of the comments concerning
the need for CMS to continue to review
plan rating measures to make certain
they truly evaluate plan quality. We
nonetheless agree that these efforts will
receive our continued attention.
Comment: Several commenters
suggested that Congress did not intend
for the plan ratings to be used as a basis
for contract termination. One
commenter also stated that the plan
rating system was not designed to
measure compliance, and it is more
effective as a plan comparison and
beneficiary education tool.
Response: While the plan ratings were
originally developed by CMS as a
beneficiary comparison tool, and
Congress has authorized the awarding of
bonus payments based on plan rating
performance, those facts do not
preclude the use of plan ratings as an
indicator of contract compliance. To the
extent that the ratings provide reliable
evidence of compliance with program
requirements, they may be used as a
basis for contract termination. Our
preamble discussion in the proposed
rule and this final rule with comment
period describes the connections
between each plan measure and a Part
C or D requirement, noting that the
measures are an effective tool for
capturing information on the
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effectiveness of a sponsor’s
administrative and management
arrangements as opposed to whether the
arrangements are merely in place. Thus,
a sponsor’s failure to meet minimal
performance thresholds for 3 straight
years can reasonably be said to be
evidence of substantial failure to meet
contract requirements.
Comment: A stand-alone PDP sponsor
commented that Part D sponsors are not
required by statute to ensure their
members’ compliance with oral
diabetes, hypertension, and cholesterol
medication regimens. The commenter
also noted that CMS announced the
measures related to drug regimen
compliance too late in the year for
sponsors to focus their efforts on the
new measures. Finally, the commenter
stated that PDP sponsors are at a
disadvantage in these measures because
they do not coordinate care with
prescribers as health plans can.
Response: All Part D sponsors are
required to administer medication
therapy management programs, which
may be focused on beneficiaries with
diabetes, hypertension, or high
cholesterol. We agree that sponsors
would have benefitted from an earlier
announcement of the new measures, but
we believe that the 3-year phase in of
the plan rating-based termination
authority will give PDP sponsors
sufficient time to make improvements to
their performance in these areas. Also,
according to our plan rating
methodology, a high score on these
three measures is not critical to
achieving a 3-star summary plan rating.
Therefore, these measures do not
impose a meaningful obstacle for PDP
sponsors to maintain the required
minimum plan rating.
Comment: A law firm that represents
clients in Medicare-related matters
commented that CMS does not have the
authority to impose a conclusive
presumption of a basis for contract
termination when doing so eliminates
the affected sponsor’s opportunity for a
hearing prior to the termination taking
effect. The commenter also asserted that
the use of plan ratings as a basis for
termination would relieve CMS of its
statutory obligation to prove that the
sponsor’s conduct has met the statutory
criteria for contract termination and
presented a regulatory construct
analogous to that struck down by the
U.S. Supreme Court in Ragsdale v.
Wolverine World Wide, Inc., 535 U.S. 81
(2002). Finally, the commenter stated
that the proposed termination authority
violates the requirements of the per se
rule as discussed by the Court in
Johnson v. California, 543 U.S. 499
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(2005) and Arizona v. Maricopa County
Medical Society, 457 U.S. 332 (1982).
Response: The new termination
authority as finalized in this rule has no
impact on the administrative appeal
rights currently afforded any plan
sponsor under Subpart N of 42 CFR
Parts 422 and 423.
We do not find the Supreme Court
opinions cited by the commenter to be
applicable in any way to our proposal.
In Ragsdale, the Court held that the
Department of Labor could not enforce
regulations that had the effect of
eliminating one of the elements that an
individual must prove when appealing
a denial of leave from work requested
under the Family and Medical Leave
Act. Our use of low plan ratings as a
basis for contract termination does not
relieve us of our obligation to prove at
least one of the three statutory bases for
termination. Rather, the plan ratings are
a tool that we will use to establish,
consistent with the Part C and D
statutes, that a sponsor has substantially
failed to meet the requirements of its
Part C or D contract. As noted
previously and in the proposed rule, the
data used to calculate the plan ratings
are derived directly from a sponsor’s
performance of its Medicare program
obligations.
The Johnson and Arizona opinions
are similarly inapplicable to the
proposed termination authority. The
Johnson matter was a civil rights case
involving the California Department of
Corrections’ (CDC) policy of segregating
inmates by race. The Court there held
that the lower courts should use strict
scrutiny in reviewing whether the CDC
policy violated prisoners’ rights under
the Equal Protection Clause of the 14th
Amendment. The majority opinion of
the Court makes no reference to a per se
rule or to any set of criteria governing
its use. The opinion involves an
analysis of the law as it applies
uniquely to allegations of racial
discrimination and cannot be said to
provide any framework for the analysis
of the contract termination process in
the Medicare program. Arizona is an
antitrust case where the Court’s majority
opinion provides a discussion of the
meaning of the per se rule as it applies
to price fixing agreements (that is,
certain practices are deemed to violate
antitrust law without regard to
surrounding circumstance or intent).
The opinion provides no principles for
assessing the legality of per se rules in
general, nor does it state that the
legitimacy of a per se rule is dependent
on the maintenance of the exact same
evaluation standards from year to year,
as the commenter maintains.
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Comment: Several commenters noted
that plan ratings rely too much on
beneficiary survey information to be
used as an indicator of contract
compliance because the results of the
surveys may reflect factors other than a
sponsor’s non-compliance with program
requirements (for example, high
beneficiary complaints based on CMSapproved changes to plan benefit
packages).
Response: In certain instances,
beneficiary satisfaction is the most
effective measure of an organization’s
contract performance. That effectiveness
outweighs the risk of the measure’s
inaccuracy as a compliance measure
presented by those rare instances when
beneficiary dissatisfaction may result
from factors outside the organization’s
control. Moreover, only a small portion
of the Part C and D measures are
focused on beneficiary satisfaction. In
2012, 5 of 36 total Part C measures, and
3 of 17 Part D measures, were based on
beneficiaries’ satisfaction with their
plans. Therefore, low beneficiary
satisfaction scores, while meaningful,
will not by themselves cause an
organization to receive a low summary
plan rating.
Comment: Several commenters stated
that plan ratings are an unreliable tool
for measuring contract compliance
because the stars are calculated based
on relative performance among all Part
C and D contracts. Therefore, every year,
some sponsors will be rated below 3
stars regardless of the actual quality of
their performance.
Response: The majority of plan rating
measures are based on fixed 4-star
thresholds, or 3-star thresholds for
measures when an absolute regulatory
standard has been established. For CY
2012, 28 of 36 Part C measures, and 9
of the 17 Part D measures, had fixed 3or 4-star thresholds. Having a set
threshold means that any entity meeting
the established threshold will receive at
least a 3 or 4 star rating for the measure.
We determine the star cut points below
4-star (or 3-star) ratings in those
measures with fixed thresholds as well
as the entire range of ratings for the
remaining measures through the use of
statistical techniques that take into
consideration the relative distribution of
the data as well as the how the data
clusters. For survey measures,
significance testing is also used to
determine the star ratings. Given the
fixed thresholds for the majority of the
measures, there is nothing in the Plan
Ratings methodology that would
prevent all sponsors achieving 4 or more
stars on measures that have fixed 4-star
thresholds or achieving 3 stars for
measures when an absolute regulatory
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standard has been set. Additionally,
while some of the cut points for the
individual measures may be determined
by examining the distribution of
collected data, for the most part, those
data sets are not normally distributed,
where some number of contracts would
have to be assigned 1- or 2-star ratings.
Indeed, in any given year, it is possible
for all Part C and D sponsors to achieve
at least three-star summary ratings
under the scoring methodology.
Furthermore, a review of the summary
plan ratings over the past 3 years would
reveal that there are very few 1-star
contracts and that a 3-star rating or
better was achieved by a strong majority
of contracts.
Comment: Several commenters stated
that the annual plan ratings are a flawed
mechanism for determining contract
compliance because the measures used
to calculate the ratings are based on data
from different timeframes. That is, the
measures do not provide a consistent
‘‘snapshot’’ of performance over a
uniform evaluation period.
Response: We use the most recent
data available to calculate the summary
plan ratings each year, and a broad
range of measures are necessary to
provide a comprehensive picture of a
sponsor’s performance. In fact, the
majority of plan ratings posted in
October of a given year reflect findings
from the most recent completed contract
year (that is, there is a gap of only about
9 months between completion of a
measure and the posting of the star
rating). However, for some performance
measures there is necessarily some
greater lag time between data collection
and analysis. The 3 consecutive year
requirement should afford sponsors
sufficient time to make operational
changes that would be reflected in data
used to calculate plan ratings by the end
of the 3-year period.
We also note that in August 2010, the
CMS Hearing Officer issued an opinion
in favor of an organization that appealed
CMS’ denial of its contract qualification
application based on a review of the
organization’s contract performance
(including its plan ratings) during the 14
months preceding the application
submission date. (In the Matter of
United Healthcare Insurance Company,
Docket No. 2011 C/D App 1–10.) Among
its arguments, the organization asserted
that CMS should not include plan
ratings as a factor in assessing past
contract performance because the
ratings were based on conduct that
occurred prior to the 14-month lookback period. The Hearing Officer
addressed this argument in a footnote to
the opinion where he stated that,
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* * * in future similar circumstances
* * * CMS could reasonably consider an
organization out of compliance for failure to
meet established performance metrics, even
if a portion of the data used to evaluate
compliance is technically derived from
instances outside the 14 month window.
Comment: Several commenters stated
that CMS should provide advanced
notice of each year’s plan rating
measures so that plan sponsors can
develop and implement operational
policies that will allow the sponsor to
successfully meet the performance
standards of each measure. A
commenter noted that CMS released the
measures for the CY 2012 plan ratings
in late 2011, just prior to posting the
results of the CY 2012 ratings.
Response: We have already informed
sponsors that we will release the plan
rating measures at the start of each
calendar year. For example, on
December 20, 2011, CMS issued,
through the Health Plan Management
System (HPMS), a request to drug and
health plan sponsors for comments on
our proposed measures for the CY 2013
plan ratings. In the memorandum we
stated that we expected to publish the
final set of CY 2013 measures in April
2012 along with a discussion of
proposed measures for the CY 2014
ratings.
Comment: A number of commenters
noted that CMS should take into
consideration the characteristics (for
example, income, age, health) of each
sponsor’s enrollees when assessing
performance. For example, CMS should
develop measures specifically tailored
to account for the unique populations
served by SNP plans.
Response: We have frequently
considered the adoption of modifying
the plan rating standards to account for
unique differences in the characteristics
of certain plan membership profiles.
However, we have not yet found any
statistical support for the special
treatment of certain plans under the
plan rating methodology.
The 2011 Part C and D plan rating
results, for example, provide no support
for the argument that MA organizations
offering SNPs face special challenges in
achieving good star ratings. The plan
rating results for all Part D contracts,
when broken down into three categories
by percentage of SNP enrollment per
contract (SNP enrollment less than 50
percent, SNP enrollment greater than 50
percent, and SNP enrollment 100
percent of total contract enrollment)
show that approximately 15 percent to
18 percent in each category receive less
than 3 stars. The Part C results are
slightly more mixed but still show that
contracts with SNP enrollment receiving
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less than 3 stars are decidedly in the
minority relative to their peers. Among
the same enrollment percentage
categories described for Part D, the
percentage of Part C contracts with low
star ratings ranged from approximately
15 percent to 29 percent. Interestingly,
the rate of less than 3 star performers
drops when SNP enrollment increases
from 50 percent or more to exactly 100
percent. That is, contracts with only
SNP members tend to have strong
performance, equal to contracts with
fewer than 50 percent SNP members.1
Therefore, we can easily conclude based
on these data that having SNP members
in a contract does not pull down
summary plan rating results for either
the Part C or Part D ratings.
Comment: A few commenters noted
that the regulation should exempt from
termination those sponsors that are
showing improvement but have not yet
reached 3 stars in the third year.
Response: Such an interpretation is
unworkable as sponsors could avoid
termination for as long they can
demonstrate improvement without
meeting the 3-star standard.
Comment: A commenter stated that
CMS should provide midyear reports to
sponsors of their progress on plan
ratings.
Response: The data collection for
several of the measures are only once a
year, so it is not possible to make
midyear assessments of a sponsor’s plan
rating performance. Sponsors should
consider the plan ratings CMS issues
each year to be interim reports during
the 3-year period preceding possible
contract termination.
Comment: A commenter stated that
CMS should release plan ratings before
bids are due so that sponsors about to
be terminated do not expend resources
on preparation for upcoming plan year.
Response: We cannot adjust our plan
rating analysis and publication schedule
solely to accommodate sponsors with
two consecutive years of low ratings.
Those organizations should review their
operations and make their own
assessment of the likelihood of
achieving a rating of at least 3 stars after
the submission of a contract
qualification application.
Comment: A few commenters
supported this provision, but also
expressed their concern that its
application will reduce the availability
of low premium plans which are often
low-rated. The commenters also
referenced a study by Avalere Health
1 CMS conducted this analysis based on plan
enrollment data available at https://www.cms.gov/
PrescriptionDrugCovGenIn/06_Performance
Data.asp and plan rating data available at https://
www.cms.gov/MCRAdvPartDEnrolData/.
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(released on October 19, 2011; https://
www.avalerehealth.net/wm/show.php?
c=&id=890) that found that 52 percent
of the stand-alone PDPs eligible for LIS
auto assignment and reassignment have
a 2 or 2.5-star rating during 2012. None
of those plans has a 5-star rating and 16
have a 4-star rating.
Response: We have analyzed the 2012
contracts rated below 3 stars and found
no correlation between low rated plans
and low premiums. However, to the
extent that the Avalere study suggests
that Part D plans to which LIS
beneficiaries are assigned tend to
achieve disproportionately lower
ratings, we believe that the threat of
termination provides the correct
incentive to these plan sponsors. That
is, we can force sponsors that might
otherwise ignore their plan ratings,
content to compete solely on price or
operate in Medicare markets with little
or no competition, to dedicate the
resources and attention necessary to
provide at least a satisfactory level of
services to their members. For LIS plans
in particular, this new authority makes
it clear that focusing solely on bidding
below the annual benchmark to keep
LIS enrollment high is no longer a
viable long-term Part D business
strategy.
Comment: A commenter stated that
CMS should add a measure based on
how often the sponsor makes exceptions
and appeals determinations in favor of
the beneficiary.
Response: The plan ratings already
include measures, based on sponsors’
IRE results, of how often the IRE agrees
with a sponsor’s decision to deny a
claim. We believe this measure is
effective in achieving the same goal
suggested by the comment; measuring
the extent to which the plan sponsor is
making correct decisions about its
members’ Part D drug coverage.
Comment: A commenter stated that
CMS should assign dual-eligible
beneficiaries only to plans rated at more
than 3 stars.
Response: This comment concerns
CMS’ process for automatically
assigning and reassigning dual-eligible
beneficiaries to stand-alone PDPs with
premiums set at or below the regional
benchmark. It does not concern the use
of the establishment of the plan ratings
as a contract requirement or as a basis
for contract termination and therefore is
outside the scope of the proposed
regulatory change.
Comment: A commenter stated that
CMS should provide information on
how it monitors 4Rx data and LIS status
for beneficiaries.
Response: We have provided and will
continue to provide this information to
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sponsors through the Health Plan
Management System (HPMS) related to
our monitoring of 4Rx data and LIS
status accuracy.
Comment: A commenter stated that it
supports the inclusion of measures
related to enrollment, LIS, and MTM.
Response: This comment is a
recommendation for the inclusion of
certain measures in the Part D plan
rating methodology. As it does not have
a bearing on the use of the current plan
ratings as administrative and
management requirements under the
Part C and D programs or as a basis for
contract termination, the comment is
outside the scope of the proposed
regulatory change.
After consideration of the public
comments received, we are finalizing
the policy without modification.
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
denial of their applications if they fail
to comply with the requirements of the
Part C or D programs during the
preceding 14 months, even if the
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.
We proposed to further refine our
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
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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
assessing past performance to 14
months. 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 proposed 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
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selection of 38 months accounts for a
3-year 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 proposed 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
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 us in prohibiting and preventing
each such organization from
manipulating 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 with the previous non-renewing
organization. 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 manipulation by
organizations whose contracts have
been terminated or non-renewed by
CMS, we proposed 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 nonrenewing 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 non-renewed contract. As
with the voluntary non-renewal
provisions, in this instance ‘‘covered
person’’ would mean one of the
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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
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.
Comment: Some commenters
recommended that CMS delete the
proposed language authorizing CMS to
deny applications from entities whose
covered persons had also served as
covered persons for a contract
terminated or non-renewed in the prior
3 years. Commenters stated that the
provision is overly broad and may
unfairly cover individuals who, for
example, join the board shortly before
CMS terminates or nonrenews a
contract.
Response: We appreciate commenters’
concerns. However, it is incumbent on
prospective directors and shareholders
to conduct proper due diligence
concerning a sponsor’s Part C and D
compliance history prior to accepting a
board appointment or purchasing a
substantial number of shares of stock.
Also, as discussed in the preamble to
the proposed rule, the ‘‘covered person’’
definition was adopted previously
under the two-year ban that follows a
contract’s voluntary non-renewal. It is
important to apply the same standard to
CMS-initiated terminations and nonrenewals in order to maintain
consistency and prevent entities from
manipulating the Part C and D contract
application process.
Comment: Many commenters
expressed general support for the
proposed language, including the
language related to ‘‘covered persons’’.
However, several expressed concern
that the 3-year look back period is too
short. They suggested a 10-year look
back period instead.
Response: We appreciate the
commenters’ support. However, we
believe that extending the look back
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period to 10 years would be unduly
punitive, as that would effectively
exclude a terminated or non-renewed
sponsor from the Part C or D programs
for 10 years. Our intent in adopting this
provision was in part to remedy the
disparity in consequences between
sponsor-initiated non-renewals and
CMS-initiated terminations or nonrenewals. As discussed in the proposed
rule, we believe that the 3-year ban on
Part C or D program participation
created by the 38-month past
performance look-back period meets
that goal by imposing some
administrative penalty where none
existed for operating a Medicare
contract so poorly. It also makes certain
that the penalty was greater than that
associated with voluntary non-renewal.
Three years is also a reasonable period
of time during which a terminated or
non-renewed sponsor could make
improvements to its organization in
preparation for providing quality
services should it elect to re-enter the
Part C and D markets. We believe that
a 10-year exclusion period goes well
beyond what is necessary to achieve our
policy goals and could be viewed as
excessively harsh by health and drug
plan sponsors and the communities they
serve.
Comment: Several commenters
remarked that the 14-month look back
period for past performance analysis
was too short.
Response: The 14-month look back
period for the past performance analysis
of all Part C and D contract applicants
was established through previous
rulemaking. As the regulatory change
described here concerns a modification
to the length of the look back period
only for applicants with previous CMSterminated contracts, comments
concerning all other types of applicants
are outside the scope of the proposed
rule.
Comment: A few commenters
expressed concern that entities would
attempt to get around the 3-year look
back period for contracts terminated or
non-renewed by CMS by voluntarily
non-renewing their contracts before
CMS terminates them.
Response: We appreciate commenters’
concerns. We will be mindful of
organizations attempting to avoid the
consequences of the new provision by
voluntarily non-renewing. However, we
believe that this type of manipulation is
unlikely because voluntary non-renewal
already carries with it a 2-year ban.
After consideration of the public
comments received, we are finalizing
these provisions as proposed.
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D. Improving Program Efficiencies
We believe that finalizing the
regulations discussed in this section
will reduce regulatory burdens for MA
organizations, Part D sponsors, and cost
contractors; lower transaction costs; and
reduce waste and unnecessary
spending—all of which will, in turn,
help keep costs down and improve the
quality of care received by Medicare
beneficiaries. Non-renewing cost
contractors will also save money
because we are finalizing a rule that
eliminates the regulatory requirement to
purchase print advertising announcing
their non-renewals. We are also
finalizing more flexible rules regarding
agent/broker compensation, which
means MA organizations and Part D
sponsors will no longer be tied to
historic agent/broker compensation
amounts and may save transaction and
other costs. Finalized regulations that
enable daily cost-sharing of prescription
drugs will not only save money for the
Part D Program and those beneficiaries
who discover during their initial fills
that certain drugs do not work for them,
but will also result in fewer unwanted
drugs that create problems of disposal or
safekeeping.
The finalized proposals mentioned
previously and others are outlined in
Table 5.
TABLE 5—PROVISIONS TO IMPROVE PROGRAM EFFICIENCIES
Part 417
Preamble
section
II.D.1 ........
Cost Contract Plan Public Notification Requirements in Cases of Non-Renewal.
New Benefit Flexibility for Certain Dual Eligible Special Needs Plans (D–SNPs).
Clarifying Coverage of Durable Medical
Equipment.
Broker and Agent Requirements .....................
Establishment and Application of Daily CostSharing Rate as Part of Drug Utilization
Management and Fraud, Abuse and Waste
Control Program.
II.D.2 ........
II.D.4 ........
II.D.5 ........
II.D.6 ........
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Part 422
Part 423
Provision
Subpart
1. Cost Contract Plan Public Notification
Requirements in Cases of Non-Renewal
(§ 417.492)
Section 1876 of the Act provides 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 current
§ 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 proposed removing the current
requirements at § 417.492(a)(1)(iii) and
(b)(1)(iii) for non-renewing costcontracting 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
was 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
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Subpart L
Section
417.492
Subpart
N/A ...........
Section
N/A
N/A ...........
N/A
N/A
Subpart C
422.102
N/A ...........
N/A
N/A ...........
N/A
Subpart C
N/A ...........
N/A
N/A ...........
N/A ...........
N/A
N/A
Subpart V
N/A ...........
422.100
422.111
422.2274
N/A
2. New Benefit Flexibility for Certain
Dual Eligible Special Needs Plans (D–
SNPs) (§ 422.102)
Section 2602(c) of the Affordable Care
Act charged us with making Medicare
and Medicaid work together more
effectively to improve patient care and
lower costs. In our October 11, 2011
proposed rule (76 FR 63018), we
proposed to give certain SNPs
additional flexibility with respect to
plan design as a means of furthering this
Frm 00047
Subpart
N/A ...........
information is sufficient to ensure
adequate non-renewal notice.
Comment: A commenter wrote that
waiving the requirement for printing a
public non-renewal notice would have
virtually no cost savings to a plan.
Response: Although we do believe
there will be some savings associated
with not having to print a public notice,
we also believe that the provision will
reduce unnecessary burden on plans.
Comment: A commenter stated that
retaining the public notification
requirement could help ensure that
beneficiaries have more knowledge
about plan changes.
Response: Because plans are still
required to contact each enrollee when
non-renewing a plan for the upcoming
year, we believe that beneficiaries will
continue to have sufficient notification.
After consideration of the public
comments received, we are finalizing
the policy without modification.
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Subpart V
Subpart D
423.2274
423.100
423.104
423.153
goal of better integrating care for dual
eligible beneficiaries.
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 ‘‘mandatory supplemental
benefit’’ that is included in an MA plan
for every enrollee who joins the plan, as
opposed to optional supplemental
benefits which are offered to all
enrollees, but for which coverage is only
provided to enrollees who choose to pay
for the optional benefit. In our October
11, 2011 proposed rule, we proposed
providing certain fully integrated dual
eligible SNPs (FIDE–SNPs) with the
flexibility to offer additional
supplemental benefits because 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. In order to implement this
proposal, we proposed amending
§ 422.102 to add a new paragraph (e)
specifying that, subject to our approval,
and as specified annually by us, certain
fully integrated dual eligible SNPs (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 provided
under Medicare and Medicaid for the
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dual eligible population. All such
benefits would also have to otherwise be
consistent with the rules for
supplemental benefits under Part 422,
including § 422.2, § 422.100(c)(1), and
§ 422.102.
We proposed limiting the new
supplemental benefits flexibility offered
under this provision to FIDE SNPs
defined at § 422.2 that are currently
operational, operated in the previous
contract year, and meet certain CMS
criteria including, but not limited to,
being of high quality (as defined by
CMS in future guidance). We believed
that this approach would be most
consistent with the objective of keeping
beneficiaries at risk of
institutionalization in their homes and
preventing health status decline that
results in additional utilization of health
services, and lowering costs for the
Medicaid and Medicare programs. We
also proposed to further limit the
additional benefit flexibility under the
proposed rule to those qualified SNPs
that serve only full-benefit dual eligible
beneficiaries. We requested 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.
In our proposed rule, we also
requested comment on what specific
categories and types of supplemental
benefits we should consider for the
purposes of extending benefit flexibility
to qualified FIDE SNPs that would be
participating in this initiative, as well as
on the circumstances under which plans
should be permitted to offer these
additional supplemental benefits. We
also requested 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
additionally requested comment 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 dual eligible population.
No commenters opposed our overall
policy proposal to offer new
supplemental benefits flexibility to
certain SNPs. We also received no
comments on our planned approach to
further implement this policy through
guidance in our final Annual Call Letter
and in Chapter 4 of the Medicare
Managed Care Manual.
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Comment: In our proposed rule, we
requested comment on whether the
benefit flexibility under this provision
should be limited to FIDE SNPs, as
defined at 42 CFR 422.2, or whether we
should extend it to other SNP types.
Most of the comments that we received
on this issue recommended that we
extend this flexibility to all SNP types
so that SNPs could target additional
supplemental benefits to special needs
individuals enrolled in chronic SNPs
(C–SNPs) and institutional SNPs (I–
SNPs). Some commenters recommended
that we extend this benefit flexibility to
all dual eligible SNPs (D–SNPs) so that
a larger number of dual eligible
beneficiaries, including those dual
eligible beneficiaries residing in
geographic areas without an operational
FIDE SNP, could access additional
supplemental benefit offerings. A few
commenters supported our proposal to
limit this new supplemental benefit
flexibility to FIDE SNPs only, because
they believed that FIDE SNPs were best
positioned to deliver integrated services
that prevent enrollee
institutionalization.
Response: After considering the
comments we received, we are
finalizing our proposed provision with
modification to allow new supplemental
benefit flexibility for certain D–SNPs
that meet a high standard of integration
and minimum performance and quality
based standards, where CMS finds that
the offering of such benefits would
better integrate care for the dual eligible
population. We outline these
integration, contract design,
performance, and quality-based criteria
for a D–SNP that would meet this
standard in the final CY 2013 Annual
Call Letter. We plan to update these
criteria annually, as necessary. We
believe that expanding the new
supplemental benefit flexibility to a
larger pool of D–SNPs that meet certain
standards in accordance with State
policies is consistent with our goal of
better integrating care for dual-eligible
beneficiaries. By expanding this
supplemental benefit flexibility beyond
FIDE SNPs, more dual eligible
beneficiaries will have access to
additional supplemental benefits that
are designed to bridge the gap between
Medicare and Medicaid services. By
limiting this flexibility to qualified D–
SNPs—all of which must contract with
the State starting in 2013—rather than
allowing the flexibility for all SNP
types, we can better ensure that plans
will use this benefits flexibility to
increase integration and care
coordination.
Furthermore, we believe that, because
D–SNPs must adhere to the State
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contract requirements at § 422.107,
limiting this new benefit flexibility to
D–SNPs rather than extending it to all
SNP types (C–SNPs and I–SNPs) would
not provide an incentive to MA
organizations to create SNPs for the
purposes of qualifying for this new
benefit flexibility. Therefore, we are
finalizing our proposed rule with
modification to afford all D–SNP types
that meet a high standard of integration
and meet minimum performance and
quality-based standards the opportunity
to qualify for this new supplemental
benefit flexibility, even if they are not
FIDE SNPs. We are modifying our
regulations at § 422.102 to add a new
paragraph (e) specifying that, subject to
CMS approval, D–SNPs that meet a high
standard of integration and minimum
performance and quality-based
standards may offer additional
supplemental benefits beyond those
other MA plans may offer where CMS
finds that the offering of such benefits
would better integrate care for the dual
eligible population.
Comment: The majority of comments
we received on our supplemental
benefit flexibility proposal related to the
types and categories of supplemental
benefits that plans would be permitted
to offer under this flexibility. A large
number of commenters requested that
we include adult day care services as a
category of supplemental benefits that
plans would be permitted to offer under
this new supplemental benefit
flexibility. The commenters noted that
adult day care services are not covered
by either Medicare or Medicaid in most
states. They further noted that many
plans that have experienced reduced
utilization of long-term care services
attribute this reduction to their
enrollees’ use of adult day care services.
Other commenters suggested that we
include assistive devices, nutritional
supplements, incontinence supplies,
and primary and secondary prevention
services as permissible types of
supplementary benefits under this
provision.
Response: We appreciate the
commenters’ suggestions. We believe
that the additional supplemental
benefits that will be available under this
provision may be appropriate to the
extent that they assist MedicareMedicaid beneficiaries with activities of
daily living, (ADLs), (for example,
eating, drinking, dressing, bathing,
grooming, toileting, transferring, and
mobility) and/or instrumental activities
of daily living, (IADLs), (for example,
managing a home, transportation,
grocery shopping, preparing food,
financial management, and medication
management). Additionally, we believe
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that the additional supplemental
benefits afforded under this provision
should be those benefits that bridge the
gap between Medicare and Medicaid
services and that have the potential to
decrease unnecessary utilization of
health care services by the dual eligible
population. We have considered
comments that we received in response
to our proposed rule according to the
standard we describe previously. We
outline supplemental benefit categories
that plans may offer under this
provision, as well as guidance on the
scope of these additional supplemental
benefits, in our final CY 2013 Annual
Call Letter. We also note that we will
provide qualified D–SNPs with
operational guidance on the bid
submission process in future guidance.
Comment: In the proposed rule, CMS
requested comment on whether it
should limit this benefit flexibility to D–
SNPs that only enroll dual eligible
beneficiaries with full Medicaid
benefits. A few commenters supported
the limitation to full-benefit dual
eligibles, noting that these individuals
would receive the most benefit from
additional supplemental benefits that
are designed to enhance Medicare and
Medicaid service integration. A
significant number of commenters felt
that limiting the additional
supplemental benefit flexibility to fullbenefit dual eligibles was needlessly
restrictive, and would not allow plans to
offer supplemental benefits designed to
prevent partial dual eligibles (that is,
dual eligible beneficiaries that do not
qualify for full Medicaid benefits) from
declining to full-benefit status.
Response: We agree with commenters’
statements that the additional
supplemental benefits that we will
allow D–SNPs to offer under this
provision could help prevent partial
dual eligible beneficiaries from
spending down to full dual status. We
also recognize the potential value of
supplemental benefits for dual eligibles
that cycle in and out of full Medicaid
eligibility during the year. We believe
that allowing plans to offer additional
supplemental benefits to partial duals
would further our goal of aligning
Medicare and Medicaid benefits to
prevent health status decline and
prevent unnecessary utilization of acute
and long term care services.
Consequently, as noted previously, we
are permitting certain, D–SNPs to offer
additional supplemental benefits even if
they are not FIDE SNPs.
Comment: In our proposed rule, we
requested comment on how our
proposal would impact costs for dual
eligible beneficiaries. All commenters
that commented on this issue
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recommended that we require SNPs that
offer new supplemental benefits under
this provision to provide these benefits
to dual eligible enrollees at zero costsharing and with no increase in
premium. Many commenters also
recommended that we prohibit plans
from creating new supplemental
benefits offerings that duplicate
Medicaid services because plans that
offer supplemental benefits that are
identical to Medicaid benefits could
modify their supplemental benefits in a
manner that would leave enrollees
liable for higher cost-sharing. These
commenters suggested that CMS require
SNPs to describe how the new Medicare
supplemental benefits and existing
Medicaid benefits will differ and work
together, as a condition of participating
in this new benefit flexibility initiative.
Response: We share commenters’
concerns that duplication of Medicaid
benefits in plans’ supplemental benefit
offerings has the potential to put dual
eligible beneficiaries at risk for higher
cost-sharing. We do not intend for the
new supplemental benefits offered
under this provision to duplicate or
supplant Medicaid benefits. In response
to such concerns and comments
received on the draft CY 2013 Call
Letter, our final CY 2013 Call Letter
requires qualifying D–SNPs, to attest, at
the time of bid submission, that the
additional supplemental benefit(s) that
the SNP describes in its plan benefit
package (PBP) do not inappropriately
duplicate an existing service(s) that
enrollees are eligible to receive under a
waiver, the State Medicaid plan,
Medicare Part A or B, or through the
local jurisdiction in which they reside.
Additionally, in order to evaluate how
D–SNPs are implementing this new
benefit flexibility, we indicate that we
will require D–SNPs that participate in
this new benefit flexibility initiative to
submit a mandatory quality
improvement project (QIP) under
§ 422.152(a)(2) on measures related to
the goals of this initiative, as
determined by CMS. Finally, in
response to the previous comments
urging that benefits offered under the
new benefit flexibility be made available
without cost sharing or additional
premium charges, we have added
language to § 422.102(e) requiring that
benefits be offered to the beneficiary at
no additional cost (that is, zero-cost
sharing and with no attributable
premium increase).
Comment: Several commenters
recommended that CMS establish a
means of assessing whether the new
supplemental benefits offered under this
provision lower costs, reduce
unnecessary utilization, and improve
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integration of Medicare and Medicaid
services.
Response: We agree with commenters’
recommendations. CMS will develop a
means for evaluating the effectiveness of
this new supplemental benefit
flexibility and will detail our evaluative
methodology in future guidance. We
will also provide qualified D–SNPs with
operational guidance at that time.
Comment: A commenter requested
clarification on the years that SNPs
must have a State contract in order to
qualify under the definition of
‘‘currently operational,’’ as discussed in
the CY 2012 Annual Call Letter and the
preamble to our proposed rule. Another
commenter suggested that we revise our
requirement that SNPs must have
operated in the previous contract year,
in order to allow new SNPs to qualify
for this new supplemental benefit
flexibility.
Response: We reject the commenter’s
suggestion that SNPs that have not
operated in the previous contract year
should qualify for this new
supplemental benefit flexibility. We are
maintaining our requirement that D–
SNPs must have operated in CY 2012
and be operating in CY 2013 in order to
qualify to participate in this
supplemental benefit flexibility
initiative because, without a record of
operation in the prior contract year,
CMS would be unable to determine
whether a D–SNP would meet the
minimum eligibility requirements (that
is, contract design, integration,
performance, and quality-based
requirements) for this new benefit
flexibility. We are updating our
regulations at § 422.102(e) to reflect the
prior year operation requirement.
Furthermore, we believe that D–SNPs
that have not operated for at least one
year would lack the experience
necessary to identify supplemental
benefits that would effectively serve the
specific needs of their dual eligible
enrollees. D–SNPs must have a State
contract in order to qualify to
participate in this initiative. In our final
2013 Annual Call Letter, we clarify
additional operational and contract
design requirements for D–SNPs
participating in this benefits flexibility
initiative. Unless otherwise stated, these
contract design requirements apply to
the specific SNP plan (that is, SNP plan
benefit package), and not the larger MA
contract.
Based on our review of the public
comments, we have modified our
proposal as discussed in the previous
responses and we have also modified
§ 422.102(e).
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3. Application of the Medicare HospitalAcquired Conditions and Present on
Admission Indicator Policy to MA
Organizations (§ 422.504)
In the October 11, 2011 proposed rule
(76 FR 63049 and 63050), we proposed
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 believed this
proposed change was appropriate in
order to bring MA requirements in line
with current HAC–POA policy in the
original Medicare program, as well as—
in the near future—to the Medicaid
program.
The HAC–POA policy aims to reduce
medical errors, improve quality of care
for beneficiaries, and reduce Medicare
expenditures for poor quality care. We
proposed to specifically apply the HAC–
POA policy in the MA program by
requiring MA organizations to include
appropriate payment provisions in their
contracts with hospital providers. We
believed this would be consistent with
the agency goal to further align the MA
and original Medicare programs and the
ACA requirements to expand the HAC–
POA policy further to Medicaid and
Medicare and to continue development
of value-based purchasing programs.
We proposed 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 solicited comments and
recommendations on what other issues
to consider in finalizing our proposal to
require a payment reduction where
payment would be reduced under the
current IPPS HAC–POA policy to MA
plans.
Comment: We received 17 comments
on the proposal. All commenters
expressed support for the goals of the
policy, that is, to ensure quality within
hospitals and reduce costs for
unnecessary or poor care. However,
reactions were mixed to the proposal to
implement this goal through the
contracting process.
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Several commenters representing
beneficiaries and health care
professionals expressed support for the
proposal and encouraged CMS to
continue efforts to more closely align
the MA program with original Medicare
and other public program initiatives
consistent with the National Quality
Strategy. A commenter discussed
specific HAC conditions and requested
that CMS remove healthcare-associated
infections from the existing HAC policy.
Several commenters representing the
MA industry supported the proposal,
stating that implementation would not
be burdensome and expressed their
belief that their organization’s existing
contract provisions would be sufficient
to implement the policy for CY 2013 as
proposed. A commenter requested
affirmation of the sufficiency of their
plan’s specific contract language. A
commenter also recommended that the
HAC–POA payment adjustment should
also apply to non-contract hospital
providers.
Response: We thank all commenters
for expressing their support and their
concerns and raising important
questions for CMS to consider. We agree
with commenters that reducing costs,
while striving for high-quality
healthcare for seniors is an important
goal of this agency and for the DHHS.
We appreciate the encouragement for
CMS to continue efforts to more closely
align the MA program with original
Medicare and other public program
initiatives consistent with the National
Quality Strategy. We also recognize that,
while many plans may already have
payment systems or contract provisions
in place that would accommodate
immediate application of this policy,
other payment models, and contractual
structures may not, and would have to
be amended to implement a reduction
in payment for occurrences of HAC.
With regard to the comment
requesting that CMS remove healthcareassociated infections from the existing
HAC policy, we note that this comment
is not within the scope of this rule.
Specific HAC conditions are considered
through public comment annually in the
IPPS rule.
With regard to the comment that the
HAC–POA policy should also apply to
non-contract providers, we indicated in
the October 11, 2011 proposed rule (76
FR 63049 and 63050), that the payment
reduction is already required for
payments to non-contract providers. MA
plans must pay non-contract acute care
hospital claims the same rate that they
would be paid under the IPPS, and this
includes adjustments for HACs and any
other IPPS payment adjustments. This is
specified in the MA Payment Guide for
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Out-of-Network Payments, available at:
https://www.cms.gov/
MedicareAdvtgSpecRateStats/
Downloads/oon-payments.pdf.
Comment: Some commenters
supported application of the policy with
extra time allowed to understand
requirements, modify contracts,
redesign payment approaches, and
incorporate POA reporting into claims
processing systems. Several commenters
requested that CMS set the deadline for
implementation at January 1, 2014.
Response: We appreciate the support
for the policy and fully recognize
concerns about the additional time that
would be needed in order to implement
the policy. However, we are also
cognizant of concerns expressed by
other commenters regarding the
operational implications of the policy,
given, for example, the varied payment
structures in place, and the need to
modify and execute new contracts. We
will need to fully understand such
implications before we are able to
establish a reasonable timeframe for
implementing the policy. Therefore, at
this time, we will not finalize the policy
as proposed with a definitive
implementation date. Instead, we intend
to further study the implications of
extending the HAC–POA policy to the
MA program and, potentially, consider
other ways to achieve the goals of the
policy.
Comment: Several commenters were
concerned about their ability to
reasonably apply these requirements to
non-DRG or fee schedule-based payment
approaches, such as capitated, per diem
or percentage-based models. They were
concerned about the burden of
‘‘dissecting’’ every claim in order to
calculate a payment and were
concerned that every claim payment
would be subject to negotiation with
hospitals. Similarly, a commenter urged
CMS to allow MA organizations
flexibility to implement the policy in a
way that would not require significant
additional resources.
A commenter stated that MA
organizations should not have to
negotiate with hospitals on
methodology, (that is, the methodology
should instead be industry standard).
Another commenter requested
clarification that this policy would only
apply to acute care inpatient hospitals.
A few commenters expressed concerns
with ensuring hospital compliance with
reporting of serious adverse events and
HACs.
Some commenters requested that
plans with capitated payment models be
exempt, stating that, under the capitated
payment structure, the risk has already
been placed on providers to reduce
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costly medical errors. A commenter
stated that this proposal would stifle
innovation of creative payment
arrangements that the private healthcare
industry uses to promote quality and
efficiency and could result in increased
costs for beneficiaries. A few
commenters claimed to have specific
recommendations for applying the
HAC–POA policy goals to these types of
payment structures, but did not provide
them in their comments.
Response: We appreciate the thorough
responses from commenters. As we
indicated in the proposed rule, we
recognize that there may be operational
challenges to implementing the HAC–
POA policy under varied payment
models, which is why we requested
specific suggestions and ideas to
consider in order to find the best
approach within the MA program to
reduce the occurrence of HAC
conditions and encourage efforts by
hospitals to increase quality of care. We
believe that exempting some MA
organizations based on their existing
payment structures with hospitals
would result in inconsistent application
of the policy and, consequently, failure
to advance the goal of reducing these
preventable medical errors. However,
we do recognize the operational
concerns expressed by the commenters.
Therefore, we believe that the most
prudent approach at this time is to
continue to study the implications of
extending the HAC–POA policy to the
MA program in order to determine how
best to incorporate the HAC–POA policy
and other quality initiatives into the MA
program.
Comment: With respect to the
proposal to add this policy as a
contractual requirement through
§ 422.504(i)(3), a commenter requested
greater transparency and full disclosure
to the public with respect to the types
of contractual flexibility that CMS
would allow. Other commenters were
concerned about CMS over-regulating
MA contracts, setting precedent for
regulating MA financial arrangements
and the burden of contract negotiations.
Several commenters stated that hospital
contracting is a multi-year process and
that opening the contract for one
provision would subject the entire
contract to renegotiation, potentially
resulting in increased costs to MA
organizations, enrollees, and CMS. A
commenter was concerned that smaller
MA organizations might be
disadvantaged in negotiating this
payment reduction with hospitals.
A few commenters recommended that
we revise the proposed rule to effectuate
the policy goals through NCDs or other
coverage requirements, rather than
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contracting/payment provisions. They
argued that this would allow MA
organizations to implement in a manner
that is most appropriate to their
provider networks without requiring
MA organizations to make changes to
their existing contracts, (for example
through manual provisions). A
commenter requested a model notice for
MA plans to issue to hospitals
describing the revised coverage policy
for HACs and POA indicator reporting.
Several other commenters requested
that CMS withdraw the proposal and
engage in a collaborative effort with MA
organizations to develop alternative
approaches to achieve the policy goal of
reducing HACs and securing higherquality hospital care for beneficiaries in
the MA program.
Response: We thank commenters who
offered alternative solutions and we
appreciate the comments expressing
concern about opening up potentially
lengthy and costly contract negotiations.
We also understand, based on
comments received, that some MA
organizations may already have
sufficient contract provisions in place to
implement the policy without further
negotiations. However, we agree with
commenters that the proposal requires
further consideration and discussion.
Therefore, after consideration of the
public comments received, we are not
finalizing the proposed policy at this
time. However, we will continue to
explore alternative approaches to
achieve a reduction in HACs, reduce
costs for unnecessary medical care and
ensure high-quality hospital care for
beneficiaries in the MA program.
4. Clarifying Coverage of Durable
Medical Equipment (§ 422.100 and
§ 422.111)
MA organizations and other
stakeholders have asked for our
guidance on whether MA organizations
can limit enrollees to specified durable
medical equipment (DME)
manufacturers and brands. Some MA
organizations have also asked us
whether they could offer lower costsharing for ‘‘preferred’’ DME products or
brands versus ‘‘non-preferred’’ DME
products or brands. 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 costsharing levels (that is, tiers) for DME
items, supplies, and Part B drugs,
provided that: (1) The highest costsharing tier is at or below the relevant
cost-sharing threshold established by
CMS for DME and Part B drugs; and (2)
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plans ensure access to all products
through the established 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 the DME brands, items
and supplies of specific (preferred)
manufacturers.
Since we understand that some MA
organizations are currently limiting
DME coverage to certain brands and
manufacturers, we believe it is
important to establish a regulatory
framework for the protection of
beneficiaries by ensuring appropriate
and adequate MA enrollee access to
DME brands, items, and supplies.
Additionally, we believe that MA plans
working with MA clinicians are
positioned to increase MA program
efficiencies by allowing plans to
negotiate bulk discounts for high-quality
items.
Accordingly, under our authority in
section 1856(b)(1) of the Act, to
establish MA standards by regulation,
and in section 1857(e) of the Act, to
specify additional contractual terms and
conditions the Secretary may find
necessary and appropriate, we proposed
the requirements discussed later in this
final rule with comment period,
followed by a discussion of any
applicable comments we received on
the proposal.
We received 43 comments in response
to our proposed requirements.
Commenters included MA organizations
and other industry representatives,
beneficiary advocacy groups, DME
manufacturers and representatives of
DME manufacturers, and certain
pharmacy groups. The majority of the
comments focused on our proposed
beneficiary protections. We have
provided a brief summary of each of the
proposed beneficiary protections to be
required of MA plans that elect to limit
provision of DME to specific brands and
manufacturers. Each proposed
beneficiary protection is followed by a
discussion of applicable comments on
that proposal, if any. Subsequent to this
discussion, we address several
additional comments associated with
more general issues related to the
proposed rule.
a. Access to Preferred DME Items and
Supplies
We proposed requiring that MA
organizations wishing to limit coverage
within a specific category of DME to
specific brands, items and supplies of
‘‘preferred’’ manufacturers take
necessary steps to ensure that enrollees
have access to all preferred
manufacturer items and brands through
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their contracts with their network of
DME suppliers. We reflected this change
in proposed § 422.100(l)(2)(i). We
received no comments on this proposal.
b. Medical Necessity Requirements for
DME Items and Supplies
In accordance with § 422.112(a)(6)(ii)
of the MA program regulations, MA
organizations must have established
policies and procedures that allow for
individual medical necessity
determinations if there is a question
about whether a service or item,
considered medically necessary by an
enrollee’s provider, 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). Therefore, we
proposed requiring MA organizations—
to the extent that they elect to limit
coverage of DME brands, items and
supplies to preferred manufacturers—to
provide coverage of any DME brands,
items and supply deemed medically
necessary, including DME brands,
items, and supplies made by nonpreferred manufacturers. We reflected
this change in proposed
§ 422.100(l)(2)(ii).
Comment: Several commenters were
concerned about the burden of the
medical necessity process for enrollees
and their providers. A commenter
pointed to our mention of
§ 422.112(a)(6)(ii) and § 422.562(a)(4)
which requires MA organizations to
have a medical director and established
policies and procedures that allow for
individual medical necessity
determinations at the MA organizational
level. These citations suggested that a
formal petition from the plan is required
for medical necessity. Several
commenters explicitly asked that the
enrollee’s provider have the right to
determine medical necessity. Several
commenters requested clarification on
the specific process for a medicalnecessity determination; for example,
whether the enrollee petitions the plan
for a non-preferred brand and, if so,
within what timeframe response can be
expected.
Response: We wish to clarify that the
medical necessity process concerning
brand/manufacturer of DME items is the
same as that for any health care service
offered by a plan. As we stated in the
proposed rule, we are not adding an
exceptions process for DME similar to
the Part D formulary exceptions process.
While medical necessity requests are the
same for DME as any other health care
service offered by a plan (that is, they
must follow the requirements for
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medical necessity at § 422.112(a)(6)(ii),
§ 422.562(a)(4) and, more generally, the
requirements for organizational
determinations at § 422.566), we do
want to clarify that medical-necessity
status may be initiated by the enrollee’s
provider if the provider believes that a
particular brand of DME is medically
necessary. Our purpose in citing
§ 422.112(a)(6)(ii) and § 422.562(a)(4)
was to clarify that plans are not
unconditionally bound by an enrollee
provider’s medical-necessity
declaration. That is, plans have the right
to deny medical-necessity requests
made by the enrollee’s provider.
However, the enrollee has the right to an
appeal or expedited appeal if the plan
denies the provider’s medical-necessity
determination. We are also reinforcing
that, as specified in § 422.112(a)(6)(i),
requests for medically-necessary items
must be responded to in a timely
fashion.
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 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
period is to transition the new enrollee
to a therapeutically-substitutable
formulary drug or, alternatively, to
obtain a formulary exception whereby
the new Part D plan would continue to
cover the non-formulary drug for the
remainder of the plan year for reasons
of medical necessity.
Similarly, we proposed requiring MA
organizations to continue to ensure
access to DME brands, items and
supplies of non-preferred
manufacturers—such as 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 DME brands, items, and
supplies of non-preferred manufacturers
such as wheelchairs, feeding pumps,
and hospital beds. More specifically, the
enrollee, during this 90-day transition
period, could elect to have the MA plan
continue to provide the DME brand,
item or supply from the non-preferred
manufacturer as well as provide all
necessary repairs to DME items,
including providing a loaner.
Alternatively, the enrollee could
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immediately switch to a brand, item, or
supply of a preferred manufacturer. We
reflected this change in proposed
§ 422.100(l)(2)(iii)(A) and
§ 422.100(l)(2)(iii)(B).
Comment: In the proposed rule we
recommended a 90-day transition
period to enable beneficiaries who had
used one brand of DME and had to
change brands because their current
plan no longer supplies this brand, to
adjust to the change. We solicited
comments on the duration of the
transition period. While we received
comments that indicated no transition
period was necessary, other commenters
agreed with the 90-day transition
period, others suggested durations of
120 days and 6 months.
Response: We believe that the
proposed 90-day transition period,
similar to the transition period in the
Part D program, strikes the appropriate
balance between ensuring an enrollee’s
smooth transition to a new plan while
taking into account the ability of the
plan to offer preferred DME items for its
enrollees.
Comment: We also received several
comments on the appropriateness of a
transition period. A commenter pointed
out that it should not be required for
enrollees to continue a former DME
brand if new brands were more
efficacious. Another commenter asked if
the use of a brand, item, or supply from
a non-preferred manufacturer based on
a medical-necessity determination only
applies to the transition period.
Response: Our requirement that plans
continue to furnish non-preferred DME
brands that they had formerly was not
intended to prevent a plan enrollee from
switching to a different brand, should
she or he so desire. If the enrollee wants
to continue using the former brand,
item, or supply, the new plan must
furnish it for 90 days. Alternately, the
enrollee may decide to change brands
immediately. We also note that the
medical necessity exception and the
transition exception are independent of
one another. An enrollee is permitted a
90-day transition period for a currently
non-preferred brand that was used in
the former plan year even if that nonpreferred brand is not considered
medically necessary for that individual.
Furthermore, if deemed medically
required, the new plan is required to
furnish the specific DME brand, item, or
supply regardless of whether the
product was used previously.
d. Midyear Changes to Preferred DME
Items and Supplies
We proposed prohibiting MA
organizations from making ‘‘negative
changes,’’ that is, eliminating coverage
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of a Medicare-covered DME brand, item
or supply of a preferred manufacturer,
midyear. However, plans would not be
responsible for involuntary negative
changes such as those due to supplier
terminations or sanctions. We also
proposed allowing MA organizations to
make ‘‘positive changes,’’ that is, adding
coverage of Medicare-covered DME
brands, items or supplies, midyear.
Examples of allowable positive midyear
changes include: Adding new
manufacturers’ products, providing
substitute DME brands, items and
supplies for DME products that are no
longer available, considering new DME
technologies, and complying with
national and local coverage
determinations for new DME brands,
items and supplies. Plans could also
add suppliers midyear. We believe this
strikes the appropriate balance between
allowing flexibility for plans to
designate preferred products, while
ensuring that changes to the list of DME
brands, items and supplies of preferred
manufacturers are not disruptive to
enrollees. We reflected this change in
proposed § 422.100(l)(2)(iv).
Comment: We received several
comments on midyear changes to DME.
A number of commenters criticized the
proposed rule on the grounds that it
would not be sensitive to midyear
changes in technology. Other
commenters raised the issue of the effect
of supplier termination or supplier
sanctions. Still other commenters asked
if suppliers as well as products could be
added midyear.
Response: In the proposed rule we
allow the addition, but not the deletion,
of brands and manufacturers midyear.
Consequently: (1) Plans may add DME
with innovative new technologies
midyear; and; (2) plans may add
midyear suppliers as this would
increase brands and manufacturers
available to enrollees. Note, that if a
midyear supplier termination or
supplier sanction deprives enrollees of
access to certain brands, items or
supplies of preferred manufacturers, the
plan has an obligation to add suppliers
midyear in order to maintain enrollee
access.
Comment: A commenter requested
that plans be allowed to withdraw
midyear brands and manufacturers
based on safety issues.
Response: We agree that plans must
exclude items from their preferred DME
list if recalled by a Federal agency, for
example, the FDA, or if CMS determines
there is a safety concern. Additionally,
if a plan has concerns regarding the
safety of a certain brand or
manufacturer, it should immediately
contact the FDA’s Center for Devices
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and Radiological Health Ombudsman to
whom such concerns should be
directed.
e. Appeals
As indicated previously, a medical
necessity determination is initiated by
the enrollee’s provider. The plan’s
subsequent denial could then lead to an
appeal or expedited appeal. We
proposed to clarify at § 422.100(l)(2)(v)
that a plan’s non-coverage of a
particular manufacturer’s product or
brand of a DME constitutes an
organization determination under
§ 422.566.
Comment: Several commenters
requested that to ensure a proper
balance between costs and access, CMS
must incorporate safeguards around the
use of DME formularies similar to those
of Part D drug formularies. These
commenters specifically identified the
following Part D safeguards as examples
of safeguards that should apply to DME:
(1) Annual review and approval of DME
formularies established by Medicare
Advantage Plans by the plans’
respective Pharmacy and Therapeutics
Committees; (2) a formal exceptions
process for non-formulary DME items
deemed medically necessary for a
particular patient, similar to that
employed for Part D drugs pursuant to
§ 423.578; and, (3) the right of patients
to seek review of adverse
determinations related to requested
DME brands, items or supplies by an
independent review entity in a manner
similar to that utilized for adverse
determinations made by Part D Plans
related to Part D drugs.
Response: As indicated in the
proposed rule, we studied the
possibility of establishing an exceptions
process for DME similar to the one
established for non-formulary Part D
drugs under § 423.578(b) and decided
that the safeguards we proposed, along
with the ability to appeal brand/
manufacturer decisions as coverage
determinations, were the most efficient
means to implement this provision in
the context of the MA program. The Part
D appeal process adds an additional
level of review to the established appeal
process under subpart M of Part 422 to
account for the fact that Part D drugs in
a category of prescription drugs are
frequently prescribed based on the
individual’s unique requirements and
disputes about medical necessity are
more likely. We believed such a process
is unnecessary for DME brands, items
and supplies because, unlike Part D
drugs, DME is generally not specific to
individuals and, as a result, appeal of
coverage determinations based on
brand/manufacturer are infrequent.
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Comment: A few commenters
requested that, in addition to the right
to appeal non-coverage of non-preferred,
medically-necessary DME, CMS issue
guidance on differential cost-sharing
between preferred and non-preferred
brands.
Response: As specified in
§ 422.100(f)(2), MA plans are already
prohibited from designing cost-sharing
structures that inhibit access. We
annually publish detailed guidance on
acceptable cost-sharing criteria.
Comment: Several commenters
requested that we provide guidance,
similar to guidance in the Part D
program, on the criteria for making an
Independent Review Entity (IRE)
determination. These commenters also
recommended that access to DME and
medical necessity be guiding principles
as part of the IRE determination process.
Response: We agree that access and
medical necessity should be two
primary principles guiding IREs in
making determinations. For this reason,
we strongly encourage MA plans when
formulating their medical-necessity
requirements, as specified at
§ 422.112(a)(6), to specifically address
how medical-necessity determinations
by enrollee providers should be
communicated and addressed. We do
not believe it necessary, however, that
IREs be given additional guidance
regarding how to determine claims
based on the brand/manufacturer of
DME.
Comment: In the proposed rule, CMS
supported our decision not to have a
formal exception process for DME
denials by citing the following statistic:
Of 12,500 appeals on wheelchairs
reviewed by the IRE since the inception
of the IRE appeals process in 2006, only
seven related to brand-specific issues. A
commenter suggested that the small
number of brand-specific appeals could
be due to our not formerly allowing
plans to limit DME items, such as
wheelchairs, by brand and
manufacturer.
Response: As indicated in the
proposed rule, we have anecdotal
evidence that plans are already limiting
DME by brand and manufacturer.
Consequently, we believe this statistic
to be supportive of our 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
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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 brands, items, and supplies of
preferred manufacturers, 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 Web site, and in writing
upon request—disclosures about these
DME coverage restrictions and enrollee
rights to the Part C appeals process for
requests to obtain medically necessary
DME brands, items, and supplies from
non-preferred manufacturers.
Comment: Several commenters
requested clarification on how MA
organizations should disclose the list of
DME brands, items, and supplies of
preferred manufacturers. For example,
several commenters asked whether they
should be listed in the bid or EOC.
These commenters pointed out that the
EOC is a template and consequently a
template change would be required for
additional disclosures. Other
commenters asked whether these
materials should be listed on plan Web
sites or in the plan finder.
Response: As specified in
§ 422.111(b)(2) and § 422.111(h)(2), MA
plans must disclose all conditions,
limitations, premiums, and cost-sharing
for benefits they provide, including
DME. There are already several vehicles
for such disclosure in place. We propose
modeling the disclosure requirements
for DME by applying similar disclosure
requirements currently used for the Part
D formulary. More specifically, a plan
choosing to limit certain DME products
to specific brands and manufacturers
would have to maintain a Web site with
current information on DME access. We
would also require that the list of DME
brands, items, and supplies of preferred
manufacturers be included in the EOC
packet. We will issue guidance on these
matters along with other guidance for
proper bid submission.
Comment: A commenter requested
that disclosure requirements apply to
any changes in provision of DME such
as midyear changes. Another
commenter asked if providing access to
only two brands is a limitation for
which notification is required.
Response: We are modeling the
disclosure requirements for DME on the
disclosure requirements for the Part D
formulary. Consequently, in addition to
the list of brands, items, and supplies of
preferred manufacturers that should be
mailed in the EOC packet along with the
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Part D formulary, MA plans must have
dedicated Web sites listing all current
information on DME provision,
including any midyear changes. Plans
must notify enrollees of any contractual
limitation in DME brands, items,
supplies, and manufacturers.
Comment: A commenter requested a
60-day notification for any midyear
changes.
Response: The notification
requirements for midyear changes
specified in the Medicare Marketing
Guidelines are applicable to midyear
changes in DME.
Comment: A commenter asked
whether plans must submit their DME
formularies, that is, their list of brands,
items, and supplies of preferred
manufacturers, to CMS for prior
approval.
Response: As indicated in the
proposed rule, we are not applying the
formulary requirements of the Part D
program in our DME policies.
Consequently, the submission of bids
that includes all supporting
documentation as part of the annual bid
review cycle will suffice.
g. Flexibility
Based on comments we received on
the proposed rule, and which we
discuss later in this final rule with
comment period, we are providing
additional flexibility at 422.100(l)(2)(vii)
for CMS to annually review DME
categories. We would also review
complaint data and appeals and
grievances data. This would allow us to
require full coverage of certain
categories of DME without limitation in
brand and manufacturer. Additionally,
such flexibility would allow us to
consider and respond to emerging new
technologies, as well as to require full
coverage of categories of DME items
typically tailored to meet individual
needs.
Comment: Several commenters
requested that we exclude orthotics and
prosthetics from the items that MA
organizations could limit purchase of to
specific brands and manufacturers.
Several commenters requested a general
exclusion of orthotics and prosthetics
while other commenters requested
exclusion of specific orthotics and
prosthetics. In particular, several
commenters pointed to our use, in the
proposed rule, of ostomy bags as an
example of an item that could be subject
to limitation based on brand or
manufacturer. One of the commenters
asked if we had intended to include
ostomy bags, as they are actually
prosthetics. The other commenters on
this issue, while not identifying ostomy
bags as prosthetics, stated that these are
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not, in fact, examples of items that are
interchangeable and, thus, should not be
subject to limitation based on brand or
manufacturer.
Response: When discussing the
transition requirement, we mistakenly
included ostomy bags, which are
prosthetic devices, in our example of
DME that would be subject to
limitation—and thus the transition
requirement—based on brand or
manufacturer. In discussing the
transition requirement, a better example
would be diabetic supplies. In this final
rule with comment period, we are
clarifying that the ability of MA
organizations to limit DME brands,
items, and supplies to specific
manufacturers does not apply to
orthotics and prosthetics. Section
1860(s) of the Act specifically
distinguishes the authorities for
provision of DME, prosthetics and
orthotics. Consequently, our proposal to
allow plans to limit provision of DME
brands, items, and supplies to specific
manufacturers would not affect
prosthetics and orthotics. MA
organizations must still provide to their
enrollees all medically-necessary
prosthetics and orthotics covered under
Original Medicare, Part B. The principal
reason for not including orthotics and
prosthetics in the scope of this
requirement is that the provision of
orthotics and prosthetics requires
clinical care by specially educated and
trained practitioners who utilize those
skills to design, fabricate, and fit custom
orthoses and prosthesis. DME, however,
primarily refers to equipment such as
wheelchairs (manual and electric),
walkers, scooters, canes, crutches, and
home oxygen therapy. A standard cane
from a supplier, for example, is
qualitatively different from receiving a
custom-fit orthotic brace molded
specifically for the patient by a skilled
provider. We already recognize this
distinction between DME and
prosthetics and orthotics in its quality
and supplier standards.
Comment: There was support for the
notion that brands of certain DME such
as canes are essentially interchangeable.
However, over half the commenters
mentioned specific categories of DME
whose brands are less likely to be
interchangeable in terms of quality,
consistency in performance, and ease in
repair. Among the 43 comments
received, 7 categories of DME were
identified for which commenters
requested full coverage without plan
limitation: (1) Wheelchairs; (2) diabetic
supplies; (3) Continuous Positive
Airway Pressure (CPAP) devices; (4)
patient lifts; (5) speech generating
devices; (6) oxygen; and (7) paddings
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(such as foam mattresses). Additionally,
a commenter questioned the
classification of speech-generating
devices as DME, rather than orthotics
and prosthetics, citing the Department
of Defense and VA classifications.
Response: We agree that certain
categories of DME include items which
are tailored to the individual and are not
interchangeable. For this reason, we
intend to conduct an annual review to
ascertain which categories or
subcategories of DME require full
coverage without allowance for plan
limitation by brand or manufacturer. In
making our decisions, we will identify
categories of DME not subject to
limitation, based on a variety of sources.
Sources include, but are not limited to—
• Comments on the proposed rule;
• Discussions with DMEPOS staff;
• Advice from the Chief Medical
Officer Center for Medicare, CMS and
DME MAC medical directors; and
• Experience from the DMEPOS
competitive bidding program and other
Medicare programs.
Based on our review of public
comments, we have modified our
proposal by adding new paragraph
(l)(2)(vii) to § 422.100 to specify that
plans must comply with CMS’
designation of DME items not subject to
limitation based on brand or
manufacturer.
We have made two other changes to
the regulatory text: (1) at
422.100(l)(2)(iii) we have clarified that
transition coverage changes are at the
enrollee’s request; and (2) throughout
the regulatory text we use the phrase
‘‘DME brands, items, and supplies of
preferred manufacturers.’’ The
enrollee’s request for transition coverage
is initiated when he or she fills a script
and generates a claim for a particular
brand. Our purpose in using the phrase
‘‘DME brands, items, and supplies of
preferred manufacturers,’’ is to
emphasize that plans can limit both
items and supplies and plans can limit
by either: brand, manufacturer, or both.
Following this discussion are several
comments that address more general
issues related to the proposed rule.
Comment: A few commenters were
opposed to the proposed rule on general
grounds. They cite section 1801 of the
Act which prohibits supervision over
the practice of medicine and section
1802 of the Act which guarantees basic
freedom of choice. Another commenter
disagreed with our authority to allow
plans to limit brands and
manufacturers, arguing that section
1852(a)(1)(A) of the Act, allowing MA
plans to contract with networks of
providers, specifically applies to
providers, not suppliers.
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Response: In the proposed rule—and
as clarified further in this final rule with
comment period—we have specifically
indicated that a medical-necessity
determination by the enrollee’s provider
initiates a process that could allow
enrollees access to DME brands, items,
and supplies of non-preferred
manufacturers. Hence, we have not
interfered with the practice of medicine.
Furthermore, section 1852(a)(1)(A) of
the Act specifically allows plans in the
MA program to limit the providers from
which services may be obtained,
provided adequate access is ensured.
The statute is silent on limitations of
supplier networks. As we stated in the
proposed rule, we believe it is
consistent with the goals of the statute
to allow MA plans to contract with
networks of suppliers and to restrict
brands and manufacturers provided
access is ensured and are thus
exercising our authority under
1856(b)(1) of the Act, to establish MA
standards by regulations, and section
1857(e)(1) of the Act to impose
additional terms and conditions found
necessary and appropriate.
Comment: A commenter believed that
the proposed regulation had given plans
arbitrary power and would
unnecessarily limit beneficiary choices.
The commenter also believed that MA
plans do not have the necessary
knowledge to make decisions about
limits on brands, items, supplies, and
manufacturers of DME. Another
commenter asked how CMS would
define access to non-preferred brands.
Response: In developing our proposal,
we took deliberate steps to ensure that
an MA organization’s DME polices not
be instituted arbitrarily and that such
policies are fair and transparent to
enrollees. In the proposed rule, we
specifically mentioned our goal to strike
‘‘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.’’ Furthermore, we explicitly
proposed at § 422.100(l)(2)(ii), that MA
organizations—to the extent that they
elect to limit coverage of DME items and
supplies to specific manufacturers’
products or brands—ensure access to
DME by providing coverage of any
medically-necessary DME brand, item,
and supply, including DME brands,
items, and supplies made by nonpreferred manufacturers. Other
requirements, such as the transition
period and the prohibition on removing
DME items midyear, also help ensure
that enrollees will continue to have full
access to DME.
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Comment: A few commenters
requested that we offer the proposed
rule as guidelines rather than
regulations. These commenters
suggested that, aside from specific
requirements to ensure adequate access,
we should not impose requirements or
otherwise oversee functions that have
traditionally been left to the discretion
of plans.
Response: We have already given
plans much flexibility in choosing DME;
we must also ensure that enrollees
continue to have access to necessary
DME. Plans must develop their own
medical necessity criteria and methods
for addressing provider determinations
of medical necessity. However, the
requirements delineated in the proposed
rule, including disclosure, beneficiary
appeal rights and access, have
traditionally been regulatory areas and
part of CMS’ oversight of plans. In the
proposed rule, we proposed
requirements in three other areas—
medical necessity, transition periods,
and midyear changes—and believe these
to be important beneficiary protections.
Comment: A commenter pointed out
that, although the proposed rule focuses
on reducing out-of-pocket costs for
beneficiaries, this concept could also
affect costs for plans.
Response: In the proposed rule we
pointed out that some organizations are
already limiting DME to specific brands;
consequently, our proposal would not
adversely affect the costs incurred by
these organizations. As we stated in the
proposed rule, we believe this provision
will give more flexibility to plans when
making DME choices; if plans wish to
offer multiple brands of DME in a
category, this provision would in no
way prohibit this. As we also stated in
the proposed rule, we believe this
additional flexibility may permit MA
organizations to negotiate bulk
discounts with preferred manufacturers.
Comment: Several commenters
pointed out that cost savings was the
only reason mentioned in the proposed
rule to allow plans the right to limit
furnishing DME to specific brands and
manufacturers. Another commenter
mentioned an MA plan that is currently
selecting manufacturers and brands of
diabetic supplies, based on consultation
with clinicians and, consequently, is
able to offer products at zero costsharing to its enrollees.
Response: We agree that a variety of
factors—including cost, access, diverse
patient needs, convenience, and
medical necessity—should be part of
benefit considerations and overall plan
design. We believe the beneficiary
protections we have specified
concerning enrollee access to all
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categories of DME will help ensure that
cost is not the sole driving factor of a
plan’s DME choices. In addition, we
believe that quality requirements, a
robust appeals process, and plan
oversight are important factors in
ensuring that enrollees have continued
access to necessary DME.
Comment: Several commenters
requested that if an individual requires
multiple DME brands, items, or supplies
and one brand, item, or supply that he
or she requires is only available through
a supplier of brands, items, and supplies
from non-preferred manufacturers, the
individual should be allowed to obtain
all the medically-necessary brands,
items, and supplies from the nonpreferred manufacturer. This would
promote efficiency and ease of obtaining
brands, items, and supplies.
Response: The implication of this
comment is that it is inconvenient for
the enrollee to have to purchase brands,
items, and supplies from multiple
suppliers. We do not agree.
Furthermore, since MA organizations
contract with suppliers, they can
communicate in advance the brands and
manufacturers that are preferred and
nonpreferred so that suppliers can stock
up on these.
Based on our review of public
comments, we are finalizing our
proposed provisions with the
modifications previously discussed.
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5. Broker and Agent Requirements
(§ 422.2274 and § 423.2274)
Regulations setting forth rules for
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. We 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
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were selected in 2009 and based on data
from 2006 and 2007.
We have also heard that 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. 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 the
new entrants may set compensation at
current-day FMV rates and are not tied
to 2009 compensation amounts.
Therefore, we proposed 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 as 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.
Comment: Many commenters
expressed support for the proposal to
allow sponsors to annually select agent/
broker compensation amounts which
reflect rates at or below the CMS
established FMV.
Response: We appreciate the many
comments received in support of this
provision.
Comment: A commenter asked
whether this provision applies to
section 1876 cost plans.
Response: This provision does apply
to section 1876 cost plans pursuant to
§ 417.428, Marketing Activities, which
states that the marketing regulations
found in subpart V of part 422, which
include this specific requirement, apply
to section 1876 cost plans.
Comment: A commenter expressed a
concern that the compensation
regulations were driving agents/brokers
away from MA and encouraging them to
sell Medigap.
Response: We appreciate the
comment and will consider it as we
continue to refine and improve our
managed care programs. However, this
comment is beyond the scope of these
regulations.
Comment: Several commenters
expressed a concern that CMS should be
evaluating its current marketing rules
against the Affordable Care Act and
considering the impacts.
Response: We appreciate the
comment and will consider it as we
implement the provisions under the
Affordable Care Act. However, these
comments are beyond the scope of this
regulation.
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After consideration of the public
comments received, we are finalizing
the provision without modification.
6. Establishment and Application of
Daily Cost-Sharing Rate as Part of Drug
Utilization Management and Fraud,
Abuse and Waste Control Program
(§ 423.100, § 423.104, and § 423.153)
Pursuant to our authority under
section 1860D–4(c) of the Act, which
requires PDP sponsors to have costeffective drug utilization management
and a fraud, abuse, and waste control
program in place, we proposed that
Medicare Part D sponsors be required to
provide their enrollees access to a daily
cost-sharing rate for prescriptions
dispensed by a network pharmacy for
less than a 30 days’ supply of certain
covered Part D drugs that: (1) Are for an
initial fill of a new medication; (2) are
intended to allow the enrollee to
synchronize refill dates of multiple
drugs; or (3) 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 beginning January 1, 2013).
As we explained in the proposed rule,
current prescribing patterns and
pharmacy benefit management (PBM)
payment practices result in most
prescriptions being written by
providers, and dispensed by retail
pharmacies, in 30-or-more days
quantities. When the full amount
dispensed is not utilized by a
beneficiary due to adverse medication
reaction or interaction, or due to failure
of beneficiary therapeutic adherence
because of cost, inconvenience, death,
or other reason for discontinuation, it
comes at an unnecessary and wasteful
cost to the beneficiary, 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 to the
program of chronic medications
discontinued after initial fills could be
avoided. In addition, the avoidance of
unused drugs would contribute to
diminishing the environmental issues 2
caused by disposal of unused
medications, and opportunities for
2 See https://www.epa.gov/ppcp for information
about Pharmaceuticals and Personal Care Products
as Pollutants (PPCPs) on the Web site of the U.S.
Environmental Protection Agency.
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criminal activities and substance abuse 3
caused by diversion of unused
medications, all of which are growing
concerns in the United States.
We observed that, currently, Part D
enrollees’ cost-sharing generally is the
same whether they receive a 7, 14, or 30
days’ supply of a medication. A daily
cost-sharing rate requirement imposed
on Part D sponsors would encourage
enrollees and their prescribers to limit
days’ supplies, when appropriate, by
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
requesting a trial fill of a prescription
for a new chronic medication, for
example, would pay only a portion of
the established cost-sharing amount
under his or her Part D benefit plan that
corresponds to the actual number of
days supply that was dispensed. This
would be the case whether it was for a
7- or 14-days’ supply, or some other
quantity less than 30 days, and this
decision would primarily be at the
discretion of the prescriber. Thus,
although a 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 a beneficiary
should receive less than a month’s
supply of a new medication. Rather,
such a decision should be made solely
by the beneficiary 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 especially
incentivized to inquire of his or her
prescriber whether a fill of less than a
month’s supply would be appropriate
when first prescribed a chronic
medication. We also believe enrollees
would be most likely to inquire about
such a trial fill when faced with high
cost-sharing for such a 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
3 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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would be most likely to concur as to the
appropriateness of a trial fill when the
prescription is for a drug that has
significant side effects and/or is
frequently poorly tolerated.
In such a case, we suggested that the
prescriber could write either one
prescription for the initial fill at the
prescriber’s discretion, or two
prescriptions (for example, one for an
initial fill and a second prescription for
a 30 or 90 days’ supply; the latter
prescription would be utilized if the
enrollee and the prescriber agreed the
drug therapy should be continued after
the trial period). Because the two
prescriptions could be written during
one office visit, or could be refilled by
the prescriber directly with the
beneficiary’s pharmacy after the trial
period, as permitted by applicable law,
additional visits to the prescriber would
not necessarily be required and would
not need to cause a burden to the
beneficiary. We assumed the twoprescriptions option would be most
convenient for the beneficiary and the
prescriber (when appropriate), but
sought specific comment on this
assumption. If a beneficiary 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 medication being prescribed should
or could be dispensed in a trial fill, we
stated that we would not expect our
proposal to have any adverse effects on
beneficiaries’ health. However, if the
medication were discontinued after use
of the initial fill, the enrollee, as well as
the sponsor, would have avoided the net
costs associated with the unused
quantity that would be dispensed under
current standard practices.
While we envisioned, as described
previously, beneficiaries primarily
requesting less than a full month’s
supply when prescribed a drug for the
first time for a chronic condition that is
known to have significant side effects,
to be frequently poorly tolerated and
expensive, we did not limit the
requirement for Part D sponsors to
establish and apply a daily cost-sharing
rate to such medications. Rather, in the
proposed rule, we also identified an
additional benefit of a daily cost-sharing
rate requirement, which is the ability to
allow for synchronization of
prescriptions. The ability to synchronize
medications should assist beneficiaries
in adhering to prescription treatment
regimens that involve multiple
medications, and we noted that at least
one study supports this belief. In
addition, we believe the ability to
synchronize medications will be
convenient for both those beneficiaries
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22127
who take advantage of it and their
prescribers by enabling fewer trips to
the pharmacy and fewer prescription
refill requests of prescribers from
beneficiaries through the ability to
consolidate pharmacy trips and
prescriber office visits and phone calls.
We also stated that daily cost-sharing
rates also may permit pharmacies, as
opposed to prescribers, to facilitate
synchronization of a beneficiary’s
medications upon his or her request,
and we sought specific comment as to
this possibility, as well as to any issues
we may need to address to facilitate this
possibility.
We noted in the proposed rule that we
do not expect long-term care (LTC)
beneficiaries to request to synchronize
medications, as this was not our
understanding of the LTC environment
with respect to prescribing, and the LTC
dispensing rules at § 423.154 require 14
days or less dispensing in LTC facilities
in certain instances, beginning January
1, 2013. However, as noted in the April
2011 final rule (76 FR 21432), 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.’’ Because Part D sponsors would
have to address copayment
methodology in connection with the
LTC dispensing requirements, we
proposed to supersede our quoted
guidance in the April 2011 final rule (76
FR 21432), and thus proposed that the
daily cost-sharing rate requirement
would apply to prescriptions dispensed
in LTC facilities, beginning January 1,
2013.
In the proposed rule, we urged the
industry to develop coding to be used
by network pharmacies to communicate
to sponsors whether a less than month’s
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
stated such coding would allow
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sponsors to be able to monitor the
prevalence and appropriateness of the
dispensing of prescriptions in shorter
than a month’s supply to ensure that a
pharmacy does not dispense a
prescription for 30 days’ supply in
stages in order to increase dispensing
fees.
We recognized in the proposed rule
that establishing and applying a daily
cost-sharing rate to the already small
copayments for LIS beneficiaries would
cause such copayments to be the same
or even smaller. We also stated 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 acknowledged in the proposed
rule that realized savings from our daily
cost-sharing rate proposal may be partly
offset by additional dispensing fees, and
that Part D sponsors would also incur
some costs to program their systems to
establish and apply a daily cost-sharing
rate to prescriptions dispensed to
enrollees for less than a 30 days’ supply.
We cited in the proposed rule a
previous review of 2009 PDE data by us
that suggested that just under 32 percent
of approximately 78.6 million first fills
for chronic medications are not refilled
by Medicare Part D enrollees. We
assumed 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, since this review did not
distinguish between community and
institutional settings, to estimate the
costs of discontinued medications in
community settings only, 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 long-term care
expenses. (We did not estimate the costs
of discontinued medications in the LTC
environment since the daily costsharing rate requirement proposed here
does not further change the dispensing
requirements in the long-term care
setting, which are applicable January 1,
2013). Consequently, we arrived at an
adjusted total estimated cost of 2009
community-based discontinued first
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fills of maintenance chronic
medications was estimated at roughly
$1.4 billion.
As noted previously and in the
proposed rule, potential savings of a
daily cost-sharing 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 made
assumptions about how many initial
fills for new maintenance medications
for chronic conditions will be dispensed
in quantities of less than a 30 days’
supply, and what the average quantity
of such initial fills will be. We pointed
out that these assumptions were highly
uncertain, because it is very difficult to
predict beneficiaries’ behavioral
response. Having noted this caveat, we
assumed 20 percent of initial fills in
2013 will be for a supply of less than 30
days, trending to almost 50 percent by
2018, and that the average of such fills
will be for a 15 days’ supply. We also
applied a dispensing fee rate of
approximately $2 in our estimation.
Assuming 32 percent of these first fills
are discontinued, we estimated the
potential savings to the Part D program
to be $140 million in FY 2013 alone,
and over $2.4 billion total by 2018.
However, because we are revising the
applicable date of this requirement to
January 1, 2014, as explained later in
this final rule with comment period, we
are revising the cumulative savings in
2018 to roughly $1.8 billion.
We noted in the proposed rule that 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 required to be dispensed in a 15day 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 2 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
acknowledged the savings benefits of
the mandatory MaineCare approach, we
stated that leaving the decision to obtain
less than a month’s supply of a
prescription with the beneficiary and
his or her prescriber and pharmacist is
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a better approach in light of the
voluntary nature of the Medicare Part D
program.
We recognized in the proposed rule
that certain medications are universally
accepted in the health care community
as not suitable to be dispensed in
amounts less than a 30 days’ supply (for
example, lotions and other drugs not in
solid form). Therefore, we proposed to
further limit the requirement that
sponsors establish and apply a daily
cost-sharing rate 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 long-term care dispensing
requirements, we proposed that the
daily cost-sharing rate requirement
would apply to both brand and generic
drugs.
Comment: Some commenters were
strongly supportive of our proposal,
recognizing as we do that, for Part D
plans that use a copayment structure,
there is currently no direct cost
incentive for enrollees to obtain a less
than 30 days’ supply, and lauding the
potential cost-savings to enrollees and
the reductions of waste as a result of our
proposal. A commenter fully endorsed
our proposal, stating that its data led to
the MaineCare program, and that after
significant effort was put into
addressing initial prescriber confusion,
there were virtually no complaints by
either prescribers or patients. This
commenter disagreed, however, that a
voluntary approach is the preferred
method, asserting that clinical inertia
for continuation of past prescribing
habits and practices may erode our
expectations on savings. A commenter
estimated that our proposal could
eliminate 1.5 billion pounds of
pharmaceutical waste at its source (the
preferred method for improving
environmental health) and $1 million in
waste management cost savings, in
addition to improving dispensing
efficiencies in terms of time spent. A
commenter asserted that an analysis of
our proposal regarding the harmful
effects on the environment should
include recognition that humans are
part of the environment and are
adversely affected by the diversion,
misuse, and abuse of unused drugs.
Response: We appreciate these
supportive comments and estimates and
agree that a daily cost-sharing
requirement will lead to significant costsavings and waste reduction in the Part
D program. We have taken the
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comments on prescriber education
under advisement, but we continue to
believe that the voluntary method is the
best way to approach less-than-30-days’
supply dispensing outside the LTC
setting in the Part D program, although
we acknowledge our opinion could
change after experience with the
voluntary method. We agree that
reducing medication waste will reduce
opportunities for medications to be
diverted for misuse and abuse.
Comment: Some commenters stated
that we should complete a more
thorough, and prospective assessment of
the potential impact of our proposal to
understand the tradeoffs and
implications before we proceed with it.
Several commenters, while supporting
our proposal’s goal to reduce cost and
waste, countered that it would increase
dispensing fees and administrative and
programming costs, some suggesting
that these fees/costs would completely
or more than offset any realized savings
from the proposal. Another commenter
stated that calculating the daily costsharing rate for each enrollee is
tremendously burdensome by
necessitating system changes at a
substantial cost, stating that the
administrative costs to Part D sponsors
are the same regardless of whether the
prescriber writes a prescription for a
trial fill or a 30 days’ fill, such that
administering a trial fill differently than
a complete fill will double the cost to
Part D sponsors.
Response: We believe that we have
sufficiently accounted for the tradeoffs
and implications of the potential impact
of our requirement, both in the
proposed rule and in this final rule with
comment period. In the preamble and
the Regulatory Impact Analysis section
of the proposed rule and this final rule
with comment period, we specifically
accounted for the additional dispensing
fees, as well as the administrative and
programming costs that we believe Part
D sponsors will incur in implementing
this requirement. Despite these costs,
we continue to estimate savings in the
hundreds of millions each year to the
Part D program.
Comment: Some commenters, while
also supportive our of proposal’s goal to
reduce fraud, waste and abuse in the
Medicare Part D program, raised various
operational concerns in implementing
the proposal and requested a delay or
phased-in approach. A commenter
requested more clarification of what
constitutes a trial fill. Some commenters
recommended that we simplify our
proposal by requiring the application of
the daily cost-sharing rate whenever less
than a month’s supply of a covered Part
D drug is dispensed (unless an
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exception applies due to the type of
drug involved), regardless of the reason,
which would obviate the need to
document the reason. Some commenters
stated that applicable law permits
pharmacists to dispense lesser
quantities than written on certain
prescription. Other commenters
indicated that standard identifiers/fields
would be needed for physicians,
pharmacies, and plans to communicate
regarding initial fills of new
medications, beneficiary
synchronization request and daily costsharing amounts. Some commenters
pointed out that pharmacies have no
reliable way to learn that a prescription
is an initial trial supply of a new
medication, since such information is
not routinely conveyed on a
prescription, and pharmacies would not
be in a position to notify sponsors of
this fact, even if coding were available.
Another commenter believed that
having to capture information from
enrollees could be difficult to reliably
implement. Some commenters thought
that our proposal would result in more
frequent ‘‘refill too soon’’ DUR edits,
including additional PDEs identified as
duplicate, requiring review and
justifications, which would result in
greater workload for Part D plans.
Commenters also noted that daily costsharing is not an industry standard in
prescription drug coverage, and
complications could arise in
coordinating benefits with other
prescription drug plans, such as in the
case of Employer Group Waiver Plans
(EGWPs). A commenter stated that our
proposal may result in multiple prior
authorizations for the same medication.
A commenter noted that our proposal
may complicate partial fill straddle
claims and have PDE and TrOOP
implications. A few of these
commenters noted that lessons may be
learned from implementation of the
long-term care dispensing requirements
at § 423.154, which are effective January
1, 2013.
Response: We were persuaded by
these commenters that more time is
needed for Part D sponsors, PBMs, their
network pharmacies, and industry
standard development organizations to
work through the details of
implementation of our requirement. We
believe that proper programming will be
crucial to address the technical issues
that the commenters referenced, such as
how to calculate cost-sharing when
multiple payers are involved. For these
reasons, we have delayed
implementation of the daily cost-sharing
rate requirement until January 1, 2014.
In addition, we will work with the
industry to develop subregulatory
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22129
guidance, if and as needed, to address
technical questions arising upon
implementation of the requirements,
such as the implications for PDE
submissions.
However, to the extent Part D
sponsors wish to implement daily costsharing rates for contract year 2013, they
may do so on a voluntary basis before
then, for instance, if such
implementation would assist them in
complying with the LTC dispensing
requirements, rather than waiting for
any lessons that may be learned from
such implementation, since Part D
sponsors will have to address costsharing with respect to LTC dispensing
in 2013.
In deciding to delay implementation
of these requirements for 1 year, we
were also persuaded by comments that
we should simplify our requirement and
apply it to all drugs dispensed for less
than a month’s supply. Without this
simplification of the requirement, we
agree that extraordinary processes
would have to be created to obtain
information about the reasons less than
a month’s supply is being dispensed.
For instance, the parties involved in the
prescription transaction (for example,
health plans, PBMs and pharmacies)
may not know when a prescription is an
initial fill of a new medication, and this
information is not necessarily readily
available from the beneficiary or
physician, whereas the days’ supply is
available from the prescription.
Therefore, we are revising our
requirement such that Medicare Part D
sponsors will be required to provide
their enrollees access to a daily costsharing rate for prescriptions dispensed
by a network pharmacy for less than a
30-days’ supply of covered Part D drugs
(unless an exception applies due to the
type of drug involved) regardless of the
reason the prescriptions are so
dispensed. This will obviate the need
for health plans, PBMs, pharmacies,
physicians, and beneficiaries to
communicate the reasons for the lessthan-30-day supply, and also make it
unnecessary to specifically define ‘‘trial
fill.’’ This revision also takes into
account our understanding that
pharmacists, under applicable law, can
currently dispense a smaller quantity
than is written on certain prescriptions
at a customer’s request, and thus there
may occasionally be other reasons for
less than a month’s supply to be
dispensed than the three reasons we
identified in the proposed rule. To be
clear, the industry can still decide to
develop coding in order to best manage
these transactions, but none is required
by this final rule with comment period.
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Comment: A few commenters
suggested we adopt a ‘‘copayment by
days’ supply’’ structure with respect to
plans that have a copayment structure,
whereby Part D enrollees would be
charged a set copayment amount based
on a range of days dispensed, for
example, a $10 copayment for 1–10
days, and a $20 copayment for 11–20
days and so on. These commenters
asserted that, for a variety of reasons,
this structure would be simpler to
implement, including: (1) It would
dovetail with the LTC dispensing
requirements at § 423.154; (2) it would
not require the maintenance of an
exception drug list; and (3) it would
enable Part D plans to more accurately
model and predict drug costs.
Response: We decline to revise our
requirement in the manner suggested by
the commenters. We do not believe it
would necessarily dovetail better with
the LTC dispensing requirements than
our requirement, as those requirements
require the implementation of 14 days’
supply or less dispensing, and thus
under the commenters’ suggested
approach, copayments in an LTC facility
could still vary. In addition, we do not
believe our requirement will necessitate
an exception drug list, as we discuss
later in this section. Finally, we believe
that creating additional multiple ‘‘copay
tiers’’ based on the days’ supply
dispensed, as suggested, would
significantly increase beneficiary
confusion in evaluating benefit
packages, which already contain
copayment tiers based on the type of
drug.
Comment: Some commenters stated
that Part D sponsor and network
pharmacy interests should be aligned in
terms of quality of patient care,
reduction of waste and the associated
savings with our proposal, such that the
stakeholders should be able to work
together to ensure that certain
pharmacies do not game our proposal.
Other commenters stated that
pharmacies may dispense a prescription
in multiple stages, even when it is not
so prescribed, to generate additional
dispensing fees, and that the net value
of any anticipated offsets should
include such manipulation.
Response: The proposed rule
recognized the possibility of
manipulation by network pharmacies to
increase dispensing fees, and as noted
previously, we urged the industry to
develop appropriate coding so that the
pharmacies could communicate the
reason for dispensing less than a
month’s supply, even though the reason
is not required under our revised,
simplified requirement, as described
previously. Although we will not
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mandate such coding, we do not think
it would be unreasonable for sponsors to
ask pharmacies to attest as to why a
prescription was dispensed for less than
a month’s supply. We would also expect
that sponsors will implement
contractual terms and auditing and
other internal controls to detect and
prevent fraud, waste, and abuse and to
ensure that pharmacies are not
inappropriately splitting prescriptions
to increase dispensing fees, and thus
costs to beneficiaries and the program.
We further note that if pharmacies
dispense prescriptions in stages merely
in order to increase dispensing fees,
they would have to have the
cooperation of the affected beneficiaries,
and we do not anticipate beneficiaries
desiring less than a month’s supply of
a medication, absent the
recommendation of their physicians, to
any significant degree, particularly
given the potential inconvenience
involved. Additionally, engaging in this
activity may constitute fraud by the
network pharmacy against the Part D
sponsors involved and the Federal
government, and we would expect
sponsors to take action appropriate
against such activity, such as
terminating the pharmacy from its
network. Consequently, we agree with
the commenter that stakeholders’
interests should be aligned under our
requirement, and we do not agree that
potential additional dispensing fees
would completely or even significantly
offset potential savings associated with
this requirement.
Comment: A commenter stated that
the purpose of cost-sharing obligations
is to provide beneficiaries with a
financial connection with the health
care service they receive, which assists
in countering potential overutilization,
and implied that reduced cost-sharing
would be less effective in this regard.
Response: While we agree that costsharing obligations create a financial
connection between beneficiaries and
the health care services they receive, we
disagree that our requirement would
engender overutilization. On the
contrary, under our requirement as
revised, a beneficiary will pay the same
cost-sharing for a month’s supply of
medication dispensed in multiple stages
that the beneficiary would otherwise
pay.
Comment: Other commenters were
concerned that Part D enrollees would
be incentivized to obtain a lesser
quantity of a medication than written by
their physicians at the pharmacy
counter in cases where the physician
would not want the enrollee to take the
medication on a trial basis, which
would negatively affect the beneficiary’s
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medication adherence. A commenter
acknowledged that plans that utilize
coinsurance structures already
accommodate the concept of assessing a
lower cost share when less than a
month’s supply is dispensed, and did
not indicate that this causes problems
with adherence today.
Response: We are unclear what
scenario the commenter is envisioning,
but we presume it to be that a
beneficiary who currently takes a
medication will begin to take less
because he or she will be able to pay
lower cost-sharing for less than a
month’s supply. We do not believe our
requirement would cause more
instances of this scenario than currently
may be the case. As noted previously, it
is our understanding that, if permitted
under applicable law, pharmacists
currently may dispense a lesser quantity
than prescribed at a customer’s request,
and we are not aware that this
possibility negatively affects medication
adherence today. In contrast to lower
cost-sharing incentivizing beneficiaries
to take less medication than they
already do, we think lower cost-sharing
is just as likely, if not more likely, to
incentivize beneficiaries to begin taking
medications they have avoided
altogether due to cost-sharing.
Comment: A commenter stated that
physicians are currently allowed to
write prescriptions for a less than a
month’s supply, and that reducing Part
D enrollees’ copayments for such
prescriptions will not incentivize
physicians to do so more frequently.
Response: As noted previously, our
requirement is directed at incentivizing
beneficiaries, who actually pay the costsharing, to consider along with their
prescribers, whether a less-than-30days’ supply of a new medication would
be appropriate. Indeed, we believe that
prescribers are generally unaware of the
copayments that their patients pay for
prescriptions. To the extent that
prescribers are aware of cost-sharing
today, we would argue that prescribing
patterns are currently influenced by the
inflexible cost-sharing arrangements in
prescription drug plans today, so it
would not make sense for prescribers to
write for shorter days’ supplies if the
industry standard is to charge a whole
month’s cost-sharing.
Comment: A commenter noted that
Part D plans currently have in place
member-friendly provisions that permit
members to pay the lesser of the
copayment amount or the cost of the
particular Part D covered drug.
Accordingly, if a prescriber were to
write a prescription for a less than a
month’s supply and the total cost were
less than the member’s copayment, the
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member would only be responsible for
the lesser amount. The commenter
asserted such provisions are a more
appropriate way to ensure that members
receive the benefit of a less than a
month’s supply option without
increasing administrative burden to
plans.
Response: We see these policies as
complementary, not alternatives. We
believe the lesser of copayment or cost
will generally result in lower costsharing than monthly copayments for
relatively less expensive drugs.
Comment: A commenter requested
clarification on support in member
documents, assuming that Plan Finder,
Evidence of Coverage, and Summary of
Benefits, would not include detailed
information on daily cost-sharing rates,
since they are not the norm.
Response: We intend to include
language in future Medicare & You and
the Part D Evidence of Coverage (EOC)
documents on availability of daily costsharing rates and on when beneficiaries
should consider taking advantage of
them. We are currently reviewing the
level of detail that we think is
appropriate to be included in
Summaries of Benefits, as daily costsharing rates are optional for the
beneficiary under this requirement. At
this point, we do not think that Plan
Finder needs to add this level of
complexity, since its purpose is to help
beneficiaries compare costs of their
current medications in different plans—
not to price shortened days’ supplies of
new prescriptions.
Comment: A commenter was
concerned that the proposal would be
very confusing to beneficiaries, and that
it is predicated on the belief that
prescribers have actual knowledge if
patients fill or refill prescriptions, and
that there is an opportunity for these
parties to have meaningful
conversations about a medication’s
relative cost.
Response: As we noted in the
preamble to the proposed rule, the
decision to try a medication for less
than a month’s supply would generally
be made by the Medicare Part D enrollee
and his or her prescriber, and if an
enrollee would have difficulty returning
to the pharmacy, or even broaching the
subject with his or her prescriber, then
we believe he or she would not seek to
obtain a smaller supply of a medication.
Comment: Some commenters believed
our proposal would result in better
adherence, specifically referencing that
our proposal would greatly facilitate
current efforts by community
pharmacists to achieve better adherence
through refill synchronization. Other
commenters believed that medication
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adherence would be negatively affected
if Part D enrollees did not return to the
pharmacy to pick up the next supply of
a medication, when it was determined
by their prescriber that the medication
should be continued after an initial trial
fill, for example. A commenter stated
that our proposal seems to run counter
to using adherence rates as a 5-star
metric to measure the quality of a plan’s
clinical services, and that there is data
in the literature that shows patients may
not return to the pharmacy to fill the
remainder of a prescription under
circumstances envisioned by our
proposal.
Response: We were persuaded by the
comments that our requirement would
assist pharmacists in synchronizing Part
D medication refill dates. Also, as noted
previously, the policy behind our
requirement is to incentivize the
appropriate elimination of unused
medication that our data shows is
already present in the Part D program.
That is, a certain percentage of initial
fills of maintenance medications for
chronic conditions are not refilled by
enrollees, and this indicates that the
medications were not effective,
tolerated, or continued, for whatever
reason, and therefore presumably, a
portion of the initial supply was not
used, either. The commenter did not
specify the referenced literature, so we
are unable to review it, and we would
note that, since daily cost-sharing rates
are not the current industry standard,
we are unclear on what data the
literature would be based. We address
star ratings later in this section.
Comment: A commenter stated that
the prescriber writing two prescriptions
is the method generally employed by
community pharmacists to assist
patients in synchronizing the refill dates
of multiple prescriptions and would
work for trial fills, as well.
Response: We appreciate the
confirmation that this practice is already
familiar to many prescribers and
pharmacies.
Comment: A commenter disputed that
many beneficiaries would be willing to
undertake the analysis necessary to
synchronize multiple prescriptions and
coordinate with their prescribers’
offices. Another commenter stated that
beneficiaries can currently synchronize
multiple medications over months, and
that allowing refill-too-soon edits to be
overridden could contribute to fraud,
waste, and abuse. Another commenter
requested additional clarification from
CMS in terms of medications that
beneficiaries are permitted to
synchronize, how many times this may
occur per year, what documentation
would be needed, and what safeguards
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plans may implement at point-of-sale to
review such claims for fraud, waste, and
abuse issues, etc.
Response: Our proposal
acknowledged that Part D enrollees
could take advantage of daily costsharing rates to synchronize multiple
prescriptions on a voluntary basis,
likely with pharmacists playing a role in
assisting them, so we do not believe that
our requirement should be modified
because some enrollees will not take
advantage of it to synchronize their
medications. While beneficiaries may be
able to synchronize medications
currently, they are disincentivized from
doing so under current cost-sharing
structures that generally assume at least
a month’s supply will be dispensed.
Under our revised, simplified
requirement, as described previously,
Medicare Part D sponsors will be
required to provide their enrollees
access to a daily cost-sharing rate for
prescriptions dispensed by a network
pharmacy for less than a 30 days’
supply of covered Part D drugs (unless
an exception applies due to the type of
drug involved), regardless of the reason,
unless fraud is suspected. We believe
that beginning this requirement on
January 1, 2014 will give sponsors
sufficient time to appropriately program
their systems to account for changes to
refill-too-soon and other similar edits.
Despite eliminating the requirement to
apply a daily cost-sharing rate only in
specific circumstances, such as for
synchronization, we note that our policy
does not prevent sponsors from
developing coding requirements or
other internal controls to ensure
pharmacists are not splitting
prescriptions to increase dispensing
fees.
Comment: A commenter requested
that additional information should be
provided on the methodology that will
apply when prescribers take advantage
of our proposal to synchronize the
dispensing dates of multiple
medications, as this would impact the
Adherence Measure in the Patient
Safety Reports because of the different
dispensing dates and alterations in days’
supply of the medications, and classify
a patient as not adherent, which would
affect Star Rating Measures.
Response: Comments about the star
ratings are outside the scope of this
rulemaking, but we do not believe a
daily cost sharing rate requirement
would have any negative impact on our
ability to measure medication adherence
because, for example, if a Part D
enrollee does not return to the
pharmacy for the second fill, he or she
will not be captured in the measure
calculation (which requires at least two
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fills of a drug in the classes measured
for adherence). Also, we account for
multiple fills for the same drug when
the days supply overlap.
Comment: A commenter stated that
our proposal should not apply to
controlled substances because prorating
cost-shares is not permitted. More
specifically, this commenter stated that
multiple prescriptions for the same
controlled substance may not be
permitted under state law, including
post-dating one for future dispense, and
that pharmacists cannot change
quantities dispensed on prescriptions
for controlled substances.
Response: To the extent that
applicable Federal and/or State law
prohibits two prescriptions from being
written simultaneously for the same
medication, a prescription from being
refilled by a physician directly with the
pharmacy, and/or a lesser quantity than
was prescribed from being dispensed,
our requirement would not supersede
such law. Therefore, we have revised
the regulation text so that the daily costsharing rate requirement applies to a
prescription presented by an enrollee at
a network pharmacy for a covered Part
D generic or brand drug that may be
dispensed for a supply less than 30 days
under applicable law.
Comment: A commenter supported
application of our proposal to LTC
dispensing, asserting it would create
consistency in the claims and billing
processes, which could otherwise be
chaotic if inconsistent approaches are
adopted by Part D sponsors. Another
commenter was opposed, stating strong
concerns that LTC pharmacies would
have to expend considerable staff time
and cost creating paper invoices for
extremely nominal amounts and
collecting LIS fees, many of which go
uncollected anyway.
Response: As noted previously, based
on comments received, this requirement
will not begin until January 1, 2014.
However, Part D sponsors can
voluntarily choose to apply a daily costsharing rate in the LTC setting in 2013
or not, or for that matter, in the retail
setting or not. Beginning January 1,
2014, under our revised, simplified
requirement, as described previously,
Medicare Part D sponsors will be
required to provide their enrollees with
access to a daily cost-sharing rate when
the covered Part D drug may be
dispensed by a network pharmacy for
less than a 30 days’ supply (unless an
exception applies due to the type of
drug involved), regardless of the reason,
unless fraud is suspected. Thus, there is
no longer any reference to the LTC
dispensing requirements in the
regulation text. We note that, because
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Part D sponsors must offer a uniform
benefit, we are unable to exempt Part D
enrollees residing in LTC facilities from
the requirement. Moreover, we agree
with the commenter who stated that a
consistent approach among Part D
sponsors in the LTC setting with respect
to cost-sharing is ideal and note that our
requirement does not address when
daily cost-sharing amounts would have
to be collected from LTC beneficiaries.
Thus, LTC pharmacies and facilities
may implement consolidated monthly
cost-sharing collection irrespective of
the cost-sharing methodology assessed
on claims. We also note that the
majority of Part D enrollees in LTC have
no copays.
Comment: A commenter stated that
LTC customers routinely request
synchronization of patient medications
for their residents and asked that we
clarify that the ability to synchronize
refills is available to LTC customers.
Response: Under our revised,
simplified requirement, as described
previously, the ability to synchronize
refills will be available in LTC settings.
Comment: A commenter expressed
support for LIS beneficiaries to continue
making nominal copayments for
prescriptions filled for less than a
month and recommended that we
consider capping total cost-sharing
amounts for such beneficiaries who take
multiple medications, since the
combined cost of daily-cost-sharing
could jeopardize the ability to comply
with such prescription drugs regimens.
Response: Under our requirement, LIS
enrollees would not pay any more in
cost-sharing for a month’s supply of
medication than they would otherwise.
However, we are revising our proposed
definition of ‘‘daily cost-sharing rate’’ to
make this clearer, as indicated by the
underlining later in this final rule with
comment period. Thus, with respect to
copayments, ‘‘daily cost-sharing rate’’ is
defined as ‘‘the established monthly
copayment under the enrollee’s Part D
plan, divided by 30 or 31 and rounded
to the nearest lower dollar amount, if
any, 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 would
otherwise be the case.’’ We have added
the ‘‘if any’’ language specifically in
recognition that some daily cost-sharing
rates may be below $1. We do not have
authority under the statute to cap
aggregate LIS cost-sharing, except as
provided after the out-of-pocket
threshold has been met.
Comment: Some commenters
expressed concern about the effect of
our proposal on the already very low
cost-sharing payments of some Part D
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enrollees. Commenters noted that,
because many plans have cost-sharing
on the preferred generic tier that is
lower than the LIS brand cost-sharing,
our proposal would cause the
copayments of enrollees other than just
LIS enrollees to be nominal, particularly
with respect to generic medications, and
with respect to some dual-eligibles, and
the copayments might even round down
to $0, depending upon on the days
supply prescribed by the prescriber.
Several commenters asserted that
generics should be exempted from our
proposal due to their low-cost-sharing
and the cost associated with dispensing
them. A commenter offered an alternate
proposal for LIS enrollees, which was to
require Part D sponsors to offer a 15
days’ supply for half the normal
copayment since dividing their already
nominal copayments by 30 days could
be impractical.
Response: While we recognize that
generics are generally associated with
low cost-sharing, not all generics may
be, and we believe our requirement
should apply to all medications (unless
an exception applies due to the type of
drug involved). Moreover, the
MaineCare program cited previously
achieved savings even with the
inclusion of generic drugs. We also
remind stakeholders that our
requirement applies to Part D sponsors,
but beneficiaries are not required to
avail themselves of this option.
Therefore, if beneficiaries are not
sufficiently incentivized by the lowered
cost-sharing applicable to a less-thanmonth’s supply of medication, they
presumably will not ask their
prescribers to write a prescription for
less than a month’s supply or their
pharmacists to dispense one. Even if
beneficiaries do ask in some instances,
the volume of unused drugs that must
be discarded will be reduced, even if the
costs are not less. Nevertheless, we
expect this requirement, even as
revised, to be most attractive to
enrollees when their drugs are relatively
more expensive and for maintenance
medications for chronic conditions. We
do not believe that that these nominal
cost-sharing scenarios would occur very
often. However, recognizing that this
requirement may result in nominal costsharing amounts for a less than month’s
supply, or none, if Part D sponsors
choose to round the applicable
copayment down to $0, we have added,
‘‘if any’’ after ‘‘rounded to the nearest
lower dollar amount,’’ in the definition
of ‘‘daily cost-sharing rate.’’ This change
recognizes that, in the case of LIS
enrollees, or other enrollees for that
matter, there will not be a ‘‘lower dollar
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amount’’ when making the calculation
required by the definition if the
‘‘established monthly copayment’’ is
lower than the $30 to $31 range.
Comment: A commenter stated that if
a plan’s preferred generic cost share is
$2, the pro-rated cost share would be
$.46 for a 7 days’ supply of the
medication, which would be rounded
up to $1, so the enrollee would be
paying half the regular cost-share for a
1 week supply.
Response: The commenter is not
correct. Under our proposed definition
of ‘‘daily cost-sharing rate,’’ as applied
to a monthly copayment, $2 would be
divided by 30 (or 31) and then rounded
to the nearest lower dollar amount ($0),
or to another amount (for example,
$0.06), but in no event to an amount
which would require the enrollee to pay
more for a month’s supply than would
otherwise be the case. In other words,
the Part D sponsor can alternatively
choose to round to $0.06 or $0, since
another figure, for instance $0.07, is a
daily cost-sharing rate (or any higher
amount) that, when applied to a 30
days’ supply, would cause the enrollee
to pay $2.10 (or more) for a 30 days’
supply, which is not permitted under
the proposed definition. Thus, the
copayment for a 7-day supply in this
example (based on 30 days being a
month’s supply) would be $0.42 or $0.
We note that this definition also does
not allow for rounding to the higher
dollar amount, as was done in the
example given by the commenter.
However, for further clarity, we have
further revised the regulation text to add
the word ‘‘lower.’’
Comment: Some commenters
requested that we provide more
rounding guidance.
Response: We will consider
addressing rounding in more detail in
guidance, and we will consider
suggestions from the industry as
appropriate in the development of any
such guidance.
Comment: A commenter stated that
including the coinsurance calculation in
the definition of ‘‘daily cost-sharing
rate’’ is incorrect and unnecessary,
because a coinsurance percentage
already applies to the allowed amount
(for example, sum of ingredient cost,
dispensing fee, vaccine administration
fee, and sales tax). A commenter
requested clarification that for drug tiers
using coinsurance, the proposal would
result in no change in the coinsurance
percentage as enrollee cost-sharing
would simply be determined via
mathematics, as well as our
expectations on ‘‘daily cost-sharing
rates’’ for plan designs that include
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coinsurance with a minimum,
maximum, or both.
Response: We agree and have revised
§ 423.100 and § 423.153(b) accordingly
so that, with respect to coinsurance,
‘‘daily cost-sharing rate’’ is defined as
the established coinsurance percentage
under the enrollee’s Part D plan, and so
that it is not multiplied by the days
supply actually dispensed. We also
confirm that coinsurance percentages
would not change under our
requirement, nor would minimum or
maximum coinsurance amounts be
affected, if applicable to an enrollee’s
Part D plan.
Comment: A commenter asked for
clarification on whether 30 or 90 days
should be used to calculate the daily
cost-sharing rate for copayments for Part
D LIS enrollees.
Response: Since a month’s supply is
typically a 30 to 31 days’ supply, the
proposed definition of ‘‘daily costsharing rate’’ is based on a month’s
supply which consists of 30 or 31 days,
regardless of whether the enrollee is an
LIS enrollee or not.
Comment: Several sponsors asked
how dispensing fees would be prorated.
Response: If the dispensing fee is
included in the copayment, it will be
‘‘prorated’’ by virtue of the copayment
being divided under the calculation in
§ 423.100 (definition of daily costsharing rate) to establish a daily costsharing rate in case of a copayment.
With respect to coinsurance, § 423.100
defines the daily cost-sharing rate as the
established coinsurance percentage
under the enrollee’s Part D plan. Thus,
to the extent that the established
coinsurance percentage is applied to the
dispensing fee, the beneficiary will be
liable for the specified coinsurance
percentage of the dispensing fee for each
fill. Therefore, beneficiaries may have a
higher liability under a shorter fill for a
given month if the beneficiary has to
pay his/her share of a dispensing fee
multiple times under a coinsurance
arrangement.
Comment: Several commenters asked
how they should account for daily-cost
sharing in their annual bids.
Response: We believe that Part D
sponsors have the requisite actuarial
expertise to adequately estimate the
potential effects on utilization and costs
generated by our requirement for their
annual bids. Previously, we stated that
our savings assumptions were highly
uncertain, because it is very difficult to
predict beneficiaries’ behavioral
response. However, we were able to
estimate savings based on our data on
first fills for chronic medications that
are not refilled, removing costs
associated with the LTC setting, and
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then making some assumptions about
beneficiaries’ response to the daily costsharing rate requirement, while
accounting for additional dispensing
fees, which we described previously.
We believe sponsors’ actuaries will
undertake a similar analysis to account
for the daily cost-sharing rate
requirements in Part D plan bids.
Comment: A few commenters
requested that a list of drugs excepted
from the daily cost-sharing rate
requirement be provided by CMS or
claims processors.
Response: As we noted previously, we
do not believe our requirement will
cause the need for an exception drug
list. The daily cost-sharing rate
requirement would apply to solid oral
doses of drugs that may be dispensed for
a supply less than 30 days under
applicable law, 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 long-term
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
believe the industry has the expertise to
administer this policy without our
assistance.
Comment: A commenter stated that
certain drug therapies in solid oral
dosage forms are inappropriate for
dispensing in less than 30 days’
supplies, because they take longer to be
effective.
Response: We believe prescribers will
know when writing for a limited days
supply is appropriate and will not do so
when not clinically appropriate.
After consideration of the public
comments received, we are finalizing
our daily cost-sharing rate proposal with
the following modifications previously
noted. Therefore, we have revised the
definition of ‘‘daily cost-sharing rate’’ in
§ 423.100. ‘‘Daily cost-sharing rate’’
means, as applicable, the established—
(1) monthly copayment under the
enrollee’s Part D plan, divided by 30 or
31 and rounded to the nearest lower
dollar amount, if any, or to another
amount, but in no event to an amount
that would require the enrollee to pay
more for a month’s supply of the
prescription than would otherwise be
the case; or (2) coinsurance percentage
under the enrollee’s Part D.
In addition, we will revise § 423.104
by adding a paragraph (i) to state that a
Part D sponsor is required to provide its
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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 will revise
§ 423.153(b) by adding a new paragraph
(4). Paragraph (4)(i) will require a drug
utilization management program to
establish and apply a daily cost-sharing
rate to a prescription presented to a
network pharmacy for a covered Part D
drug that is dispensed for a supply of
less than 30 days, and in the case of a
monthly copayment, multiplied by the
days supply actually dispensed.
Paragraph (b)(4)(i)(A) would limit the
requirement to drugs that are in the
form of solid oral doses and may be
dispensed for a supply less than 30 days
under applicable law. Paragraph
(b)(4)(i)(B) 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
manuals instruction to assist MA
organizations and Part D sponsors in
ensuring the proper and efficient
administration of the Part C and D
programs. In this section, we are
finalizing provisions that 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 6.
TABLE 6—PROVISIONS TO CLARIFY PROGRAM REQUIREMENTS
Part 417
Preamble
Section
II.E.1 ........
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.
Part 422
II.E.2 ........
II.E.3 ........
II.E.4 ........
II.E.5 ........
Subpart
Subpart K
Section
Subpart
417.422
417.432
417.427
Subpart B
N/A ...........
N/A
N/A ...........
N/A ...........
Subpart K
II.E.6 ........
II.E.7 ........
II.E.8 ........
II.E.9 ........
II.E.10 ......
II.E.11 ......
422.60
Subpart
Subpart B
Section
423.56
N/A
N/A ...........
N/A
Subpart C
422.101
N/A ...........
N/A
N/A
Subpart E
422.216
N/A ...........
N/A
N/A
Subpart K
N/A ...........
N/A
N/A ...........
N/A
Timeline for Resubmitting Previously Denied
MA Applications.
Clarification of Contract Requirements for
First Tier and Downstream Entities.
Valid Prescriptions.
N/A ...........
N/A
Subpart K
422.500
422.501
422.502
422.641
422.660
422.501
N/A ...........
N/A
Subpart K
422.504
Subpart K
423.505
N/A ...........
N/A
N/A ...........
N/A
Subpart C
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
1. Technical Corrections to Enrollment
Provisions (§ 417.422, § 417.432,
§ 422.60, and § 423.56)
In our October 11, 2011 proposed rule
we proposed a number of technical
corrections to our enrollment
regulations (76 FR 63056). Specifically
we proposed the following changes:
• At § 417.422(d) (Eligibility to enroll
in an HMO or CMP) and § 417.432(d)
(Conversion of enrollment) we proposed
to remove references to signatures
thereby ensuring that all of our
regulations conform with allowing cost
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plans to utilize alternate enrollment
mechanisms.
• At § 422.60(c) (Election process) we
proposed to revise an outdated crossreference.
• At § 423.56 (Procedures to
determine and document creditable
status of prescription drug coverage) we
proposed to remove an outdated
reference to the Annual Coordinated
Election Period.
We received no comments on these
proposals, and therefore, are finalizing
this provision without modification.
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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
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Act gives the Secretary the authority to
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, and waives
requirements to review such materials.
In our April 2010 final rule (75 FR
19785), in which we discuss extending
MA marketing requirements to cost
contracts, we note that 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. As we specified in
the proposed rule, 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
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 proposed to extend the
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disclosure requirements in § 422.111
and § 423.128 to cost contract plans by
adding a new § 417.427.
Comment: A commenter supported
the provision as specified in the
proposed rule.
Response: We thank the commenter
for its support.
Comment: A few commenters believe
the effective date of 60 days after
publication of the final rule does not
allow enough time for Medicare cost
contract plans to implement the new
requirements and that the requirements
instead should become effective no
sooner than for the 2013 annual election
period (that is, in the Fall of 2012).
Response: Although the provisions of
the rule are effective 60 days after
publication of the rule, the disclosure
requirements are primarily carried out
through the ANOC/EOC, so we would
indeed expect that the disclosure
requirements would be implemented
during the 2013 annual election period
(Fall of 2012), the first such period after
the effective date of the regulations.
Comment: A commenter stated that
changing the ANOC/EOC delivery date
from December 1 to 15 days prior to the
beginning of the annual election period
would not be appropriate for cost
contract plans that include only
Medicare benefits, (that is, no
supplemental benefits). The commenter
stated that CMS may not have released
the applicable deductible amounts for
the following contract year at the time
the ANOC is required to be distributed,
which is a significant issue because
some cost plans mirror Original
Medicare cost-sharing amounts.
Response: We will continue to require
that cost plans not offering Part D send
the ANOC for member receipt by
December 1. It was not our intention to
change this date for cost plans. We will
clarify this in forthcoming plan
guidance. All cost plans offering Part D
must currently follow the MA ANOC
timelines, and must send the ANOC for
member receipt 15 days before the
beginning of annual coordinated
election period.
Comment: A commenter notes that,
contrary to the MA disclosure language
at § 422.111(b)(7), which states that noncontract providers submit claims to the
MA organization, non-contract
providers would submit claims to the
Medicare administrative contractor
(MAC), not the cost contract plan. The
commenter asks that we address this
issue in the regulation by establishing a
waiver process for MA provisions that
do not apply to cost contract plans.
Response: We will clarify in the cost
contract plan EOC that, in most
instances, non-contract providers
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22135
should submit claims to the MAC, and
not directly to the cost contract plan.
Therefore, we do not believe that it is
necessary to establish a general
exceptions process to waive MA
requirements.
After consideration of the public
comments received, we are finalizing
the policy without modification.
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
apply only to 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 proposed 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
extending the RPPO rules to LPPOs.
Specifically, we proposed to clarify the
application of the single deductible
differential for in-network services and
modify 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 proposed 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
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beneficiaries when they evaluate and
select plans for enrollment. In previous
rulemaking, we took 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 proposed 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 later in this section.
As discussed previously, we proposed
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 proposed 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
to the overall, single plan deductible;
and
• Choose to exempt, that is, exclude,
specific plan-covered items or services
from the deductible. That is, the LPPO
or RPPO may choose to always cover
specific items or services at planestablished cost-sharing levels
regardless of whether 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 in-network
physician services to $100. This LPPO
or RPPO could also choose to exclude
particular in-network services from
application of the deductible altogether;
for example, all in-network home health
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services would not be subject to the
deductible.
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). Therefore, we will now
require both LPPO and RPPO plans to
exclude preventive services from the
single deductible at § 422.101(d)(1), and
will add a new paragraph
§ 422.101(d)(1)(iv) that explicitly
requires LPPO and RPPO plans to
exclude certain Medicare-covered
preventive services (as defined in
§ 410.152(l)) from the single, combined
deductible.
Comment: A commenter supported
CMS’ proposed clarification of the rules
for RPPO plans with a deductible.
Response: We thank the commenter
for its support.
After consideration of the public
comment received, we are finalizing the
proposed clarifications of the RPPO
deductible and extension of deductible
rules to local PPO plans without
modification.
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
Explanation of Benefits (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 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
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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
proposed—in our October proposed
rule—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 of the
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 proposed 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.
We did not receive any comments on
this provision in the proposed rule;
therefore, we are finalizing this
technical change as proposed.
5. Application Requirements for Special
Needs Plans (§ 422.500, § 422.501,
§ 422.502, § 422.641, and § 422.660)
Section 1859(f) of the Act and its
implementing regulations specify
several requirements for Special Needs
Plans (SNPs). MA organizations that
would like to offer a SNP are required
to engage in an intensive application
process to demonstrate that they meet
these SNP specific requirements,
including the requirement in
§ 422.101(f) that MA organizations
offering a SNP implement an evidence
based model of care (MOC) to be
evaluated by NCQA; the requirement in
§ 422.107 that Dual Eligible SNPs (D–
SNPs) have a contract with the State
Medicaid Agencies in the States in
which they operate; and the
requirement in § 422.152(g) that SNPs
conduct a quality improvement
program. SNP applicants follow the
same process in accordance with the
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same timeline as applicants seeking to
contract as MA organizations.
Accordingly, we proposed to broaden
the regulations on Medicare Advantage
(MA) Application Requirements and
Evaluation and Determination
Procedures, in accordance with section
1859(f) of the Act, to apply to SNP
applicants. Specifically, we proposed 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 proposed to add paragraph (iii) to
§ 422.501(c)(1) to specify the
documentation SNP applicants must
provide to complete an application.
Furthermore, we proposed 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 proposed
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 proposed
adding a new paragraph (d) to § 422.641,
a new paragraph (a)(5) to § 422.660, and
a new paragraph (b)(5) to § 422.660. We
believe these proposed changes will
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.
Comment: Commenters expressed
their support for our proposals to ensure
that SNP applicants have the same
rights and responsibilities as other MA
contract applicants. A commenter
specifically noted its support for
consistent rules for all MA options.
Response: We appreciate the
commenters’ support for this provision,
which makes the rules and appeal rights
for SNP applicants consistent with the
rules governing the MA contract
application and appeals process.
Comment: A commenter
recommended that we add language to
our application regulations to ensure
that an entity that has applied as a SNP
is presumed to have applied as an MA
plan. The commenter thought that such
language would be necessary so that the
MA organization could operate an MA
plan in the event that the MA
organization is not able to meet the SNP
application requirements necessary to
operate a SNP.
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Response: It has been CMS’
longstanding policy that, in order to
offer a SNP, an MA organization must
also apply and be approved to offer an
MA Coordinated Care Plan (CCP) in the
service area in which it would like to
offer a SNP. (Please note that a prior
year’s MA application approval is
sufficient to meet this requirement. The
plan is not required to submit a new MA
application if it has been previously
approved to offer a CCP in the service
area in which it is applying to offer a
SNP.) Accordingly, if an approved MA
organization’s SNP application is
denied, the plan is nonetheless still
authorized to bid to offer an MA plan
for the upcoming contract year. If an
MA organization is applying to offer an
MA CCP that is also a SNP, and the SNP
application is denied, the MA
organization’s MA application must still
be approved. As such, the language
requested by the commenter will not be
added to the regulatory text and we will
finalize the policy without modification.
Comment: A commenter requested
that we modify our substantive
regulations on the SNP MOC approvals
to specify that SNPs can be approved for
multiple years. Another commenter
encouraged CMS to provide States with
operational support and regulatory
guidance regarding the D–SNP State
contract requirements.
Response: While we appreciate these
suggestions, the MOC approval
regulations and D–SNP State contract
requirements are outside the scope of
this regulation. We will consider these
suggestions as we develop future
rulemakings and guidance.
After review of the public comments,
we are finalizing our proposal without
modification.
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 all
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
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obsolete and inconsistent with current
agency practices, as we presently
operate on an annual application cycle.
In order to align § 422.501 with current
procedures, we proposed 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 was previously denied in the
current contract year’s application
cycle.
Comment: A commenter
recommended that if a SNP application
is denied, the plan should be presumed
to have applied for an MA plan; thus,
if the application meets MA
requirements, the plan will not have to
reapply as such.
Response: We have addressed the
commenter’s concern that a SNP
application shall be presumed to be an
MA application and approvable if it
meets the MA requirements in the
comment and response for our provision
on applications for SNPs in section
II.E.5. of this final rule with comment
period.
Comment: The commenter also
expressed its support for extending
appeal rights to denied SNP
applications.
Response: SNP application
requirements and appeal rights are
outside the scope of this provision.
After consideration of the public
comments received, we are finalizing
the policy without modification.
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
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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
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 MA organizations 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
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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 proposed 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 proposed
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.’’
Comment: An MA organization
expressed its concern about the use of
the term ‘‘contract’’ throughout the
proposed regulatory change. The
organization noted that the term was too
narrow and appeared to exclude less
formal arrangements that sponsors use
to meet their Part C and D obligations.
For example, some organizations use
related parties (for example, another
subsidiary of their parent organization)
to perform delegated functions and
those relationships may be governed by
something other than a contract.
Response: We believe that the term
‘‘contract’’ best expresses the nature of
the arrangements sponsors must have in
place to meet the requirements of
§ 422.504(i) and § 423.505(i). Therefore,
we are retaining the proposed language
in the final rule. Nonetheless, we
acknowledge that organizations may
meet the requirements through the use
of documents that may not be expressly
labeled as ‘‘contracts.’’ These may
include letters of agreement or
intercompany agreements. Sponsors
must simply make certain that the
documents they use to memorialize the
functions delegated to their first tier,
downstream, or related entities contain
language that clearly describes an
enforceable set of plan sponsor rights
and subcontractor obligations to the
sponsor, regardless of whether the
sponsor is a party to the agreement.
Comment: An MA organization asked
that CMS provide more information
about the deficiency that led to the
application denial discussed in the
proposed rule.
Response: More discussion of the
facts of the application denial appeal is
provided in the CMS Hearing Officer’s
opinion, In the Matter of Stonebridge
Life Insurance Company, Inc., Denial of
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Application, S3502, Docket No. 2010 C/
D App. 7. The opinion is posted on the
CMS Web site at https://www.cms.gov/
Medicare-Advantage-Prescription-DrugPlan-Decisions/downloads/
2010_CD_App_7.pdf.
Comment: A commenter requested
that CMS clarify that sponsors are not
required to directly monitor the
performance of all downstream entities
to which they have delegated functions
but with which they do not directly
contract.
Response: The commenter is
technically correct that the regulations
only require that the contracts that
govern the delegated functions among
the sponsor’s first tier, downstream, and
related entities contain provisions
expressly granting the sponsor the
authority to perform oversight of the
activities of the subcontractors. The
regulations do not require the sponsor to
exercise that authority. That said, we
remind sponsors that the Part C and D
regulations require them to adopt and
implement an effective compliance
program which provides for, among
other things, the sponsor to establish an
effective system for monitoring and
auditing its first tier and downstream
entities to ensure their compliance with
our requirements. We encourages all
sponsors to review their compliance
program activities to make certain that
their methods for oversight of their
subcontractors are effective in holding
them accountable for Part C and D
functions performed on the sponsors’
behalf.
Comment: A commenter requested
that CMS provide model contracting
language that meets the subcontracting
requirements discussed in the proposed
provision.
Response: The arrangements between
a plan sponsor and its first tier,
downstream and related entities are
subject to considerable variation from
sponsor to sponsor. Accordingly, the
contracts governing the arrangements
must be tailored to reflect their
particular features. For example, some
arrangements may require a unique
contract where the plan sponsor is
specifically named in the document
while others can be served through a
contract template used by a
subcontractor that serves multiple plan
sponsors and the sponsors are identified
by proper reference to another
document. We believe that it would be,
at best, not useful for CMS to provide
model language and at worst,
counterproductive as it could create the
temptation for sponsors to use the
model language in their contracts when
a specially-tailored set of terms is
needed to properly govern their unique
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arrangements and to meet the Part C and
D program requirements.
Comment: A commenter requested
that CMS require MA organizations to
provide to their first tier and
downstream entities a copy of the
organization’s Part C contract with CMS.
The commenter stated that such a
requirement would be useful to
subcontractors perform their delegated
functions in a manner consistent with
the MA organization’s contract with
CMS.
Response: The subject of this
comment is technically outside the
scope of our proposal. However, we
note that our contracts with Part C and
D sponsors consist of uniform terms and
conditions for each type of plan
offering. Therefore, we have already
responded to this request by posting on
our Web site all of the current Part C
and D contract templates.
Subcontractors can now obtain the
Medicare plan sponsor contact terms
and conditions directly from CMS.
After consideration of the public
comments received, we are finalizing
the policy without modification.
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 proposed in our October
NPRM 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 proposed, first, to add a definition
of the term ‘‘valid prescription’’ to
§ 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 underscore, as we did in the
proposed rule, 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
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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 proposed 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 discussed
previously, 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 final
rule with comment period (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 with information
that could be essential to identifying
and prosecuting the particular
individuals committing or abetting
fraud, waste, or abuse. Accordingly, we
once again would like to take 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.
Comment: A few commenters
indicated they supported or agreed with
the provision.
Response: We appreciate the
commenters’ support of this codification
of our long standing policy.
Comment: A few commenters
questioned whether the proposed
regulation would change existing
responsibilities and asked CMS to
provide additional guidance. A
commenter first pointed out that
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22139
pharmacies, not plans, are required by
State pharmacy laws to ensure that
prescriptions meet minimum State
requirements and should not be held
accountable if a pharmacy fails to fill a
prescription pursuant to applicable
laws. The commenter then requested
that CMS (1) ‘‘reiterate’’ that pharmacies
must ensure that prescriptions are valid;
and (2) direct pharmacies to ensure that
CMS mandates like NPIs are included in
prescription claims sent to plans.
Response: This regulation does not in
any way preempt existing State
requirements or create new Federal
requirements. Rather, our codification of
longstanding policy merely specifies in
regulation that applicable State law
applies in determining whether a
prescription is valid. Therefore, we
disagree with the commenter’s
suggestion that our policy takes any
position with respect to which parties
are responsible for ensuring
prescriptions are valid under applicable
State law—the parties should look to
applicable State law on that issue.
However, we would like to note, as has
always been the case, that it is up to
each Part D sponsor to determine
through its contracting management
how to best ensure that its network
pharmacies are complying with the Part
D requirement that prescriptions be
valid under applicable State law.
Comment: Several commenters asked
CMS to clarify the limits on audits as
related to this proposal. One of these
commenters believed that prescriptions
cannot be audited using more strict
guidelines than State law requires and
requested that CMS instruct sponsors to
stop ‘‘egregious audit practices’’ against
pharmacies for violations of
requirements not found in State law.
Requesting that CMS clarify that LTC
pharmacies being audited should not be
required to produce documentary proof
of prescriptions under applicable State
laws, another commenter expressed
concern that LTC pharmacies would not
be able to provide sponsors, auditors,
and/or CMS with such proof valid
under State law because such
prescriptions are typically kept with
patient charts at the LTC setting.
Response: As discussed previously,
our proposal was intended to codify our
longstanding policy that applicable
State law applies in determining what
constitutes a valid prescription and that
Part D benefits should be available only
for otherwise covered drugs that are
dispensed upon a valid prescription. We
did not propose rules governing the
conduct of audits by any entities—
including plan sponsors.
Comment: A commenter appreciated
that CMS encouraged States to require
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individual NPIs for valid prescriptions.
But, after observing that no States
required NPIs for valid prescriptions,
the commenter indicated that
pharmacists would be challenged by a
large number of prescriptions lacking
appropriate NPIs.
Response: For a response addressing
this issue, please see section II.E.11 of
this final rule with comment period
(Access to Covered Part D Drugs
Through Use of Standardized
Technology and National Provider
Identifiers).
We are finalizing this provision
without modification.
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
(individuals as specified with multiple
chronic diseases, taking multiple
covered Part D drugs, and likely to incur
certain annual Part D drugs costs),
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 as part
of the MTM services furnished to
targeted beneficiaries to offer, at a
minimum, an annual comprehensive
medication review (CMR) that must 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.
As we reiterated in the preamble to
the October 11, 2011 proposed rule, we
first explained in our April 2011 final
rule (75 FR 21476 through 21478) that
beneficiaries residing in long term care
(LTC) facilities who have cognitive
impairments may not be able to
participate in CMRs. The current
regulations at § 423.153(d)(1)(vii)(B),
which were amended in the April 2011
final rule to reflect certain requirements
of the Affordable Care Act, continue to
exempt sponsors from offering
interactive, person-to-person
consultations to targeted beneficiaries
who reside in LTC settings. However,
the Act, as amended by section 10328 of
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the Affordable Care Act, does not
provide a basis for creating an exception
to the requirement to offer a CMR based
on the setting of care. Since the
Affordable Care Act provision for MTM
programs was not effective until January
1, 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.
In the October 11, 2011 proposed rule,
we proposed 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 a CMR
without the beneficiary. When the
beneficiary is cognitively impaired and
cannot make decisions regarding his or
her medical needs, we recommended
that the pharmacist or qualified
provider reach out to the beneficiary’s
prescriber, caregiver, or other
authorized individual, such as the
resident’s health care proxy or legal
guardian, to take part in the
beneficiary’s CMR.
Comment: Several commenters
questioned how to determine whether a
beneficiary residing in an LTC setting is
cognitively impaired or able to
participate in the CMR and suggested
that this determination should be made
by or coordinated with the LTC facility
or LTC consultant pharmacist. One of
these commenters questioned if
documentation of this determination
should be maintained and another
suggested revising the Part D reporting
requirements to require Part D sponsors
to report the beneficiaries who opted
out of the CMR due to cognitive
impairment.
Response: We agree that LTC
consultant pharmacists are positioned to
help plan sponsors work with the LTC
facility staff to identify cognitively
impaired beneficiaries in LTC settings
and determine whether beneficiaries are
capable of participating in a CMR. We
recommend that plan sponsors
coordinate with LTC consultant
pharmacists to make these
determinations. If asked, plan sponsors
should be able to present
documentation or a rationale for these
determinations. Any changes to the Part
D reporting requirements are outside the
scope of this regulation.
Comment: A few commenters are
opposed to the proposed policy, and a
commenter argued that the CMR
requirement in the LTC setting should
be the responsibility of the LTC facility,
not plan sponsors, because LTC
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facilities are paid to provide care to
their patients and have their own
physicians and pharmacists who order
and fill the drugs.
Response: The statute specifies that
‘‘prescription drug plan sponsors shall
offer medication therapy management
services to targeted beneficiaries’’ and
requires interventions ‘‘to increase
adherence to prescription medications
or other goals deemed necessary’’ and
includes at a minimum ‘‘an annual
comprehensive medication review
furnished person-to-person or using
telehealth technologies.’’ Further, the
Act, as amended by section 10328 of the
Affordable Care Act, does not provide a
basis for distinguishing the offering of a
CMR based on the setting of care.
Comment: Several commenters urged
CMS that in order to maximize the
efficient use of healthcare resources, the
CMR should be performed in the LTC
setting by an LTC consultant pharmacist
or that plan sponsors should coordinate
with the consultant pharmacists
performing monthly drug regimen
review (DRR) before intervening to
resolve potential medication-related
problems identified through the CMR or
other MTM services. Other commenters
requested clarification and additional
guidance on the pharmacist or other
qualified provider who will perform the
CMR on behalf of the targeted
beneficiary in LTC settings and how this
would be implemented. Another
commenter questioned if the pharmacist
or other qualified provider performing
the CMR is permitted to be employed by
the sponsor or its Pharmacy Benefits
Manager (PBM) and if it is common for
the MTM provider to be the PBM, and
not the plan sponsor.
Response: Sponsors may utilize inhouse resources or make arrangements
with other resources (such as PBMs,
MTM vendors, or individual
pharmacists or other qualified
providers) to provide MTM services and
administer their MTM program to
targeted beneficiaries. We agree that
LTC consultant pharmacists would be a
valuable resource for the delivery of
CMRs to targeted beneficiaries in LTC
settings, and also acknowledge that the
potential overlap between the DRR
reviews required in LTC settings and
Part D MTM reviews could possibly
result in conflicting reviews. To
maximize efficient use of healthcare
resources, we encourage plan sponsors
to consider making arrangements that
include the LTC consultant pharmacist
in conducting Part D MTM services for
targeted beneficiaries in LTC. Such
arrangements could include direct
contracts between the sponsor and
consultant pharmacists (or their
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intermediaries), or indirect contracts
between the sponsor’s MTM vendor or
PBM and LTC consultant pharmacists
(or their intermediaries). We would like
to hear from any parties who may
currently be doing this and how such
arrangements have improved care
coordination or created efficiencies. You
may contact CMS at
partd_mtm@cms.hhs.gov.
Comment: A commenter argued that
when the targeted beneficiary in the
LTC setting is unable to participate in
the CMR, there should be an exemption
from the CMR standardized format
requirements.
Response: Section
423.153(d)(1)(vii)(D) of the regulations
requires standardized format action
plans and summaries that comply with
requirements as specified by CMS for
the standardized format, to be provided
following each CMR. This applies
whether the CMR is provided to the
beneficiary, or to the authorized
representative or prescriber who may
take part in the CMR if the beneficiary
cannot participate. If the commenter
meant to suggest that no written
summary be provided, we would
respond that the need for a CMR is
certainly no less vital when individuals
are cognitively impaired and these
summaries can serve to coordinate care.
Comment: A few commenters
suggested that CMS consider alternative
approaches to disseminating MTM
recommendations in the LTC setting by,
for instance, providing: (1) The findings
or recommendations related to drug
therapy to the attending physician and/
or nursing staff at the LTC facility; (2)
CMR written summaries and
standardized action plans to the LTC
facility; or (3) medication review results
to the beneficiary’s medical power of
attorney, if applicable.
Response: We appreciate these
recommendations. Plan sponsors and
MTM providers may, but are not
required to, provide copies of the CMR
written summaries and medication
action plans to other HIPAA-covered
entities to coordinate care. Also, a
HIPAA covered entity may share a
beneficiary’s health information (such
as medication review results) with the
beneficiary’s personal representative,
which includes a person with medical
power of attorney, where that
information is relevant to such personal
representation.
Comment: Several commenters
focused on outreach to individuals to
participate in the CMR aside from the
targeted beneficiary. A commenter
suggested that, even when the
beneficiary can participate, the provider
conducting the CMR still should be able
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to reach out to individuals, such as the
family caregiver, other authorized
individual, and beneficiary’s prescriber,
to participate in the CMR. A few
commenters suggested that when
impairment prevents a targeted LTC
beneficiary from participating in the
CMR, CMS should require the provider
arranging the CMR to provide written
notice to the individual’s health care
proxy or legal representative, while
another asked whether telephone or
mail contact was acceptable. Another
commenter recommended that if the
targeted beneficiary in the LTC setting is
unable to participate, the caregiver or
surrogate should be engaged first, and
then the prescriber, to ensure that the
patient’s best interests are protected.
Response: While we certainly
appreciate an approach that would
allow the beneficiary to be joined by, for
instance, family members for a CMR, we
believe it best, when a beneficiary is
able to participate, to leave the decision
as to whom he or she wishes to invite
to his or her discretion. In these
instances the pharmacist or other
qualified provider may ask the
beneficiary for permission to invite
other individuals to the CMR. As to the
form of the outreach, sponsors are
responsible for choosing the outreach
method, and are expected to use more
than one approach when possible to
reach all eligible targeted beneficiaries,
regardless of setting, so they are able to
receive MTM services and a CMR versus
only reaching out via passive offers.
These expectations also apply to any
outreach to a beneficiary’s prescriber,
caregiver, or other authorized
individual. Lastly, we do not believe it
would be appropriate to burden the
pharmacist or qualified provider
arranging the CMR by specifying the
order in which to contact individuals to
represent a beneficiary who cannot
participate in the CMR. This decision
should be at the discretion of the
provider and is dependent on the
individual beneficiary’s needs and
situation.
Comment: A commenter
recommended that CMS recognize that
MTM services focused on the use of the
most appropriate and cost-effective
medications should be the primary goal
of MTM in the LTC population.
Response: This comment is outside
the scope of this rulemaking, and
therefore, we will not address it in this
rule.
Comment: A few commenters
suggested that beneficiaries in other
settings may be cognitively impaired or
unable to participate in the CMR (such
as hospice patients, beneficiaries being
cared for in an assisted living facility, or
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22141
at home) and the proposed rule should
not be limited to targeted beneficiaries
in the LTC setting.
Response: Targeted beneficiaries in
other health care settings are not
excluded from the Part D MTM
requirements, and must be offered MTM
services if eligible. The proposal to
eliminate the exception to the
requirement to offer a CMR for
beneficiaries residing in LTC settings
was necessary in order to bring the
existing regulation into compliance with
requirements of section 10328 of the
Affordable Care Act. Accordingly, the
proposed revisions to the language of
§ 423.153(d) would require Part D
sponsors to offer CMRs to all targeted
beneficiaries in all settings. We
acknowledge that beneficiaries in
settings other than LTC may suffer
cognitive impairments. Therefore, we
encourage MTM programs to adopt
similar approaches to furnishing MTM
services to these beneficiaries who may
be unable to accept an offer of a CMR
and recommend outreach to the
beneficiary’s prescriber, caregiver, or
other authorized individual.
Comment: A commenter questioned
whom the plan sponsor can contact to
act on behalf of the beneficiary if a call
to an LTC facility results in the plan not
being able to reach a beneficiary. The
commenter questioned if the plan
sponsor should assume that the
prescriber and/or LTC consultant
pharmacist on staff can be called and a
CMR can be completed.
Response: We recommend that when
a targeted beneficiary moves to an LTC
facility, Part D plan sponsors should
identify the appropriate contact for each
beneficiary, which could be the
prescriber, caregiver, or authorized
representative. Alternatively, sponsors
could include this requirement in any
arrangements that may be made with the
LTC consultant pharmacist in the
conduct of Part D MTM services.
Comment: Several commenters
requested clarification about
distinguishing services provided
through the existing LTC consultant
pharmacist monthly DRR and those
required for targeted LTC beneficiaries
through Medicare Part D MTM and
commented that the efforts are
duplicative. Some commenters
suggested that plan sponsors should rely
on the consultant pharmacists’ review
or, alternatively, sponsors should not be
required to conduct CMRs for
beneficiaries in the LTC setting.
Response: As mandated by section
10328 of the Affordable Care Act,
sponsors are required to offer CMRs to
all targeted beneficiaries, including
those in LTC settings. While there is
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some potential overlap between the LTC
consultant pharmacist monthly DRR
and MTM required for targeted LTC
beneficiaries through Part D, Part D
sponsors remain subject to the
requirement to furnish MTM services to
all targeted beneficiaries consistent with
section 1860D–4(c)(2) and the
regulations at § 423.153(d). Thus,
services required for MTM, such as
offering a CMR, which must include an
interactive, person-to-person, or
telehealth consultation, are required for
all targeted beneficiaries, including
those in LTC settings. In light of the
potential overlap, and to maximize
efficient use of healthcare resources, we
encourage plan sponsors to consider
making arrangements that include the
LTC consultant pharmacist in the
conduct of Part D MTM services for
targeted beneficiaries in LTC settings.
We will provide guidance on the
implementation of the MTM
requirements and set service level
expectations where necessary.
Comment: Several commenters felt
that the recommendation that MTM
providers reach out to the beneficiary’s
prescriber, caregiver, or other
authorized individual to participate in
the CMRs is administratively
burdensome and costly given that plan
sponsors cannot easily identify the LTC
resident’s health care proxy or
authorized representative, or primary
care physician (and their contact
information), and question if this
contact information is consistently
captured or reported.
Response: As indicated in an earlier
response, we recommend but do not
require that when a beneficiary moves
to an LTC facility, Part D plans identify
the appropriate contact for each
beneficiary, which could be the
prescriber, caregiver, or authorized
representative. Alternatively, sponsors
could include this requirement in any
arrangements that may be made with the
LTC consultant pharmacist regarding
the conduct of Part D MTM services.
LTC consultant pharmacists are
positioned to help plan sponsors work
with LTC facility staff to identify the
resident’s authorized representative or
prescriber, particularly in cases where
this information is not part of the Part
D enrollment information. We
recommend that plan sponsors
coordinate with LTC consultant
pharmacists to obtain this information.
Comment: A few commenters
requested clarification to distinguish
between an interactive and noninteractive CMR and how it differs from
the current MTM and interactive CMR
processes.
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Response: The October 11, 2011
proposed rule inappropriately referred
to ‘‘non-interactive CMRs.’’ By
definition, a CMR is an interactive
consultation with the beneficiary or an
authorized individual, such as their
prescriber or caregiver, to review the
beneficiary’s medications and must be a
real-time interaction. Per the regulation
at § 423.153(d)(1)(vii)(B)(i), the annual
comprehensive medication review with
written summaries must include an
interactive, person-to-person, or
telehealth consultation performed by a
pharmacist or other qualified provider.
While providers are required to offer a
CMR to all beneficiaries, regardless of
setting, in the event the beneficiary is
cognitively impaired, the MTM provider
is encouraged to reach out to other
appropriate parties to participate in a
CMR. However, in the event the MTM
provider is unable to identify another
individual who is able to participate in
the CMR, or a beneficiary in any setting
refuses to participate in the CMR, a
CMR cannot be performed, but sponsors
are required to perform targeted
medication reviews at least quarterly
with follow-up interventions when
necessary and perform prescriber
interventions. To make the distinction
clear, we are adding the word
‘‘comprehensive’’ before ‘‘medication
review’’ in § 423.153(d)(1)(vii)(B)(2). We
are also revising
§ 423.153(d)(1)(vii)(B)(2) to remove the
reference to beneficiaries residing in
LTC settings and to state that if a
beneficiary is offered the annual CMR
and is ‘‘unable to’’ accept the offer to
participate, the pharmacist or other
qualified provider ‘‘may’’ perform the
CMR ‘‘with the beneficiary’s prescriber,
caregiver, or other authorized
individual’’ to clarify that a CMR is
voluntary and that a CMR cannot be
performed without participation by the
beneficiary, or an individual authorized
to represent the beneficiary.
Comment: A commenter requested
that we delay implementation due to
potential bid and cost implications that
would impact contract negotiations with
LTC facilities or even the pharmacy
providers for LTC facilities.
Response: We cannot delay
implementation of this requirement
because the statute mandates that we
implement section 10328 of the
Affordable Care Act by January 1, 2013.
Additionally, sponsors were put on
notice regarding this deadline in our
April 2011 final rule in which we stated
our plans to undertake additional
rulemaking to clarify the CMR
requirements for targeted beneficiaries
in LTC settings. However, we thank the
commenter for highlighting that we
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incorrectly stated in the proposed rule
that we did not anticipate any costs
associated with this change. This was an
oversight, and we have revised the
regulatory impact and estimate to
acknowledge that there will be a modest
increase in costs to offer CMRs to
beneficiaries residing in LTC settings
with written summaries in a
standardized format that complies with
the requirements specified by CMS.
After consideration of the comments
received in response to this final rule
with comment period, we are adopting
the revisions to § 423.153(d)(1)(vii)(B) as
proposed with the clarifying changes
discussed previously. The revisions will
become effective January 1, 2013.
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). Both employers/
unions that contract directly with CMS,
as well as PDP sponsors that contract
with employers/unions and CMS, may
offer customized employer group PDPs
which are referred to collectively as
employer/union-only group waiver
plans (EGWPs). 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 employment-based retiree
health coverage in a manner similar to
that in which they apply to an MA plan
in relation to employers, including
authorizing the establishment of
separate premium 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
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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
proposed to revise § 423.458 by adding
a new paragraph (paragraph (c)(3)) 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.
Comment: While supporting the
clarification, a commenter opined that
significant operational challenges exist
for EGWPs as they try to meet Part D
requirements in areas including
enrollment, formulary requirements,
and transition fill policy. The
commenter requested that CMS
establish a forum and process for
stakeholders such as EGWPs and
employer groups to raise these issues
and re-evaluate the current Part D
requirements in consultation with
stakeholders. In calling for transparency
and efficiency, it further requested that
CMS publish the outcome of waiver
requests.
Response: We thank the commenter
for the support and appreciate that
EGWPs and EGWP sponsors face unique
operational issues. We have already
established a forum for stakeholders to
raise Part C and D concerns—the
biweekly Part C & D user call—and we
would welcome any questions or
concerns that EGWPs, EGWP sponsors,
employer groups, or other interested
stakeholders might care to raise.
Stakeholders can email inquiries to the
Part C & D user call at
PartDBenefitImpl@cms.hhs.gov.
As to the suggestion that we publish
the outcome of waiver requests, Chapter
12 of the Prescription Drug Benefit
Manual (and Chapter 9 of Medicare
Managed Care Manual) describes
approved waivers current as of the date
of publication; we also post Part D
waivers when approved by CMS
through HPMS. We will take the
suggestion to publish requests for
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waivers that are denied under
consideration.
We are finalizing the provision as
proposed with one modification. In
§ 423.458, the new paragraph will be
designated as paragraph (c)(4) instead of
(c)(3).
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 a prescriber identifier 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)
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, we signaled 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’’) 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,
including 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.
Not only can all practitioners who are
authorized to prescribe Part D drugs
under applicable U.S. State laws acquire
an NPI from HHS, but most are required
to do so. 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,
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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 May 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 (January 23, 2004, 69 FR
3445). 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 discussed in greater detail later in
this section of the final rule with
comment period. In addition, for those
health care providers who do not
already have an NPI, obtaining one is
not a burdensome endeavor and is free
of charge.
As a measurable indicator,
approximately 90 percent of Medicare
Part D claims as reported in 2011
prescription drugs events (PDEs)
submitted to CMS contain valid
individual prescriber NPIs—a uniform
identifier—even though CMS permits
alternate prescriber IDs at this time.
However, while the vast majority of
Medicare Part D claims contain
individual NPIs as of coverage year
2011, 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.
The consistent use of a single
validated identifier would enable us to
provide better oversight over possible
fraudulent activities. 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 default,
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 crossreference 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 pre-analysis and also would
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introduce potential errors in correctly
matching prescribers among databases.
In light of the foregoing, we proposed
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.
We also proposed 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 (POS), in order not to
impede Medicare beneficiary access to
needed medications. In other words, we
proposed that Part D sponsors may not
reject pharmacy claims at point of sale
without prompt follow-up to ensure that
the claim has been resubmitted by the
network pharmacy with a corrected and
valid individual prescriber NPI, or new
information has been otherwise received
to correct the sponsor’s information.
Our proposal meant 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, such as a
prescription 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.
We reminded Part D sponsors that the
requirements proposed were on
sponsors, whose responsibility it would
be to submit PDEs to CMS with
individual prescriber NPIs. Therefore,
we stated that we would expect that
network pharmacies will be permitted
to correct any invalid data before
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payment for a claim is reversed, if the
contract allows such a reversal.
Additionally, we stated that we would
expect that any requirement by a plan
sponsor or its contracted PBM on 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. For the reasons
discussed in the following comment and
response section, in response to
comments, we are modifying the
regulation text to better accomplish
these policy goals.
With respect to requests for
reimbursement submitted directly by
Medicare beneficiaries, we proposed
that requests for reimbursement from
Medicare beneficiaries be handled in
the same manner by Part D sponsors as
claims from pharmacies. Thus, we
proposed that sponsors may not make
payment to the beneficiary dependent
upon the sponsor’s acquisition of an
active and valid individual prescriber
NPI, unless there is an indication of
fraud. If the sponsor is unable to
retrospectively acquire an active and
valid NPI in connection with a request
for reimbursement submitted by a
beneficiary, we proposed that the
sponsor may not seek recovery of the
payment from the beneficiary solely on
that basis, unless there is an indication
of fraud.
We had 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 our
proposal was thus responsive to those
observations. In addition, some
pharmacy representatives have offered
that certain States require or accept
other prescriber identifiers, which
impedes 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. Therefore, we
sought 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. We did not
receive any such comments.
We stated that 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,
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which is a provider credentialing
process. Thus, we were 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 three page
application form that primarily seeks
only identifying and location
information and is free of charge. We
stated that since we know that
prescribers will also be concerned about
beneficiary access to medications, we
believed 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
stated our understanding 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 stated our belief 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 in contrast to our proposal with
respect to domestic prescribers, we did
not propose to require Part D sponsors
to cover claims involving foreign
prescribers without an active and valid
individual prescriber NPI. 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 proposed an exception
to our proposal that the sponsor must
pay an otherwise payable 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, we proposed a
Part D sponsor could reject a claim
involving a foreign prescriber who does
not have an NPI at point-of-sale without
additional follow-up requirements.
In fact, in light of our lack of
jurisdiction over foreign prescribers and
our motivation to conduct better
oversight over possible fraudulent
activities, we stated that we were
considering whether the proposal with
respect to foreign prescribers was broad
enough and whether we should instead
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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. We noted that we
were not making such a proposal, but
solicited specific comments on foreign
prescribers and the Part D program.
However, we received no comments on
this alternative to the foreign prescriber
issue, and therefore we are finalizing
our original proposal as to foreign
prescribers.
Comment: Some commenters
acknowledged the need for a single,
validated prescriber identifier on PDEs.
A commenter elaborated that our
proposal would streamline prescriber
identifier validation and enhance the
ability to more effectively track and
validate prescription activity at the
individual prescriber level, which will
assist in the identification of potentially
fraudulent or inappropriate claims, as
well as in improve the quality of
patients’ therapeutic outcomes.
Response: We agree with these
comments. In addition to assisting us,
we believe our proposal will result in a
more streamlined prescriber validation
process for Part D sponsors, PBMs, and
network pharmacies. Routine use of a
single identifier will minimize
validation costs and efforts for all
entities that collect, review and utilize
this data.
Comment: Some commenters
reiterated our observation that not all
prescribers have to obtain an NPI and
use it, in particular medical interns and
residents, and these commenters stated
that interns and residents have often
used group or supervisor NPIs on
prescriptions. Other commenters stated
it was unfair for Part D sponsors to
shoulder the burden of claims for which
there is not an active and valid
prescriber NPI. Another commenter
stated conversely that, due to the
standards described in the CY 2012 Call
Letter regarding prescriber identifiers,
nearly all claims submitted by
pharmacies to Part D sponsors will
contain prescriber NPIs by 2013.
Response: As part of our observations
in the proposed rule, we stated that we
believe there are actually very few
prescribers who either do not have, or
would be unwilling to obtain, an
individual NPI that they will disclose to
Part D sponsors and/or their network
pharmacies who need it for standard
transactions in order to facilitate their
Medicare patients’ access to needed
medications. Moreover, nothing
prevents a sponsor from requesting a
prescriber to obtain and disclose an NPI
to facilitate a delayed submission of a
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PDE. Nevertheless, other strategies are
being explored which would require
prescribers who are not currently
required to obtain NPIs to be required to
obtain them. We agree with the
commenter that there will be very few
instances in which a Part D sponsor
would not be able to submit a PDE to
CMS due to the lack of an active and
valid individual prescriber NPI.
Comment: A commenter stated that
our request that payers not reject a claim
from a network pharmacy for lack of an
active and valid NPI (unless the issue
can be resolved at point of sale) and
retrospectively obtain one, could result
in a retroactive denial of the claim, and
that this scenario would not adhere to
NCPDP’s definition of a paid response.
That is, if the sponsor has or should
have had reason to believe that the
identifier on the submitted claim is
invalid or not active, but submits a paid
response in such circumstances, this
response would be inconsistent with
HIPAA transaction standards, pursuant
to which a paid response may be sent
only when the claim satisfies the payer’s
requirements for payment. Another
commenter stated that the ‘‘unless the
issue can be resolved at point-of-sale’’
standard is very unclear.
Other commenters, while
acknowledging the beneficiary access
issue should still be considered,
requested that we modify the final rule
to allow Part D plans greater flexibility
to implement measures to address
claims lacking an active and valid NPI,
such as claim rejection at POS, in order
to alert the pharmacy of this fact, and to
allow for two-way communication
between the parties when there is an
inconsistency between prescriber
identifier databases at the time when the
inconsistency is most readily resolved.
Some commenters expressed
appreciation and support for our
statements regarding the fact that the
requirement to obtain an active and
valid NPI is imposed on sponsors and
our expectation that sponsors would
provide opportunities for network
pharmacies to correct any invalid data
before recouping any payment. These
commenters also appreciated and
supported our statements regarding any
requirements by Part D sponsors/PBMs
for the pharmacies to acquire automated
validation capability to be mutually
negotiated. However, these commenters
stated that the practical effect of our
proposal not to allow claims rejection at
POS would be that network pharmacies
will be forced to bear recoupment of
claims paid by Part D sponsors, when
active and valid NPIs cannot be
obtained retrospectively, even when
they have done nothing wrong. These
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commenters further stated that
pharmacies must generally dispense a
medication if the Part D plan provides
coverage under their contact, and they
are furthermore not in a position to
refuse these Part D plan/PBM terms, nor
terms requiring pharmacies to obtain a
valid NPI for the claim to be payable,
which will impose additional costs on
many pharmacies, particularly smaller
ones. A commenter stated that some
Part D plans are already imposing
requirements above and beyond current
Federal regulations by recouping
pharmacy reimbursement unless the
underlying claims contain a valid
individual NPI.
Response: Our proposed policy that
payers not reject a claim from a network
pharmacy for lack of an active and valid
NPI (unless the issue can be resolved at
point of sale) and to retrospectively
obtain one was to ensure beneficiary
access to needed medications in cases
when the NPI issue could not be
resolved at point-of-sale. We believed
this scenario would be rare, and that
most NPI issues could and would be
resolved at point-of-sale. We have been
even more persuaded by commenters
that real time notification of a possible
NPI issue or error is the most efficient
process, since the pharmacy is in the
best position to acquire corrected
information from the beneficiary and/or
prescriber when filling the prescription.
This is because we believe the
pharmacy representative is most
motivated to check available data or
contact the prescriber in order to get the
claim adjudicated. Similarly, a
prescriber is most motivated to disclose
a missing NPI when the pharmacy is
trying to dispense the drug prescribed to
his or her patient.
In addition, in light of the comments
received that our proposal did not allow
for claim rejection at POS (even though
this is a misunderstanding of our
proposal), we are concerned that this
proposed provision would be
implemented by Part D sponsors in such
a manner that sponsors will not
undertake efforts at POS to resolve the
NPI issue. We are concerned that
sponsors will indicate to network
pharmacies that claims lacking an active
and valid individual prescriber NPI are
payable, when the sponsors actually
have reason to believe that the NPI is
not active and valid, and then later
recoup payment from the pharmacies
pursuant to their agreements. We were
especially persuaded by the commenter
who stated that such a scenario would
not adhere to NCPDP’s definition of a
paid response. That is, if the sponsor
has reason to believe that the identifier
on the submitted claim is invalid or not
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active, but submits a paid response in
such circumstances, this response
would be inconsistent with HIPAA
transaction standards, pursuant to
which a paid response may be sent only
when the claim satisfies the payer’s
requirements for payment.
For these reasons, and in response to
comments, we are revising our policy
and the regulation text to require a Part
D sponsor to ensure that the lack of an
active and valid individual prescriber
NPI on a network pharmacy claim does
not unreasonably delay a beneficiary’s
access to a covered Part D drug.
Sponsors will be required to so ensure
in the following manner: (1) A sponsor
must communicate at point-of-sale
whether or not the prescriber NPI is
active and valid; (2) if the sponsor
communicates that the prescriber NPI is
not active and valid, the sponsor must
permit the pharmacy to confirm that the
NPI is active and valid, or in the
alternative, to correct it; (3) if the
pharmacy confirms that the prescriber
NPI is active and valid or corrects it, the
sponsor must pay the claim if it is
otherwise payable; and (4) if the
pharmacy cannot or does not correct or
confirm that the prescriber NPI is active
and valid, the sponsor must require the
pharmacy to resubmit the claim (when
necessary), which the sponsor must pay,
if it is otherwise payable, unless there
is an indication of fraud or the claim
involves a prescription written by a
foreign prescriber (where permitted by
State law).
We would expect the back-and-forth
between a sponsor and network
pharmacy described previously to take
no more than 24 hours, which means
that sponsors will have to have controls
in place to make sure network
pharmacies resubmit claims where the
sponsor has communicated an issue
with the NPI and a pharmacy cannot or
does not correct or confirm that the NPI
is active an valid. We note that in
practice today, pharmacy customers are
not infrequently asked to return to the
store later the same day or the next to
pick up a prescription to allow time to
resolve a claim adjudication or stock
replenishing issue. Thus, we would
consider a 24-hour timeframe to be
timely access to outpatient medications.
We also note that it is standard retail
pharmacy practice to dispense a few
doses of medication when these delays
occur if the customer needs immediate
access to the drug.
We believe these revisions preserve
our policy that beneficiaries not be
denied access to needed medications,
while making it clearer that the
requirement to obtain active and valid
prescriber NPIs is imposed on Part D
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sponsors. At the same time, we believe
these revisions respond to commenters’
concerns by clarifying what we meant
when we stated that NPI issues must be
resolved at point-of-sale. In addition, in
response to commenters’ concerns that
pharmacies will be unscrupulously
subjected to payment recoupment for
claims that do not contain an active and
valid NPI when the requirement to
obtain one is on sponsors, we are further
revising the regulation text to state that
a Part D sponsor must not later recoup
payment from a network pharmacy for
a claim that does not contain an active
and valid individual prescriber NPI on
the basis that it does not contain one,
unless the sponsor: (1) Has complied
with the POS requirements previously
described ; (2) has verified that a
submitted NPI was not in fact active and
valid; and (3) the agreement between the
parties explicitly permits such
recoupment. We believe that this
revision will further ensure that Part D
sponsors engage in the point-of-sale NPI
validation that we are requiring for the
reasons stated previously.
Comment: A commenter requested
that we instruct Part D plans that they
are not allowed to mandate the use of
individual NPIs on Part D claims. Other
commenters requested that CMS do just
that.
Response: Because this rule requires
Part D sponsors to submit an active and
valid prescriber NPI with a PDE, Part D
sponsors may require that the NPI be
submitted on claims by network
pharmacies. However, as described
previously, Part D sponsors will be
required to communicate at the point-ofsale about the status of the NPI and will,
under certain circumstances, be
required to pay an otherwise payable
claim, even if it does not contain an
active and valid prescriber NPI.
Comment: Some commenters stated
that following up with prescribers to
obtain NPIs creates an administrative
burden on plans, especially when
considering CMS PDE submission
requirements.
Response: We agree that this
requirement imposes a new
administrative burden on Part D
sponsors. However, as we have stated
previously, we believe that it is
important to ensure that we have active
and valid individual prescriber NPIs to
allow us to better combat fraud and
abuse. Therefore, we believe the benefit
of this requirement outweighs the
burden. Moreover, we expect that
prescribers will readily respond to both
pharmacy and sponsor activities to
correct invalid data, and that any
corrective action needed will
substantially and rapidly decline over
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time, thus decreasing the burden on all
parties. In light of the revision to our
proposal to require NPI validation by
sponsors at point-of-sale, as described
previously, we believe there will be
relatively little additional follow-up
administration effort required on the
part of sponsors that would interfere
with timely PDE submission to CMS.
Comment: A few commenters
requested clarification of the meaning of
‘‘active and valid.’’
Response: By an ‘‘active and valid’’
NPI, we mean that the NPI number is in
the expected format/sequencing for such
numbers and is listed as an active
identifier in the National Plan and
Provider Enumeration System (NPPES).
Comment: A commenter stated that
we should prohibit group NPIs from
being used on Part D prescriptions.
Other commenters stated that
prescribers should have to use
individual NPIs on their prescriptions.
Response: Prescriptions are regulated
by State law as noted in section II.E.8.
of this final rule with comment period.
We do not regulate prescriptions. At this
time, we are not aware of any State that
requires each electronic or written
prescription to include the prescriber’s
group or individual NPI in order for that
prescription to be valid. However, we
would again like to take 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.
Comment: Some commenters stated
that CMS should notify all prescribers
that pharmacies cannot fill Part D
prescriptions unless they provide an
active and valid individual NPI.
Response: We encourage sponsors not
to permit their network pharmacies to
refuse to accept prescriptions when a
prescriber has not disclosed an active
and valid NPI, although we cannot
prohibit a pharmacy from
independently doing so. However, we
do not anticipate that pharmacies will
engage in this practice, as we have
revised this requirement so that
sponsors must provide information at
POS regarding whether a submitted NPI
is not active and valid, and to prohibit
recoupment by the sponsor if it has not
provided this information. Thus, since
pharmacies will have an opportunity to
correct or resolve apparent
discrepancies concerning the validity of
NPIs, and if they do, will not be subject
to recoupment, we believe pharmacies
will be able to manage the risk of
nonpayment by sponsors and will not
refuse prescriptions. Also, options are
being explored to require NPIs for those
few prescribers who are not currently
required to obtain NPIs, and who do not
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voluntarily do so, in order to facilitate
their patient access to Part D drugs, even
though we believe there are very few
prescribers in this category.
Comment: A commenter believed that
our proposal would actually undermine
its purpose to achieve better oversight
over possible fraudulent activities, as
well as other program oversight
objectives, since PDE records would no
longer constitute a comprehensive
database of drugs covered under the Part
D program. In other words, we
understood this commenter to assert
that plans will not submit significant
numbers of PDEs for lack of an active
and valid prescriber NPI.
Response: We disagree. As noted
previously, most prescribers already
have and disclose NPIs, and we believe
that number will increase after current
efforts in 2012 to correct invalid
prescriber identifiers on file with
pharmacies. Also, options are being
explored to require NPIs for those few
prescribers who are not currently
required to obtain NPIs, and who do not
voluntarily do so, in order to facilitate
their patient access to Part D drugs.
Thus, we believe the commenter’s
projected risk of sponsors not
submitting PDE records due to missing
or invalid NPIs, leading to incomplete
Part D drug utilization records on file
with CMS, will not materialize.
Comment: Several commenters stated
that there is no single, thorough,
complete, and accurate database that
contains up to date and validated
prescriber NPIs, including NPPES,
which also lacks all the data elements
needed, such as DEA numbers, which
causes editing issues in a real-time
adjudication environment. One of the
commenters stated that NPPES
information should be disseminated and
available to plans on a weekly basis,
with deactivated NPIs noted, including
the rationale for and date of
deactivation. This commenter also
stated that CMS should work with HHS
Office of Inspector General (OIG) to
ensure excluded individuals are
identified in NPPES, as well as to create
an NPI reference on the HHS–OIG
excluded provider list.
Response: The primary purpose of the
NPPES is to collect information needed
to uniquely identify individual and
organization health care providers,
assign NPIs to those health care
providers, maintain and update the
information about the health care
providers, and disseminate the
information according to the NPPES
Data Dissemination Notice. NPPES data
is available to the public via the NPI
Registry and is updated daily. In
addition to the NPI Registry, CMS
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provides a monthly NPPES
downloadable file.
NPPES was designed in a way to meet
its intended purpose in the most
feasible way and was not intended to be
a one-stop database for all prescriber
identifiers. Also, sanction data were not
included in the data element list
published in the final NPI rule
published January 23, 2004, and
therefore, are not included in the NPPES
data element list today. However, we do
acknowledge the advantages of the
additional information desired by
sponsors, such as the date and reason
for deactivation of an NPI, and we are
exploring the feasibility of improving
the information available regarding the
deactivated NPIs.
Comment: A commenter stated that a
grace period should be allowed to
address the processing of claims with
deactivated NPIs, such as when a
prescriber has retired or passed away.
This commenter suggested that rather
than rejecting the claims, sponsors
could send an information edit to notify
pharmacies of the time period when it
will begin to reject claims that contain
the prescriber NPI, and pharmacies
could then inform beneficiaries to find
a new prescriber with an active
individual NPI.
Response: An informational edit
during a grace period for an NPI
deactivated due to death or retirement
might be a prudent practice, since we
understand some States permit refills
when the prescription was written
before the prescriber’s retirement or
death. We will provide additional
guidance in the future, if necessary on
this point. We take no position on
whether a pharmacy should encourage a
beneficiary to find a new prescriber
with an active NPI.
Comment: A commenter supported
the proposal to not permit recovery of
beneficiary payment on beneficiarysubmitted requests for reimbursement
when retroactive acquisition of the
prescriber NPI has not been successful,
as a means to protect beneficiary access
to drug therapy prescribed by his or her
physician. Another commenter was
pleased that beneficiaries will not be
negatively impacted by such lack of an
NPI for a PDE.
Response: We appreciate the support
for our proposal.
Comment: A commenter was pleased
that we chose not to require Medicare
Part D prescribers to enroll in Medicare
which supports beneficiary access and
obviates the need for physicians to
engage in a credentialing process for
which they are not compensated.
Response: We appreciate the support
for our proposal.
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Comment: A few commenters
supported our proposal regarding
foreign prescribers. Another commenter
stated the proposal was essential for
prohibiting claims payment on
prescriptions involving foreign
prescribers. One commenter noted that
there is no database of foreign
prescribers.
Response: We thank the commenters
for their support. Under our proposal, as
revised in response to other comments,
if a foreign prescriber has an active and
valid NPI that is submitted on the claim,
a Part D sponsor must pay the claim, if
it is otherwise payable and applicable
State law permits prescriptions from
foreign prescribers. However, if the NPI
is not active and valid and the
pharmacy cannot correct the NPI for a
foreign prescriber, then the sponsor
does not have to require the pharmacy
to resubmit the claim (when necessary)
and is not required to pay it (if it is
otherwise payable). This is consistent
with our proposal that sponsors could
not reject a claim lacking an active and
valid NPI unless the claim involved a
prescription written by a foreign
prescriber. We acknowledge that there is
no database of foreign prescribers;
however, we do not believe the lack of
such a database would hinder sponsors’
compliance.
Comment: Some commenters
requested a delay in the NPI
requirement.
Response: We were not persuaded by
the comments we received that we
should delay the prescriber NPI
requirement for PDEs. In particular, we
considered that ninety percent of PDEs
as of coverage year 2011 already contain
prescriber NPIs, according to CMS data,
and weighed that against the importance
of a single prescriber identifier to assist
in fighting potential fraud in the Part D
program.
After consideration of the public
comments received, we are finalizing
our proposal with the modifications
noted previously.
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 adding a new paragraph (c)(5)(i)
which requires 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)(ii) will require a Part D plan
sponsor to ensure that the lack of an
active and valid individual prescriber
NPI on a network pharmacy claim does
not unreasonably delay a beneficiary’s
access to a covered Part D drug by
taking the steps described in a new
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paragraph (c)(5)(iii). New paragraph
(c)(5)(iii) requires that the sponsor
communicate at point-of-sale whether or
not a submitted NPI is active and valid;
paragraph (c)(5)(iii)(A)(1) and (2) will
require, if the sponsor communicated
that the NPI is not active and valid, that
the sponsor must permit the pharmacy
to confirm that the NPI is active and
valid, or in the alternative, to correct it.
If the pharmacy confirms that the NPI is
active and valid or corrects the NPI,
paragraph (c)(5)(iii)(B)(1) will require
the sponsor to pay the claim, if it is
otherwise payable. Paragraph
(c)(5)(iii)(B)(2) will require, if the
pharmacy cannot or does not correct or
confirm that NPI is active and valid, that
the sponsor must require the pharmacy
to resubmit the claim (when necessary),
which claim the sponsor must pay, if it
is otherwise payable, unless there is an
indication of fraud or the claim involves
a prescription written by a foreign
prescriber (where permitted by State
law).
New paragraph (c)(5)(iv) will prohibit
a Part D sponsor from later recouping
payment to a network pharmacy for a
claim that does not contain an active
and valid individual prescriber NPI on
the basis that it does not contain one
unless the sponsor: (1) Complied with
paragraph (c)(5)(ii) and (iii); (2) verified
that a submitted NPI was not in fact
active and valid; and (3) the agreement
between the parties explicitly permits
such recoupment.
New paragraph (c)(5)(v) will prohibit
a Part D sponsor, with respect to
requests for reimbursement submitted
by Medicare beneficiaries, from making
payment to the beneficiary dependent
upon the sponsor’s acquisition of an
active and valid individual prescriber
NPI, unless there is an indication of
fraud. It will further prohibit a Part D
sponsor from seeking recovery of any
payment to the beneficiary 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. As noted
previously, these changes would be
effective for PDEs submitted by Part D
sponsors on January 1, 2013 or later.
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,
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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.
The following sections of this
document contain paperwork burden
but not all of them are subject to 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–14(d)(6) of the Act
exempts this section from PRA
requirements.
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 proposed 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.
Part D plan sponsors will 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 will be included in
the PRA package entitled, Formulary
Submission for Medicare Advantage
(MA) Plans and Prescription Drug Plans
(PDP) for Contract Year (CY) 2013 (OCN
0938–0763).
Comment: A few commenters
believed that they would be burdened
because they would need to apply prior
authorization to determine whether
barbiturates covered specific
indications. A commenter pointed to an
increased number of appeals, while the
other foresaw an increased number of
documents related to indication
determinations. A commenter also
noted that the change would impact
SNPs because these medications are
typically available without prior
authorization under their medical
assistance benefit.
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Response: It is outside of the scope of
this proposed rule to comment on the
use of prior authorization for this
purpose. However, we do not believe
that this inclusion will increase the
burden of any plan in any significant
way because sponsors must always
ensure that they cover drugs only when
used for medically accepted indications.
Making this determination is no
different for barbiturates than for other
drugs. As to the SNP concerns, we are
complying with the statutory
requirement, and because Part D
coverage requirements for SNPs are not
different from those for other MA–PDs,
this requirement applies consistently
across plan types.
After considering the public
comments received, we are finalizing
the policy without modification.
C. ICRs Regarding Pharmacy Benefit
Manager’s Transparency Requirements
(§ 423.514)
Consistent with the statutory
requirements under section 1150A(b)(3),
we proposed to add an additional data
element to the DIR data reporting
requirements: 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, also known as PBM
spread. In the 2010 DIR reporting
requirements, we collected PBM spread
amounts aggregated to the plan benefit
package level. We believe that with the
addition of PBM spread amounts for
retail pharmacies and PBM spread
amounts for mail order pharmacies to
the existing DIR reporting requirements,
Part D sponsors will meet the
requirements to report the elements in
§ 423.514(d)(4) through (6). Beyond this
change, no additional DIR reporting will
be required pursuant to section 1150A
of the Act. We did not receive any
comments on increased burden due to
reporting PBM spread. We are finalizing
as proposed reporting of this data
element, also known as PBM spread.
In addition, section 1150A(b)(1) of the
Act requires PBMs and Part D sponsors
to report the percentage of all
prescriptions that were provided
through retail pharmacies compared to
mail order pharmacies and 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). We
explored the ideas commenters
submitted for CMS to provide
crosswalks or derive the pharmacy type
data from existing data sources and
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determined that we could crosswalk
National Provider Identifiers with a file
from the National Council for
Prescription Drug Programs to
determine the percentage of all
prescriptions that were provided
through retail pharmacies as compared
to mail order pharmacies as required
under § 423.514(d)(2). However, this
approach cannot be used to categorize
independent, chain, supermarket, and
mass merchandiser pharmacies because
they are not standard pharmacy
classifications captured in industry
databases or files. Thus, while we are
finalizing § 423.514(d)(3) as proposed,
we will issue further subregulatory
guidance regarding this reporting
requirement before requiring Part D
sponsors to submit this information.
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 rule would not impose any new
information collection requirements. We
received no comments on the cost
burden of the collection of information
requirements related to this proposal
and therefore are finalizing this
provision without modification.
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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
proposed to expressly require MA plans
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)
We are amending a calculation at
§ 423.56 to be consistent with the
calculation of the actuarial value of
qualified retiree prescription drug
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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
requirement. There is no new
information collection burden on
organizations.
We received no comments on the cost
burden of the collection of information
requirements related to this proposal
and therefore are finalizing this
provision without modification.
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.
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.
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22149
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 Certain Dual Eligible
Special Needs Plans (SNPs) (§ 422.102)
Under § 422.102(e), we would allow
certain dual SNPs meeting a high
standard of integration and minimum
performance and quality based
standards, 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. The
collection of benefit design information
via PBP software is currently approved
under OCN 0938–0944. We are seeking
to revise this control number to
incorporate the additional use of this
information that is described in this
section of the final rule with comment
period.
Additionally, in order to evaluate how
D–SNPs are implementing this new
benefit flexibility, we indicate that we
will require D–SNPs that participate in
this new benefit flexibility initiative to
submit a mandatory quality
improvement project (QIP) on measures
related to the goals of this initiative, as
determined by CMS. The burden
associated with this requirement is the
time and effort that qualifying D–SNPs
would put forth to develop and submit
a QIP, which is currently approved
under OCN 0938–1023 (CMS form
#10209). We are assuming that this
process would be completed by one MA
organization staff person receiving a
median hourly wage rate of $37.58,
which is equivalent to the median
hourly wage rate that the BLS currently
reports for a management analyst.
Adding the standard OMB figures of 12
percent for overhead and 36 percent for
benefits, respectively, we estimate an
hourly cost of $55.61 to comply with
this requirement. Based on our existing
estimates of the QIP submission burden,
we estimate that it would take each SNP
approximately 15 hours to complete
each QIP, resulting in an aggregate
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burden of 1,095 hours (15 hours
multiplied by 73 D–SNPs) for the 73 D–
SNPs that we believe may qualify to
offer additional supplemental benefits
under this new benefit flexibility
initiative. Therefore, we estimate that
D–SNPs participating in this initiative
will incur an aggregate cost of $60,892
($55.61 per hour multiplied by 1,065
hours) in order to comply with this
additional QIP submission requirement.
We are seeking to revise our collection
approved under OCN 0938–1023 to
account for this new requirement for
certain D–SNPs participating in this
benefits flexibility initiative.
L. ICRs Regarding Clarifying Payment to
Providers in Instances of HospitalAcquired Conditions (HACs) (§ 422.504)
We proposed to require MA
organizations provide in their contracts
with hospitals that payments for Part A
hospital services will be reduced 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. We believe that plans
already have some operational systems
in place to facilitate implementation of
the requirement. For example, MA
organizations are already required to
pay non-contract provider hospitals the
amount that they will receive for
services under original Medicare,
including any applicable reductions for
HACs. Also, beginning January 3, 2012,
MA plans 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). This
information is collected using the
HIPAA 5010, which is already in use by
hospital providers for FFS claims and
contains fields for POA indicator
reporting. While this requirement is
subject to the PRA, the diagnosis, POA
indicator information, and other claims
information is already collected as part
of the encounter data collection process,
and this burden is currently approved
under OCN 0938–1054.
Additionally, we expressed our belief
that hospitals will already be familiar
with POA reporting and will 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
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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 will be incurred by plans in
the normal course of their business
activities.
We received no comments on the
information collection requirements
associated with this proposal. However,
based on the comments received on the
proposed policy, we are not finalizing
this proposal. We will continue to not
only consider alternate strategies for
reducing hospital-acquired conditions
in hospitals that provide care to MA
enrollees, but also strive toward aligning
quality initiatives in the Medicare and
Medicare Advantage programs.
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 proposed 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 was formerly
approved under OMB control number
(OCN) 0938–0753 which expired
November 30, 2011. We are seeking to
reinstate this collection.
M. ICRs Regarding Clarifying Coverage
of Durable Medical Equipment
(§ 422.101(a) and § 422.112(a))
Under § 422.100(l), we proposed 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
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 was
formerly approved under OCN 0938–
0753 which expired November 30, 2011.
We are seeking to reinstate this
collection in order to account for the
new DME disclosure requirement.
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 (§ 423.100,
§ 423.104 and § 423.153)
In accordance with section 1860D–
4(c) of the Act, we are 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, under certain circumstances, 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 requirement, the
enrollee and his or her prescriber
generally will decide if a medication
supply of less than 30 days will be
appropriate, and if so, the cost-sharing
for the medication will be prorated by
the Part D sponsor based on the days
supply dispensed. Since obtaining a
supply of a medication for less than 30
days is optional for the enrollee and his
or her prescriber, the collection of
information burden imposed by these
regulations on either Part Medicare D
enrollees or their prescribers is
negligible. Moreover, any burden
associated with this proposal on
sponsors related to the required data
entry in the PBP software will 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)
2014, since we are delaying the effective
date of this requirement until January 1,
2014.
After consideration of the public
comments received, none of which
N. ICRs Regarding Broker and Agent
Requirements (§ 422.2274 and
§ 423.2274)
At § 422.2274 and § 423.2274, we
proposed that plans can choose any
agent/broker compensation amount at or
below the fair market value amount
annually. We require MA organizations
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specifically addressed this collection of
information burden section, we are
modifying this requirement as discussed
in section II.D.6. of this final rule with
comment period (Establishment and
Application of Daily Cost-Sharing Rate
as Part of Drug Utilization Management
and Fraud, Abuse and Waste Control
Program (§ 423.100, § 423.104 and
§ 423.153)). However, we are not
modifying these ICRs, since the
collection of information burden
imposed by this final rule with
comment period will still be negligible,
and any burden associated with it will
still be captured elsewhere.
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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 proposed technical
changes that correct cross-references
that should have been updated in
previous rulemaking. These changes 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, these
changes do not impose any new
information collection requirements.
Q. ICRs Regarding Applying MA and
Part D Disclosure Requirements to Cost
Contract Plans (§ 417.427)
We proposed 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 Web sites.
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
regulations. For each entity, we estimate
that it will take 12 hours to develop and
submit the required information. This
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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 7. 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 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 expiration date.
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
proposed 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 proposed 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. While this proposed requirement
is subject to the PRA, the information
collection has been approved under
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22151
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 MA
organization 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 MA organization
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. We are seeking
to renew this collection.
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
proposed 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
and none of these denials were
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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 ×
4 SNP application denials = 32 hours).
The estimated annual cost to all MA
organizations, in the aggregate, that have
been denied to offer a SNP associated
with this provision (assuming an
attorney billing $250 per hour) is $8,000
(32 hours × $250 = $8,000) as detailed
in Table 7. We are revising the PRA
package currently approved under OCN
0938–0935, with a January 31, 2012
expiration date, to account for this
burden. We are seeking to renew this
collection.
U. ICRs Regarding Timeline for
Resubmitting Previously Denied MA
Applications (§ 422.501)
This section does not impose any new
information collection requirements.
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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 MA organizations 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 MA organizations 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.
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
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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 MA
organizations 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 MA organizations, 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)
Current regulations require that
unless a beneficiary is in a LTC setting,
the comprehensive medication review
(CMR) must include an interactive,
person-to-person, 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 a
CMR. Accordingly, we proposed a
change to § 423.153 permitting the
sponsor to allow the pharmacist or other
qualified provider to perform the CMR
without the beneficiary in cases when
the beneficiary is in a LTC facility and
is cognitively impaired and thus, cannot
accept the sponsor’s offer of a CMR . We
anticipated that the impact of this
proposed revision would 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 a CMR before administering it.
We incorrectly stated in the proposed
rule that we did not anticipate any costs
or savings associated with this change.
However, there will be a modest
increase in costs based on the
requirement to offer CMRs to
beneficiaries residing in LTC settings
with written summaries and provide the
summaries and action plans for these
beneficiaries in a standardized format
that complies with the requirements
specified by CMS. We estimate that
215,000 beneficiaries in LTC settings are
eligible for MTM services and 10
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percent (21,500) of those beneficiaries
will receive an annual CMR. We also
estimate that the average CMR requires
35 minutes to complete and the average
hourly compensation (including fringe
benefits, overhead, general and
administrative expenses and fee) of the
MTM provider is $120. Therefore, the
estimated total annual cost of providing
CMRs in LTC settings is $1,504,140
(21,500 CMRs × 0.583 hours/CMR ×
$120/hour). The estimate reflects costs
previously calculated in the OCN 0938–
1154.
Y. ICRs Regarding Coordination of Part
D Plans With Other Prescription Drug
Coverage (§ 423.458)
We proposed a change to simply
strengthen our policy regarding EGWP
sponsor responsibilities, there is no
additional burden on the part of
sponsors or other entities associated
with the regulation. This section does
not impose any new information
collection.
Z. ICRs Regarding Access to Covered
Part D Drugs Through Use of
Standardized Technology and National
Provider Identifiers (§ 423.120)
The inconsistent use of identifiers
that have not been validated has
hindered efforts to combat fraud and
abuse. Therefore, we will require,
effective January 1, 2013, that Part D
sponsors must include active and valid
individual prescriber NPIs as identifiers
in PDEs submitted to CMS. Since Part
D sponsors are already required to
include a prescriber identifier on PDEs
submitted to CMS, there is no new
collection of information burden
imposed by this proposed regulation.
Furthermore, the change does not
impose any new collection of
information burden on Medicare
beneficiaries enrolled in the Part D
program with respect to requests for
reimbursement they may submit, since
the requirement is imposed on Part D
sponsors. After consideration of the
public comments received, none of
which specifically addressed this
collection of information burden
section, we are modifying this
requirement as discussed in section
II.E.11. of this final rule with comment
period, Access to Covered Part D Drugs
Through Use of Standardized
Technology and National Provider
Identifiers (§ 423.120). However, we are
not modifying these ICRs since, again,
no new collection of information burden
is imposed by this requirement.
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TABLE 7—ESTIMATED FISCAL YEAR REPORTING, RECORDKEEPING AND COST BURDENS
Responses
Total annual
burden
(hours)
Hourly labor
cost of
reporting
($)
Total labor
cost
($)
20
73
4
21,500
20
73
4
21,500
12
15
8
0.583
240
1,095
32
12,534.5
44.22
55.61
250.00
120.00
10,613
60,893
8,000
1,504,140
N/A
N/A
N/A
N/A
10,613
60,893
8,000
1,504,140
21,597
21,597
....................
13,901.5
....................
..................
N/A
1,583,646
Regulation sections
Respondents
.................................................
.................................................
.................................................
.................................................
0938–0753
0938–1023
0938–0935
..................
Total ...............................................
..................
417.427
422.102
422.500
423.153
Total
capital/
maintenance
costs
($)
Burden per
response
(hours)
OMB
control No.
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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AA. Additional Information Collection
Requirements—Independence of LTC
Consultant Pharmacists
In the proposed rule we imposed
collection of information requirements
as outlined in the regulation text and
specified earlier in this section.
However, we also made reference to
associated information collection
requirements that were not presented in
the regulation text of the proposed rule.
In our October 11, 2011 proposed rule
(76 FR 63067), we discussed the
information collection requirements
related to the changes we considered
that would require each LTC facility to
employ or obtain the services of a
consultant pharmacist who was not
employed, under contract, or otherwise
affiliated with the facility’s pharmacy, a
pharmaceutical manufacturer or
distributor, or any affiliate of these
entities.
Comment: Many commenters noted
that the services performed by LTC
consultant pharmacists are more
extensive than the drug regimen reviews
and include activities such as
destroying unused medications,
checking storage areas, conducting exit
conferences, providing in-service
education to nursing staff, observing
medication distribution, and attending
meetings. Commenters stated the full
range of consultant pharmacist services
need to be considered in determining
the burden associated with the new
requirements.
Response: We appreciate these
comments and will use them to inform
possible future rulemaking regarding the
LTC consultant pharmacist
requirements. However, after
considering the public comments
received, we are not finalizing this
provision at this time.
V. Regulatory Impact Analysis
A. Statement of Need
The purpose of this final rule with
comment period is to make revisions to
the MA Part C and Part D programs to
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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 final
rule with comment period will—(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
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
final rule with comment period 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
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effects (costs, savings, and expected
benefits), and alternatives considered by
proposed requirement. Details regarding
the burden associated with the
requirements of this final regulation are
located in the Collection of Information
section (section IV. of this final rule
with comment period).
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 final
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. 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 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
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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 will be reached by the
requirements in this final rule because
this final rule will have minimal impact
on small entities. Therefore, an analysis
for the RFA will not be prepared
because the Secretary has determined
that this final rule with comment period
will 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 604 of the RFA. For purposes of
section 1102(b) of the Act, we define a
small rural hospital as a hospital that is
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located outside of a metropolitan
statistical area and has fewer than 100
beds. We are not preparing an analysis
for section 1102(b) of the Act because
the Secretary has determined that this
final rule with comment period will 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 was approximately $136
million. This final rule with comment
period 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
final rule with comment period imposes
substantial direct requirement costs on
State and local governments, preempts
State law, or otherwise has Federalism
implications.
After considering the public
comments received, we are not
finalizing two of the provisions
included in the proposed rule—
Application of Medicare HospitalAcquired Conditions and Present on
Admission Indicator Policy to MA
organizations, and Independence of LTC
Consultant Pharmacists. We estimated
that the impact of the former provision
would be negligible and received no
comments on our estimate. We
estimated the costs and savings
associated with the consultant
pharmacist independence provision and
stated that we believed the costs and
benefits would be offsetting. Some
commenters disagreed with our
estimates. However, we agree with the
many commenters who claimed that the
requirement for consultant pharmacists
to be independent would be highly
disruptive to the industry, but would
not solve drug overutilization and
inappropriate prescribing in LTC,
because others, such as LTC facility staff
and physicians, contribute significantly
to the problem. Therefore, although we
believe changes are necessary and a
requirement for consultant pharmacist
independence is part of the right
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approach, we are not finalizing the
requirement in this rule. Since we are
not finalizing these two provisions, they
have no impact on this final rule with
comment period.
In Table 8, 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 final rule with
comment period. The provisions with
the most significant costs (costs greater
than $100 million from FY 2013 through
FY 2018) in this final rule with
comment period are the Medicare
Coverage Gap Discount Program
(Discount Program), and the Inclusion of
Benzodiazepines, and Barbiturates as
Covered Part D drugs.
The total costs of the Discount
Program for the periods beginning FY
2013 through FY 2018 are estimated to
be $31.1 billion, and the total costs of
the inclusion of benzodiazepines and
barbiturates is $1.9 billion.
Tables 9, 10, and 11 detail the costs
by cost-bearing entity. Specifically,
Table 9 describes costs and savings to
the Federal government, Table 10
describes costs to MA organizations
and/or PDP sponsors and third party
entities, Table 11 describes costs to
pharmaceutical manufacturers, and
Table 12 describes savings to States.
As a result, when considering both
the costs and savings associated with
the provisions of this final rule with
comment period, we conclude with a
net cost estimate of $31.3 billion for FY
2013 through FY 2018.
C. Anticipated Effects
1. Medicare Coverage Gap Discount
Program
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). In general,
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.
a. Required Payment of Gap Discounts
We believe that there will be
significant costs to manufacturers from
paying the required discounts to
beneficiaries while in the coverage gap.
We estimate that aggregate discounts
from pharmaceutical manufacturers will
be $29.7 billion during FY 2013 through
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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
inducing additional use of more
expensive brand name drugs by
improving beneficiary adherence as a
result of the lower out-of-pocket costs
by increasing use of brand name instead
of generic drugs. The increased use of
brand name drugs will increase
Medicare costs by increasing the
number of beneficiaries reaching the
Part D catastrophic threshold and
thereby, increasing the cost of plan
benefits. We estimate that the Discount
Program will increase Medicare costs by
$1.3 billion during FY 2013 through FY
2018.
It is important to note that these
estimated Medicare costs do not include
costs related to the Affordable Care Act
provisions that revised the Part D
benefit structure to close the coverage
gap. These provisions not only revised
the coinsurance amount, but also
reduced the growth in the annual outof-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.
estimate that the cost to manufacturers
will 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.
b. Other Manufacturer Costs
We believe that manufacturers will
also incur costs as a result of specific
obligations under the Discount Program
Agreement. The Discount Program
Agreement must be signed by all
participating manufacturers and
provides the terms and conditions for
timely payment of discounts, disputes
and appeals, penalties, and termination
of the Agreement. In order to comply
with the Discount Program Agreement,
manufacturers will 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. This
will require them to establish
connectivity with the Discount Program
third party administrator (TPA) to
receive quarterly invoices and file
disputes, and obtain access to the CMS
Health Plan Management System
(HPMS) to update and maintain contact
and labeler code information. However,
manufacturers already have existing
systems and perform similar activities
as a result of their experience with
Medicaid and Tricare. We estimate that
analyzing and paying the quarterly
invoices will require 0.5 FTEs. We
3. Provision of Applicable Discounts for
Applicable Drugs for Applicable
Beneficiaries
We believe that there will 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 final rule. Further,
we believe that the carrying cost of
distributing the discounts to
beneficiaries will be offset by
prospective payments from us as
previously described.
We believe that the additional
workload associated with this final
regulation will 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
reporting and recordkeeping. We
estimate that Part D sponsors will
increase resources the equivalent of 0.5
additional FTEs to accomplish these
tasks. We estimate the cost to Part D
sponsors will be $63,360 (annual salary
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2. Payment Processes for Part D
Sponsors
We believe that there will 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 will be a marginal
increase in resources focused on
accounting and computer system
operations and maintenance. We
estimate that the additional resources
required will be 0.5 FTEs, on average,
per Part D sponsor. We estimate that the
total cost to Part D sponsors will 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.
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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 final regulation will 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 will be accommodated by
the additional resources that we earlier
linked to the Discount Program
Agreement. Therefore, we are not
estimating an additional economic
impact to manufacturers from this
provision.
5. Beneficiary Dispute Resolution
The final rule will 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 will 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,
will result in accurate discounts that
will generate few beneficiary appeals
and will be accommodated within
existing resources.
6. Compliance Monitoring and Civil
Money Penalties
The final regulations require CMS to
impose penalties if a manufacturer does
not pay gap discounts that are owed
according to the terms of the Discount
Program Agreement. We believe that, in
general, manufacturers will pay the
quarterly invoice according to the terms
within the Discount Program Agreement
and, therefore; we expect very few
instances where manufacturers are
levied a civil money penalty.
Accordingly, we assume that monetary
penalties will be levied on only a very
small percent of all discount payments,
estimated to be approximately 0.03
percent, for a total of $9.64 million in
civil money penalties imposed over the
period FY 2013 through FY 2018.
7. Termination of Discount Program
Agreement for Part D Program
We believe that we will rarely find it
necessary to terminate an agreement.
Upon termination, covered Part D drugs
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of the manufacturers will be excluded
from the Part D program and the
manufacturer potentially will suffer a
significant reduction in revenue. We
have experience with similar programs
and believe that the potential reduction
of revenue will encourage
manufacturers to resolve our concerns.
This will tend to avoid terminations and
the associated fiscal effects.
Consequently, we estimate that there
will be no material costs to
manufacturers due to potential
agreement terminations during the
period FY 2013 through FY 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 proposed 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 provision, Part D plan
sponsors will be required to submit
information in their formulary files
indicating that they will cover these
drugs. We estimated 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 will increase proportional to
the current overall Part D level.
9. Good Cause and Reinstatement Into a
Cost Plan
At § 417.460(c)(3) we proposed to
allow beneficiaries who have been
disenrolled from their cost plans for
nonpayment of premium or other
charges imposed by the plan for
deductible and coinsurance amounts the
opportunity to be reinstated into their
plan if they can establish good cause for
nonpayment of cost-sharing. CMS (or its
designee) will 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. We received no
comments on the regulatory impact
analysis of this proposal and therefore
are finalizing this provision without
modification.
10. Determination of Actuarially
Equivalent Creditable Prescription Drug
Coverage
We are clarifying our regulations at
§ 423.56 to define creditable
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prescription drug coverage consistent
with the calculation of the actuarial
value of qualified retiree prescription
drug coverage found at § 423.884(d).
Since this is a clarification to an existing
calculation that is already being utilized
by organizations providing creditable
coverage, there will be no cost impact
on these organizations.
We received no comments on the
regulatory impact analysis of this
proposal and are finalizing this
provision without modification.
11. Who May File Part D Appeals With
the Independent Review Entity
The changes to § 423.600 will allow
prescribing physicians and other
prescribers to request IRE
reconsiderations on behalf of Part D
plan enrollees and the corresponding
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 will 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
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about $648,000. The estimated
increased cost associated with issuing
substantive reconsideration decisions
(as opposed to dismissals) and the
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 for 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
all Part D plan sponsors of
approximately $75,000 ($25 per file ×
3,000 additional files = $75,000), or a
total of $450,000 from FYs 2013 through
2018.
Comment: CMS received a few
comments on the regulatory impact
analysis of this proposal. A commenter,
citing the greater number of IRE
reconsideration requests under the MA
program and linking that in part to
providers’ ability to initiate appeals,
urged CMS to consider additional
administrative costs associated with this
change. Another commenter specifically
noted the increased burden placed on
plan sponsors’ appeals departments as a
result of having to prepare a larger
number of case files for the IRE.
Response: We agree that compared to
the Part D program, the MA program has
a significantly higher number of IRE
appeal requests. However, this is not a
result of provider appeals, because in
the MA program, providers do not
technically have a right to appeal an
adverse plan reconsideration to the IRE.
Instead, in MA, all adverse plan
reconsiderations are auto-forwarded to
the IRE for review. We are not proposing
that all adverse redeterminations in the
Part D program be auto-forwarded to the
IRE. The burden estimate already
includes a discussion of the burden
associated with the increased number of
reconsiderations as a result of the
proposed change and the increased
number of cases that plan sponsors will
need to prepare for shipment to the IRE.
Thus, we believe that we have
accurately accounted for the estimated
burden increase related to this
provision, both for the government and
plan sponsors, and are finalizing this
provision without modification.
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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 MA organization 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 at least a
3-star 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
will 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
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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.
The changes made to this regulation
will 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
In our October 11, 2011 proposed rule
(76 FR 63071), we discussed the
anticipated effects of the changes we
considered that would require each LTC
facility to employ or obtain the services
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of a consultant pharmacist who was not
employed, under contract, or otherwise
affiliated with the facility’s pharmacy, a
pharmaceutical manufacturer or
distributor, or any affiliate of these
entities.
Comment: Some commenters
disagreed with our belief that the costs
and benefits associated with this
provision would be offsetting. Instead,
they contended that the requirement for
independent consultant pharmacists
would create a financial burden for
facilities and consultant pharmacists
and that the requirement would cost,
not save, money.
Response: We are not finalizing the
requirement for consultant pharmacists
to be independent in this rule. However,
we appreciate the comments on our
impact analysis and will consider the
information provided in the process of
possible future rulemaking on this issue.
15. New Benefit Flexibility for Certain
Dual Eligible Special Needs Plans (D–
SNPs) (§ 422.102)
We estimate that our modification of
§ 422.102(e) to allow certain D–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
$137.7 million between FY 2013 and FY
2018. These Federal and State savings
estimates are based on our assumption
that, based on the eligibility standards
we establish, approximately 73 D–SNPs
will qualify to participate in this
initiative, representing a total of
approximately 507,000 enrollees in
2011. We estimate that D–SNPs
participating in this initiative will incur
a small cost of approximately $0.07
million annually in order to comply
with the QIP reporting requirements
that we are requiring for eligible D–
SNPs as a condition of participating in
this initiative. Accounting for these
administrative costs to MA
organizations, we estimate this
provision will result in an aggregate
savings to the health care sector of
$137.22 million between FY 2013 and
FY 2018.
While we acknowledge that the
current authority for all SNPs, including
D–SNPs, to restrict enrollment to special
needs individuals (under section
1859(f)(1) of the Act), expires at the end
of the 2013 contract year, we report the
impact of this provision from FYs 2013
through 2018, to be consistent with the
scoring of other provisions of this rule.
We note that this impact may vary based
on Congressional action.
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We are basing our analysis of the
potential cost impacts of the D–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,
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 demonstration, 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
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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 D–SNPs that
participate in this benefit flexibility
initiative 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 enrollment for these qualified
D–SNPs, we project $131.6 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 qualified D–SNPs will be
permitted to offer under our proposed
changes to § 422.102(e) will 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,
Minnesota, and Wisconsin
demonstrations, we believe that the
flexibility for D–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 enrollment for D–SNPs
that would qualify to participate in this
initiative, we estimate Federal and State
Medicaid savings of $6.12 million for
the 6-year period between FY 2013 and
FY 2018 as a result of this provision.
Finally, as detailed in the section III.
Information Collection Requirements, of
this final rule with comment period, we
estimate an annual cost of $60,893 to
MA organizations as a result of this
provision’s requirements. This cost
reflects the administrative cost,
including burden hours and staff wage
rates, that participating D–SNPs would
incur in order to complete and submit
the additional QIP that we are requiring
as a condition of participating in this
benefits flexibility initiative. We
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estimate that these requirements will
cost MA organizations approximately
$0.36 million from FYs 2013 through
2018.
16. Application of the Medicare
Hospital-Acquired Conditions and
Present on Admission Indicator Policy
to MA Organizations (§ 422.504)
We proposed to require MA
organizations 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
will 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.
Based on the comments received, we
are not finalizing this proposal, but will
continue to consider alternate strategies
for reducing hospital-acquired
conditions in hospitals that provide care
to MA enrollees and strive toward
aligning quality initiatives in the
Medicare and Medicare Advantage
programs.
17. Establishment and Application of
Daily Cost-Sharing Rate as Part of Drug
Utilization Management and Fraud,
Abuse, and Waste Control Program
As discussed in section II.D.6. of this
final rule with comment period,
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 the adjusted total
estimated cost of 2009 communitybased discontinued first fills of chronic
medications was roughly $1.4 billion. In
light of this cost, we proposed 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 cost-sharing
rate, under certain circumstances, to a
prescription presented 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 will decide if a
medication supply of less than 30 days
will be appropriate, and if so, the daily
cost-sharing rate for the medication will
be applied by the Part D sponsor based
on the days supply dispensed.
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Potential savings of a daily costsharing rate requirement on Part D
sponsors will come from a reduction of
the estimated $1.4 billion in costs noted
above which will be offset by some
additional dispensing fees. We
previously estimated the potential
savings to the Part D program to be $140
million in 2013 alone, and over $2.4
billion total by 2018 as described in
section II.D.6. of this final rule with
comment period. However, because we
are revising the applicability date of this
requirement to January 1, 2014, we have
updated the cumulative savings in 2018
to roughly $1.8 billion, as also noted in
section II.D.6. of this final rule with
comment period.
Aside from the additional dispensing
fees, 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
(Department of Labor, Bureau of Labor
Statistics, Computer Software
Engineers-Applications), which equals
$465,184.
We did not receive any comments on
this specific section, and are finalizing
the requirement as discussed in section
II.D.6. of this final rule with comment
period.
18. Technical Corrections to Enrollment
Provisions
We proposed technical changes that
correct cross-references that should
have been updated in previous
rulemaking. These changes are technical
corrections and do not represent a
burden for small businesses, rural
hospitals, States, or the private sector.
We received no comments on the
regulatory impact analysis of this
proposal and, therefore, are finalizing
this provision without modification.
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
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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
respect to dissemination of explanations
of benefits, customer service call
centers, and Internet Web sites.
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 will be affected annually by
this requirement, resulting in a total
annual burden of 240 hours. We
estimate, based on an hourly wage of
$21.93 (hourly rate for a GS–10 step 1)
plus 48 percent for fringe benefits and
overhead, that this requirement will
result in a total annual burden of $7,789
rounded. We did not receive public
comments on the regulatory impact for
this provision but are revising it to more
accurately reflect the labor associated
with the provision. In the October 2011
proposed rule, we based costs on the
activities of a compliance officer instead
of those of a GS–10 step 1.
20. Denials of SNP Applications and
SNP Appeal Rights
We estimate that the proposed
provision will 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 will 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 will
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
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applications were denied and none of
these denials were appealed. Taking the
average of the last 2 years, we estimate
that approximately 4 denied applicants
will 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,
The estimated annual cost to all of the
MA organizations, the aggregate, that
have been denied to 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 MA organizations 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 will 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 will 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
will not result in any additional costs.
Not only have we expected that
prescriptions will be valid under
applicable State law since the beginning
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22159
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 MA
organizations or Part D sponsors and
pharmacies) likely also require valid
prescriptions. In light of the above
realities, it is not unreasonable to
presume that MA organizations, Part D
sponsors, PBMs, and pharmacies are
already taking steps to write
prescriptions that are valid under
applicable State law. Accordingly, we
do not believe codifying the valid
prescription requirement will change
current practices.
23. Medication Therapy Management
Comprehensive Medication Reviews
and Beneficiaries in LTC Settings
Current regulations require that
unless a beneficiary is in a LTC setting,
the comprehensive medication review
(CMR) must include an interactive,
person-to-person, 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 a
CMR. Accordingly, we proposed a
change to § 423.153 to require that Part
D sponsors offer a CMR to beneficiaries
in LTC settings, but permitting the
sponsor to allow the pharmacist or other
qualified provider to perform the CMR
without the beneficiary in cases when
the beneficiary is in a LTC facility and
is cognitively impaired and thus, cannot
accept the sponsor’s offer of a CMR. We
anticipated that the impact of this
proposed revision would 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 a CMR before administering it. We
incorrectly stated in the October 2011
proposed rule that we did not anticipate
any costs or savings associated with this
change. However, there will be a modest
increase based on the requirement to
offer CMRs to beneficiaries residing in
LTC settings with written summaries
and provide the summaries and action
plans in a standardized format that
complies with the requirements
specified by CMS. We estimate that
215,000 beneficiaries in LTC settings are
eligible for MTM services and 10
percent of those beneficiaries will
receive an annual CMR. We also
estimate that the average CMR requires
35 minutes to complete and the average
hourly compensation (including fringe
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benefits, overhead, general and
administrative expenses and fee) of the
MTM provider is $120 (labor cost per
CMR is $70), and that it costs $0.91 to
print and mail a CMR summary in CMS’
standardized format. Therefore, the
estimated total annual cost of providing
CMRs in LTC settings is $1,524,565
($70.91/CMR × 21,500 CMRs). The
estimate reflects costs previously
calculated in the OCN 0938–1154.
24. Coordination of Part D Plans With
Other Prescription Drug Coverage
The regulation will 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
proposed to require, effective January 1,
2013, that Part D sponsors include only
active and valid individual prescriber
NPIs as identifiers in PDEs submitted to
CMS.
The impact associated with these
proposed regulations is: (1) The annual
cost for PBMs and plan organizations to
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 active and valid prescriber
NPIs. We estimated 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
coverage year 2011 PDEs submitted to
date conducted by a contractor to CMS
indicate that approximately 90 percent
already 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 $5,120,000 (6,400,000 × 0.8).
With respect to PBMs and plan
organizations that decide to build their
own databases of active and valid
prescriber NPIs (or to contract with
network pharmacies for prescriber
validation services), we assume that
they will only do so if the cost is equal
to or less than contracting with a
commercial vendor for such services,
and therefore, no estimation of the costs
to do so is necessary.
Since approximately 90 percent of
PDEs for coverage year 2011 submitted
to CMS already contain valid individual
NPIs, an estimated 95 percent of
physicians have an NPI, and prescribers
may voluntarily obtain an NPI to
facilitate coverage of their patients’
prescriptions, we estimate negligible
costs associated with any PDE that
cannot be submitted to CMS for lack of
an NPI.
After consideration of the public
comments received, we are modifying
this requirement as discussed in section
II.E.11. of this final rule with comment
period (Access to Covered Part D Drugs
Through Use of Standardized
Technology and National Provider
Identifiers (§ 423.120)). However, we are
not modifying this regulatory impact
analysis, since none of the comments
received specifically addressed this
analysis, and we believe our
modifications do not necessitate a
change to this analysis.
TABLE 8—ESTIMATED AGGREGATED COSTS TO THE HEALTH CARE SECTOR BY PROVISION FOR FISCAL YEARS 2013
THROUGH 2018
Fiscal year
($ in millions)
Regulation
section(s)
Provision(s)
Total
($ in millions)
FYs 2013–
2018
2013
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Medicare Coverage Gap Agreement ..........................
Payment Processes for Part D Sponsors ...................
Provision of Applicable Discounts ...............................
Compliance and Civil Money Penalties ......................
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 Certain Dual Eligible Special
Needs Plans (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 .........................
MTM Comprehensive Medication Reviews in LTC
Settings ....................................................................
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2014
2015
2016
2017
2018
423.2315
423.2320
423.2325
423.2340
423.2315
3,760.00
12.66
12.66
1.18
13.03
4,260.00
12.66
12.66
1.32
13.03
4,810.00
12.66
12.66
1.48
13.03
5,440.00
12.66
12.66
1.67
13.03
6,050.00
12.66
12.66
1.88
13.03
6,730.00
12.66
12.66
2.11
13.03
31,050.00
75.96
75.96
9.64
78.18
423.100
200.00
280.00
300.00
330.00
360.00
390.00
1,860.00
423.600
1.05
1.05
1.05
1.05
1.05
1.05
6.30
422.102
¥30.71
¥28.67
¥21.71
¥20.16
¥17.99
¥17.98
¥137.22
423.100
423.104
423.153
0.50
¥150.00
¥260.00
¥360.00
¥460.00
¥580.00
¥1,809.50
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
423.153
1.52
1.52
1.52
1.52
1.52
1.52
9.12
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TABLE 8—ESTIMATED AGGREGATED COSTS TO THE HEALTH CARE SECTOR BY PROVISION FOR FISCAL YEARS 2013
THROUGH 2018—Continued
Fiscal year
($ in millions)
Regulation
section(s)
Provision(s)
Total
($ in millions)
FYs 2013–
2018
2013
Total Impact ($ in millions) ..................................
..................
2014
2015
2016
2017
2018
3,977.03
4,408.71
4,875.83
5,437.57
5,979.95
6,570.19
31,249.28
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 9—ESTIMATED COSTS AND SAVINGS TO THE FEDERAL GOVERNMENT BY PROVISION FOR FYS 2013
THROUGH 2018
Fiscal year
($ in millions)
Regulation
section(s)
Provision(s)
2013
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 .............
2014
2015
2016
2017
Total
($ in millions)
(FYs 2013–
2018)
2018
423.2315
160.00
190.00
210.00
260.00
260.00
260.00
1,340.00
423.100
200.00
280.00
300.00
330.00
360.00
390.00
1,860.00
423.600
0.97
0.97
0.97
0.97
0.97
0.97
5.84
423.100
423.104
423.153
0.00
¥150.00
¥260.00
¥360.00
¥460.00
¥580.00
¥1,810.00
Benefit Flexibility for Certain Dual Eligible Special
Needs Plans (SNPs)—Medicare .............................
Benefit Flexibility for Certain Dual Eligible Special
Needs Plans (SNPs)—Federal Medicaid ................
422.102
¥29.80
¥27.63
¥20.76
¥19.08
¥17.16
¥17.13
¥131.56
422.102
¥0.67
¥0.64
¥0.59
¥0.55
¥0.52
¥0.53
¥3.50
Total ($ in millions) ..............................................
..................
330.50
292.70
229.62
211.34
142.29
53.31
1,260.78
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 MA ORGANIZATIONS AND PART D SPONSORS BY PROVISION FOR FYS 2013
THROUGH 2018
Costs per fiscal year
($ in millions)
Regulation
section(s)
Provision(s)
2013
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 .............
Benefit Flexibility for Certain Dual Eligible Special
Needs Plans (SNPs)—Medicare .............................
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 .........................
MTM Comprehensive Medication Reviews in LTC
Settings ....................................................................
Total ($ in millions) ..............................................
2014
2015
2016
2017
Total
(FYs 2013–
2018)
($ in millions)
2018
423.2320
423.2325
12.66
12.66
12.66
12.66
12.66
12.66
12.66
12.66
12.66
12.66
12.66
12.66
75.96
75.96
423.600
0.08
0.08
0.08
0.08
0.08
0.08
0.45
423.100
423.104
423.153
0.5
0
0
0
0
0
0.5
422.102
0.06
0.06
0.06
0.06
0.06
0.06
0.36
417.427
0.01
0.01
0.01
0.01
0.01
0.01
0.06
22.500
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
423.153
1.52
1.52
1.52
1.52
1.52
1.52
9.12
..................
32.62
32.12
32.12
32.12
32.12
32.12
193.19
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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TABLE 11—ESTIMATED COSTS TO MANUFACTURERS BY PROVISION FOR FISCAL YEARS 2013 THROUGH 2018
Costs per fiscal year
($ in millions)
Regulation
section(s)
Provision(s)
2013
Medicare Coverage Gap Agreement ..........................
Other Manufacturer Costs ...........................................
Compliance and Civil Money Penalties ......................
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423.2315
423.2315
423.2340
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2014
2015
2016
2017
2018
3,600.00
13.03
1.18
4,070.00
13.03
1.32
4,600.00
13.03
1.48
5,180.00
13.03
1.67
5,790.00
13.03
1.88
6,470.00
13.03
2.11
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Total
(FYs 2013–
2018)
($ in millions)
29,710.00
78.18
9.64
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TABLE 11—ESTIMATED COSTS TO MANUFACTURERS BY PROVISION FOR FISCAL YEARS 2013 THROUGH 2018—Continued
Costs per fiscal year
($ in millions)
Regulation
section(s)
Provision(s)
2013
Total ($ in millions) ..............................................
..................
2014
2015
2016
2017
2018
3,614.21
4,084.35
4,614.51
5,194.70
5,804.91
6,485.14
Total
(FYs 2013–
2018)
($ in millions)
29,797.82
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 12—ESTIMATED SAVINGS TO STATES BY PROVISION FOR FISCAL YEARS 2013 THROUGH 2018
Savings per fiscal year
($ in millions)
Regulation
section(s)
Provision(s)
2013
Benefit Flexibility for Certain Dual Eligible Special
Needs Plans ............................................................
422.102
¥0.50
2014
2015
¥0.48
¥0.44
2016
2017
¥0.41
¥0.39
2018
Total savings
(FYs 2013–
2018)
($ in millions)
¥0.40
¥2.62
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.
D. Expected Benefits
1. Medicare Coverage Gap Discount
Program Agreement
The rule codifies a number of
requirements that must be included in
the manufacturer Discount Program
Agreement that generally must be
signed by a manufacturer to allow Part
D coverage of the manufacturers
applicable drugs. These requirements
are fundamental to ensuring that
participating manufacturers pay all
applicable discounts for applicable
drugs received by applicable
beneficiaries while in the coverage gap.
We believe that a well-implemented
Discount Program will increase
beneficiary adherence to medication
regimens that can improve their health
by lowering their pharmaceutical costs
at the point-of-sale.
2. Payment Processes for Part D
Sponsors
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3. Provision of Applicable Discounts on
Applicable Drugs for Applicable
Beneficiaries
The rule requires Part D sponsors to
calculate the applicable discount that
should be provided to applicable
beneficiaries in the coverage gap.
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4. Manufacturer Discount Payment
Audits and Dispute Resolution
We believe that the audit and dispute
programs will 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 and
stable Discount Program will help
beneficiaries plan their finances and
health care costs over time.
5. Beneficiary Dispute Resolution
The rule requires CMS to facilitate
distribution of the applicable discount
to beneficiaries by requiring that CMS
provide an interim discount payment to
Part D sponsors. That interim discount
payment will be subsequently
reconciled against manufacturer
payments for discounts provided to
beneficiaries. This provision will help
Part D sponsors maintain operations
with minimal, if any, effect on cash
flow. This will help ensure that Part D
sponsors provide the applicable
discount to applicable beneficiaries at
point-of-sale.
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Applicable beneficiaries will, 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 will likely
automate discount calculations,
potentially reducing errors and the need
for beneficiaries to file an appeal that
challenges the discount amount.
The traditional Medicare program
provides a means for beneficiaries to
challenge Medicare decisions to ensure
they receive needed benefits. We believe
that beneficiaries will 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 will
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
will generally comply with the terms of
the Discount Program 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,
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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 will 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
This final rule with comment period
requirement to change the actuarial
value calculation for creditable coverage
to exclude the additional value of gap
coverage consistent with the
determination of the RDS actuarial
value of prescription drug coverage will
enable beneficiaries who switch from an
RDS plan or other creditable
prescription drug coverage to a Part D
plan to do so without incurring a late
enrollment penalty.
10. Who May File Part D Appeals With
the Independent Review Entity
The changes to § 423.600 and
§ 423.602 will allow physicians and
other prescribers to request IRE
reconsiderations on behalf of Part D
plan enrollees. These changes will
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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 an enrollee’s behalf, it will further
improve the enrollee’s access to the Part
D appeals process and assist enrollees in
obtaining coverage of medically
necessary medications.
11. Termination for Lower-Than-ThreeStar-Performance Ratings
The benefit of this change is that we
will 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
will 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.
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13. Benefit Flexibility for Certain Dual
Eligible Special Needs Plans (SNPs)
We believe that allowing certain dual
eligible SNPs that meet high integration
and performance based standards to
offer supplemental benefits beginning
contract year 2013 will 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.
14. 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 chronic medications,
particularly those with higher costsharing and that are known to
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frequently be poorly tolerated. As noted
previously, we believe trial fills will
result in the avoidance of unused drugs,
reduce drug costs, diminish the
environmental issues 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 will 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.
We received no specific comments on
this section.
application. This proposed change will
ensure that the only MA organizations
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.
15. Apply MA and Part D Disclosure
Requirements to Cost Contract Plans
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 will ensure that the
beneficiaries have information to help
them make best choices for their health
care needs.
The expected benefits of the revisions
to § 423.153 are that Part D sponsors
will be required to offer all targeted
beneficiaries in LTC facilities the
opportunity to participate in a CMR, but
in the event the beneficiary is
cognitively impaired and unable either
to respond to the offer or to participate
in a 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.
16. 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
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17. Clarification of Contract
Requirements for First Tier and
Downstream Entities
This clarification ensures that the MA
organizations and Part D sponsors retain
the necessary control and oversight over
their delegated entities, thereby
strengthening the programs and
protecting Medicare beneficiaries.
18. Valid Prescriptions
By removing any doubt as to the
appropriate source of law to consult
when determining whether a
prescription is valid, this regulation will
benefit federal law enforcement
agencies. We do not believe, however,
that there is a quantifiable monetary
value to easing prosecutions in this
manner.
19. Medication Therapy Management
Comprehensive Medication Reviews
and Beneficiaries in LTC Settings
20. 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 them the same protections as
those afforded Medicare beneficiaries
enrolled in individual market Part D
plans where such protections have not
been explicitly waived.
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21. 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.
We received no specific comments on
this section, and therefore are not
modifying our policy based on such
comments. However, we are modifying
our proposal, as described in section
II.E.11. of the final rule with comment
period, Access to Covered Part D Drugs
through Use of Standardized
Technology and National Provider
Identifiers (§ 423.120), based on general
comments we received.
E. Alternatives Considered
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
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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 will involve a third party
administrator directly adjudicating the
discount payment to pharmacies. In this
model, the pharmacy will submit the
Part D claim to the Part D sponsor and
receive information on the response that
will 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 will 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
We clarified our regulations at
§ 423.56 to define creditable
prescription drug coverage consistent
with the calculation of the actuarial
value of qualified retiree prescription
drug coverage found at § 423.884(d).
This is a clarification to an existing
calculation that is already being used by
organizations providing creditable
coverage, therefore, there is no cost
impact on these organizations.
period, we are not limiting this benefit
flexibility to FIDE SNPs, but are instead
allowing D–SNPs that meet integration
and performance-based standards
established by CMS to qualify for this
benefit flexibility. We believe that
expanding this flexibility to a larger
pool of D–SNPs that are integrating care
for dual eligible beneficiaries is still
consistent with our overall objective of
preventing institutionalization, and will
give more dual eligible beneficiaries
across the country access to these
additional supplemental benefits.
4. Who May File Part D Appeals With
the Independent Review Entity
As previously mentioned, the changes
to § 423.600 and § 423.602 will 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 by the
IRE on behalf of their patients. 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 prescribing physicians or
prescribers and can create an
unintended barrier to enrollees
accessing the appeals process.
Consequently, we are finalizing the
change previously highlighted in this
rule.
8. Establishment and Application of
Daily Cost-Sharing Rates as Part of Drug
Utilization Management and Fraud,
Abuse, and Waste Control Program
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 will 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 Certain
Dual Eligible Special Needs Plans
(SNPs)
In our proposed rule, we considered
affording this benefit flexibility only to
those plans that met the definition of a
fully integrated dual eligible special
needs plan (FIDE SNP) as defined at 42
CFR 422.2. We also proposed limiting
this benefit flexibility to only those
FIDE SNPs that enrolled dual eligible
beneficiaries that received full Medicaid
benefits. In this final rule with comment
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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
sought specific comment on this belief.
Comment: A few commenters offered
a ‘‘copayment by days supply’’
alternative.
Response: For these reasons discussed
in section II.D.6. of this final rule with
comment period (Establishment and
Application of Daily Cost-Sharing Rate
as Part of Drug Utilization Management
and Fraud, Abuse and Waste Control
Program), we decline to adopt this
alterative.
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
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effective ‘‘no-cost’’ means to achieving
it.
10. Valid Prescriptions
We did not consider alternatives for
this regulation as it reflects existing
state laws.
11. Medication Therapy Management
Comprehensive Medication Reviews
and Beneficiaries in LTC Settings
Section 10328 of the Affordable Care
Act requires that a CMR be offered to all
targeted beneficiaries, regardless of
setting. Thus, the only alternative to this
revision would be to have the
pharmacist or provider attempt to
perform a CMR with a LTC resident who
is not capable of participating. However,
by requiring a CMR to be offered to all
targeted beneficiaries residing in LTC
our revisions to the regulations will give
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 CMR,
the beneficiary will still benefit from
having a CMR performed by a
pharmacist or other qualified provider
on PDEs, but we believe this option is
not in line with Congressional intent
regarding the use of NPIs as provider
identifiers.
Comment: A commenter supported
our policy to not require physicians to
enroll in Medicare in order for their
prescriptions to be covered by the Part
D program.
Response: We appreciate the
commenter’s support.
After consideration of the other public
comments received, we are modifying
this requirement as discussed in section
II.E.11. of this final rule with comment
period, (Access to Covered Part D Drugs
Through Use of Standardized
Technology and National Provider
Identifiers (§ 423.120)).
with the beneficiary’s prescriber and/or
caregiver without interacting with the
beneficiary.
12. Coordination of Part D Plans With
Other Prescription Drug Coverage
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.
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 were 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
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 the proposed rule for FY
2013 through 2018.
TABLE 13—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED COSTS AND SAVINGS, FROM FY 2013 TO FY 2018
[$ In millions]
Transfers
Category
Units discount rate
Period covered
7%
Annualized Monetized Transfers ...............................................................................
From Whom To Whom? ............................................................................................
3%
$220.3
$214.5
FYs 2013–2018
Federal Government to MA Organizations and Part D
Sponsors
¥$0.44
Annualized Monetized Transfers ...............................................................................
From Whom To Whom? ............................................................................................
¥$0.44
FYs 2013–2018
States to Medicaid Providers
Costs (All other provisions)
Units discount rate
Period covered
7%
Annualized Costs to MA organizations and Part D Sponsors ..................................
Annualized Costs to Manufacturers ..........................................................................
3%
$32.2
$4,853.7
$32.2
$4,916.9
FYs 2013–2018
FYs 2013–2018
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(* Monetized figures in 2011 dollars.)
In accordance with the provisions of
Executive Order 12866, the Office of
Management and Budget reviewed this
final rule with comment period.
42 CFR Part 417
Administrative practice and
procedure, Grant programs—health,
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Medicare, Penalties, Privacy, and
Reporting and recordkeeping
requirements.
42 CFR Part 422
List of Subjects
Health care, Health insurance, Health
maintenance organizations (HMO), Loan
programs—health, Medicare, and
Reporting and recordkeeping
requirements.
Administrative practice and
procedure, Emergency medical services,
Health facilities, Health maintenance
organizations (HMO), Health
professionals, Medicare, Penalties,
Administrative practice and
procedure, Health facilities, Health
maintenance organizations (HMO),
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42 CFR Part 423
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§ 417.460 Disenrollment of beneficiaries
by an HMO or CMP.
Privacy, Reporting and recordkeeping
requirements.
For the reasons set forth in the
preamble, the Centers for Medicare &
Medicaid Services amends 42 CFR
chapter IV as set forth below:
*
PART 417—HEALTH MAINTENANCE
ORGANIZATIONS, COMPETITIVE
MEDICAL PLANS, AND HEALTH CARE
PREPAYMENT PLANS
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.
2. Section § 417.422 is amended by
revising paragraph (d) to read as
follows:
■
§ 417.422
CMP.
Eligibility to enroll in an HMO or
*
*
*
*
*
(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;
*
*
*
*
*
■ 3. Subpart K is amended by adding
§ 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:
■
§ 417.432
Conversion of enrollment.
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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).
*
*
*
*
*
■ 5. Section 417.460 is amended by
adding paragraphs (c)(3) and (4) to read
as follows:
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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
such reinstatement is a change in the
individual’s circumstances subsequent
to the involuntary disenrollment for
non-payment of premiums.
*
*
*
*
*
PART 422—MEDICARE ADVANTAGE
PROGRAM
§ 417.492
[Amended]
6. Section 417.492 is amended as
follows:
■ A. In paragraph (a)(1)(i), ‘‘;’’ is
removed and ‘‘; and’’ is added in its
place.
■ B. In paragraph (a)(1)(ii), ‘‘; and’’ is
removed and ‘‘.’’ is added in its place.
■ C. By removing paragraph (a)(1)(iii).
■ D. By removing paragraph (b)(1)(iii).
■ 7. Section 417.801 is amended by
revising paragraph (d)(1)(ii) to read as
follows:
■
§ 417.801 Agreements between CMS and
health care prepayment plans.
*
*
*
*
*
(d) * * *
(1) * * *
(ii) The HCPP is not in substantial
compliance with the provisions of the
agreement, applicable CMS regulations,
or applicable provisions of the Medicare
law. This includes, but is not limited to,
the following:
(A) Failure to provide for and
document adequate access to providers.
(B) Failure to comply with CMS
requirements concerning provision of
data and maintenance of records.
(C) Failure to comply with financial
requirements specified at § 417.806; or
*
*
*
*
*
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8. The authority citation for part 422
continues to read as follows:
■
Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and
1395hh).
§ 422.60
[Amended]
9. In § 422.60, paragraph (c)(1) is
amended by removing the reference
‘‘§ 422.80’’ and adding in its place the
reference ‘‘§ 422.2262’’.
■ 10. Section 422.100 is amended by
adding paragraph (l) to read as follows:
■
§ 422.100
General requirements.
*
*
*
*
*
(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 DME
brands, items, and supplies of preferred
manufacturers provided the MA
organization ensures all of the
following:
(i) Its contracts with DME suppliers
ensure that enrollees have access to all
DME brands, items, and supplies of
preferred manufacturers.
(ii) Its enrollees have access to all
medically-necessary DME brands, items,
and supplies of non-preferred
manufacturers.
(iii) At the enrollees’ request, 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 DME brands, items,
and supplies of non-preferred
manufacturers.
(B) Provide for the repair of DME
brands, items, and supplies of nonpreferred manufacturers.
(iv) It makes no negative changes to
its DME brands, items, and supplies of
preferred manufacturers during the plan
year.
(v) It treats denials of DME brands,
items, and supplies of non-preferred
manufacturers 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 DME brand,
item, or supply of a non-preferred
manufacturer as part of the description
of benefits required under
§ 422.111(b)(2) and § 422.111(h).
(vii) It provides full coverage, without
limitation on brand and manufacturer,
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to all DME categories or subcategories
annually determined by CMS to require
full coverage.
11. Section 422.101 is amended by
revising paragraph (d)(1) to read as
follows:
■
§ 422.101
benefits.
Requirements relating to basic
*
*
*
*
(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 other plan-covered
items and services from the single
deductible described in paragraph
(d)(1)(i) of this section.
(iv) Must waive all Medicare-covered
preventive services (as defined in
§ 410.152(l)) from the single deductible
described paragraph (d)(1)(i) of this
section.
*
*
*
*
*
■ 12. Section 422.102 is amended by
adding paragraph (e) to read as follows.
Supplemental benefits.
*
*
*
*
*
(e) Supplemental benefits for certain
dual eligible special needs plans.
Subject to CMS approval, dual eligible
special needs plans that meet a high
standard of integration and minimum
performance and quality-based
standards may offer additional
supplemental benefits, consistent with
the requirements of this part, where
CMS finds that the offering of such
benefits could better integrate care for
the dual eligible population provided
that the special needs plan—
(1) Operated in the MA contract year
prior to the MA contract year for which
it is submitting its bid; and
(2) Offers its enrollees such benefits
without cost-sharing or additional
premium charges.
13. Section 422.111 is amended by
adding paragraph (i) to read as follows:
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■
§ 422.111
Disclosure requirements.
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*
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*
*
(i) Provision of information required
for access to covered services. MA plans
must issue and reissue (as appropriate)
member identification cards that
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14. Section 422.216 is amended by
revising paragraph (d)(1) to read as
follows:
■
*
§ 422.102
enrollees may use to access covered
services under the plan. The cards must
comply with standards established by
CMS.
§ 422.216 Special rules for MA private feefor-service plans.
*
*
*
*
*
(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).
*
*
*
*
*
■ 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
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.
*
*
*
*
*
■ 16. Section 422.501 is amended as
follows:
■ A. By revising paragraph (a).
■ B. In paragraph (c)(1)(i) by removing
‘‘; or’’ and adding in its place ‘‘.’’.
■ C. By adding paragraph (c)(1)(iii).
■ D. By revising paragraph (e).
The addition and revisions 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.
*
*
*
*
*
(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.
*
*
*
*
*
(e) Resubmittal of an application. An
application that has been denied by
CMS for a particular contract year may
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not be resubmitted until the beginning
of the application cycle for the
following contract year.
*
*
*
*
*
■ 17. Section 422.502 is amended as
follows:
■ A. In paragraph (a)(1), by 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), by 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. By adding paragraphs (b)(3) and (4).
■ D. In paragraph (c) introductory text,
by 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’’.
■ E. By revising paragraphs (c)(2) and
(c)(3)(i).
The additions and revision read as
follows:
§ 422.502 Evaluation and determination
procedures.
(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
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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,
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;
*
*
*
*
*
■ 17. Section 422.504 is amended as
follows:
■ A. By adding paragraphs (a)(17) and
(18).
■ B. By revising paragraphs (i)(3)(iii),
(i)(4)(i), (ii), (iii), (iv) introductory text
and (i)(5).
The additions and revisions read as
follows:
(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.
(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—
*
*
*
*
*
(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.
*
*
*
*
*
■ 18. Section 422.510 is amended by
adding paragraph (a)(14) to read as
follows:
§ 422.504
§ 422.641
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.
*
*
*
*
*
(i) * * *
(3) * * *
(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.
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§ 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.
*
*
*
*
*
■ 19. Section 422.641 is amended by
adding paragraph (d) to read as follows:
Contract determinations.
*
*
*
*
*
(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 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
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CMS’ determination was inconsistent
with the requirements of §§ 422.2;
422.4(a)(1)(iv); 422.101(f); 422.107, if
applicable; and 422.152(g) of this part.
*
*
*
*
*
■ 21. Section 422.2274 is amended as
follows:
■ A. By revising paragraph (a)(1)(i).
■ B. By removing and reserving
paragraph (a)(1)(ii).
■ C. By revising paragraph (a)(1)(iii).
■ D. By adding paragraph (f).
The revisions and addition read as
follows:
§ 422.2274
Broker and agent requirements.
*
*
*
*
*
(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).
*
*
*
*
*
(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–43, and 1871 of the Social Security
Act (42 U.S.C. 1302, 1395w–101 through
1395w–153, and 1395hh).
23. Section 423.56 is amended by
revising paragraphs (a) and (f)(3) to read
as follows:
■
§ 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
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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.
*
*
*
*
*
(f) * * *
(3) Prior to the commencement of the
Annual Coordinated Election Period as
defined in § 423.38(b); and
*
*
*
*
*
■ 24. Section 423.100 is amended as
follows:
■ A. By adding in alphabetical order the
definition of ‘‘Daily cost-sharing rate.’’
■ B. By revising paragraph (2)(iii) of the
definition of ‘‘Incurred costs.’’
■ C. In paragraph (2)(ii) of the definition
of ‘‘Part D drug,’’ by removing the
phrase ‘‘smoking cessation agents’’ and
adding in its place the phrase ‘‘smoking
cessation agents; barbiturates when used
to treat epilepsy, cancer, or a chronic
mental health disorder; and
benzodiazepines’’.
■ D. By revising the definition of
‘‘Supplemental benefits.’’
■ E. By adding in alphabetical order the
definition of ‘‘Valid prescription.’’
The additions and revision read as
follows:
§ 423.100
Definitions.
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*
*
Daily cost-sharing rate means, as
applicable, the established—
(1) Monthly copayment under the
enrollee’s Part D plan, divided by 30 or
31 and rounded to the nearest lower
dollar amount, if any, or to another
amount, but in no event to an amount
that would require the enrollee to pay
more for a month’s supply of the
prescription than would otherwise be
the case; or
(2) Coinsurance percentage under the
enrollee’s Part D.
*
*
*
*
*
Incurred costs * * *
(2) * * *
(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
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Medicare Coverage Gap Discount
Program (as defined in § 423.2305); or
*
*
*
*
*
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).
*
*
*
*
*
Valid prescription means a
prescription that complies with all
applicable State law requirements
constituting a valid prescription.
■ 25. Section 423.104 is amended by
adding paragraphs (h) and (i) to read as
follows:
§ 423.104 Requirements related to
qualified prescription drug coverage.
*
*
*
*
*
(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. Beginning
January 1, 2014, a Part D sponsor is
required to 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 paragraph (c)(5) to read as
follows:
§ 423.120
Access to covered Part D drugs.
*
*
*
*
*
(c) * * *
(5)(i) A Part D sponsor must submit to
CMS only a prescription drug event
(PDE) record that contains an active and
valid individual prescriber NPI.
(ii) A Part D sponsor must ensure that
the lack of an active and valid
individual prescriber NPI on a network
pharmacy claim does not unreasonably
delay a beneficiary’s access to a covered
Part D drug, by taking the steps
described in paragraph (c)(5)(iii) of this
section.
(iii) The sponsor must communicate
at point-of-sale whether or not a
submitted NPI is active and valid in
accordance with this paragraph
(c)(5)(iii).
(A) If the sponsor communicates that
the NPI is not active and valid, the
sponsor must permit the pharmacy to—
(1) Confirm that the NPI is active and
valid; or
(2) Correct the NPI.
(B) If the pharmacy—
(1) Confirms that the NPI is active and
valid or corrects the NPI, the sponsor
must pay the claim if it is otherwise
payable; or
(2) Cannot or does not correct or
confirm that the NPI is active and valid,
the sponsor must require the pharmacy
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22169
to resubmit the claim (when necessary),
which the sponsor must pay, if it is
otherwise payable, unless there is an
indication of fraud or the claim involves
a prescription written by a foreign
prescriber (where permitted by State
law).
(iv) A Part D sponsor must not later
recoup payment from a network
pharmacy for a claim that does not
contain an active and valid individual
prescriber NPI on the basis that it does
not contain one, unless the sponsor—
(A) Has complied with paragraphs
(c)(5)(ii) and (iii) of this section;
(B) Has verified that a submitted NPI
was not in fact active and valid; and
(C) The agreement between the parties
explicitly permits such recoupment.
(v) With respect to requests for
reimbursement submitted by Medicare
beneficiaries, a Part D sponsor may not
make payment to a beneficiary
dependent upon the sponsor’s
acquisition of an active and valid
individual prescriber NPI, unless there
is an indication of fraud. If the sponsor
is unable to retrospectively acquire an
active and valid individual prescriber
NPI, the sponsor may not seek recovery
of any payment to the beneficiary solely
on that basis.
*
*
*
*
*
■ 27. Section 423.153 is amended as
follows:
■ A. In the introductory text for
paragraph (b) by removing the phrase
‘‘that -’’ and adding in its place the
phrase ‘‘that address all of the
following:’’.
■ B. In paragraph (b)(1) by removing ‘‘;’’
and adding in its place ‘‘.’’.
■ C. In paragraph (b)(2) by removing ‘‘;
and’’ and adding in its place ‘‘.’’.
■ D. By adding paragraph (b)(4).
■ E. By revising paragraph (d)(1)(vii)(B).
The addition and revision read as
follows:
§ 423.153 Drug utilization management,
quality assurance, and medication therapy
management programs (MTMPs).
*
*
*
*
*
(b) * * *
(4)(i) Establishes a daily cost-sharing
rate and applies it to a prescription
presented to a network pharmacy for a
covered Part D drug that is dispensed
for a supply less than 30 days, and in
the case of a monthly copayment,
multiplies the daily cost-sharing rate by
the days supply actually dispensed—
(A) If the drug is in the form of a solid
oral dose, subject to paragraph
(b)(4)(i)(B) of this section and may be
dispensed for a supply less than 30 days
under applicable law;
(B) The requirements of this
paragraph (b)(4)(i) do not apply to either
of the following:
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(1) Solid oral doses of antibiotics.
(2) 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.
(ii) [Reserved]
*
*
*
*
*
(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 is offered the
annual comprehensive medication
review and is unable to accept the offer
to participate, the pharmacist or other
qualified provider may perform the
comprehensive medication review with
the beneficiary’s prescriber, caregiver, or
other authorized individual.
*
*
*
*
*
■ 28. Section 423.458 is amended by
adding paragraph (c)(4) to read as
follows:
§ 423.458 Application of Part D rules to
certain Part D plans on or after January 1,
2006.
*
*
*
*
*
(c) * * *
(4) 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)(3) of this section.
*
*
*
*
*
■ 29. Section 423.501 is amended by
adding the definition of ‘‘Bona fide
service fees’’ in alphabetical order 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 drug.
*
*
*
*
*
■ 30. Section 423.503 is amended as
follows:
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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.
*
*
*
*
*
■ 31. Section 423.505 is amended as
follows:
■ A. By adding paragraphs (b)(24)
through (26).
■ B. By revising paragraphs (i)(3)
introductory text, (i)(3)(iii), (i)(3)(v), and
(i)(4)(i) through (iv).
The addition and revisions read as
follows:
(25) Maintain 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) Maintain 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 D
performance measure scores.
*
*
*
*
*
(i) * * *
(3) Each and every contract governing
Part D sponsors and first tier,
downstream, and related entities, must
contain the following:
*
*
*
*
*
(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.
*
*
*
*
*
(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.
*
*
*
*
*
(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.
*
*
*
*
*
■ 32. Section 423.509 is amended by
adding paragraph (a)(13) to read as
follows:
§ 423.505
§ 423.509
A. In paragraph (b)(1), by removing
the phrase ‘‘If a Part D’’ and adding in
its place ‘‘Except as provided in
paragraphs (b)(2), (3), and (4) of this
section, if a Part D’’.
■ B. Adding paragraphs (b)(3) and (4).
The additions read as follows:
■
§ 423.503 Evaluation and determination
procedures for applications to be
determined qualified to act as a sponsor.
*
Contract provisions.
*
*
*
*
*
(b) * * *
(24) Provide applicable beneficiaries
with applicable discounts on applicable
drugs in accordance with the
requirements in subpart W of Part 423.
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Termination of contract by CMS.
*
*
*
*
*
(a) * * *
(13) Achieves a Part D summary plan
rating of less than 3 stars for 3
consecutive contract years. Plan ratings
issued by CMS before September 1,
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2012 are not included in the calculation
of the 3-year period.
*
*
*
*
*
■ 33. Section 423.514 is amended as
follows:
■ A. By redesignating paragraphs (d)
through (g) as paragraphs (g) through (j),
respectively.
■ B. By 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 and 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,
plan, or prices charged for drugs, for the
following purposes:
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(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.
*
*
*
*
*
■ 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
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
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22171
condition would not be as effective for
the individual as the non-formulary
drug, would have adverse effects for the
individual, or both.
*
*
*
*
*
■ 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.
*
*
*
*
*
■ 36. Section 423.1000 is amended by
adding paragraph (a)(3) to read as
follows:
§ 423.1000
Basis and scope.
*
*
*
*
*
(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.
*
*
*
*
*
■ 38. Section § 423.2274 is amended as
follows:
■ A. By revising paragraph (a)(1)(i).
■ B. By removing and reserving
paragraph (a)(1)(ii).
■ C. By revising paragraph (a)(1)(iii).
■ D. By adding paragraph (f).
The revisions and addition read as
follows:
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Broker and agent requirements.
*
*
*
*
*
(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 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.
*
*
*
*
*
(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).
*
*
*
*
*
(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.
■ 39. Subpart W is added to read as
follows:
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.
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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§ 423.2300
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.
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(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 user.
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
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Frm 00102
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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
and type.
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-of-network
provider in accordance with the
applicable beneficiary’s Part D plan outof-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.
§ 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.
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(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.
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§ 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 learning of a new
code assigned by the FDA.
(5) Collect, have available, and
maintain appropriate data, including
data related to manufacturer’s labeler
codes, FDA drug approvals, FDA NDC
Directory listings, NDC last lot
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
providing timely information about
discontinued drugs to enable the
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publication of accurate information
regarding what drugs, identified by
NDC, are in current distribution.
(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)
of this section 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 1-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.
§ 423.2320
sponsors.
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.
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22173
§ 423.2325 Provision of applicable
discounts.
(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) 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 the Part D plan.
(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.
(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. For
long-term care and home infusion
pharmacies, the date of dispensing can
be interpreted as the date the pharmacy
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submits the discounted claim for
reimbursement.
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§ 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
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, NDC last lot 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.
(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
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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
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
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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. 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:
(1) A description of the basis for the
determination.
(2) The basis for the penalty.
(3) The amount of the penalty.
(4) The date the penalty is due.
(5) The manufacturer’s right to a
hearing (as specified in § 423.1006).
(6) 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
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) of section
of 1128A of the Act) apply to CMPs
under this section 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.
(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 (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.
E:\FR\FM\12APR2.SGM
12APR2
Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Rules and Regulations
mstockstill on DSK4VPTVN1PROD with RULES2
(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.
VerDate Mar<15>2010
17:36 Apr 11, 2012
Jkt 226001
(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.
(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
PO 00000
Frm 00105
Fmt 4701
Sfmt 9990
22175
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: March 15, 2012.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare
& Medicaid Services.
Approved: March 28, 2012.
Kathleen Sebelius,
Secretary, Department of Health and Human
Services.
[FR Doc. 2012–8071 Filed 4–2–12; 4:15 pm]
BILLING CODE 4120–01–P
E:\FR\FM\12APR2.SGM
12APR2
Agencies
[Federal Register Volume 77, Number 71 (Thursday, April 12, 2012)]
[Rules and Regulations]
[Pages 22072-22175]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-8071]
[[Page 22071]]
Vol. 77
Thursday,
No. 71
April 12, 2012
Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 417, 422 and 423
Medicare Program; Changes to the Medicare Advantage and the Medicare
Prescription Drug Benefit Programs for Contract Year 2013 and Other
Changes; Final Rule
Federal Register / Vol. 77, No. 71 / Thursday, April 12, 2012 / Rules
and Regulations
[[Page 22072]]
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 417, 422, and 423
[CMS-4157-FC]
RIN 0938-AQ86
Medicare Program; Changes to the Medicare Advantage and the
Medicare Prescription Drug Benefit Programs for Contract Year 2013 and
Other Changes
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule with comment period.
-----------------------------------------------------------------------
SUMMARY: This final rule with comment period revises 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. It also responds to public comments
regarding the long-term care facility conditions of participation
pertaining to pharmacy services.
DATES: Effective dates: These regulations are effective on June 1, 2012
unless otherwise specified in section I.B. of this final rule with
comment period (see Table 1). Amendments to the definitions of ``other
health or prescription drug coverage'' at Sec. 423.2305 and
``supplemental benefits'' at Sec. 423.100 are effective January 1,
2013.
Comment date: We will only consider public comments on the issues
specified in section II.B.5 of this final rule with comment period,
Independence of LTC Consultant Pharmacists, if we receive them at one
of the addresses specified in the ADDRESSES section of this final rule
with comment period, on June 11, 2012.
Applicability dates: In section I.B. of the preamble of this final
rule with comment period, we provide a table (Table 1) which lists
revisions that have an applicability date other than the effective date
of this final rule with comment period.
ADDRESSES: In commenting, please refer to file code CMS-4157-FC.
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. Follow the ``Submit a
comment'' instructions.
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-FC, 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 to
the following address only: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-4157-FC, 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 only to 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 payment issues.
Ilina Chaudhuri, (410) 786-8628, Part D payment issues.
SUPPLEMENTARY INFORMATION: 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: 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 1-800-743-3951.
Table of Contents
I. Executive Summary, Effective and Applicability Dates, and
Background
A. Executive Summary
B. Effective and Applicability Dates
C. Background
II. Provisions of the Final Regulation and Analysis of and Responses
to Public Comments
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) Timing and 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 (Sec. 423.2325)
(1) Obligations of Part D Sponsors; Point-of-Sale Discounts
[[Page 22073]]
(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
(3) Dispute Resolution
h. Beneficiary Dispute Resolution (Sec. 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
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. Sec. 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
(Sec. Sec. 422.502 and 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 Certain Dual Eligible Special
Needs Plans (D-SNPs) (Sec. 422.102)
3. Application of the Medicare Hospital-Acquired Conditions and
Present on Admission Indicator Policy to MA Organizations
4. Clarifying Coverage of Durable Medical Equipment (Sec. Sec.
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 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. Sec. 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 (Sec. Sec. 423.100, 423.104, and 423.153)
E. Clarifying Program Requirements
1. Technical Corrections to Enrollment Provisions (Sec. Sec.
417.422, 417.432, 422.60, and 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. Sec.
422.500, 422.501, 422.502, 422.641, and 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. Sec. 422.504 and 423.505)
8. Valid Prescriptions (Sec. Sec. 423.100 and 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. 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 Medication 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
[[Page 22074]]
MSA Metropolitan Statistical Area
MSAs Medical Savings Accounts
MSP Medicare Secondary Payer
MTM Medication Therapy Management
MTMP Medication Therapy Management Program
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. Executive Summary and Background
A. Executive Summary
1. Purpose
a. Need for Regulatory Action
We are publishing this final rule with comment period for the
Medicare Advantage (Part C) and prescription drug (Part D) programs to
make changes as required by statute, including the Affordable Care Act,
as well as improve the program through modifications that reflect
experience we have obtained in administering the Part C and Part D
programs and/or address requests for clarification received from
stakeholders such as health plans and Part D sponsors. The five
different sections of the preamble cover the specific means by which we
believe the final rule will: (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. Legal Authority
Our authority for this final regulation stems from the Social
Security Act (the Act). As is discussed in more detail in section I.C.
of this final rule with comment period, the Balanced Budget Act of 1997
(BBA) and the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) created, respectively, the Medicare
Advantage (MA) program (Part C) and the Medicare Prescription Drug
Benefit Program (Part D). Congress continues to amend the Act and
change both Parts C and D, and this final regulation includes
modifications required by, for instance, the Medicare Improvements for
Patients and Providers Act of 2008 (MIPPA) and the Affordable Care Act.
2. Summary of the Major Provisions
a. Coverage Gap Discount Program (Sec. 423.100, Sec. 423.505(b),
Sec. 423.1002, and Subpart W (Sec. 423.2300 Through 423.2410))
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). We
implemented the Discount Program through program instructions due to
the January 1, 2011 implementation deadline. Although not required, we
are codifying most of the 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.
b. Pharmacy Benefit Manager's Transparency Requirements (Sec. 423.501
and Sec. 423.514)
Section 1150A of the Act, as amended by section 6005 of the
Affordable Care Act, requires Part D sponsors and entities that provide
pharmacy benefits management services to report various data elements.
The statute further specifies that this information is confidential and
generally shall not be disclosed by the government or by a plan
receiving the information, with certain exceptions that allow the
government to disclose the information in a non-identifiable form.
There are penalties for those that fail to meet the requirements of
this provision. We are codifying the reporting requirements,
confidentiality protections, and penalty provision in this final rule
with comment period.
c. Who May File Part D Appeals With the Independent Review Entity
(Sec. 423.600 and Sec. 423.602)
This change to our regulations allows prescribers to request a
reconsideration on an enrollee's behalf without obtaining an appointed
representative form. We believe this change will make the Part D
appeals process more accessible to beneficiaries. The legal authority
for this policy is section 1860D-4(g) of the Act.
d. 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. Sec. 422.510, 423.505, and 423.509)
Each year, we issue performance quality ratings, using a 5-star
system where 5 stars indicates the highest quality, of Part C and D
plan sponsors. The plan ratings are based on a series of measures that
correspond to operational requirements of the Part C and D programs. We
have established that 3 stars reflects an average level of performance
and is the lowest acceptable rating for plan sponsors. Sponsors that
fail for three consecutive years to achieve at least a 3-star rating
have demonstrated that they have substantially failed to meet the
requirements of the Part C and D programs and failed to take timely and
effective corrective action. Therefore, we are adopting the authority
to terminate the contracts of Part C and D sponsors that fail to
achieve at least a 3-star plan rating for 3 consecutive years. The data
used to calculate the plan ratings is plan performance data that serves
as evidence that the sponsor has reached the substantial failure
standard
[[Page 22075]]
that CMS must use, pursuant to section 1857(c)(2) of the Act, to make a
contract termination decision.
e. New Benefit Flexibility for Fully-Integrated Dual Eligible Special
Needs Plans (FIDE SNPs) (Sec. 422.102)
This provision specifies that, subject to CMS approval, and as
specified annually by CMS, certain dual eligible SNPs (D-SNPs) that
meet integration and performance standards may offer additional
supplemental benefits beyond those CMS currently allows other MA plans
to offer, where CMS finds that the offering of such benefits could
better integrate care for the dual eligible population. Such benefits
may include nonskilled nursing services, personal care services, and
other long-term care services and supports designed to keep dual
eligible beneficiaries out of institutions. We would require D-SNPs
that offer these additional supplemental benefits to do so at no
additional cost to the beneficiary. We believe that providing certain
D-SNPs that meet integration and performance standards the flexibility
to offer additional supplemental benefits could better integrate care
for the dual eligible population, help prevent health status decline,
and reduce the quantity and cost of future health care needs.
f. Clarifying Coverage of Durable Medical Equipment (Sec. Sec. 422.100
and 422.111)
This provision permits a Medicare Advantage plan to limit durable
medical equipment (DME) to specific ``preferred'' brands and
manufacturers as long as the plan complies with several requirements
intended to ensure that the enrollee continues to have access to all
categories of DME specified in the Social Security Act. Beneficiary
protections include access to all preferred brands, a transition period
permitting enrollees to retain DME when changing plans, exceptions to
plan limitations based on medical necessity, the ability to appeal a
plan's denial of DME based on brand/manufacturer, and plan disclosure
of DME limitations to enrollees.
g. Establishment and Application of Daily Cost-Sharing Rate as Part of
Drug Utilization Management and Fraud, Abuse, and Waste Control Program
(Sec. Sec. 423.104 and 423.153)
The daily cost-sharing rate requirement provides a financial
incentive to Medicare Part D beneficiaries to ask their prescribers
whether less than a month's supply of a drug would be appropriate
because, if so, the Part D sponsor will apply lower, pro-rated cost
sharing when the prescription is dispensed, which also reduces costs
and waste. Sponsors will not be required to provide daily cost-sharing
rates upon request until January 1, 2014.
h. Access to Covered Part D Drugs Through Use of Standardized
Technology and National Provider Identifiers (Sec. 423.120)
Part D sponsors must include an active and valid prescriber
National Provider Identifier (NPI) on prescription drug event records
(PDEs) that they submit to CMS, which will assist the Federal
government in fighting possible fraudulent activity in the Part D
program, because prescribers will be consistently and uniformly
identified. This policy will not interfere with beneficiary access to
needed medications because Part D sponsors must validate the NPI at
point of sale, and if this is not possible, permit the prescription to
be dispensed and obtain the valid NPI afterwards.
3. Summary of Costs and Benefits
------------------------------------------------------------------------
Preamble Provision Total 6 year Total 6 year
section description costs benefits
------------------------------------------------------------------------
II.A.1......... Coverage Gap $1.3 billion: $29.7 billion in
Discount Program Cost to Federal manufacturer
(Sec. Sec. government $76 discounts for
423.100, M: Cost to Part Part D
423.505(b), D sponsors. enrollees.
423.1002, and $29.8 billion: Provides
Subpart W (Sec. Cost to additional
Sec. 423.2300- manufacturers. health benefits
423.2410)). through
increased
adherence to
medication
regimens; and
allows
beneficiaries to
reach the
catastrophic
coverage phase
more quickly.
II.A.3......... Pharmacy Benefit N/A (Nearly all Promotes PBM
Manager's data elements transparency to
Transparency are already Part D sponsors
Requirements collected for and Medicare.
(Sec. Sec. other purposes).
423.501 and
423.514).
II.B.4......... Who May File Part $5.84 million: Improves
D Appeals with Cost to Federal beneficiary
the Independent government. access to the
Review Entity $450,000: Cost Part D appeals
(Sec. 423.600). to Part D process.
sponsors.
II.C.2......... Plan Performance N/A.............. For
Ratings as a beneficiaries:
Measure of Provides
Administrative assurance that
and Management they are making
Arrangements and a plan election
as a Basis for from among only
Termination or those sponsors
Non-Renewal of a that demonstrate
Medicare a commitment to
Contract (Sec. providing high
Sec. 422.510, quality service.
423.505, and For CMS:
423.509). Emphasizes
further CMS'
commitment to
driving
improvement in
the health care
and prescription
drug benefit
markets.
II.D.2......... New Benefit $0.36 million to For
Flexibility for MA organizations. beneficiaries:
Certain Dual The flexibility
Eligible Special for certain D-
Needs Plans SNPs to offer
(D[dash]SNPs) additional
(Sec. 422.102). supplemental
benefits is in
keeping with our
objective of
keeping Medicare-
Medicaid (``dual
eligible'')
beneficiaries
who are at risk
of
institutionaliza
tion in the
community.
For CMS: $135.1
million in
savings that
accrue to the
Federal Medicaid
program and the
Medicare
program.
For States:
$2.62 million in
savings to the
State Medicaid
program.
[[Page 22076]]
II.D.4......... Clarifying N/A.............. N/A.
Coverage of
Durable Medical
Equipment (Sec.
Sec. 422.100
and 422.111).
II.D.6......... Establishment and $0.5 million: Over $1.8 billion
Application of cost to Part D in estimated
Daily Cost- sponsors. savings to the
Sharing Rate as Part D program.
Part of Drug Savings to
Utilization beneficiaries
Management and who take
Fraud, Abuse, advantage of
and Waste option in
Control Program consultation
(Sec. Sec. with their
423.100, 423.104 prescribers
and 423.153). through lower
cost-sharing for
prescriptions.
Reduction of
medication
waste.
II.E.11........ Access to Covered $30.7 million: Improved
Part D Drugs cost to Part D capability to
Through Use of sponsors. fight fraud in
Standardized the Medicare
Technology and Part D program.
National
Provider
Identifiers
(Sec. 423.120).
------------------------------------------------------------------------
B. Effective and Applicability Dates
We note that these regulations will be effective 60 days after the
publication of this final rule with comment period, except for two
regulations whose effective dates are mandated by statute and one
regulation whose effective date we are choosing to delay. Section
175(b) of MIPPA provides that barbiturates for specified health
conditions and benzodiazepines be considered as Part D drugs for
prescriptions dispensed on or after January 1, 2013. Similarly, section
10328 of the Affordable Care Act requires that, for plan years
beginning on or after 2 years after the date of its enactment, Part D
sponsors offer to targeted beneficiaries annual comprehensive
medication reviews (CMRs). The Affordable Care Act was enacted on March
23, 2010; accordingly, the revision regarding CMRs in LTC settings will
become effective January 1, 2013. Additionally, we have delayed the
effective date of the change to the policy on who may file Part D
appeals with the Independent Review Entity to clarify that physicians
and other prescribers may not request reconsiderations on behalf of
beneficiaries until the beginning of the 2013 plan year (unless they
are the beneficiary's authorized representative).
Unless specified in this final rule with comment period, the
effective date and the applicability date are the same. There are some
instances in which they may vary. For instance, because the health and
drug plans under the Part C and D programs operate under contracts with
CMS that are applicable on a calendar year basis, some provisions will
not be applicable prior to contract year January 1, 2013. In Table 1 we
provide a list of revisions whose applicable dates vary from the
effective date of 60 days after publication of this final rule with
comment period.
Table 2--Finalized Revisions With Effective and/or Applicable Dates
Other Than 60 Days After Publication
------------------------------------------------------------------------
Effective date
Preamble section Section title applicability date
------------------------------------------------------------------------
II.A.1...................... Coverage Gap The definition of
Discount Program. ``other health or
prescription drug
coverage'' under
Sec. 423.2305 and
change to the
existing definition
of ``supplemental
benefits'' under
Sec. 423.100 are:
effective 60 days
after date of
publication
applicable 01/01/13
Note: All remaining
regulations related
to the Coverage Gap
Discount Program
remain:
Effective 60 days
after date of
publication
applicable 60 days
after date of
publication
II.A.2...................... Inclusion of effective 01/01/13
Benzodiazepines and applicable 01/01/13
Barbiturates as
Part D Covered
Drugs.
II.B.1...................... Good Cause and effective 60 days
Reinstatement into after date of
a Cost Plan. publication
applicable 01/01/13
II.B.2...................... Requiring MA plans effective 60 days
to disclose Member after date of
ID cards. publication
applicable 01/01/13
II.B.4...................... Clarifying Who May effective and
File Part D Appeals applicable 01/01/13
with the
Independent Review
Entity.
II.C.1...................... CMS Termination of effective 60 days
Health Care after date of
Prepayment Plans. publication
applicable 01/01/13
II.D.1...................... Cost Contract Plan effective 60 days
Public Notification after date of
Requirements in publication
Cases of Non- applicable 01/01/13
Renewal.
II.D.2...................... Flexibilities for effective 60 days
Certain Fully- after date of
Integrated Dual publication
Eligible Special applicable 01/01/13
Needs Plans.
II.D.4...................... Clarifying Coverage effective 60 days
of Durable Medical after date of
Equipment. publication
applicable 01/01/13
II.D.5...................... Broker and Agent effective 60 days
Requirements. after date of
publication
applicable 01/01/13
II.E.6...................... Establishment and effective 60 days
Application of after date of
Daily Cost-Sharing publication
Rate as Part of applicable 01/01/14
Drug Utilization
Management and
Fraud, Abuse, and
Waste Control
Program.
II.E.2...................... Extending MA and effective 60 days
Part D Program after date of
Disclosure publication
Requirements to applicable 01/01/13
Section 1876 Cost
Contract Plans.
[[Page 22077]]
II.E.3...................... Clarification of, effective 60 days
and Extension of after date of
Regional Preferred publication
Provider applicable 01/01/13
Organization Plan
Single Deductible
Requirements to,
Local Preferred
Provider Plans.
II.E.4...................... Technical Change to effective 60 days
Private Fee-For- after date of
Service Plan publication
Explanation of applicable sometime
Benefits after 2013
Requirements. application cycle
(when EOB model for
all MA plans are
finalized)
II.E.5...................... Application effective 60 days
Requirements for after date of
Special Needs Plans. publication
applicable 01/01/13
II.E.6...................... Timeline for effective 60 days
Resubmitting after date of
Previously Denied publication
MA Applications. applicable 01/01/13
II.E.7...................... Clarification of effective 60 days
Contract after date of
Requirements for publication
First Tier and applicable 01/01/13
Downstream Entities.
II.E.9...................... Medication Therapy effective 01/01/13
Management applicable 01/01/13
Comprehensive
Medication Reviews
and Beneficiaries
in LTC Settings.
II.E.11..................... Access to Covered effective 60 days
Part D Drugs after date of
Through Use of publication
Standardized applicable 01/01/13
Technology and
National Provider
Identifiers.
------------------------------------------------------------------------
C. 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 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. 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 then-recent legislative changes.
The Patient Protection and Affordable Care Act (Pub. L. 111-148)
was enacted on March 23, 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 provisions enacted
in 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.
In the October 11, 2011 Federal Register (76 FR 63018), we
published a proposed rule with proposed revisions to the Medicare
Advantage (MA) program (Part C) and prescription drug benefit program
(Part D). The goals of this proposed rule were to: Implement provisions
from the Affordable Care Act (ACA) and the Medicare Improvements for
Patients and Providers Act of 2008 (MIPPA); strengthen beneficiary
protections; exclude plan participants that perform poorly; improve
program efficiencies; and clarify program requirements for contract
year 2013. The proposed rule also included consideration of changes to
the long term care facility (LTC) conditions of participation relating
to pharmacy services.
[[Page 22078]]
II. Provisions of the Proposed Rule and Analysis and Response to Public
Comments
We received approximately 516 items of timely correspondence
containing comments on the proposed rule published in the October 11,
2011 Federal Register (76 FR 63018). Commenters included health and
drug plan organizations, insurance industry trade groups, provider
associations, pharmacists (including consultant pharmacists) and
pharmacy associations, representatives of hospital and long term care
institutions, pharmacy benefit managers, drug manufacturers, mental
health and disease specific advocacy groups, beneficiary advocacy
groups, private citizens, ombudsmen, and others.
In this final rule with comment period, we address all comments and
concerns regarding the policies included in the proposed rule. We also
reference, in the comment and response sections of this final rule with
comment period, some comments that were outside the scope of the
revisions we proposed in October 2011. We present a summary of public
comments, as well as our responses to them in the applicable subject-
matter sections of this final rule with comment period.
In the sections that follow, we discuss finalized revisions to the
regulations in 42 CFR parts 417, 422, and 423 which govern the MA and
prescription drug benefit programs. We also considered--but for the
present decided against--making changes to the regulations setting
forth the Medicare conditions of participation for long-term care
facilities, which are currently codified at 42 CFR part 483. The
preamble for the final rule will follow the structure of the October
2011 proposed rule and cover issues by topic area. Accordingly, our
proposals address the following five specific goals:
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 of the five major
sections of the preamble to this final rule with comment period, we
discuss provisions in order of appearance in the associated
regulations; a chart at the beginning of each of the five sections
provides subsection numbers and titles and the associated regulatory
citations. Although we are not finalizing all the revisions proposed,
discussion (including comments and responses) of non-finalized
proposals will still appear in the same order as was the case in the
October 2011 proposed rule.
A. Implementing Statutory Provisions
We are finalizing all three provisions in this section, two of
which implement sections of the Affordable Care Act and one which
implements a MIPPA mandate. In this final rule with comment period, we
consolidate and codify previous guidance regarding the Coverage Gap
Discount Program mandated by the Affordable Care Act. We believe this
consolidation will provide stakeholders a central, clear source of
direction. We are also finalizing regulations under a MIPPA provision
which will provide treatment for beneficiaries who require
benzodiazepines and, as specified, barbiturates. Lastly, we are
finalizing regulations implementing section 6005 of the Affordable Care
Act, which contains several reporting requirements for Part D sponsors
and 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 2.
Table 2--Provisions To Implement Statutory Provisions
----------------------------------------------------------------------------------------------------------------
Part 423
Preamble section Provision --------------------------------------------------
Subpart Section(s)
----------------------------------------------------------------------------------------------------------------
II.A.1.................... Coverage Gap Discount Program.... Subpart C........................ 423.100
Subpart K........................ 423.505
Subpart T........................ 423.1000
Subpart T........................ 423.1002
Subpart W (new).................. 423.2300-
423.2345
II.A.2.................... Inclusion of Benzodiazepines and Subpart C........................ 423.100
Barbiturates as Part D Covered
Drugs.
II.A.3.................... Pharmacy Benefit Manager's Subpart K........................ 423.501
Transparency Requirements. 423.514
----------------------------------------------------------------------------------------------------------------
1. Coverage Gap Discount Program (Sec. Sec. 423.100, 423.505(b),
423.1000, 423.1002, and 423.2300 Through 423.2345 (Subpart W))
Section 3301 of 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 applicable
beneficiaries for all covered brand-name and generic drugs and
biological products after the deductible 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). In general, 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. We note that we have authority under section 1860D-
43(c) of the Act to make an exception that allows coverage without an
agreement, but based on the current level of participation by
manufacturers and the breadth of applicable drugs covered by Discount
Program Agreements, we do not anticipate needing to exercise such
authority.
[[Page 22079]]
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 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 have determined that the Part D sponsor can accurately provide the
discount at point-of-sale.
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 on May 21, 2010, 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 implemented the Discount Program through program instruction due
to the January 1, 2011 implementation deadline. Although not required,
we are codifying most of 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.
In this section, we summarize the provisions of subpart W and
respond to public comments.
b. Definitions (Sec. 423.2305)
Proposed Sec. 423.2305 included 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 final
rule with comment period.
(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 treats the product as a 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 requirements 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.
(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
[[Page 22080]]
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
proposed 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 proposed 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 proposed adding this language to the definition to track the
defined term in the Discount Program Agreement, and because we believe
this is the only practical way to define manufacturer under the
Discount Program 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 label, relabel or
repackage drug products and market them with unique labeler codes. It
would be very difficult, if not impossible, to track all labeled,
relabeled or repackaged products back to the original maker of the drug
if we limited the definition of manufacturer to the original maker.
Therefore, for purposes of the Discount Program, we interpret the
definition of ``manufacturer'' in Sec. 423.2305 to mean any company
associated with a unique labeler code included in the NDCs of the
applicable drugs dispensed by pharmacies.
Applicable drugs are generally marketed with labels that include
the product's NDC number. In any NDC, the labeler code segment uniquely
corresponds to a single company. 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 proposed 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, we
proposed to apply CMS's cell-size suppression policy to the information
we would release to manufacturers when 10 or fewer beneficiaries with
the same applicable drug (identified as having the same first 2
segments of NDC) have claims at the same pharmacy (``low-volume
claims''). Specifically, we proposed to withhold the pharmacy
identifier information for these claims as an additional safeguard for
preventing manufacturers from receiving information that could
potentially be used to identify beneficiaries.
(6) Negotiated Price
We proposed to define negotiated price for purposes of the Discount
Program consistent with section 1860D-14A(g)(6) of the Act, 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 proposed 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,
[[Page 22081]]
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 proposed 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 proposed 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 also
proposed to make a conforming change to the definition of supplemental
benefits in Sec. 423.100 to exclude benefits offered by EGWPs. With
respect to EGWPs, this 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 EGWPs.
Comment: A commenter recommended that we allow the determination of
``applicable drug'' status to be based upon plan formulary
categorization as ``brand name'' or ``generic'' as opposed to being
based upon the FDA approved marketing category.
Response: We disagree with this commenter. Section 1860D-14A(g)(2)
of the Act clearly defines an applicable drug based upon its FDA
marketing category as approved under a new drug application or licensed
under a biologics license application. The definition proposed in Sec.
423.2305 is consistent with the statute, and we do not have the
authority to define it differently based upon formulary categorization.
Comment: A commenter supported our exclusion of Part D compounds
from the definition of an applicable drug. However, another commenter
stated that our exclusion of compounds from the definition of
applicable drug was inconsistent with including compounds in the
definition of a Part D drug.
Response: We disagree with the commenter that stated our exclusion
of compounds from the definition of ``applicable drug'' was
inconsistent with including compounds in the definition of a Part D
drug. Whereas Part D sponsors can accurately determine that a compound
has at least one Part D ingredient and the costs associated with such
ingredient(s), we believe there are additional complexities associated
with trying to accurately determine and validate discounts on an
ingredient-level basis that require us to consider the compound as a
whole for purposes of the Discount Program. Moreover, because a
compound as a whole is not approved by the FDA under a new drug
application or licensed under a biologics license application, a
compound does not meet the definition of an applicable drug.
Comment: A few commenters supported our proposal to withhold
specific data elements from the Medicare Part D Discount Information
for low-volume claims. However, several commenters opposed our
proposal. These commenters emphasized that the Medicare Part D Discount
Information does not include any identifying beneficiary information
and that under the Discount Program Agreement, manufacturers cannot:
(1) link Medicare Part D Discount Information to any other data; or (2)
use Medicare Part D Discount Information for purposes unrelated to the
Coverage Gap Discount Program, such as to identify beneficiaries. They
believe that all of the Medicare Part D Discount information is
necessary to accurately validate claims and to determine that a drug
was appropriately covered under Medicare Part D as opposed to Medicare
Part B.
Response: We appreciate all of the comments and have decided not to
finalize the proposal to withhold additional data elements for low-
volume claims. This proposal was intended to codify a prior CMS policy
to withhold certain data elements on low-volume claims that has since
changed and is no longer applicable.
Comment: A number of commenters requested that CMS change the
definition of negotiated price under the Coverage Gap Discount Program
to include dispensing and vaccine administration fees so that it is
consistent with the other phases of the benefit. Further, they
recommended that if the definition is not changed, we require point-of-
sale notice that the dispensing fee or vaccine administration fee is
not discounted and also include similar language on the explanation of
benefits.
Response: Section 1860D-14A(g)(6) of the Affordable Care Act
defines ``negotiated price'' for purposes of the Coverage Gap Discount
Program and gap coverage 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. Since the
statute clearly excludes dispensing fee from the definition, we do not
have the authority to include it in the definition. As for vaccine
administration fees, we continue to believe that, for purposes of the
Discount Program, they are analogous to dispensing fees and, therefore,
do not fall within the definition of ``negotiated price.''
We also believe it is neither necessary nor practical to require
beneficiary notification on every discounted claim that the beneficiary
is responsible for paying the entire dispensing fee or vaccine
administration fee. Electronic pharmacy transactions processed under
the Health Insurance Portability and Accountability (HIPAA) approved
National Council for Prescription Drug Programs electronic standard do
not provide pharmacies with sufficient information at point-of-sale to
know whether the beneficiary is paying the dispensing fee on a claim.
Nevertheless,
[[Page 22082]]
we understand there is a need for more clarification with respect to
beneficiary liability for dispensing and vaccine administration fees
for applicable drugs in the coverage gap and thus have provided
guidance in the 2013 Advance Notice clarifying how manufacturer,
beneficiary, and Part D sponsor liabilities, including dispensing fee
liabilities, for coverage gap claims must be determined beginning in
2013.
Comment: Several commenters supported our proposal to define all
supplemental benefits offered by employer group waiver plans (EGWPs) as
other health or prescription drug coverage that are not Part D
benefits. However, a few commenters opposed the proposal and contend
that CMS does not have the authority to adopt this proposal and that it
would be imprudent to adopt the proposal even if CMS had the authority
to do so. They state that CMS cannot use its waiver authority under
section 1860D-22(b) of the Act because it is not a waiver of a
requirement that hinders the design of, the offering of, or the
enrollment in employer sponsored coverage.
Response: We disagree with the commenters who believe that we do
not have the authority to exclude any coverage offered through EGWPs,
other than basic prescription drug coverage as defined in Sec.
423.100, from the definition of Part D supplemental benefits and,
therefore, treat them as other health or prescription drug coverage.
Under current waivers authorized by section 1860D-22(b) of the Act,
EGWP sponsors submit only one formulary and a standard-defined benefit
package for review by CMS. We waived the requirement for EGWPs to
submit final benefit packages and formularies because we believe
upholding the requirement would hinder the design, offering, or
enrollment in employer-sponsored coverage given the additional
complexity and level of effort that would be required of EGWPs to
submit all applicable information on all such benefit packages.
Consequently, we have never reviewed any supplemental benefits offered
through EGWPs as Part D benefits nor have we provided guidance that
such benefits are Medicare or non-Medicare benefits. In the absence of
such guidance, we are aware that some EGWPs previously may have
considered these supplemental benefits to be Medicare benefits while
others may have considered them to be non-Medicare benefits.
As discussed in the proposed rule, the Discount Program now makes
it crucial to be able to distinguish Part D benefits (which apply
before the applicable discount) from non-Medicare benefits (which apply
after the applicable discount). In order to make this distinction
consistently and accurately, we believe it is necessary to define all
such supplemental benefits as other health or prescription drug
coverage because requiring submission of benefit packages would hinder
the design of, the offering of, or the enrollment in employer-sponsored
coverage for the same reasons that we currently waive the requirement
for EGWPs to submit final benefit packages and formularies as well as a
high probability that many of these supplemental benefits are also
governed by other non-Medicare rules (for example ERISA) and collective
bargaining agreements that could make it difficult to comply with Part
D rules. Moreover, while the submission requirement itself would be a
hindrance, the effort required to restructure benefits to provide all
additional gap coverage as other coverage in order to maximize
discounts, which we could not prevent, would add costs and complexity
to the provision of EGWP coverage and, therefore, additionally hinder
the design and offering of employer sponsored coverage. Accordingly, we
believe it is necessary to use the waiver authority under section
1860D-22(b) of the Act to explicitly exclude any supplemental benefits
offered through EGWPs (which we do not review and have never reviewed)
from Part D supplemental benefits and define them as other health or
prescription drug coverage.
Comment: Several commenters requested that we clarify the effective
date for defining any coverage offered through EGWPs, other than basic
prescription drug coverage as defined in Sec. 423.100, as other health
or prescription drug coverage is January 1, 2013.
Response: We clarify that, beginning on January 1, 2013, EGWP
supplemental benefits over basic Part D coverage must be treated as
other health or prescription drug coverage. We are designating January
1, 2013 as the applicable date of this requirement in order to avoid
midyear disruptions of operations for any EGWPs that currently treat
supplemental benefits as Medicare benefits and therefore, calculate the
discount after applying such benefits. This will provide them time to
align their systems to meet the January 1, 2013 requirements.
Comment: A commenter requested that CMS clarify that coverage
offered through EGWPs, other than basic prescription drug coverage as
defined in Sec. 423.100, will be defined as other health or
prescription drug coverage only for purposes of the Coverage Gap
Discount Program but not for other purposes such as appeals and
grievances.
Response: Beginning January 1, 2013, any coverage offered through
EGWPs, other than basic prescription drug coverage as defined in Sec.
423.100, will be defined as other health or prescription drug coverage
and not considered Medicare benefits. This definition applies to all of
Medicare Part D and is not limited to the Discount Program. While the
Discount Program triggered our decision to explicitly exclude
supplemental coverage offered through EGWPs from Part D supplemental
benefits, we believe it is necessary to apply the exclusion more
broadly for the same reasons it is necessary under the Discount
Program. Specifically, because we do not receive and review these
benefits we cannot appropriately oversee their provision and requiring
submission of these benefits needs to be waived because we believe it
would hinder the design of, offering, or enrollment in employer
sponsored coverage. Therefore, other Medicare Part D requirements, such
as those related to appeals and grievances, will not apply to these
non-Medicare benefits.
After consideration of the public comments received, we are
finalizing these definitions with one modification. We are not
finalizing our proposal to withhold some of the Medicare Part D
Discount Information from manufacturers on low-volume claims. All
definitions will be effective and applicable 60 days after publication
of the rule, except for the definition of ``other health or
prescription drug coverage'' found in Sec. 423.2305 and the conforming
change to the definition of supplemental benefits in Sec. 423.100 to
exclude benefits offered by EGWPs, which definition and change to an
existing definition will on January 1, 2013.
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 contemplates 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
[[Page 22083]]
plainest reading of section 1860D-43(a) of the Act 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
Discount 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 proposed to codify this
policy in regulations.
Section 1860D-43(c)(1) of the Act authorizes us to allow coverage
for drugs that are not covered by Discount Program Agreements if we
have made a determination that the availability of the drug is
essential to the health of beneficiaries under this part, and we
proposed 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.
Comment: Many commenters supported our proposal to exclude only
applicable drugs that are not covered by a signed manufacturer
agreement from Medicare Part D and continue to allow coverage of other
Part D drugs, such as generic drugs, irrespective of a manufacturer's
participation in the Coverage Gap Discount Program. However, a
commenter recommended that we delay codifying this proposal until the
Discount Program is fully implemented and until evidence exists that
manufacturers plan to continue participating in the Discount Program.
Response: We agree with commenters that supported our proposal and
do not believe it is necessary to delay codifying it until there has
been more experience with the Discount Program. We believe it is
important to codify this provision now to provide certainty about our
policy.
After consideration of the public comments received, we are
finalizing the policies in this section without modification except for
the technical correction to Sec. 423.2315(b)(7) that clarifies
manufacturers must provide timely information about discontinued drugs
to enable the publication of accurate information regarding what drugs,
identified by NDC, are in current distribution.
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. In
consultation with manufacturers, we established the model agreement on
August 1, 2010 and proposed to codify in Sec. 423.2315 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 in section II.A.1. of the October 11, 2011 proposed rule)
(76 FR 63018) we proposed to implement this requirement as set forth in
the current Discount Program Agreement. That is, we proposed 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 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 in advance 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 3
business days after learning of a new code assigned by 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 Part D
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 Web site 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 3 business days after learning of a new code
assigned by the FDA.
To permit CMS and Part D sponsors to accurately identify applicable
drugs, we proposed to codify the requirement set forth in the Discount
Program Agreement that manufacturers electronically list and maintain
an 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. In this final rule with comment
period, we are making a technical correction to this requirement by
specifying that manufacturers provide timely information about
discontinued drugs to enable the publication of accurate information
regarding what drugs, identified by NDC, are in current distribution.
This language replaces the requirement that manufacturers timely remove
discontinued NDCs in the FDA NDC Directory because we realized that it
is the FDA that makes the determination to remove NDCs based upon
information provided by the manufacturer.
We also proposed to require manufacturers to maintain up-to-date
NDC listings with the electronic database vendors for which they
provide their NDCs for pharmacy claims
[[Page 22084]]
processing. Part D sponsors and the rest of the pharmacy industry 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 databases is accurate and up-
to-date. Our proposal would require manufacturers to ensure that
electronic database vendors are prospectively notified of expiration
dates for NDCs of products that are no longer 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-of-sale, and therefore we require
manufacturers to reimburse Part D sponsors promptly because it is the
manufacturers that are financially responsible for payment of
applicable discounts. Given this structure, we proposed to codify this
requirement at Sec. 423.2315(b)(3). We further proposed in Sec.
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 of payment 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, Sec. 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
manufacturers' disputes later in this section of the final rule with
comment period.
Section 1860D-14A(b)(2) of the Act requires each manufacturer with
an executed 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 Sec. 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 last lot 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. In addition, 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 Sec.
423.2330, which are discussed in section II.A.1.g. of this final rule
with comment period.
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 proposed to codify this
requirement in Sec. 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 Sec. 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 invoiced 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-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 non-Coverage 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) Timing and Length of Agreement
Section 1860D-14A(b)(1)(C) of the Act states that in order for an
agreement with a manufacturer to be in effect under this section with
respect to the period beginning on January 1, 2011, and ending on
December 31, 2011, the manufacturer shall enter into such agreement not
later than 30 days after the date of establishment of a model
agreement. It also states that for 2012 and subsequent years the
manufacturer shall enter into such agreement (or such agreement shall
be renewed) not later than January 30 of the preceding year. We
proposed to codify these requirements in Sec. 423.23.15(c)(1) and
(c)(2).
Section 1860D-14A(b)(4)(A) of the Act also 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, Sec.
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
1 year each January 1 thereafter, unless the agreement is terminated in
accordance with Sec. 423.2345.
[[Page 22085]]
Comment: A commenter requested that CMS clearly state that the
Discount Program Agreement cannot be modified through rulemaking. The
commenter argued that the Discount Program Agreement predates the
regulations and already states, ``the Manufacturer's full compliance
with the responsibilities listed * * * in Section II shall constitute
satisfaction of the Manufacturer's responsibilities under the Discount
Program.'' They point out that the proposed rule generally tracks the
manufacturers obligations set forth in the Discount Program Agreement
but are not identical in a number of ways. The commenter recommended
that CMS reaffirm that manufacturers' obligations are limited to those
listed in Section II of the Discount Program Agreement.
Response: We disagree with the commenter that we cannot modify the
Discount Program Agreement through rulemaking. The Affordable Care Act
required us to establish a model Discount Program Agreement, in
consultation with manufacturers, and allow for comment on such model
agreement. Section IX (g) of the model agreement specifies that CMS
retains the authority to amend the model agreement after consulting
with manufacturers and allowing for comment on such amendments. While
formal rulemaking is not the only mechanism for consulting with
manufacturers, we believe the notice and comment rulemaking process
clearly meets the requirement for consultation with manufacturers and
allowing for comment.
In some instances we proposed new requirements. For example, we
proposed to amend the Discount Program Agreement by adding a
requirement that manufacturers maintain up-to-date NDC listings with
the electronic database vendors for which manufacturers provide NDCs
for pharmacy claims processing. In other instances, the proposed
language was intended to mirror the current model Discount Program
Agreement requirement even if the language is not identical. We will
review the language in the model Discount Program Agreement and make
conforming changes if we believe it is necessary to remove any
ambiguity between the regulation and the model agreement. This is
consistent with our approach to amending Medicare Part C/D agreements
with Part D sponsors whereby we generally codify requirements and amend
the agreements during the next contracting cycle, which in this case
will be for calendar year 2014. Nevertheless, these codified
requirements become effective 60 days after the date of publication of
this final rule with comment period in the Federal Register. Finally,
we stated in the proposed rule that we were not codifying all of the
provisions in the model Discount Program Agreement; we therefore do not
intend to make further changes to any such provisions without first
consulting with the manufacturers.
Comment: A few commenters supported our proposal to codify the
requirement that manufacturers electronically list and maintain up-to-
date electronic listings of all national drug codes (NDCs) of the
manufacturer, including the timely removal of discontinued NDCs, in the
FDA NDC Directory. These commenters also supported our proposal 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. However, these commenters do not believe
our proposal goes far enough because it does not specify that the
manufacturer must ensure their listings are accurate and therefore
recommend that we impose monetary penalties and sanctions on
manufacturers for inaccurate or out-of-date information.
Response: We believe that manufacturers are already required to
provide the FDA with accurate information. We continue to work with the
FDA on improving the availability of Part D drug information and could
potentially implement additional prescription drug event (PDE) measures
in the future to ensure that we only accept PDEs with NDCs that
represent currently marketed drug products. We do not believe we have
the authority under the Discount Program to impose monetary penalties
on manufacturers for inaccurate or out-of-date information listed with
the FDA, but we will consider other compliance actions against
manufacturers that fail to fulfill their obligations under the Discount
Program Agreement.
Comment: A commenter requested that we clarify what information
proposed in Sec. 423.2315(b)(5) would be required of manufacturers to
maintain regarding FDA approval and NDC Directory listing information
for 10 years. Specifically, this commenter noted that these two
categories are specified in preamble but are not specified in the
regulatory text or Discount Program Agreement. Moreover, the commenter
requests that we further specify precisely what data CMS believes
should be collected, kept available, and maintained by providing
illustrative examples.
Response: We specified the FDA approval and NDC Directory listing
information in the preamble to help clarify what data related to
manufacturer labeler codes needs to be collected, kept available, and
maintained. However, for further clarity we will specify these
categories in the regulatory text. We also clarify that pertinent NDC
expiration dates refers to last lot expiration dates and have made this
change to the regulation text. We do not have other examples that
further specify the data manufacturers must collect, keep available,
and maintain except to specify that such data should include any
information that would be useful to either dispute or support a
manufacturer's obligation to pay discounts for its applicable drug
products under the Discount Program.
Comment: Many commenters raised concerns with the requirement that
a manufacturer must sign a Discount Program Agreement by January 30th
of the preceding year because it could result in new drugs being
unavailable under Medicare Part D for almost 2 years if this deadline
is missed. They point out that some manufacturers may not have been
aware of the deadline because they previously did not manufacture any
applicable drugs. These commenters recommend that we consider
additional measures, such as allowing manufacturers to enter into
provisional agreements to join the Discount Program pending FDA
approval of a new drug so there would not be a waiting period before
the drug could be covered. In addition, these commenters urge CMS to
establish a process for using its authority under section 1860D-43(c)
of the Act to allow coverage for Part D drugs not covered under
agreements if we determine that a drug is ``essential to the health of
beneficiaries.''
Response: We appreciate the concerns raised by commenters that new
drugs manufactured by companies without existing Discount Program
Agreements could be excluded from Medicare Part D until the next
opportunity to enter into the Discount Program. However, the deadline
of January 30th of the preceding year is a statutory deadline. But we
already allow, and encourage, manufacturers without drug products
currently on the market to sign Discount Program Agreements in advance
so that there would be no waiting period if they do begin marketing an
applicable drug; a number of companies have done so. We are also aware
that some manufacturers have been successful in working out licensing
arrangements with other manufacturers that have existing Discount
Program Agreements
[[Page 22086]]
to temporarily include drug products under such existing agreements and
avoid any delay in access under Part D. Based on the current level of
participation by manufacturers and the breadth of applicable drugs
covered by Discount Program Agreements, we do not believe it is
necessary at this time to establish a detailed process for using our
authority under section 1860D-43(c) of the Act to allow coverage for
applicable drugs not covered by Discount Program Agreements.
After consideration of the public comments received, we are
finalizing the proposals in this section with two modifications. We
added FDA drug approval data and FDA NDC Directory listing data to the
required information in Sec. 423.2315(b)(5) and clarified in Sec.
423.2315(b)(5) that pertinent NDC expiration dates refers to NDC last
lot expiration dates.
e. Payment Processes for Part D Sponsors (Sec. 423.2320)
We are finalizing our October 11, 2011 proposed rule to provide
monthly interim coverage gap payments to Part D sponsors in Sec.
423.2320(a). The interim payments ensure that Part D sponsors will have
the funds available to advance the manufacturer discounts to applicable
beneficiaries at the point of sale. We also proposed, and are now
finalizing, a process to reconcile the estimated interim coverage gap
discount payments with actual Discount Program costs in Sec.
423.2320(b). Coverage Gap Discount Reconciliation will occur after Part
D payment reconciliation.
Comment: A number of commenters raised the issue of dispensing fees
and vaccine administration fees for applicable drugs in the coverage
gap. One requested that CMS clarify plan sponsor responsibility in the
gap for applicable drugs. Others noted that the definition of
negotiated price is not the same in the coverage gap as it is in the
other phases because it excludes the dispensing fee. Commenters noted
that if beneficiaries must pay dispensing fees and vaccine
administration fees for brand drugs in the gap, this would increase
their out-of-pocket costs.
Response: We issued proposed guidance on Part D plan sponsor
liability for dispensing and vaccine administration fees in the Advance
Notice of Methodological Changes for Calendar Year (CY) 2013 for
Medicare Advantage (MA) Capitation Rates, Part C and Part D Payment
Policies and 2013 Call Letter, which was published on February 17,
2012. Based on comments received in response to the Advance Notice, we
will finalize a policy in the Final Rate Announcement.
f. Provision of Applicable Discounts (Sec. 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 to beneficiaries at the point-of-sale. As
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. Working
with industry experts on electronic transactions, we have determined
that the only entity capable of providing the discount at point-of-sale
is the Part D sponsor because no other entity would have all four
pieces of information at that time. Therefore, Sec. 423.2325(a) would
require Part D sponsors to provide applicable beneficiaries with
applicable discounts on applicable drugs at point-of-sale on behalf of
the manufacturer. Part D sponsors would be required by Sec.
423.2325(b)(1) to determine that: (1) an enrollee is an applicable
beneficiary (as defined in Sec. 423. 100); (2) a Part D drug is an
applicable drug (as defined in Sec. 423.100); and (3) the amount of
the applicable discount (as defined in Sec. 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 the applicable discount
or the applicable beneficiary's cost sharing, we proposed to require,
in Sec. 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 amount 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 is later reprocessed in
the catastrophic phase as a result of the receipt of an automated TrOOP
balance transfer amount, 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 1860D14A-(g)(4)(C) of the Act requires that 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 (ICL) and below the annual out-of-pocket threshold.
Because our proposed definition of negotiated price for purposes of the
Discount Program would exclude both the dispensing fee and vaccine
administration fee, proposed Sec. 423.2325(b)(3) would have required
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 out-of-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). However, as
discussed later, we are not finalizing this proposal at Sec.
423.2325(b)(3).
Section 423.2325(b)(4) would require Part D sponsors to first
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 then notify such beneficiaries. This situation could occur if
participating manufacturers fail to timely notify CMS when a new
labeler code becomes available or otherwise fail to provide us with all
of their labeler codes as required.
In Sec. 423.2325(c) we proposed to require that Part D sponsors
must provide an applicable discount 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 the Part D
plan. 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 requires
provision of the discount at the point-of-sale, it does not state that
applicable beneficiaries are not entitled
[[Page 22087]]
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. Therefore, beneficiaries would still receive the discount
in the limited circumstances when they submit claims for reimbursement
that were not adjudicated at the point-of-sale, such as when they
needed to obtain a prescription from an out-of-network pharmacy or on
an emergency basis.
(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
point-of-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 proposed to codify the requirement in
Sec. 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 and reimburses that payer and/or the
beneficiary for amounts that the plan would have paid as the primary
payer.
(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 Sec. 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 an individual market 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 negotiated
price of the drug. The applicable discount would then be calculated as
50 percent of the negotiated price (as defined in Sec. 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-of-sale would generally be approximately 50
percent of his or her expected cost-sharing under the plan's benefit
package. This amount will change over time as the coinsurance level in
the basic benefit for a beneficiary is reduced until it reaches 25
percent in 2020. Proposed Sec. 423.2325(e)(3) would have required 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 proposed 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 believed that 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 proposed to implement this requirement in Sec. 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.
Finally, we proposed to add a new paragraph (24) to Sec.
423.505(b) so that the requirements we are proposing in Sec. 423.2325
are included in all Part D sponsor contracts with us.
Comment: A commenter requested that CMS clearly indicate how Part D
sponsors implement the plan responsibility for reduced cost-sharing
[[Page 22088]]
in the coverage gap beginning in 2013 when the phase-down of coverage
gap brand drug cost-sharing will begin to take effect.
Response: We agree that additional clarification is necessary to
explain how plans need to determine both plan and beneficiary
liabilities for brand-name drug coverage when the additional brand-name
coverage in the coverage gap begins to phase in starting in 2013, but
this is beyond the scope of this regulation. We addressed the issue in
the 2013 Advance Notice by clarifying how manufacturer, beneficiary,
and Part D sponsor liabilities, including dispensing fee liabilities,
for coverage gap claims must be determined beginning in 2013. In light
of that guidance, we will not be finalizing the requirements in
proposed Sec. 423.2325(b)(3) and (e)(5) with respect to dispensing and
vaccine administration fees, and have re-designated proposed Sec.
423.2325(b)(4) as Sec. 423.2325(b)(3) in the final rule.
Comment: A few commenters opposed the requirement under proposed
Sec. 423.2325(b)(4) (redesignated as Sec. 423.2325(b)(3)) that would
require Part D sponsors to notify affected beneficiaries whenever CMS
specifies a retroactive effective date for a labeler code. They contend
that such notice will be less likely to be beneficial to the
beneficiary as the Discount Program matures. They also believe it often
will be difficult for the Part D sponsor to accurately identify if an
alternative product had been prescribed and covered after the initial
denial and thus Part D sponsors will cause more enrollee confusion by
``over notifying'' enrollees.
Response: We disagree with the commenters. We do not believe
manufacturers should be excused from their obligation to pay a discount
because they failed to timely report a labeler code for an applicable
drug to CMS. Moreover, and more importantly, we do not believe the
administrative burden on Part D sponsors, which we do not anticipate
will be significant, justifies denying a beneficiary access to a
discount for which they are entitled. As discussed in the proposed
rule, Part D sponsors can minimize any beneficiary confusion by
notifying only those beneficiaries that it determines likely still need
the drug or who paid for the drug out-of-pocket.
Comment: A commenter recommended that we require that the discount
payment be calculated before any Part D supplemental benefits are
applied by a Part D plan.
Response: The requirement proposed under Sec. 423.2325(e) is
consistent with the statutory requirement under section 1860D-14A(c)(2)
of the Act. We do not have the authority to change the statutory
requirement to require the discount payment to be calculated before
Part D supplemental benefits are applied by a Part D plan.
Comment: Several commenters supported our proposal to implement the
pharmacy reimbursement requirements of section 1860D-14A(c)(1)(A)(iv)
of the Act 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. The applicable number of calendar days with respect to
claims for reimbursement submitted electronically is 14 days, and
otherwise, is 30 days. We proposed that this requirement would apply to
all network pharmacies including but not limited to long-term care and
home infusion pharmacies. Other commenters recommended that we
reconsider applying this requirement to long-term care and home
infusion pharmacies because current billing practices in these pharmacy
settings, such as once a month billing practices, could result in Part
D sponsors being out of compliance with the requirements.
Response: We acknowledge that current billing practices in long-
term care and home infusion pharmacies could prevent Part D sponsors
from complying with this provision if they are not billed by the
pharmacy on the date of service. Therefore, we clarify in Sec.
423.2325(g) that for long-term care and home infusion pharmacies, the
date of dispensing can be interpreted as the date the pharmacy submits
the discounted claim for reimbursement and not the actual date the
pharmacy dispensed the medication. After consideration of the public
comments received, we are with the exception of the provisions at Sec.
423.2325(b)(3) and (e)(3) finalizing the policies in this section with
modification to Sec. 423.2325(g). We note that we are not finalizing
the proposed provisions for Sec. 423.2325(b)(3) and (e)(3) and have
redesignated proposed Sec. 423.2325(b)(4) as Sec. 423.2325(b)(3) in
the final rule.
g. Manufacturer Discount Payment Audit and Dispute Resolution (Sec.
423.2330)
(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 proposed in Sec. 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.
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 proposed 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
[[Page 22089]]
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 Sec. 423.2330(a)(3) also supports our obligation to
protect the privacy of beneficiary medical information. This section
proposed 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 Sec. 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
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 proposed to codify this requirement in
Sec. 423.2330(b). Similar to the limitation in Sec. 423.2330(a)(1),
we proposed to define the term periodic in Sec. 423.2330(b)(1) as no
more often than annually. In Sec. 423.2330(b)(3) we proposed 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 proposed in Sec. 423.2330(c) a multistage 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 disagrees with the outcome of the initial appeals
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 proposed in Sec. 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.
Proposed Sec. 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 proposed this requirement
because the manufacturer bears the burden of proof that the PDE data is
incorrect. We also proposed in Sec. 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 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 proposed 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 proposed 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 proposed that this request be made within 30 days after
the manufacturer receives a decision from the IRE to facilitate a
timely outcome. Finally, we proposed that the decision of the
Administrator would be final and binding.
We proposed to codify the policies as described and welcomed
comments on the dispute and appeals process.
Comment: A few commenters recommended that we include affected Part
D sponsors in the disputes and appeals process, and that Part D
sponsors be given appeal rights if disputes or appeals are upheld.
Response: We do not believe it is necessary, nor would it be
helpful, to insert Part D sponsors in every step of every manufacturer
dispute and appeal. This process is specifically designed to address
manufacturer disputes or appeals and manufacturers have the burden to
demonstrate that an applicable discount advanced by the Part D sponsor
likely is in error according to standards established in CMS guidance.
If the manufacturer satisfies the threshold, the Part D sponsor will be
given the opportunity to confirm the accuracy of the discount and if
confirmed, the dispute or appeal will be denied. If the manufacturer
[[Page 22090]]
dispute or appeal does not meet the standard for demonstrating likely
error in the first place, the dispute or appeal will be denied without
needing Part D sponsor confirmation. In situations that involve the
determination of applicable drug status for an NDC based upon its FDA
approval status, CMS will make those determinations based upon the
information that was available from the FDA on the date of dispensing.
While Part D sponsors will not have the opportunity to appeal
determinations that uphold manufacturer disputes or appeals under this
process, Part D sponsors have appeal rights under the Part D payment
reconciliation process to redress payment disputes, including those
related to the Discount Program.
After consideration of the public comments received, we are
finalizing the policies in this section without modification.
h. Beneficiary Dispute Resolution (Sec. 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 Sec.
423.2330(c) would address the disputes that could arise between the
manufacturer and CMS or the TPA, Sec. 423.2335 would provide the
beneficiary dispute resolution requirements. Specifically, Sec.
423.2335 would provide that beneficiaries shall have access to the Part
D coverage determination and appeals process as described in Sec.
423.558 through Sec. 423.638 for disputes involving the availability
and amount of applicable discounts under the Discount Program.
Comment: Some commenters supported CMS' proposal in Sec. 423.2335
to provide beneficiaries with access to the existing Part D coverage
determination and appeals process as described in Sec. Sec. 423.558
and 423.638 for disputes involving the availability and amount of
applicable discounts under the Discount Program. However, a commenter
raised concerns that the existing process is not well understood by
beneficiaries and therefore we should require Part D plans to provide
explicit, plain language information on how to file a dispute.
Response: We agree with commenters that supported our proposal. The
existing Part D coverage determination and appeals process provides the
best and most efficient mechanism for resolving beneficiary disputes
involving the availability and amount of applicable discounts. We do
not believe it would be beneficial to anyone, most importantly
beneficiaries, to establish an entirely separate and duplicative
process. Moreover, we do not believe a new plain language requirement
is necessary because Part D plans are already required to use a
consumer tested model Evidence of Coverage (EOC) that is intended to
explain the existing Part D coverage determination and appeals process
in language that is appropriate for beneficiaries.
After consideration of the public comments received, we are
finalizing the policies in this section without modification.
i. Compliance Monitoring and Civil Money Penalties (Sec. 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
proposed to revise the definition of ``affected party'' in subpart T
(as defined in Sec. 423.1002) by adding the term ``manufacturer'' (as
defined in Sec. 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 Sec. 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
Sec. 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 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) codifies 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 Sec. 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 Sec. 423.1006) and information about where to file the request
for hearing. To ensure a consistent approach to CMPs, we proposed
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 of adverse agency determinations affecting an array of medical
providers, MA organizations, and Part D sponsors.
[[Page 22091]]
We therefore proposed 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 proposed to revise the definition of
``affected party'' in Sec. 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 Sec.
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 proposed to codify this
requirement in Sec. 423.2340(f). We welcomed comments on this
proposal. We did not receive any comments and we are finalizing these
provisions as proposed.
j. Termination of Agreement (Sec. 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, Sec. 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 proposed,
consistent with the statutory requirement as reflected in the Discount
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 proposed to clarify in Sec. 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 (5) of this section. Proposed
paragraphs (a)(4) and (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 proposed in Sec. 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 30
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
hearing officer. The decision of the CMS Administrator would be final
and binding on either party. We requested 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 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 proposed to codify these requirements in Sec. 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 proposed to codify this
requirement in Sec. 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, Sec.
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, Sec. 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.
We did not receive any comments and we are finalizing these
provisions as proposed.
2. Inclusion of Benzodiazepines and Barbiturates as Part D Covered
Drugs (Sec. 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 ``used in the treatment of epilepsy, cancer, or a
chronic mental health disorder'' and benzodiazepines. MIPPA further
specified that these amendments apply to prescriptions dispensed on or
after January 1, 2013. Accordingly, we proposed to revise the
definition of a Part D drug at Sec. 423.100 to include barbiturates
used for the three specified medical indications and benzodiazepines
that are dispensed on or after January 1, 2013. Like any other
prescription drugs under the Part D benefit program, barbiturates as
specified and benzodiazepines must meet all other conditions for Part D
drugs found in Sec. 423.100.
As in the proposed rule, we once again remind sponsors that it is
their responsibility to use the tools (that is, system edits, quality
assurance checks) at their disposal to ensure barbiturates
[[Page 22092]]
are covered for the conditions specified in the statute. Also, given
the vulnerability of both barbiturates and benzodiazepines to misuse
and abuse, it is recommended that Part D sponsors use their drug
utilization review tools to identify and prevent waste and clinical
abuses/misuses.
Comment: A number of commenters endorsed the statutory inclusion of
barbiturates as specified and benzodiazepines as covered Part D drugs.
Some of these commenters anticipated that the change would result in
better treatment of health conditions such as mental health conditions,
with a commenter predicting lowered health care spending would stem
from better quality of life and health care outcomes. Several
supporters opined that the existing tools in the Part D program were
sufficient to, for instance, address misuse and protect beneficiaries
from harm.
Response: We appreciate the commenter support of the statutory
inclusion of these medications.
Comment: Several commenters suggested that CMS restrict access to
the drugs by, for instance, removing the medical indications
requirements from the regulation, limiting benzodiazepines coverage to
short-acting agents, or allowing barbiturates only for seizure
disorders.
Response: We lack the authority to restrict drugs through any of
the modifications suggested by these commenters because of the clear
statutory mandate found in section 175 of MIPPA, which amends section
1860D-2(e)(2)(A) of the Act to include as Part D drugs both
barbiturates used in the ``treatment of epilepsy, cancer, or a chronic
mental condition'' and benzodiazepines. Accordingly, our proposed
revisions must include as Part D drugs barbiturates for the three
medical indications, as well as benzodiazepines.
That we track the statutory language does not, however, mean that
there are no restrictions on the availability of barbiturates as
specified and benzodiazepines--statutory and regulatory requirements
apply to restrict availability. As is the case for all Part D drugs, a
barbiturate as specified or a benzodiazepine may only be a Part D drug
if it falls within the definition of Part D drug at Sec. 423.100,
which would mean that it must--
Be used for a medically accepted indication;
Be dispensed only upon a prescription;
Meet requirements described in section 1927(k)(2)(A)(i)
through (iii) of the Act; and
Not be otherwise excluded from Part D coverage on the
basis that payment for such drug, as so prescribed and dispensed or
administered to an individual, is available for that individual under
Part A or Part B (even though a deductible may apply, or even though
the individual is eligible for coverage under Part A or Part B but has
declined to enroll in Part A or Part B).
Additionally, for any barbiturates as specified or benzodiazepines
that meet the definition of an applicable drug under section 1860D-
14A(g)(2) of the Act, in order for coverage to be available under Part
D, the manufacturers of the brand drug must participate in the Medicare
Coverage Gap Discount Program.
Comment: A number of commenters, many of which endorsed the
inclusion, voiced concerns with utilization control issues--with the
vast majority of these commenters questioning whether the available
Part D utilization tools would be effective enough in restricting
access to barbiturates for the specified indications and
benzodiazepines as to prevent misuse. In contrast, a few commenters
voiced concern that CMS is ``encouraging'' plans to apply utilization
management tools to therapies for chronic conditions, such as mental
illnesses. Stating that utilization management tools had impeded
beneficiary access to medications in the past, these commenters
requested that CMS remove the language about these tools from the
preamble.
Response: We do not agree with the commenters who suggested we
remove language from the preamble of the proposed rule that discusses
the availability of drug management tools. We see no justification to
treat barbiturates and benzodiazepines any differently from how we
treat all other Part D drugs.
Comment: Many commenters requested more direction and instructions
regarding the use of drug utilization tools. A commenter requested that
CMS implement restrictions such as a specific quantity limit per year,
while the two commenters requested that CMS provide instructions that
would, for instance, prevent step therapy and fail first policies for
individuals already on these medications. Several commenters indicated
that they wanted to use prior authorization (PA) to ensure that
barbiturates would be prescribed only when used in the treatment of
epilepsy, cancer, or chronic mental health disorders. A few others
indicated that when used for certain indications (for instance,
barbiturates for uses listed in the statute and benzodiazepines for
epilepsy), barbiturates and benzodiazepines might be part of a
protected class--with a commenter stating that in such instances the
drugs must be made available to members and another asserting that the
drugs must be denied protected class status.
Response: These comments are beyond the scope of the proposed rule.
We did not propose to implement any special rules with regard to these
drugs; rather, we proposed merely to codify the statutory requirement
set forth in section 175 of MIPPA. To the extent we believe additional
guidance about these products is necessary or appropriate, we will
provide such guidance in the future.
Comment: A commenter requested guidance on the issues as soon as
possible, but no later than January 2012, to provide plans enough time
for appropriate utilization management as part of the 2013 formulary
submissions.
Response: Although this comment is beyond the scope of the proposed
rule, we would like to note that we believe our current formulary
guidance provides Part D sponsors with the information they need to
make such determinations.
Comment: A commenter suggested that the inclusion would impact the
accuracy of the current risk adjustment formula because the new drugs
would be available only to members with the three specified medical
conditions. The commenter accordingly requested that, after January 1,
2013, the risk adjustment factors associated with these specified
conditions be increased to reflect the increased costs expected from
covering these drugs.
Response: In the calibration of the original Part D risk adjustment
model and in subsequent versions, we reasoned that benzodiazepines and
barbiturates were substitutable drugs and included the costs of these
drugs as a proxy for their substitutes. Given that we never removed
either barbiturates or benzodiazepines from our Part D model
calibration, the mandated inclusion will not impact the accuracy of the
current risk adjustment model. In a discussion in our 2006 Advanced
Notice on removing non-covered Part D drugs from the calibration of the
risk adjustment, we stated, ``Other non-covered drugs, benzodiazepines
and barbiturates, were intentionally left in the file because their
costs proxy for the costs of substitutes. This was deemed preferable to
removing the claims and costs altogether.'' See Advance Notice of
Methodological Changes for Calendar Year (CY) 2006 Medicare Advantage
(MA) Payment Rates, Attachment II, Risk Adjustment Model, page 45.
[[Page 22093]]
Comment: A commenter questioned whether CMS had conducted an
analysis to determine if all manufacturers of barbiturates and
benzodiazepines were currently participating, or would be offered the
opportunity to participate in the Coverage Gap Discount Program,
because they may have not sought participation when the drugs were
excluded.
Response: Given that the Coverage Gap Discount Program only applies
to brand drugs and that most barbiturates and benzodiazepines are
available as generics, we believe that Part D coverage will be
available for most--if not all--types of barbiturates that treat the
specified indications and benzodiazepines. Indeed, at this time, we are
not aware of any barbiturates as specified or benzodiazepines that will
not be covered on the basis that a manufacturer is not participating in
the program.
Comment: Several commenters expressed concerns that, because the
High Risk Medication (HRM) Part D Plan Rating measure incorporates the
Beers list, which identifies benzodiazepines and barbiturates as
potentially harmful for the elderly, plan ratings will suffer resulting
in lower bonus payments. While a commenter requested that CMS deny Part
D coverage of drugs on the Beers list, others requested changes to the
rating system itself such as excluding the medications from the HRM
measure calculation to give the industry time to understand the impact
on the safety of beneficiaries or adjusting the 4-star threshold.
Response: As we noted in our discussion of the Part D High-Risk
Medication (HRM) measure in our draft 2013 Call Letter published on
February 17, 2012 (page 63), we will continue to explore changes to
this measure. Modifications may result from specification changes made
by the Pharmacy Quality Alliance (PQA) or National Committee for
Quality Assurance (NCQA) as they consider modifying the specifications
and medication list based on the American Geriatrics Society's (AGS)
update to the Beers List. We will consider applying these updates to
future Plan Ratings and changes to the measure medication list will not
be retroactively applied for the 2013 Plan Ratings. Rather, we will
apply changes to the medication list when evaluating sponsors' CY 2012
or CY 2013 PDE data for the 2014 or 2015 Plan Ratings, respectively. At
that time, we will also evaluate the inclusion or exclusion of
benzodiazepines and specified barbiturates in the measure calculation.
After considering the public comments received, we are finalizing
the proposed language in Sec. 423.100, with a grammatical clarifying
modification. Pursuant to section 175(b) of MIPPA, this revision will
be effective January 1, 2013.
3. Pharmacy Benefit Manager's Transparency Requirements (Sec. Sec.
423.501 and 423.514)
We proposed implementing the provisions of section 1150A of the
Act, as amended by section 6005 of the Affordable Care Act, with
respect to Part D sponsors and the entities that manage prescription
drug coverage under a contract with a Part D sponsor. We now codify the
various reporting requirements from the proposed rule to promote
transparency of financial transactions involving Part D sponsors and
pharmacy benefits managers (PBMs) or other entities that provide
pharmacy benefit management services at Sec. 423.514, with a minor,
technical correction to the language of Sec. 423.514(e) regarding
confidentiality of pharmacy benefits manager data. In addition, we are
finalizing with modification the proposed definition of ``bona fide
service fees'' in our regulations at Sec. 423.501.
Comment: A commenter recommended that CMS define ``pharmacy
benefits manager'' to encompass any entity or division of an entity,
including a Part D sponsor itself, that performs any of the functions
or activities for which reporting is required in order to clarify the
scope of the regulation.
Response: We believe that we were clear in the proposed rule when
we stated that this provision applies to both Part D sponsors and to
entities that provide pharmacy benefits management services to Part D
sponsors, for which we use the shorthand term of PBM. Further, section
1150A of the Act makes clear that a health benefits plan or any entity
that provides pharmacy benefits management services on behalf of a
health benefits plan is subject to all requirements and protections
under this provision. Thus, we decline to introduce a definition of PBM
in this regulation, but take this opportunity to emphasize that the
entity's function is more important than the form of its name.
Comment: A number of commenters requested additional details
regarding the proposed reporting requirements under paragraph (d)(3) of
Sec. 423.514. This provision would require reporting of the percentage
of prescriptions for which a generic drug was available and dispensed
by pharmacy type, which includes an independent, chain, supermarket, or
mass merchandiser pharmacy that is licensed as a pharmacy by the State
and that dispenses medication to the general public. Most commenters
requested clarification on how to distinguish the various pharmacy
types. A few commenters noted that neither plan sponsors, PBMs, nor
pharmacy groups themselves differentiate among these pharmacy types.
Several suggested ways for CMS either to provide crosswalks for PBMs
and sponsors to help categorize the pharmacy types or to derive the
data from available data sources.
Response: We agree that consistent definitions of independent,
chain, supermarket, and mass merchandiser pharmacies are necessary for
accurate reporting of this data element. We explored the ideas
commenters submitted for CMS to provide crosswalks or to derive the
data from existing data sources and determined that we could crosswalk
National Provider Identifiers with a file from the National Council for
Prescription Drug Programs to determine the data element in Sec.
423.514(d)(2) (the percentage of all prescriptions that were provided
through retail pharmacies as compared to mail order pharmacies).
However, this approach cannot be used to categorize independent, chain,
supermarket, and mass merchandiser pharmacies because they are not
standard pharmacy classifications captured in industry databases or
files. Thus, while we are finalizing Sec. 423.514(d)(3) as proposed,
we will issue further subregulatory guidance regarding this reporting
requirement before requiring Part D sponsors to submit this
information.
Comment: We received a number of comments regarding Sec.
423.514(d)(4), under which we proposed to require reporting of the
aggregate amount and type of rebates, discounts, or price concessions
(excluding bona fide service fees) that a PBM negotiates that are
attributable to patient utilization under the plan. In the proposed
rule, we sought comment regarding whether there are differences between
direct and indirect remuneration (DIR) under the Part D program and
rebates, discounts, and price concessions ``attributable to patient
utilization.'' Most commenters believed that there is no difference,
with a couple of commenters mentioning that DIR under the Part D
program is already based on price concessions for prescription drugs
that are provided to Medicare Part D beneficiaries. Another commenter
suggested that DIR under the
[[Page 22094]]
Part D program is broader than DIR attributable to patient utilization,
and thus CMS should scale back the definition in the DIR reporting
requirements.
Response: We agree that there is no substantive difference between
the aggregate amount of rebates, discounts, and price concessions
``attributable to patient utilization'' and DIR under the Part D
program. Per Sec. 423.308 and our annual DIR reporting guidance, DIR
is any and all rebates, subsidies, or other price concessions from any
source (including manufacturers, pharmacies, enrollees, or any other
person) that serve to decrease the costs incurred by the Part D sponsor
(whether directly or indirectly) for the Part D drug. Costs are
incurred by the Part D sponsor when patients utilize Part D drugs, and
thus we believe that ``rebates, discounts, and price concessions that
are attributable to patient utilization'' are substantively the same as
DIR under the Part D program. Further, rebates, discounts, and price
concessions would not be negotiated unless Part D plan sponsors were
purchasing prescription drugs from the manufacturer for use by their
enrollees. Thus, we believe even rebates, discounts, and price
concessions for things such as formulary placement for a particular
product, administrative services, or generic dispensing incentives are
indirectly attributable to patient utilization, such that they would be
subject to the reporting requirements under Sec. 423.514(d)(4).
Comment: One commenter requested that we clarify the authority
under which we collect DIR and that Part D sponsors have no additional
reporting requirements for DIR attributable to patient utilization.
Response: In the 2010 DIR reporting requirements, we collected PBM
spread amounts aggregated to the plan benefit package level. We believe
that with the addition of PBM spread amounts for retail pharmacies and
PBM spread amounts for mail order pharmacies to the existing DIR
reporting requirements, Part D sponsors will meet the requirements to
report the elements in Sec. 423.514 (d)(4), (5), and (6). Beyond this
change, no additional DIR reporting will be required to comply with
section 1150A of the Act. We clarify that sections 1150A and 1860D-
15(f)(1)(A) of the Act provide us with the authority to collect DIR
data.
Comment: Several commenters recommended that instead of requiring
the percentage of prescriptions for which a generic drug was available
and dispensed (generic dispensing rate) by independent, chain,
supermarket, and mass merchandiser pharmacy types, we allow the data to
be reported by different and/or more general categories, such as mail
order or retail pharmacy types.
Response: Consistent with 1150A(b)(1) of the Act, we believe that
we must collect the percentage of prescriptions for which a generic
drug was available and dispensed (generic dispensing rate) by
independent, chain, supermarket, and mass merchandiser pharmacy types.
Because reporting of this information is expressly required under the
statute, we do not believe we have the authority to limit or change the
scope of the reporting requirements. We note, however, that in
implementing this requirement and all of the other reporting
requirements under section 1150A of the Act, we have sought to minimize
administrative burden where possible by relying on existing reporting
mechanisms and avoiding duplicative reporting.
Comment: Some commenters favored greater transparency of
prescription drug cost information than we proposed. Suggestions ranged
from requesting that the proposed data elements under Sec. 423.514(d)
be reported with greater granularity to proposing additional reporting
requirements beyond those proposed. Examples include requiring maximum
allowable cost (MAC) lists for pharmacy reimbursement, requiring
transparency regarding pharmacy network design, requiring reporting of
a dispensing rate for when a lower cost drug could have appropriately
been dispensed, requiring reporting of prompt payment rates, and
requiring PBMs to report how patient data is used and disclosed.
Response: These suggestions are beyond the scope of the current
rulemaking, which implements the specific reporting requirements of
section 1150A. We note that some of the commenters' requests may be
more appropriate as suggestions for revisions to prompt payment and
pricing standard update requirements already codified at Sec. Sec.
423.505(b)(21) and 423.520. Should we determine that the reporting of
additional or more detailed information or disclosure of aggregated
data is necessary and appropriate for the Part D program, we may
consider some of the commenters' suggestions in the future.
Comment: Some commenters expressed concern about maintaining
confidentiality of PBM-related data.
Response: We agree that maintaining the confidentiality of PBM-
related data is important and are finalizing Sec. 423.514(e) regarding
the confidentiality of PBM data. The confidentiality protections under
this provision are nearly identical to those in section 1150A, and
specify that information disclosed by a Part D sponsor or PBM is
confidential, and shall not be disclosed by the Secretary or by a plan
receiving the information. The statute and the regulation recognize
limited exceptions allowing the Secretary to disclose information
disclosed by a Part D sponsor or PBM for certain limited purposes.
These purposes are as the Secretary determines necessary to carry out
section 1150A of the Act or Part D of Title XVIII, to permit the
Comptroller General to review the information provided, or to permit
the Director of the Congressional Budget Office to review the
information provided. (Section 1150A of the Act also permits disclosure
of the information to States to carry out section 1311 of the
Affordable Care Act. We have not incorporated this exception into Sec.
423.514(e) because it is applicable to qualified health benefits plans
offered through an exchange established by a State under section 1311
of the Affordable Care Act and is addressed in separate rulemaking.)
Consistent with the statute, any disclosures pursuant to these
exceptions, must be in a form which does not disclose the identity of a
specific PBM, plan, or prices charged for drugs.
Comment: A few commenters were concerned that the proposed
definition of ``bona fide service fee'' in Sec. 423.501 was too broad;
for example, a commenter thought that the term ``patient care
programs'' has no boundaries or limitations. Another suggested that we
not qualify the definition of bona fide service fees with specific
examples, while another would like us to provide not only examples of
what is included in the definition of bona fide service fees but also
examples of what is excluded from the definition.
Response: After considering these comments, we are modifying the
proposed definition of bona fide service fees in Sec. 423.501 by
omitting the examples of bona fide services listed in the proposed
definition. Bona fide services are subject to change as new ones are
developed or other bona fide services are discontinued. Thus, we
believe it is appropriate to elaborate on the definition of bona fide
service fees in subregulatory guidance, as we have typically done in
our DIR reporting guidance. We expect to provide such guidance to help
Part D plan sponsors determine what is included in or excluded from the
definition of bona fide service fees. We also note that by not
including specific examples of such fees in the regulation, the
definition of bona fide service fees in Sec. 423.501 is
[[Page 22095]]
consistent with the definition of bona fide service fees used in the
Medicare Part B and Medicaid programs.
Comment: A few commenters questioned how CMS will monitor
compliance with reporting requirements (for example, accurate reporting
of bona fide service fees) and whether we intend to audit PBMs. A
commenter asked for flexibility in CMS' policy on collecting PBM
transparency data until sponsors have completed their next contract
negotiations with PBMs.
Response: We intend to explore whether auditing PBMs will be
necessary to ensure compliance with this provision. However, we do not
believe it is necessary or appropriate to delay implementation of these
reporting requirements because the statute, which was effective upon
enactment, directs each PBM to provide to the Part D sponsor the data
elements required by this rulemaking.
Comment: A commenter urged CMS to differentiate between PBM-owned
mail order pharmacies and PBMs that contract for mail order pharmacy
services because they believe that the Affordable Care Act should not
be interpreted as requiring PBMs that own mail order pharmacies to
disclose drug acquisition costs. Another commenter recommended that CMS
clarify the reporting requirement with respect to PBM-owned mail order
facilities in which there is no aggregate difference in the amount
collected and the amount paid to the pharmacy. A commenter claimed that
Medicare contracts between PBMs and sponsors must be 100 percent pass-
through.
Response: If there is no difference between the amount the Part D
sponsor pays the PBM and the amount that the PBM pays mail order
pharmacies (that is, if Part D sponsors use pass-through pricing for
their mail order pharmacies), then the amount should be reported under
Sec. 423.514(d)(6) as zero. Thus, for the purpose of collecting this
data element, we do not believe that PBM-owned mail order pharmacies
present unique challenges relative to PBMs that contract for mail order
pharmacy services. Moreover, because only the aggregate amount of the
difference between the amount the Part D sponsors pays the PBM and the
amount the PBM pays retail pharmacies is reported, the PBM's drug
acquisition costs drugs will not be disclosed.
Consistent with the discussion in our January 12, 2009 final rule,
we also clarify that sponsors may use either the lock-in pricing or
pass-through pricing approach when contracting with PBMs, but they must
use the price ultimately received by the pharmacy (or other dispensing
provider) as the basis for calculating beneficiary cost sharing, total
drug spend, and cost reporting to CMS. (See Sec. 423.100 for the
definition of negotiated price and 74 FR 1505 through 1511 for more
details.)
Comment: A commenter requested that CMS clarify whether the total
number of prescriptions dispensed reported under Sec. 423.514(d)(1) is
based on PDEs or actual claims. If it is based on PDEs, the commenter
believed CMS should clarify that it would still be the Part D sponsor's
responsibility to hire a data validation auditor to evaluate the
validity of the reports, as opposed to passing this responsibility to
the PBM.
Response: We do not plan to institute a new requirement on plan
sponsors or PBMs to collect this data element as they already report it
on PDEs. We remind plan sponsors that they must maintain audit trails
to PDE source data. We expect that the plan will be able to directly
link any PDE to the individual claim transactions from which the PDE
was extracted, and will conduct audits of PDE data to ensure the
accuracy of payment. Part D sponsors have the discretion to negotiate
terms with each PBM that obligate the PBM to participate in maintaining
audit trails. Also, consistent with Sec. 423.505(k), each year Part D
sponsors must certify that their PDEs and DIR reports, among other
data, are accurate, complete, and truthful. While Part D sponsors
remain accountable for their certifications, they have the discretion
to negotiate with their first tier and downstream entities concerning
the entities' participation in the data validation activities that must
support each certification.
Comment: A commenter suggested that CMS should provide an annual
report on the best and worst plans with respect to the reporting
requirements in paragraph (d).
Response: We believe that this comment is out of scope as section
1150A of the Act addresses PBM reporting requirements, confidentiality
of PBM-related data, and penalties for failure to provide pharmacy
benefits manager data.
After considering the comments received, we are finalizing the
policy as proposed with one modification to the definition of ``bona
fide service fees'' in Sec. 423.501. We have also made a minor,
technical correction to the language of Sec. 423.514(e).
B. Strengthening Beneficiary Protections
This section includes provisions aimed at strengthening beneficiary
protections under Parts C and D. 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 finalizing this provision will result in uninterrupted plan
coverage for eligible beneficiaries and thereby improve access to
healthcare for individuals such as those with chronic conditions
requiring continual monitoring and medication. Similarly, we expect
that requiring sponsors to provide enrollees in MA plans with uniform
ID cards which all providers will be able to easily recognize will
facilitate access to health care for those beneficiaries. We also
believe that calculating creditable coverage by excluding the value of
additional coverage in the coverage gap and the manufacturers
discount--the standard that qualifies retiree drug coverage for the
retiree drug subsidy--will mean a beneficiary receiving retiree drug
coverage will be less likely to be assessed a late enrollment penalty
if he or she subsequently decides to enroll in 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 appointment of representative
forms will, in our opinion, lessen the burden faced by providers
seeking to assist enrollees with appeals and will encourage more health
care professionals to help beneficiaries access this level of the
appeals process. The foregoing proposals and the changes considered are
set forth in Table 3.
[[Page 22096]]
Table 3--Provisions To Strengthen Beneficiary Protections
--------------------------------------------------------------------------------------------------------------------------------------------------------
Part 417 Part 422 Part 423 Part 483
Preamble Provision ---------------------------------------------------------------------------------------------------------------------
section Subpart Subpart Section Section Subpart Section Subpart Section
--------------------------------------------------------------------------------------------------------------------------------------------------------
II.B.1......... Good Cause and Subpart K...... 417.460 N/A............ N/A N/A........... N/A N/A........... N/A
Reinstatement
into a Cost Plan.
II.B.2......... Requiring MA N/A............ N/A Subpart A...... 422.111 N/A........... N/A N/A........... N/A
Plans to Issue
Member ID cards.
II.B.3......... Determination of N/A............ N/A Subpart K...... 422.56 N/A........... N/A N/A........... N/A
Actuarially
Equivalent
Creditable
Prescription
Drug Coverage.
II.B.4......... Who May File Part N/A............ N/A N/A............ N/A Subpart M..... 423.600 N/A........... N/A
D Appeals with 423.602
the Independent
Review Entity.
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Good Cause and Reinstatement Into a Cost Plan (Sec. 417.460)
Current regulations at Sec. 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 plan for deductible and
coinsurance amounts. The cost plan must demonstrate that it made
reasonable efforts to collect the unpaid amount (for example, the plan
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 cost-
sharing. A plan may adopt either policy and must apply it consistently
to all members in the plan.
Individuals who are disenrolled from an MA or Part D plan for
failure to pay premiums are generally ineligible to regain MA or Part D
coverage until the next Annual Election Period. However, in some of
these cases, there may be extenuating circumstances that would make
reinstatement appropriate. Thus, in the April 2011 final rule (76 FR
21511), we established provisions at Sec. Sec. 422.74 and 423.44 that
allow individuals, who are disenrolled from MA and Part D plans for
failure to pay premiums, to request reinstatement into their former
plan based on good cause and the ability to pay all arrearages. These
MA and Part D rules provide alignment with the existing Part B policy
regarding delinquent Medicare Part B premium payments.
In the October 11, 2011 proposed rule (76 FR 63036), we proposed to
extend the right to request reinstatement for good cause to
beneficiaries enrolled in cost plans. Specifically, we proposed to
amend Sec. 417.460(c) to allow reinstatement of enrollment for good
cause following involuntary disenrollment, based on failure to pay
premiums or other cost-sharing amounts, to a cost plan. Section
417.460(c) provides that--
To be eligible for reinstatement, the enrollee would have
to pay all outstanding arrearages, including premiums that accrued
during the period of disenrollment;
The standard for good cause would be similar to the
standard established under MA and Part D (for example, unexpected,
prolonged hospitalization or loss of home or severe impact by fire);
and
An individual who is involuntarily disenrolled within the
same timeframe from both his or her cost plan and a standalone PDP (not
affiliated with the cost plan), would have to seek separate good cause
determinations for reinstatement into each plan.
Comment: CMS received several comments on this proposal, all of
which expressed broad support and concurrence with our intent to mirror
the existing MA and Part D requirements. A commenter expressed regret
with our determination that good cause would not exist if the sole
basis for requesting reinstatement is a change in an individual's
financial circumstances. The commenter suggested that such an
individual might eventually find the means to afford the plan's
premiums, in which case, she or he should not be prohibited from
reinstatement and the opportunity to reestablish relationships with
previous providers. In addition, the commenter believes that
beneficiaries should be able to appeal a denial of reinstatement.
Response: The intent behind this provision was to give cost plan
enrollees the same protections that we currently extend to MA and Part
D plan enrollees. As such, we do not believe that it would be
appropriate to expand these protections to include either additional
factors that meet the good cause standard or appeal rights when a
request for reinstatement is denied. It is important to note that
denying a beneficiary's request for reinstatement does not result in
the loss of Medicare coverage. Instead, individuals who are
involuntarily disenrolled from a cost plan revert back to Original
Medicare and are free to maintain their relationships with established
providers. In addition, if an individual's financial circumstances
improve over time, she he can re-enroll during the cost plan's next
period of open enrollment.
We appreciate the comments that were submitted on this provision
and will be finalizing this proposal without modification.
2. Requiring MA Plans to Issue ID Cards (Sec. 422.111)
Pursuant to section 1860D-4(a)(1) of the Act and Sec. 423.120(c),
and consistent with, common industry practice as described in the
Medicare Marketing Guidelines (https://www.cms.gov/ManagedCareMarketing/03_FinalPartCMarketingGuidelines.asp), Part D sponsors must issue and
re-issue as
[[Page 22097]]
appropriate a card or other technology that enrollees can use to access
negotiated prices for Part D covered drugs. While we have made
recommendations with respect to member identification (ID) cards for
Medicare Advantage (MA) Preferred Provider Organization and Private
Fee-for-Service products through our Medicare Marketing Guidelines
(https://www.cms.gov/ManagedCareMarketing/), we have issued no related
regulatory requirements. Many MA organizations issue ID cards to their
enrollees, but, absent such a requirement in regulation, we cannot
ensure that all MA organizations issue cards to their members or that
the cards contain certain information at a minimum and other
information necessary for consistency of information across such
documents. Thus, we believe it is important to establish requirements
for the MA member ID cards to ensure that key information (such as the
plan's customer service number and the member ID number) is on the card
so that enrollees can access care. Specifically, we proposed 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 Web site; (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.
We indicated that implementation of these provisions would 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), at section 1856(b)(1) of the Act (to
establish standards by regulation) and section 1857(e) of the Act (to
specify additional contractual terms and conditions the Secretary may
find necessary and appropriate), we proposed to amend Sec. 422.111 by
adding a new paragraph (i) to expressly require that MA plans issue and
re-issue, as necessary, a card that contains certain information and
enables enrollees to access all covered services.
Comment: Several commenters expressed support for the proposal to
require MA plans to issue ID cards. Additionally, they offered
suggestions for specific ID card requirements: (1) add an identifier to
the card for individuals who receive Medicaid or are QMBs; and (2)
adopt the Workgroup on Electronic Data Interchange (WEDI) standards for
medical ID cards. In addition, one commenter said that we should
exclude the Medicare Limiting Charges statement because of card
crowding.
Response: We appreciate the thoughtful comments. In light of the
recommendations that we add more information to the ID card, and
realizing that there is limited space in which to include such
information, we will be issuing further guidance in this area based on
accepted industry practice. In developing such guidance, we will also
consider the commenter's concern about the possible lack of space on
the card if we were to include our proposed statement regarding
Medicare Limiting Charges.
Comment: A commenter questioned whether this requirement applies to
section 1876 cost plans.
Response: Yes. With the final publication of these regulations,
Sec. 417.427 will be amended to require section 1876 cost plans to
follow the disclosure requirements contained in Sec. 422.111. As the
ID provision is part of these disclosure requirements, as of the
publication of these regulations, section 1876 cost plans will be
required to issue ID cards.
After consideration of the public comments received, we are
finalizing the policy with the following modification: We are removing
the specific information requirements from the ID card provision (Sec.
422.111(i)).
3. Determination of Actuarially Equivalent Creditable Prescription Drug
Coverage (Sec. 423.56)
Section 1860D-22 of the Act outlines the special rules for
employer-sponsored 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 that changed the formula for determining
the actuarial equivalence of retiree prescription drug coverage to the
defined standard coverage. Consistent with this provision, qualified
retiree prescription plans, in their attestation of actuarial
equivalence, must disregard the value of any discount or coverage
provided during the coverage gap provided under standard prescription
drug coverage. Thus, in the April 2011 final rule (76 FR 21478), we
amended Sec. 423.884(d) to remove the value of any discount or
coverage provided during the coverage gap from the valuation of
standard prescription drug coverage when comparing the value of the
retiree drug subsidy (RDS) calculation to determine valuation of the
RDS coverage.
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. This
provision requires the cost of prescription drug coverage to have an
actuarial value that equals or exceeds the actuarial value of the
standard Medicare prescription drug benefit (as determined under
section 1860D-11(c) of the Act). The Affordable Care Act established
two standard Medicare prescription drug benefits. Thus, there are now
two calculated actuarial values for the standard prescription drug
benefit--one value that would apply for standard prescription drug
coverage when establishing the low-income subsidy and another value
that would apply to applicable beneficiaries. As a result, we needed to
clarify which actuarial equivalence standard is used for the valuation
of creditable prescription drug coverage. Retiree prescription drug
coverage is the most common source of creditable coverage, therefore we
proposed 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 values for both determinations, we ensure that RDS individuals,
who are enrolled in plans that meet the actuarial equivalence value of
defined standard prescription drug coverage as provided under Sec.
423.884(5)(iii)(C), are not subject to the LEP under Sec. 423.46 if
they subsequently enroll in a Part D plan.
To this end, we proposed to amend Sec. 423.56(a) to exclude the
value of gap discounts or coverage, so that the definition of
creditable coverage is consistent with the calculation of the actuarial
value of RDS coverage in Sec. 423.884(d). We also proposed to revise
the reference to ``CMS actuarial guidelines'' in Sec. 423.56(a) to
read ``CMS guidelines,'' to provide additional flexibility in issuing
interpretive guidance on the definition of creditable coverage.
Comment: All commenters who addressed this issue were in favor of
the proposal. Commenters indicated that CMS' changes would ensure that
more employer-sponsored plans will be determined creditable, so
enrollees will not be subject to the Part D late enrollment penalty if
they choose to switch from employer-sponsored coverage to Part D
coverage.
[[Page 22098]]
Response: We appreciate the commenters' support of the proposal and
agree with their position that this approach will enable beneficiaries
who switch from employer-sponsored creditable prescription drug
coverage to a Part D plan to do so without incurring a late enrollment
penalty.
Comment: A commenter indicated support to exclude the late
enrollment penalty (LEP) from the calculation of creditable coverage
and requested that CMS provide employer-sponsored plans with the LEP
amounts to effectuate the proper calculation.
Response: The calculation for creditable coverage for qualified
retiree prescription drug plans does not include the LEP. Further,
because the LEP is not part of the formula to determine and attest
creditable coverage, we do not believe it is necessary to share the LEP
amounts with employer-sponsored plans.
We appreciate the comments that were submitted on this provision
and will be finalizing this proposal without modification.
4. Who May File Part D Appeals With the Independent Review Entity
(Sec. Sec. 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 sets of
regulations to strengthen enrollee access to the Part C and Part D
appeals processes. Specifically, we amended the MA appeals regulations
at Sec. 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 Sec. 423.580, allowing prescribing
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 later in this
section. Consequently, we proposed to revise the Part D regulations at
Sec. 423.600 to allow prescribing physicians and other prescribers to
request Independent Review Entity (IRE) reconsiderations on behalf of
enrollees. We also proposed making a corresponding change to the notice
provisions at Sec. 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
independent review of their cases which creates the potential for
delays in prescription drug access. Furthermore, given a prescriber's
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 rule will 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 will enhance beneficiary
access to the appeals process and better ensure prompt IRE decisions on
whether requested drugs are covered under Part D.
Under this final rule with comment period, the regulations will
continue to require a Part D enrollee, or a prescriber acting on his/
her behalf, to request IRE review; adverse redeterminations will not be
automatically forwarded to the IRE. We considered requiring auto-
forwarding of adverse redetermination requests under the Part D
program, but we continue to believe that in order to obtain IRE review,
the statute requires the enrollee (or someone acting on the enrollee's
behalf) to 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 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 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 change 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
change will allow a prescriber to act on an enrollee's behalf on an as-
needed, case-by-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, including the right to bring appeals at any level.
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 change 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 also making a corresponding change to Sec. 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 also receive a written decision notice from
the IRE, thereby ensuring that enrollees are fully informed about the
review process and able to participate if they choose to do so.
As in Sec. Sec. 422.582 and 423.580, prescribers must notify
enrollees whenever they request IRE review on
[[Page 22099]]
their behalf. We intend to issue additional operational guidance with
respect to how this requirement may be satisfied. Finally, we make
clear that this final rule with comment period 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 an appeal must continue to do so as the enrollee's
representative.
Comment: Most commenters expressed support for the proposal, noting
that allowing prescribers to file IRE appeal requests on behalf of
enrollees without becoming that enrollee's appointed representative
would reduce administrative burdens on prescribers, limit dismissals of
reconsideration requests, make the appeals processes under Parts C and
D more similar, and enhance beneficiary access to the Part D appeals
process.
Response: We appreciate the commenters' support and are finalizing
the proposed revisions without modification.
Comment: A few commenters expressed concerns that the proposed
change may negatively affect plan sponsors' quality ratings because it
will likely result in an increase in the number of IRE appeal requests
and potentially result in a higher IRE overturn rate.
Response: We agree that this change is likely to increase the
number of IRE reconsideration requests, as discussed in the regulatory
impact analysis for this provision. To the extent that a plan sponsor's
IRE reversal rate increases as a result of this change, plan sponsors
may wish to review their internal policies and procedures to ensure
compliance with CMS subregulatory guidance instructing them to conduct
reasonable and diligent outreach efforts to prescribers and enrollees
when supporting statements or clinical information necessary to make a
coverage decision are absent or incomplete.
Comment: A few commenters believe that allowing prescribers to file
IRE appeals may violate section 1860D-4(h) of the Act, which
specifically states that only the enrollee can bring an appeal to the
IRE. The commenters note that the statutory language differs from the
language related to Part C IRE appeals, and further suggest that
Congressional intent was to limit the Part D IRE appeals process to
individuals acting on behalf of enrollees, disallowing individuals
other than the enrollee from initiating IRE appeals absent an AOR form.
Response: We disagree with the commenters. This provision does not
give prescribers appeal rights; it merely allows them to file an appeal
with the IRE on behalf of an enrollee. We believe that an enrollee's
prescribing physician or other prescriber is in the best position to
provide the necessary medical rationale and documentation to support a
favorable coverage decision. As we stated in the proposed rule, the
revised regulation will require prescribers to notify enrollees that
the request is being made. We intend to issue additional operational
guidance with respect to how this requirement may be satisfied in a
manner similar to the notification requirements for prescriber-
initiated redeterminations.
Comment: A few commenters recommended that CMS limit IRE review to
include only the information provided by the prescriber at the coverage
determination and redetermination levels. These commenters believe that
prescribers often delay providing full clinical information until an
appeal reaches the IRE level and the IRE solicits it. Commenters note
that if plans received the same information they may reach the same
conclusion as the IRE in less time and at a lower cost.
Response: We strongly disagree with the commenters. The proposed
rule was not intended to modify the IRE review process itself in any
way; it only proposed to modify who may initiate an IRE appeal. We are
retaining existing regulatory and subregulatory guidance regarding the
requirement that the IRE solicit the views of the prescriber and retain
a written account of those views in the IRE's record.
Additionally, we have not seen any indication that prescribers are
intentionally withholding applicable clinical information in either the
Part D coverage determination or appeals processes. As we noted in the
proposed rule, prescribers do not have independent standing in Part D
appeals, and generally are not entitled to payment from the enrollee,
pharmacy, or plan for the drug being requested and therefore do not
have a financial interest in the outcome of Part D appeals. In these
cases, the prescriber is merely trying to assist the enrollee in
obtaining coverage for a drug the prescriber believes is medically
necessary. Prescribers have no incentive to withhold information that
would support coverage. To the extent that the IRE routinely solicits
and obtains information from a prescriber that was not provided during
the initial coverage determination or redetermination, plan sponsors
may wish to review their internal policies and procedures to ensure
compliance with our subregulatory guidance, which instructs plan
sponsors to conduct reasonable and diligent outreach efforts to
prescribers and enrollees when necessary supporting statements or
clinical information are absent or incomplete.
Comment: CMS received several comments related to enrollee
notification of a prescriber-initiated IRE appeal requests. Some
commenters recommended that CMS issue guidance requiring prescribers to
notify enrollees when they file an appeal on the enrollee's behalf. One
commenter expressed a belief that, under the proposed change, plan
sponsors would need to exercise additional oversight such as contacting
enrollees to ensure that prescribers are appropriately notifying
enrollees and review any form or document the prescriber uses to make
the IRE appeal request. Another commenter recommended that CMS not
require plan sponsors or the IRE to obtain proof from the prescriber
that the enrollee was notified of the requested IRE review made on
their behalf. Finally, one commenter stated that a prescriber must
obtain the enrollee's consent in order to file an appeal with the IRE.
Response: We do not require and do not expect plan sponsors to
conduct any type of review or oversight to determine whether
prescribers have notified enrollees that they are initiating an IRE
appeal on their behalf. We intend to issue guidance to the IRE with
respect to making a reasonable determination of whether the enrollee
has notice of the prescriber's request for a reconsideration on the
enrollee's behalf. This provision merely eliminates the requirement
that a prescriber obtain an enrollee's express consent (through a
properly executed AOR form) in order to initiate an IRE appeal on
behalf of the enrollee.
Comment: A commenter requested that plan sponsors be informed of
all IRE submissions and determinations so that they can evaluate their
internal processes and provide oversight of delegated entities.
Response: We agree with the commenter. In accordance with current
processing requirements, the IRE will continue to request the plan
sponsors' case files subsequent to all valid requests for IRE
reconsideration. The proposed change to Sec. 423.602(a) does not
change the requirement that the IRE notify all parties, including the
plan sponsor, of the reconsideration decision. Thus, processes for
communication with and notification to plan sponsors with respect to
prescriber-initiated reconsiderations will be identical to the
[[Page 22100]]
current processes for enrollee-initiated reconsiderations.
Comment: Several commenters recommended that CMS require auto-
forwarding of all adverse redeterminations to the Part D IRE, as is
currently done with adverse plan reconsiderations in the MA program.
Response: While we understand that auto-forwarding all adverse
redeterminations to the IRE would enhance enrollee access to the Part D
appeals process, we believe that this practice would be inconsistent
with the statute. As we stated in the proposed rule, we interpret the
statutory language related to Part D appeals to require the enrollee
(or someone acting on his or her behalf) to affirmatively request IRE
review.
Comment: A commenter recommended that CMS include information on
who may file appeals with the IRE on the Medicare Web site, in Medicare
& You and in plan communications to increase awareness of appeal
options.
Response: We agree with the commenter and will ensure that all
relevant CMS materials are updated to reflect this change after the
final rule has been published. Part D plan sponsors are also required
to maintain current information regarding the Part D appeals process on
their plan Web sites and in annual enrollment materials.
Comment: A commenter requested that notification of IRE decisions
for appeals initiated by prescribers be provided to the enrollee either
by the provider or the IRE.
Response: We agree with the commenter that enrollees must receive
written notification of IRE appeal decisions. As stated previously, we
are finalizing the proposed corresponding change to Sec. 423.602(a),
which specifies that in all cases the IRE is responsible for notifying
the enrollee (as well as the prescriber) of its decision, including
when a prescriber makes a request on behalf of the enrollee.
Comment: A commenter sought clarification on whether a prescriber
still needs to be appointed by the enrollee to file a request for IRE
reconsideration.
Response: The purpose of the proposed change is to eliminate the
need for a prescriber to obtain representative status in order to
initiate an IRE appeal on the enrollee's behalf. Therefore, we are
finalizing the proposed regulation text to state that, upon providing
notice to the enrollee, the prescribing physician or other prescriber
may request an IRE reconsideration on behalf of the enrollee. An
``appointment'' is no longer required.
Comment: A commenter noted that a prescription may be denied by a
Part D plan at the point of sale for a variety of reasons, and that a
coverage determination should be required before proceeding to the IRE
as a majority of appeals could be resolved through plan adjudication.
Response: We agree with the commenter. The proposed change allowing
prescribers to file IRE appeals on behalf of an enrollee does not
eliminate the requirement to exhaust plan level reviews before
requesting IRE review. Under the proposed change, enrollees, their
representatives and physicians or other prescribers may make a request
for IRE review only after the Part D plan sponsor has made an adverse
redetermination decision.
Comment: A commenter requested clarification that ``prescriber''
refers only to the physician, PA or NP who wrote the order for the drug
in dispute.
Response: Under our proposed change to Sec. 423.600, the
``prescribing physician or other prescriber''--the individual who wrote
the order for the drug in dispute--will be the only person authorized
to make an IRE appeal request on behalf of an enrollee (absent an
authorized or appointed representative).
Comment: A commenter recommended that IRE appeal requests be
limited to prescribing physicians and not to a physician designee.
Response: We agree that the proposed change only allows prescribing
physicians and other prescribers to initiate IRE appeals on behalf of
enrollees. However, we understand that medical and administrative
staffs perform various functions for physicians (such as calling in
prescriptions or responding to requests for medical records) these same
staff should be allowed to assist prescribers in submitting Part D IRE
appeal requests and providing any necessary clinical documentation. We
will develop additional subregulatory guidance around this process.
Comment: A commenter stated that allowing prescribers to initiate
IRE appeals on behalf of enrollees will contribute to the increasing
problem of overutilization of medications caused by prescribers who
continue to prescribe drugs that are not medically necessary.
Response: We understand the commenters concerns, but disagree with
the suggestion that the proposed provision will lead to
overutilization. We are only allowing prescribers to request coverage
at the IRE level. The decision whether to overturn the adverse
redetermination will continue to be made by the IRE based on statutory
and regulatory guidelines and applicable clinical documentation.
Comment: A commenter encouraged CMS to ensure that prescriber
requests for IRE reconsideration are consistent throughout the Part D
and MA programs.
Response: We are seeking to make the Part D and MA programs more
similar through this regulatory change. However, as noted previously,
we believe the statutory differences with respect to IRE
reconsiderations do not allow for these processes to be identical.
Comment: CMS received a number of comments related to fees charged
by prescribers who assist enrollees with Part D appeals. Several
commenters urged CMS to reexamine the policy surrounding ``allowable
extra fees,'' stating that Part D and MA program appeals are rarely
successful without physician support and allowing physicians to charge
fees for providing letters of medical necessity or producing medical
records creates an unnecessary tension in the doctor-patient
relationship. Some commenters requested that CMS prohibit physicians or
other prescribers who file IRE appeals on behalf of enrollees, from
charging enrollees any fee for assistance unless an enrollee has agreed
to the fee in writing. Other commenters requested that CMS issue
guidance related to reasonable fees. A number of commenters also noted
that CMS rules related to appointment of representatives include a
provision that a physician representative may waive a fee for
representing a beneficiary.
Response: Subpart M does not address fees charged by physicians or
other prescribers; therefore, we believe these comments are outside the
scope of the proposed regulation.
As stated previously, we are finalizing the proposed changes
without modification. However, we are, changing the effective date of
this provision from 60 days after the publication of this rule to
January 1, 2013, to clarify that prescribers may not begin requesting
reconsiderations on behalf of the beneficiary until the 2013 plan year.
5. Independence of LTC Consultant Pharmacists (Sec. 483.60)
In our October 11, 2011 proposed rule (76 FR 63038), we noted that
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
[[Page 22101]]
requirement is codified in regulations at Sec. 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. We explained that, as a
result of their role in LTC facilities, LTC consultant pharmacists may
exercise significant influence over the drugs that LTC facility
residents receive.
We noted that nursing homes commonly 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. We indicated that, in verbal
conversations with industry representatives, we had been informed that
some LTC pharmacies provide the consultant pharmacists to nursing homes
at rates that may be below the LTC pharmacy's cost and below fair
market value.
We expressed our concern with the potential effect on patient
safety and quality of care for nursing home residents regarding the
various contractual arrangements involving LTC facilities, LTC
pharmacies, pharmaceutical manufacturers and/or distributors, and the
LTC consultant pharmacists that may be provided through LTC pharmacies
directly or indirectly to LTC facilities. We noted these arrangements
may take many forms and mentioned the practice of LTC pharmacies'
providing consultant pharmacists to nursing homes at below cost or fair
market value as one such type of arrangement. We noted also that any
such arrangements have the potential to directly or indirectly
influence consultant pharmacist drug regimen recommendations. We
indicated our concern 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
nursing homes to recommend or use certain drugs for their residents. We
noted this could result in the overprescribing of medications, the
prescribing of drugs that may be inappropriate for LTC or geriatric
residents, or the use of unnecessary or inappropriate therapeutic
substitutions. We remarked that such potential outcomes could pose
serious health-related consequences to some nursing home residents'
health and safety.
In our October 11, 2011 proposed rule (76 FR 63039), we referenced
the claims brought by qui tam relators under the False Claims Act and
cited research findings, HHS Office of Inspector General review
findings, and nursing home survey and certification data to demonstrate
that our concerns were not merely theoretical. We acknowledged that our
findings did not directly connect LTC pharmacy relationships with
consultant pharmacists to the research findings and survey results;
however, we believed it was reasonable to presume that the incentives
present in the relationships among some consultant pharmacists, LTC
pharmacies, and drug manufacturers could influence the prescribing
practices reflected in the data. As a result, we expressed our belief
that requiring the independence of consultant pharmacists was necessary
and appropriate and were considering making such a change. We solicited
comments on our understanding in this matter.
In our October 11, 2011 proposed rule (76 FR 63040), we stated that
we believed 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 would ensure that financial arrangements would not
influence the consultant pharmacist's clinical decision making to the
detriment of LTC residents. Therefore, we indicated that we were
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 and believed such a requirement would be necessary to
ensure that consultant pharmacist decisions were objective, unbiased,
and in the best interest of nursing home residents. LTC facilities
would use a qualified professional pharmacist to conduct drug regimen
reviews and make medication recommendations based on the best interests
of the resident. We expressed our belief that this could be achieved
only if the consultant pharmacist were working without the influence of
conflicting financial interests that might otherwise encourage
overprescribing and overutilization, which creates health and safety
risks for residents.
We noted the changes we were 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 stated we were considering requiring that LTC
facilities employ or directly or indirectly contract the services of a
licensed pharmacist who is independent. We also noted we were
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.
Finally, we noted our understanding that some LTC consultant
pharmacists may perform approximately 60 drug regimen reviews in a day.
We indicated 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 did not propose to codify changes to
the drug regimen review requirements, we solicited public comment on
best practices related to the conduct of drug regimen reviews and
stated we would use these comments to inform possible future rulemaking
regarding the drug regimen review requirements.
Comment: CMS received many responses to our request for comment on
our understanding of the problems associated with conflict of interest
involving LTC consultant pharmacists. A significant number of
commenters who identified themselves as current or former consultant
pharmacists either acknowledged they had experienced conflict of
interest in the past or confirmed our understanding that conflict of
interest were an on-going problem. Several of these commenters claimed
that conflicts of interest have been widespread and alleged that
patient care suffers because of it. A number of these commenters wrote
anonymously stating they feared retribution from their pharmacy
employers. A commenter asserted that the rules LTC pharmacies placed on
their employee consultant pharmacists strongly influenced utilization.
This, they note, often resulted in a higher number of medications per
resident and use of inappropriate drugs. Commenters who had witnessed
or experienced conflict of interest described practices associated with
it that included the following:
[[Page 22102]]
Several commenters indicated their LTC pharmacy gave
consultant pharmacists a list of ``preferred'' drugs; that is, drugs
for which the LTC pharmacy receives preferred pricing or higher rebates
from the pharmaceutical manufacturer, to be used for making their
medication recommendations.
A few commenters described their LTC pharmacy's
therapeutic interchange program, which involves the consultant
pharmacist recommending a change from a prescribed non-preferred drug
to one of the pharmacy's preferred drugs. A commenter characterized
therapeutic interchange to rebated drugs as ``big business'' for the
pharmacy. Another commenter explained that, once a change
recommendation was made by the consultant pharmacist, the LTC pharmacy
automatically generated a fax notice to the prescriber requesting the
he or she sign the notice to approve the therapeutic interchange. An
additional commenter indicated that the consultant pharmacists'
medication change recommendations were communicated in the form of
letters to the prescriber prepared by the corporate clinical department
of the pharmacy.
Several commenters explained that consultant pharmacists'
performance evaluations and bonuses were based on the market share of
particular brand name drugs in the LTC facility. Thus, as the
commenters noted, consultant pharmacists had financial incentives to
make medication recommendations that enabled the facility market-share
targets to be met.
Many commenters stated that they had first-hand knowledge
that LTC pharmacies continue to charge below-market rates for the LTC
consultant services as a means of acquiring the LTC facility's pharmacy
business, noting that this remains a common practice. Some of these
commenters charged that the pharmacies recovered their costs for the
consultant pharmacist services by requiring the consultant pharmacists
to recommend drugs that generated the highest profit for the pharmacy.
Many commenters charged that the consultant pharmacists'
drug regimen review quotas were so high that sufficient time was not
available to perform a thorough review of the residents' medication
regimens and make good recommendations. One commenter cited a minimum
drug regimen review quota of 1,500 reviews per month. Another commenter
reported that, when a large LTC pharmacy organization acquired the
pharmacy at which the commenter had been employed, the new management
required that the commenter perform the same number of drug regimen
reviews as the commenter had been performing previously, but also that
the commenter spend 2 days per week dispensing. As a result, the time
available for the commenter to perform the same number of medication
reviews was decreased by 40 percent.
Some commenters asserted that by limiting the time
available to conduct them, the drug regimen reviews were perfunctory.
Others described how the drug regimen review requirements were
subverted. For example, a commenter contended that the consultant
pharmacists employed by an LTC pharmacy were performing the medication
reviews at the pharmacy rather than the facility and, thus, had no
access to medication administration records, physician and nursing
assessment notes, lab results, or other information available in the
residents' medical records. Another asserted that an LTC pharmacy
organization had its consultant pharmacists review the residents'
medication administration records, not the entire medical record, thus
missing lab values and other assessments and notes.
Many commenters agreed that consultant pharmacists should
be free from conflict of interest and their medication recommendations
should be based solely on the residents' best interests. Finally,
however, many other commenters stated that they never experienced any
pressure in the conduct of their consultant pharmacist activities, nor
had they seen others pressured, and thus they believed that conflict of
interest is not an issue for consultant pharmacists.
Response: We appreciate the confirmation of our understanding that
conflict of interest may be a problem for many LTC consultant
pharmacists. We recognize that a significant number of commenters
disagreed with our understanding and, thus, the problem may not be
universal. We believe the comments suggest that the problem has been
addressed in some places and not in others, is more widespread in some
places and therefore more evident, or is associated with a particular
LTC pharmacy or pharmacies, particular LTC facilities or chains or
pharmaceutical manufacturers or manufacturer representatives.
However, the reports of conflict of interest are sufficient to
indicate it continues to exist and our concerns regarding its impact on
the quality of care in LTC facilities are well-founded. We believe that
this demonstrates that change is necessary to ensure that all LTC
consultant pharmacists are free from conflicts of interest, are able to
base their professional medication recommendations on the best interest
and clinical needs of LTC facility residents, and are able to advocate
for the Medicare beneficiary.
Comment: CMS received a large number of comments from advocates and
advocacy organizations, long term care ombudsmen, LTC consultant
pharmacists, and others supporting a requirement for LTC consultant
pharmacists to be independent and noting that such a policy was needed
and long overdue. These commenters asserted that independence is
essential to ensure that drug regimen reviews are impartial and the
consultant pharmacist is able to act as an advocate for the resident
without fear of financial repercussions. A commenter agreed with an
independence requirement, noting that removing the financial incentives
between the consultant pharmacists and the LTC pharmacy would increase
transparency.
CMS also received many comments opposing a requirement that would
separate LTC pharmacy consulting from dispensing services. Many of
these commenters claimed the requirement would be seriously disruptive,
asserting that communication and collaboration between the dispensing
pharmacy and the consultant pharmacist would be diminished, consultant
pharmacists would be deprived of access to proprietary LTC pharmacy
systems, data and other resources critical to the performance of
consultant pharmacists' activities. Opposing commenters noted the
requirement would also deprive consultant pharmacists of the
significant advantages derived from pharmacy employment, including
health, retirement and other benefits, and would increase costs to both
the LTC facilities and consultant pharmacists. A significant number of
these commenters expressed concern that independence would decrease the
quality of patient care accordingly.
Many commenters requested that we finalize the requirement and not
yield to those who argued against it. CMS received several comments
from independent consultant pharmacists noting that, although others
have argued otherwise, working independently has neither hindered
access to residents' prescription or medical information, nor
diminished the residents' quality of care.
Response: We appreciate these comments, as well as the concerns
expressed by those commenters opposed to the requirement for
independent consultant pharmacists. The comments supporting the
independence requirement have sustained our concerns about conflict of
[[Page 22103]]
interest and its impact on the quality of long term care. Also, the
significant advantages associated with employment described in the
opposing comments serve to highlight the strong influence such
financial ties can exert on pharmacy-employed consultant pharmacists
and reinforce the importance of an independence requirement to ensure
unbiased medication reviews. As a result, we remain convinced of the
need for changes to ensure that the consultant pharmacists'
recommendations are based solely on the residents' best interests and
clinical needs. However, we acknowledge that an independence
requirement could be highly disruptive to the industry overall,
including the LTC facilities and those consultant pharmacists with
current industry affiliations, and would result in higher costs to the
facilities and consultant pharmacists.
Comment: A few commenters claimed we do not have the statutory
authority to impose an independence requirement. These commenters
asserted that we cannot use the Secretary's authority under sections
1819(d)(4)(B) and 1919(d)(4)(B) of the Act, because consultant
pharmacist independence has no direct relationship to resident health
and safety. Therefore, for us to require consultant pharmacists to be
independent would require Congressional authorization.
Response: We disagree. We believe that the conflict of interest
inherent in the employment relationship between a consultant pharmacist
and an LTC facility's pharmacy undermines the ability of the consultant
pharmacist to make unbiased medication recommendations that are solely
in the best interests of the residents. Many of the comments previously
discussed corroborate our belief. Recommendations made on other bases,
such as those reflecting the financial interests of the consultant
pharmacist or the consultant pharmacist's employer, pose health and
safety risks for the residents. Even in those situations in which the
consultant pharmacist is able to make unbiased medication
recommendations because there are no pressures to do otherwise, if the
drug regimen review quota established by the consultant pharmacist's
employer is so high as to permit the consultant pharmacist to perform
only the most perfunctory medication reviews, then resident health and
safety are at risk.
Comment: Many commenters agreed with the definition of
``independence'' we indicated we were considering. Some commenters
disagreed with the definition, indicating that consultant pharmacists
should not be permitted to be employees of the LTC facility in order to
avoid the potential conflict of interest inherent in an employment
relationship. Other commenters requested that consultant pharmacists be
permitted to affiliate with pharmaceutical manufacturers and
distributors. These commenters argued that affiliations with these
entities permit the exchange of scientific and educational information
on topics, such as medications and product benefits and risks, and much
of this exchange occurs at educational programs supported by the
industry at professional meetings and trade shows. They noted that
consultant pharmacists frequently serve on industry advisory boards and
are engaged as speakers and researchers with industry financial support
and contended that HHS Office of Inspector General guidance for
pharmaceutical manufacturers and industry guidelines related to the
healthcare professionals' decision-making provide sufficient oversight.
One other commenter requested that we define the terms ``affiliates''
and ``affiliated.''
Response: We acknowledge that there may be potential conflicts of
interest in an employment relationship between consultant pharmacists
and LTC facilities, but note that both the LTC facility and its
residents have a common interest in the facility meeting CMS standards
for unnecessary drug use in the facility. We do not agree with the
commenters who advocated that we allow consultant pharmacist
relationships with pharmaceutical manufacturers and distributors. The
relationships that these commenters describe cause us substantial
concern, as we believe they represent a basis for the conflicts of
interest that we seek to eliminate. We believe that consultant
pharmacists who receive remuneration from pharmaceutical manufacturers/
distributors for activities, such as research and speaking engagements
or for serving on advisory boards, may be influenced by these
relationships in the performance of their consultant pharmacist
activities. Thus, if the consultant pharmacists' recommendations are to
be based solely on the LTC residents' best interests, these
affiliations should be prohibited.
Comment: We received many comments from those supporting the
independence requirement for LTC consultant pharmacists as well as from
those opposing it, noting that consultant pharmacist independence would
not solve the entire problem of conflict of interest, because other
agents contribute to drug overutilization and inappropriate drug use in
LTC facilities. Contributors specifically cited by commenters were LTC
facility medical directors, nurse practitioners and physician
assistants and the residents' attending physicians. A few commenters
noted that family members, influenced by pharmaceutical advertisements,
could request antipsychotics as adjuncts for depression and the
prescriber could accede to these requests. Other commenters noted the
LTC facilities' role citing serious understaffing, high staff turnover,
and the lack of specialized staff trained in meeting the needs of
dementia patients as factors contributing to inappropriate drug use in
LTC facilities. Another commenter observed that others also play a
contributing role, noting that a considerable number of residents
admitted into LTC facilities from their homes, hospitals, and assisted
living facilities are already on potentially unnecessary drugs.
Many commenters pointed out that the ultimate decision regarding
what medications to prescribe and whether to accept or reject a
consultant pharmacist's recommendation lies with the physician.
Therefore, the commenters asserted prescribers, not consultant
pharmacists, should be held accountable for overuse or inappropriate
use of drugs in LTC facilities. Commenters claimed LTC residents'
physicians, as well as the facility's medical director, rarely see or
examine the residents and medications are reordered without the
physician reviewing the residents' condition. According to another
commenter, if a resident's behavior problem escalates, such as in the
case of a resident with dementia, facility staff would call the
physician to increase the medication dosage, and the physician would
commonly comply without seeing the resident. Several other commenters
noted that prescribers, aware of potential bias, ignore the consultant
pharmacists' recommendations due to uncertainty that the
recommendations are in the residents' best interests.
Many of the commenters in opposition to the consultant pharmacist
independence requirement noted that conflicts of interest pervade the
LTC industry, affecting the facility (which imposes its own formulary
requirement to contain costs for the drugs it covers), facility staff
(who can encourage the use of chemical restraints to manage residents
with behavioral problems), and the residents' physicians and LTC
facility-based prescribers (who may have their own financial ties to
the pharmaceutical industry). For these reasons, the commenters
objected to a
[[Page 22104]]
requirement that would single out only one group of actors that
contribute to this problem. Several commenters recommended that we
require that all clinicians in an LTC facility be independent, or that
we at least consider the role of the physicians who prescribe
medications when determining how best to solve the problem. Other
commenters agreed with the independence requirement, but indicated that
it was only a partial solution and a more comprehensive approach would
be necessary to respond effectively to the whole problem.
Response: We appreciate the many comments noting that others in the
LTC industry, including facility staff and residents' attending
physicians, contribute significantly to overutilization. Commenters not
only implicated others as contributing to overuse of drugs in LTC
facilities, but also described other factors that contribute to the
problem. Therefore, we recognize that requiring consultant pharmacists
to be independent will not solve the entire problem. As a result of
these comments, we are better aware that the independence requirement
we specifically described in the October 11, 2011 proposed rule would
disproportionately target consultant pharmacists and leave the other
actors to continue to operate as they do currently. This suggests that,
unless the industry on its own implements steps to curtail
overutilization and inappropriate drug use in LTC facilities, we must
consider requiring broader changes than independence only for
consultant pharmacists and propose those changes in future notice and
comment rulemaking.
Comment: Several commenters mentioned the recent investigations of
nursing homes conducted by the California Department of Public Health
which found that LTC consultant pharmacists failed to identify and
report the misuse of antipsychotic medications in 90 percent of the
cases identified by investigators as involving inappropriate and
potentially lethal doses of these drugs. We also received comments from
an LTC pharmacy reporting that over the past 5 years its consultant
pharmacists have made over 700,000 recommendations to prescribers
regarding antipsychotic drug use and that more than 99 percent were
recommendations to reduce dosage, discontinue or question use or
recommend monitoring for side effects. (We note this commenter did not
provide information on whether these recommendations were followed.)
Citing these data from the LTC pharmacy, another commenter noted that,
if (as the level of antipsychotic drug use suggests) prescribers are
ignoring the consultant pharmacist recommendations, it raises the
question of the effectiveness of the drug regimen reviews. A commenter
suggested that, over time, conflict of interest can diminish
prescribers' confidence in the consultant pharmacists, eroding their
effectiveness. This suggestion was supported in the comments of another
who claimed that prescribers who have been practicing in LTC facilities
are sensitive to the ethical conflicts faced by consultant pharmacists
and are skeptical of their recommendations because of the prescribers'
uncertainty as to whether the recommendations are in the residents'
best interests.
Response: These comments and the data reported by the commenters
suggest that the required monthly drug regimen reviews are not yielding
the intended outcomes nor are they providing the expected beneficiary
protections. If perceived conflict of interest has potentially eroded
confidence in the recommendations of the consultant pharmacists that
prescribers are ignoring them and the reviews have become merely
perfunctory exercises, then we may consider changing the requirements
in Sec. 483.60(c) and explore alternative requirements and approaches.
In determining whether a regulatory change is necessary, we will
continue to evaluate the number of deficiency citations for unnecessary
medication use and will monitor two new performance measures on the use
of antipsychotics in LTC facilities. These new performance measures,
based on resident assessment information reported in the Minimum Data
Set (MDS 3.0), will reflect antipsychotic drug use by short-term stay
and by long-term stay facility residents and will be available later in
2012 on the CMS nursing home compare Web site at https://www.medicare.gov/NHcompare/home.asp.
Comment: We received extensive comments expressing serious concerns
about the level of overuse and inappropriate use of antipsychotic drugs
in LTC facilities. A commenter stated that, ``On any given day, over
350,000 nursing home residents receive powerful antipsychotics, despite
FDA warnings that the drugs increase the risk of death and studies that
show the drugs do not work and have terrible side effects.'' Many
commenters noted the vast majority of those receiving these drugs are
residents with dementia who are being chemically restrained when there
are safe, effective, and less expensive nonpharmacological methods to
care for these residents. Another commenter stated that studies show
that compassionate, person-centered care can minimize anxiety and
depression and minimize the need for psychotropic medications.
Response: We share the grave concerns expressed by the commenters
concerning the level of antipsychotic drug use in LTC facilities. We
believe these comments also call into question the effectiveness of the
consultant pharmacists' drug regimen reviews in curtailing the use and
misuse of antipsychotic drugs, regardless of whether the
ineffectiveness is caused by inadequate medication reviews by
consultant pharmacists or prescribing physicians ignoring the
recommended changes. As we indicated previously, we agree that
consultant pharmacist independence will not solve the whole problem.
Therefore, we challenge the entire LTC industry to do what is in the
best interests of our most vulnerable beneficiaries and implement the
necessary and appropriate changes to address this serious situation.
We expect that through the implementation of changes, such as
placement of greater emphasis on the use of nonpharmacological methods
of care as an alternative to pharmacological treatment for the
behaviors associated with dementia, the industry will achieve
substantial improvement in the appropriate use of these medications.
Although not all non-pharmacological treatments are appropriate for all
patients, some nonpharmacological interventions may have potential
benefits for residents with the behavior symptoms associated with
dementia, such as agitation or aggression, wandering and sleeping
disturbances. These interventions include, for example, music therapy,
massage therapy, behavior management techniques, and animal-assisted
therapy.
Comment: A number of commenters offered recommendations for
increasing transparency in order to address conflicts of interest
issues in LTC facilities. Some commenters recommended that we require
LTC facilities to separate contracts for LTC consulting services from
contracts for other services, including drug dispensing, and require
LTC facilities pay a fair market rate for consultant pharmacist
services. Some commenters suggested either that we require consultant
pharmacists to disclose to the facility any affiliations that would
pose a potential conflict of interest or require consultant pharmacists
to sign an integrity agreement. Several commenters recommended that LTC
[[Page 22105]]
pharmacies ensure that consultant pharmacists are empowered to make
independent judgments and affirm this in a statement to the facility.
One commenter suggested that, should the implementation of a
requirement for consultant pharmacists to be independent be delayed, we
require consultant pharmacists to disclose their affiliations and
potential conflicts of interest.
Response: We continue to believe that requiring independent
consultant pharmacists is part of the right approach to address our
concerns regarding conflict of interest and quality of care in LTC
facilities. It is an approach that was strongly supported by some
consultant pharmacists who confirmed our belief that LTC pharmacies do
exert pressure on the consultant pharmacists in their employ to
influence the medication recommendations. It was also supported by
individual commenters, advocates and advocacy organizations, Part D
plan sponsors and PBMs, and consultant pharmacist organizations.
However, we acknowledge that others in the industry, including LTC
facility staff and prescribers, are likewise implicated in the problem
of overprescribing and inappropriate drug use. Thus, an independence
requirement solely for consultant pharmacists would not solve
overutilization and would single out one party, but leave the others to
continue unaffected. We agree with commenters that the requirement
would be highly disruptive to both LTC facilities and consultant
pharmacists with current industry affiliations. Because the proposed
requirement does not address the role of facility staff and prescribers
in driving overutilization and inappropriate use, it is unlikely to
result in substantially reducing these problems that would, in our
view, outweigh the costs of industry disruption.
Comment: We received several comments that noted the lack of
empirical evidence linking overutilization of drugs in LTC facilities
to consultant pharmacists' possible conflicts of interest. Numerous
commenters suggested that we study the recommendations, drug
utilization and outcomes data for independent and pharmacy employed
consultant pharmacists and many of these commenters also recommended
that we consult with stakeholders to better define and scope the
problem and formulate a more appropriate approach for addressing it.
Response: If, as suggested by other commenters, consultant
pharmacist recommendations are rarely acted upon, this calls into
question the very purpose of the consultant pharmacists' medication
reviews. We expect the industry to demonstrate the value of these
reviews to the LTC residents' quality of care. Therefore, we believe
the industry should collect data on the number and type of
interventions recommended by the consultant pharmacists and on the
outcomes of those recommendations. We expect some, if not all, of these
data are already being collected and we recommend the industry work
with such entities as the Pharmacy Quality Alliance (PQA) and other
consensus gathering organizations, to develop performance measures to
assess consultant pharmacist effectiveness. Further, since the
consultant pharmacists are not the only group with responsibility for
ensuring the safety and efficacy of care in the LTC facility, we expect
the LTC provider and medical industry to also implement changes to
address the problem of overuse and misuse of medications in LTC so that
we will see inappropriate prescribing of all medications, but
particularly antipsychotics, decrease. Should marked improvement not
occur, we will use future notice and comment rulemaking to propose
requirements to address our concerns. In determining whether marked
improvement has been made, we will continue to evaluate the number of
deficiency citations for unnecessary medication use and will monitor
the two new performance measures on the use of antipsychotics in LTC
facilities.
Comment: We received comments recommending that LTC pharmacies be
required to disclose their rebates and several other comments
recommending the elimination of manufacturer rebates to LTC pharmacies
based on utilization.
Response: Although we agree that market-share-moving rebates may
provide incentives that are not in the LTC residents' best interests,
we believe that these suggestions are beyond the scope of this
proposal, and we are not in a position to respond to these
recommendations at this time.
Comment: Several commenters recommended a requirement that
facilities use qualified professional consultant pharmacists for LTC
consulting services and strictly enforce compliance with that
requirement. Another commenter suggested that, as an alternative, we
establish an audit or other oversight process to review and evaluate
all medication changes recommended by LTC consultant pharmacists and
all contractual agreements that pose potential conflict of interest
risk.
Response: We appreciate these comments and will consider the
recommendations in the process of future rulemaking on this issue.
However, as noted above, we believe the LTC industry should collect
data on the number and type of interventions recommended by the
consultant pharmacists and on the outcomes of those recommendations and
we recommend the industry work with such entities as the PQA and other
consensus gathering groups, to develop performance measures to assess
consultant pharmacist effectiveness. Since the consultant pharmacists
are not the only group with responsibility for ensuring the safety and
efficacy of care in the LTC facility, we expect the LTC provider and
medical industry to also implement changes to address the problem of
overuse and misuse of medications in LTC so that we will see
inappropriate prescribing of all medication.
Comment: Many commenters responded to our request for comment on
permitting exceptions for unique situations involving minimal conflict
of interest risk or waiving the independence requirement to permit
other alternate approaches. Some commenters recommended that we grant
no waivers or exceptions, arguing that there should be a level playing
field and that no employment relationship was free from conflicts of
interest. Other commenters agreed with allowing exceptions or waivers
for alternate approaches for IHS/Tribal facilities and facilities in
rural or other ``hardship areas''. Several commenters suggested we
monitor the exception and waiver processes to ensure they are fair and
equitable. Other commenters requested either exceptions or alternate
approaches for facilities with in-house pharmacies, VA, and State
Veterans nursing homes, and various other situations.
Response: We appreciate these comments and will consider them in
the process of future rulemaking on this issue.
Comment: Several commenters recommended either coordination between
consultant pharmacists' drug regimen reviews and medication therapy
management (MTM) services in order to eliminate overlap/duplication
between the two reviews.
Response: We agree that the potential overlap between the drug
regimen reviews required in LTC and Part D MTM reviews could possibly
result in conflicting reviews. As a result, in the provision on MTM in
LTC facilities discussed elsewhere in this rule, we encourage plan
sponsors to consider
[[Page 22106]]
making arrangements that include the LTC consultant pharmacist in
conducting Part D MTM services for targeted beneficiaries in LTC
facilities. We note such arrangements could include direct contracts
between the sponsor and consultant pharmacists (or their
intermediaries), or indirect contracts between the sponsor's MTM vendor
or PBM and consultant pharmacists (or their intermediaries).
Comment: Several commenters recommended we establish a January 1,
2013 effective date, and other commenters requested either a delay in
implementation or suggested a later effective date. Commenters provided
recommendations for phasing in the requirement and for implementing the
requirement initially as a demonstration program. Commenters also noted
that these latter approaches would enable us to benefit from lessons
learned and identify best practices for future implementation.
Response: We appreciate these comments, but, as discussed further
later in this section, we are not finalizing this provision at this
time.
Comment: We received numerous comments in response to our request
for information concerning best practices in the conduct of drug
regimen reviews. A few commenters suggested that we require consultant
pharmacists be afforded adequate time for the monthly drug regimen
reviews. Another suggested that we refer to the American Society of
Consultant Pharmacists ``Guidelines for Assessing the Quality of Drug
Regimen Review in Long Term Care Facilities'' which the commenter noted
provides standards to evaluate the quality of the drug regimen review
and to improve the process. Several other commenters asserted that
establishing a specific rate would be inappropriate because the
facility's case-mix could affect the rate. However, other commenters
specified what they believed would be the optimal rate per day; the
suggested rates varied from a low of 20 to a high of 64 per day.
Response: We appreciate the comments and suggestions and will use
them to inform possible future rulemaking regarding the drug regimen
review requirements.
Comment: Many commenters noted that the services performed by LTC
consultant pharmacists are more extensive than the drug regimen reviews
and include activities, such as destroying unused medications, checking
storage areas, conducting exit conferences, providing in-service
education to nursing staff, observing medication distribution, and
attending meetings. Commenters stated all the full range of consultant
pharmacist services need to be considered in evaluating the impact of
any new requirements.
Response: We appreciate these comments and, as we indicated in the
October 11, 2011 proposed rule, we will use them to inform possible
future rulemaking regarding the LTC consultant pharmacist requirements.
As a result of considering the comments we received on this issue,
we now believe a more targeted and less disruptive approach, at least
initially, is warranted. We considered the possibility of finalizing
several of the requirements recommended by these commenters to increase
transparency around current contractual arrangements and incentives. We
agree with the recommendation that LTC facilities pay a fair market
rate for consultant pharmacist services; we note that the OIG has
stated that provision of consultant pharmacists' services by LTC
pharmacies at below market rates ``present[s] a heightened risk of
fraud and abuse'' (OIG Supplemental Guidance Program for Nursing
Facilities, 73 FR 56832, 56838, note 53, September 30, 2008). However,
we do not believe it is within our statutory authority to require
provision of such services at market rates. We also considered
requiring that LTC facilities separately contract for consultant
pharmacist services from other pharmacy services and that consultant
pharmacists disclose to the LTC facility, the medical director,
ombudsmen, and residents upon request any affiliations that would pose
a potential conflict-of-interest risk.
However, due to the notice and comment provisions of the
Administrative Procedure Act (5 U.S.C. 553) and section 1871(a)(4) of
the Act, and their respective requirements that a final rule be the
logical outgrowth of a proposed rule, we believe that any such
requirements cannot be finalized in this final rule with comment
period, since we did not propose them initially. As a result, since a
requirement for independent consultant pharmacists will not solve the
entire problem, but would be significantly disruptive for much of the
LTC industry, we are not finalizing this provision at this time.
Instead, we are soliciting additional comments to help us determine a
more comprehensive approach to eliminate overprescribing and the use of
chemical restraints in LTC.
In the meantime, given our continuing conflict of interest
concerns, we strongly encourage the LTC industry in general to
voluntarily adopt the following changes to increase transparency:
separate contracting for LTC consulting services from dispensing and
other pharmacy services; payment by LTC facilities of a fair market
rate for consultant pharmacist services; and disclosure by the
consultant pharmacists to the LTC facility of any affiliations that
would pose potential conflicts of interest; or the execution by the
consultant pharmacists of an integrity agreement. We expect the
industry to use this opportunity to collect data on the number and type
of interventions recommended by the consultant pharmacists and on the
outcomes of those recommendations. We believe that LTC pharmacies may
already collect some, if not all, of these data and would be able to
work with such entities as the Pharmacy Quality Alliance (PQA) and
other consensus gathering organizations, to develop performance
measures to assess consultant pharmacist effectiveness.
Until the next opportunity for us to propose a regulatory change,
we will closely evaluate the number of deficiency citations for
unnecessary drug use and will monitor the two new performance measures
to track the use of antipsychotics in LTC facilities and expect to see
significant improvement. We will also continue to participate in a
Department of Health and Human Services (DHHS) initiative focused on
the use of antipsychotics for persons with Alzheimer's disease. As part
of this effort, we are seeking to eliminate the inappropriate use of
antipsychotic drugs in LTC facilities for residents with Alzheimer's
disease through updated guidance on the use of these medications and
stricter enforcement of current requirements. In partnership with the
Alzheimer's Disease Education and Referral Center, we will work to
better educate LTC facilities, prescribers and the resident's families.
We believe that effort focused on eliminating the use of inappropriate
chemical restraints for LTC facility residents with Alzheimer's disease
may also serve to improve the quality of care for the LTC facility
residents with the behavior symptoms associated with dementia.
Our expectation is that the industry will implement changes to
address the problem and we will see inappropriate prescribing decrease.
Should marked improvement in inappropriate utilization not occur, we
will use future notice and comment rulemaking to propose requirements
to address these concerns. After considering the public comments
received, we are not finalizing this provision. However, we are
soliciting further comment to assist us to better define the problem
and frame a more comprehensive solution to address our concerns
regarding
[[Page 22107]]
medication management and quality in LTC. Specifically, we solicit
comment related to the following three issues:
Enhancing medication management and the effectiveness of
medication review.
We noted in the previous comment summary and responses that many
commenters pointed out that besides consultant pharmacists, other
parties and factors contribute to overprescribing and inappropriate
drug use in LTC facilities. These commenters charged that prescribers,
including facility medical directors, nurse practitioners and physician
assistants as well as the residents' attending physicians, are major
contributors. Others described how pharmaceutical representatives and
advertising, family members, and the LTC facility's understaffing, high
staff turnover, and lack of specialized staff trained in meeting the
needs of dementia patients contribute to the problem. We noted, too,
that commenters questioned the effectiveness of the consultant
pharmacists' medication reviews, charging that drug regimen review
quotas were so high that the reviews had become perfunctory and that
others had described how the review requirements were subverted. Other
commenters suggested that the consultant pharmacists' recommendations
were being ignored by prescribers due to their lack of confidence that
the recommendations were in the best interests of the residents. As a
result of these comments, we are not only aware that requiring
consultant pharmacists to be independent will not solve the entire
problem, but also that the drug regimen reviews may not be yielding the
intended outcomes or providing the expected beneficiary protections,
Therefore, we seek comment in response to the following questions:
++ What actions/steps should be taken to strengthen attending
physician (and other prescribers) medication management and prescribing
practices to ensure the best quality of care for the nursing home
resident?
++ What is and should be the role of the nursing home medical
director in overseeing the attending physician (or other prescribers)
medication management activities?
++ What actions, if any, should the medical director take when
attending physicians (or other prescribers) fail to engage in
appropriate/adequate medication management activities?
++ What actions/steps could be undertaken to establish and ensure
the independence and effectiveness of a consultant pharmacist in
conducting their medication reviews on behalf of nursing home
residents?
++ What training and best practice models would assist all nursing
home staff to better understand behavior signs and symptoms and respond
appropriately and effectively in assisting and caring for nursing home
residents?
Data collection and use.
As we indicated previously, in commenting on this provision,
several commenters noted the lack of empirical evidence linking overuse
and inappropriate use of drugs in LTC facilities to consultant conflict
of interest. Numerous commenters recommended CMS conduct further study
and consult with stakeholders to better define the problem and
formulate a more appropriate approach for addressing it. As a result,
we solicit comment in response to the following questions:
++ What data are needed to enable and support the Medicare and
Medicaid programs and others in monitoring the appropriateness and
adequacy of medication management activities, including the use of
antipsychotics drugs?
++ What data are needed to enable CMS to study the effectiveness of
consultant pharmacist medication reviews?
++ What data are needed to create public performance metrics
regarding the independence of consultant pharmacists and prescribers
from pharmacies and drug manufacturers/distributors?
++ Are data needed on the number and type of interventions
recommended by consultant pharmacists and on the outcomes of those
recommendations? If so, how could such data be used and by whom?
Increasing transparency.
Finally, as noted previously, a number of commenters offered
recommendations for increasing transparency in order to address
conflict of interest in LTC. Many commenters on this provision charged
that conflict of interest was pervasive in LTC, affecting the facility
which imposed its own formulary requirements to contain costs for the
drugs it covered, facility staff who encouraged the use of chemical
restraints to manage residents with behavioral problems, and residents'
attending physicians and facility prescribers who may have had their
own ties to the pharmaceutical industry. We expressed our interest in
several of the recommendations, but due to the notice and comment
provisions of the Administrative Procedure Act and section 1871(a)(4)
of the Act, and their respective requirements regarding logical
outgrowth, we believe that any such requirements cannot be finalized in
this rule. Thus, we solicit comment in response to the following
questions:
++ What specific details regarding the financial (and other)
arrangements between LTC facilities, consultant pharmacists, and LTC
pharmacies providing consulting and/or dispensing services should be
disclosed, and to whom should this information be available?
++ Should the public be informed of the financial and other
arrangements between LTC facilities, consultant pharmacists, and LTC
pharmacies providing consulting and/or dispensing services? If so, what
metrics could be used?
++ What information is needed to assess the independence and
adequacy of physician (and other prescriber) medication management and
oversight on behalf of nursing home patients? What metrics could be
used to assess the adequacy and appropriateness of prescriber response
to consultant pharmacist recommendations?
++ What metrics could be used to describe the adequacy and
appropriateness of a LTC facility's medication management program?
++ Describe the incentives and other arrangements that create the
conflict of interest in LTC that contributes to overutilization and
inappropriate drug use in LTC facilities. How can the conflict of
interest stemming from these incentives and arrangements be contained
or eliminated?
C. Excluding Poor Performers
We are finalizing three proposals designed to strengthen our
ability to remove poor performers from participation in the Part C and
D Medicare programs. Beneficiaries will be protected through the first
provision, which enables CMS to terminate or non-renew any health care
prepayment plan (HCPP) which does not adhere to specified financial,
reporting, and access requirements.
The next two regulatory changes we are finalizing give entities
that want to administer benefits to Medicare beneficiaries strong
incentives 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 4 for details of these proposals. Specifically, we are
finalizing a regulation which will provide CMS the authority to
terminate MA organizations and Part D sponsors that have failed to
achieve, over a period of 3 years, at least a 3-star plan rating. This
authority will enable us to utilize the
[[Page 22108]]
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-to-understand 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 are also finalizing a regulation that provides CMS the authority
to deny applications submitted by MA organizations and Part D sponsors
that have performed so poorly that CMS has terminated or non-renewed a
contract with the organization in the past. We anticipate that this
regulation will directly enable us to protect beneficiaries from poor
care.
Table 4--Provisions to Exclude Poor Performers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Part 417 Part 422 Part 423
Preamble section Provision ---------------------------------------------------------------------------------------------------------
Subpart Section Subpart Section Subpart Section
--------------------------------------------------------------------------------------------------------------------------------------------------------
II.C.1............... CMS Termination of Subpart U............ 417.801 N/A................. N/A N/A................. N/A
Health Care Prepayment
Plans.
II.C.2............... Plan Performance N/A.................. N/A Subpart K........... 422.504 Subpart K........... 423.505
Ratings as a Measure 422.510 423.509
of Administrative and
Management
Arrangements and as a
Basis for Termination
or Non-Renewal of a
Medicare Contract.
II.C.3............... Denial of Applications N/A.................. N/A N/A................. 422.502 Subpart K........... 423.503
Submitted by Part C
and D Sponsors with a
Past Contract
Termination or
CMS[dash]Initiated
Non[dash]Renewal.
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. CMS Termination of Health Care Prepayment Plans (Sec. 417.801)
Section 1833(a)(10)(A) of the Act authorizes arrangements with
HCPPs, but specifies only what type of benefits are to be provided
(Part B), the method of payment (reasonable cost), and limits on cost-
sharing (20 percent of reasonable cost). In implementing section
1833(a)(1)(A) of the Act, we have in regulations set forth requirements
relating to these three areas that parallel those imposed under section
1876 cost contracts. In addition, since section 1833(a)(1)(A) of the
Act does not address appeals, and the appeals procedures in section
1869 of the Act involve specific claims payments that do not exist for
HCPP enrollees, 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 Sec. 417.801(d) permit us to
terminate a contract with an HCPP for specified reasons, we proposed to
codify additional specified grounds for HCPP termination in Sec.
417.801(d) to strengthen our oversight and enforcement capabilities.
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 proposed to retain these bases for termination
but to modify Sec. 417.801(d)(ii) to include three specific
circumstances in which ``substantial non-compliance,'' that relate to
the CMS contract, applicable CMS regulations, or applicable provision
of the Act may be found. As we stated in the proposed rule, we believe
that specifying instances of substantial non-compliance through notice-
and-comment rulemaking will ensure that all HCPPs are aware that their
failure to comply with such requirements may lead to termination of
their contracts.
First, in their agreements with us, HCPPs agree to provide adequate
access to providers and to document such access. Accordingly, we
proposed that failure to provide adequate access to providers, and
provide CMS with documentation of such access, is a basis for
determining that an HCPP is not in substantial compliance with
applicable regulatory requirements. We proposed to expressly identify
this violation as an adequate justification for termination or non-
renewal in a 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 Sec. 417.806, which cross
references financial records requirements at Sec. 417.568 of the
section 1876 cost contract plan regulations. We stated in the proposed
rule that we would specify, in new paragraph (d)(1)(ii)(B), that
failure to provide such data and/or to maintain records appropriately
is another violation indicating 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 Sec. 417.568 of the cost contract program
regulations. Currently, these requirements are also referenced in
HCPPs' agreements with CMS. We proposed that a new paragraph at
(d)(1)(ii)(C) would specify that failure to report costs to CMS will
constitute yet another basis for determining that an HCPP is not in
substantial compliance.
Comment: A commenter supported the provision as specified in our
proposed rule.
Response: We thank the commenter for their support.
After consideration of the public comment received, we are
finalizing the policy without modification. We would also clarify that
this new list is not exhaustive and CMS may still make a determination
that a HCPP is not in substantial compliance absent the existence of
any of these individual violations.
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)
Since 2007, we have developed and published annual performance
ratings for all stand-alone Medicare PDPs. In 2008, we began issuing
ratings for MA
[[Page 22109]]
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 PDP sponsors, member satisfaction, 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 Sec. 422.503(b)(4) and Sec.
423.504(b)(4) state that, to qualify as an MA organization or Part D
sponsor, an organization must have administrative and management
arrangements satisfactory to CMS, including, per Sec.
422.503(b)(4)(ii) and Sec. 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 MA organization or Part D sponsor, an
organization remains obligated to maintain satisfactory administrative
and management arrangements, a point we proposed to clarify by adding
paragraphs Sec. 422.504(a)(17) and Sec. 423.505(b)(25) to the list of
required elements in CMS' contracts with MA organizations 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 proposed adding paragraphs Sec. 422.504(a)(18) and Sec.
423.505(b)(26) to require an organization to demonstrate that it
maintains satisfactory administrative and management arrangements by
achieving a summary plan rating of at least 3 stars each year.
We also proposed 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 MA organization 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 at least an ``average''
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 MA organization 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 MA organization or
Part D 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 proposed adding
paragraphs Sec. 422.504(a)(17) and Sec. 423.505(b)(25) which state
that the maintenance of effective administrative and management
arrangements is a material term of the MA organization 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 D to calculate the Part D summary
rating. (The Part C and D technical notes may be found on the CMS Web
site at https://www.cms.gov/PrescriptionDrugCovGenIn/06_PerformanceData.asp.) 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 proposed to establish as a requirement that organizations must
achieve a summary plan rating of at least three stars for each of Part
C and Part D each year by adding paragraphs Sec. 422.504(a)(18) and
adding paragraph Sec. 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 thus giving CMS an inaccurate picture of the
effectiveness of a sponsor's administrative and management
arrangements.
The star ratings may also be used as a basis for contract
enforcement actions (for example, termination/non-renewal or
intermediate sanctions). We have the authority under section 1857(c)(2)
of the Act to terminate CMS' contract with an MA organization 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 ``average'' or better quality services to their members.
Accordingly, we proposed to amend the bases upon which CMS may
[[Page 22110]]
terminate an MA organization or Part D sponsor contract under Sec.
422.510(a) and Sec. 423.509(a) to include a sponsor's failure to
achieve at least a 3-star summary plan performance rating for 3
consecutive contract years. We believe that 3 years is sufficient time
for a sponsor 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 plan ratings issued in September 2010
(referred to as the CY 2011 plan ratings) 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 CY 2011 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 Sec.
422.152(a)(2) state that MA organizations 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 MA
organizations provided screenings to their members for conditions such
as breast cancer, colorectal cancer, elevated cholesterol, glaucoma,
and osteoporosis, as well as 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 MA organizations 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 their scores for this measure. Moreover,
we have clearly fulfilled our obligation under Sec. 422.152(a)(2) to
identify areas that MA organizations need to address for this purpose
by annually publishing the methodology, providing private previews for
MA organizations to review their own results, and releasing the results
publicly through the CMS Web site. As a result, an MA organization's
score in the ``Staying Healthy'' domain is a fair measure of the extent
to which it is complying with Sec. 422.152(a)(2).
The ``Managing Chronic (Long Term) Conditions'' domain most closely
mirrors the requirements at Sec. 422.152(a)(1) which obligate MA
organizations 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 MA organizations 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 MA
organization's compliance with its obligations under Sec.
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 Sec.
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 MA organization affords its
members their coverage determination appeal rights under the Part C
program. The Part C regulations at Part 422, Subpart M, require MA
organizations to adhere to standards and timeframes for issuing timely
and accurate determinations concerning the coverage of health services
for their 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 MA organization meets the regulatory
deadlines for issuing responses to member appeals while the ``Reviewing
Appeals Decisions'' rating measures the frequency with which the MA
organization determinations were overturned by the Independent Review
Entity (IRE). The analysis for these measures was conducted by Maximus,
Inc., with 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 MA organization'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 MA
organization's operations. The CAP measure reflects the number and type
of findings made by us during an audit of an MA organization's
performance. Thus, these two measures provide a snapshot of the MA
organization's compliance with a 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 MA organizations 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 MA organization 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 Sec. 422.111(g).
The four domains of the CY 2011 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
[[Page 22111]]
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 and 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 customer service call center requirements
described in the Medicare Marketing Guidelines issued in accordance
with Sec. 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 Sec. 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 Sec. 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 Sec. 423.128,
that it disseminate information about its Part D plans, and that it
provide benefits through a point of claims adjudication system (per
Sec. 423.505(b)(17)) operated through a contracted pharmacy network
that meets Part D access requirements (per Sec. 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 of its obligation under Sec.
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, pursuant to Sec. 423.505(f)(2),
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 Sec. 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 standard-based 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 assign
stars for measures based on evaluating the maximum score possible for
that measure, and testing initial percentile star thresholds with the
actual data. The contract-level scores are grouped using statistical
techniques to minimize the distance between scores within a grouping
(or ``cluster'') and maximize the distance between scores in different
groupings. Most databases that are utilized are not normally
distributed, requiring further adjustments to the star thresholds to
account for gaps in the data. CMS does not force the Plan Ratings data
into 5-star categories for every measure. For some measures, based on
the distribution of the data, there may only be 3. 4, or 5 stars, while
for other measures there may only be 1, 2, or 3 stars. 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 standards through the
analysis of all Medicare contractors' performance to identify outliers
is consistent with our regulatory authority at Sec. 422.504(m)(2) and
Sec. 423.505(n)(2). We have previously issued guidance (for example,
CY 2012 Call Letter, page 119, issued April 4, 2011) to MA
organizations 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 non-compliance, we
believe that the use of prospective Plan Ratings is more appropriate in
our application of this authority. Therefore, we proposed that we would
not begin calculating the 3-year 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. The issuance of the
2015 ratings, expected in September 2014, will present the first
opportunity for
[[Page 22112]]
sponsors to have accumulated three consecutive years of low plan
ratings that could subject them to contract termination. We invited
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.
Comment: Several commenters expressed opposition to the proposed
addition of the failure to achieve 3 stars for 3 consecutive years to
the list of bases upon which CMS may terminate an MA organization or
PDP sponsor contract. They maintain that the plan rating system is not
sufficiently mature or stable to provide a reliable basis for
determining that an organization has substantially failed to comply
with its contract. The commenters maintain that the number and type of
measures have changed each year that CMS has released plan ratings.
These annual changes undermine the proposed termination authority in
two ways. First, the variable measures and weighting over a 3-year
period mean that CMS cannot fairly evaluate a sponsor's plan rating
performance over 3 years because it has not applied a consistent
standard of review during that period. Second, low-rated sponsors'
efforts to take corrective action to raise their ratings over 3 years
are impeded by CMS' annual changes to its methodology for calculating
those ratings.
Response: The Medicare plan rating system and its component
measures have been in place for a sufficient period of time for plan
sponsors to become familiar with the correlation between their
operations and the plan ratings they have achieved. MA organizations
have been measured on a star system since 2008 and Part D plans since
2007. In addition, the vast majority of measures, which come from HEDIS
and CAHPS, have been required of MA organizations since the late 1990s.
While we have made some changes in each of the past 3 years to the
plan rating methodologies, these changes have been relatively minor and
have not affected sponsors' ability to achieve and maintain at least a
3-star summary rating over a 3-year period. This history suggests that
organizations have had ample time to adjust their efforts toward
achieving higher quality outcomes. For the 2010 Part C ratings through
the 2012 ratings, 30 of the measures remained constant, while the 2010
ratings featured a total of 33 measures, 37 in 2011, and 36 in 2012.
For the Part D ratings during the same period, 13 measures remained
constant, out of 19 total in 2010 and 2011 and 17 total for 2012. We
have also made low-rated sponsors aware, through the issuance of
compliance notices beginning in 2010, of the risk their low plan
ratings pose to their status as Medicare Part C and D sponsoring
organizations and the urgent need for them to take corrective action.
Comment: Several commenters expressed their strong support for the
proposed provision. They also suggested ways to strengthen the
termination authority by making it effective immediately upon
publication of the final rule rather than after the release of the CY
2015 plan ratings in late 2014 as we had proposed. They also
recommended that any reinstatement of a sponsor's contract be
accompanied by a probationary period during which the sponsor's
contract could be terminated if it fails in one year to achieve a 3-
star rating. The commenters also urged CMS to apply our existing
sanction and termination authority against low-rated plans, improve
outreach to beneficiaries about the meaning and usefulness of the plan
rating system to encourage their participation in HEDIS and CAHPS
surveys, and to conduct ongoing evaluations of performance measures to
make sure they truly drive improvement in areas important to
beneficiaries.
Response: We appreciate the expressions of support for our
proposal. We also appreciate the advocates' recommendation that we
strengthen the termination authority, but we believe that our draft
provision allows for a reasonable transition period during which
sponsors can take steps, in light of the increased consequences of low
plan ratings (that is, contract termination), to focus their attention
and resources on quality improvement. Of course, as we have stated in
recent call letters, during the transition period (that is, from the
date on which this rule becomes final until CMS' publication of the CY
2015 plan ratings in late 2014) we will continue to apply a heightened
scrutiny to consistently low rated contracts to determine whether they
are substantially failing to meet Part C or D program requirements.
We appreciate the concern expressed by the commenters that sponsors
that re-enter the Part C and D programs after a termination for
consistently low plan ratings not be permitted to ``game'' the system
by immediately repeating their previous poor level of performance. We
believe, however, that our proposal already provides a sufficient
safeguard against that type of conduct without requiring re-entering
sponsors to operate under a probationary period during which even one
year of poor performance would be a sufficient basis for termination.
In section II.C.3. of the proposed rule, we stated our intent to adopt
the regulatory authority to disapprove an application for qualification
as a Part C or D contract submitted by an organization for which CMS
had terminated a Medicare contract within the previous 3 years. This
authority, which we finalize in this rule, will apply to all terminated
sponsors, including those terminated based on consistently low plan
ratings. We believe the 3-year period of ineligibility for Part C or D
program participation, combined with the forfeiture of their entire set
of plan members, is sufficient to provide an incentive for returning
sponsors to achieve 3-star ratings upon their return to the Medicare
program. We also note that consistently low plan ratings will not
become the exclusive basis for contract termination. We retain the
authority to terminate a sponsor based on its performance within only
one year if its performance during that period fails substantially to
meet Medicare requirements, and we will exercise that authority where
justified.
The comments concerning outreach to beneficiaries discussing
participation in the survey tools whose results are used to calculate
plan ratings are outside the scope of this proposal. We believe this is
also true of the comments concerning the need for CMS to continue to
review plan rating measures to make certain they truly evaluate plan
quality. We nonetheless agree that these efforts will receive our
continued attention.
Comment: Several commenters suggested that Congress did not intend
for the plan ratings to be used as a basis for contract termination.
One commenter also stated that the plan rating system was not designed
to measure compliance, and it is more effective as a plan comparison
and beneficiary education tool.
Response: While the plan ratings were originally developed by CMS
as a beneficiary comparison tool, and Congress has authorized the
awarding of bonus payments based on plan rating performance, those
facts do not preclude the use of plan ratings as an indicator of
contract compliance. To the extent that the ratings provide reliable
evidence of compliance with program requirements, they may be used as a
basis for contract termination. Our preamble discussion in the proposed
rule and this final rule with comment period describes the connections
between each plan measure and a Part C or D requirement, noting that
the measures are an effective tool for capturing information on the
[[Page 22113]]
effectiveness of a sponsor's administrative and management arrangements
as opposed to whether the arrangements are merely in place. Thus, a
sponsor's failure to meet minimal performance thresholds for 3 straight
years can reasonably be said to be evidence of substantial failure to
meet contract requirements.
Comment: A stand-alone PDP sponsor commented that Part D sponsors
are not required by statute to ensure their members' compliance with
oral diabetes, hypertension, and cholesterol medication regimens. The
commenter also noted that CMS announced the measures related to drug
regimen compliance too late in the year for sponsors to focus their
efforts on the new measures. Finally, the commenter stated that PDP
sponsors are at a disadvantage in these measures because they do not
coordinate care with prescribers as health plans can.
Response: All Part D sponsors are required to administer medication
therapy management programs, which may be focused on beneficiaries with
diabetes, hypertension, or high cholesterol. We agree that sponsors
would have benefitted from an earlier announcement of the new measures,
but we believe that the 3-year phase in of the plan rating-based
termination authority will give PDP sponsors sufficient time to make
improvements to their performance in these areas. Also, according to
our plan rating methodology, a high score on these three measures is
not critical to achieving a 3-star summary plan rating. Therefore,
these measures do not impose a meaningful obstacle for PDP sponsors to
maintain the required minimum plan rating.
Comment: A law firm that represents clients in Medicare-related
matters commented that CMS does not have the authority to impose a
conclusive presumption of a basis for contract termination when doing
so eliminates the affected sponsor's opportunity for a hearing prior to
the termination taking effect. The commenter also asserted that the use
of plan ratings as a basis for termination would relieve CMS of its
statutory obligation to prove that the sponsor's conduct has met the
statutory criteria for contract termination and presented a regulatory
construct analogous to that struck down by the U.S. Supreme Court in
Ragsdale v. Wolverine World Wide, Inc., 535 U.S. 81 (2002). Finally,
the commenter stated that the proposed termination authority violates
the requirements of the per se rule as discussed by the Court in
Johnson v. California, 543 U.S. 499 (2005) and Arizona v. Maricopa
County Medical Society, 457 U.S. 332 (1982).
Response: The new termination authority as finalized in this rule
has no impact on the administrative appeal rights currently afforded
any plan sponsor under Subpart N of 42 CFR Parts 422 and 423.
We do not find the Supreme Court opinions cited by the commenter to
be applicable in any way to our proposal. In Ragsdale, the Court held
that the Department of Labor could not enforce regulations that had the
effect of eliminating one of the elements that an individual must prove
when appealing a denial of leave from work requested under the Family
and Medical Leave Act. Our use of low plan ratings as a basis for
contract termination does not relieve us of our obligation to prove at
least one of the three statutory bases for termination. Rather, the
plan ratings are a tool that we will use to establish, consistent with
the Part C and D statutes, that a sponsor has substantially failed to
meet the requirements of its Part C or D contract. As noted previously
and in the proposed rule, the data used to calculate the plan ratings
are derived directly from a sponsor's performance of its Medicare
program obligations.
The Johnson and Arizona opinions are similarly inapplicable to the
proposed termination authority. The Johnson matter was a civil rights
case involving the California Department of Corrections' (CDC) policy
of segregating inmates by race. The Court there held that the lower
courts should use strict scrutiny in reviewing whether the CDC policy
violated prisoners' rights under the Equal Protection Clause of the
14th Amendment. The majority opinion of the Court makes no reference to
a per se rule or to any set of criteria governing its use. The opinion
involves an analysis of the law as it applies uniquely to allegations
of racial discrimination and cannot be said to provide any framework
for the analysis of the contract termination process in the Medicare
program. Arizona is an antitrust case where the Court's majority
opinion provides a discussion of the meaning of the per se rule as it
applies to price fixing agreements (that is, certain practices are
deemed to violate antitrust law without regard to surrounding
circumstance or intent). The opinion provides no principles for
assessing the legality of per se rules in general, nor does it state
that the legitimacy of a per se rule is dependent on the maintenance of
the exact same evaluation standards from year to year, as the commenter
maintains.
Comment: Several commenters noted that plan ratings rely too much
on beneficiary survey information to be used as an indicator of
contract compliance because the results of the surveys may reflect
factors other than a sponsor's non-compliance with program requirements
(for example, high beneficiary complaints based on CMS-approved changes
to plan benefit packages).
Response: In certain instances, beneficiary satisfaction is the
most effective measure of an organization's contract performance. That
effectiveness outweighs the risk of the measure's inaccuracy as a
compliance measure presented by those rare instances when beneficiary
dissatisfaction may result from factors outside the organization's
control. Moreover, only a small portion of the Part C and D measures
are focused on beneficiary satisfaction. In 2012, 5 of 36 total Part C
measures, and 3 of 17 Part D measures, were based on beneficiaries'
satisfaction with their plans. Therefore, low beneficiary satisfaction
scores, while meaningful, will not by themselves cause an organization
to receive a low summary plan rating.
Comment: Several commenters stated that plan ratings are an
unreliable tool for measuring contract compliance because the stars are
calculated based on relative performance among all Part C and D
contracts. Therefore, every year, some sponsors will be rated below 3
stars regardless of the actual quality of their performance.
Response: The majority of plan rating measures are based on fixed
4-star thresholds, or 3-star thresholds for measures when an absolute
regulatory standard has been established. For CY 2012, 28 of 36 Part C
measures, and 9 of the 17 Part D measures, had fixed 3- or 4-star
thresholds. Having a set threshold means that any entity meeting the
established threshold will receive at least a 3 or 4 star rating for
the measure. We determine the star cut points below 4-star (or 3-star)
ratings in those measures with fixed thresholds as well as the entire
range of ratings for the remaining measures through the use of
statistical techniques that take into consideration the relative
distribution of the data as well as the how the data clusters. For
survey measures, significance testing is also used to determine the
star ratings. Given the fixed thresholds for the majority of the
measures, there is nothing in the Plan Ratings methodology that would
prevent all sponsors achieving 4 or more stars on measures that have
fixed 4-star thresholds or achieving 3 stars for measures when an
absolute regulatory
[[Page 22114]]
standard has been set. Additionally, while some of the cut points for
the individual measures may be determined by examining the distribution
of collected data, for the most part, those data sets are not normally
distributed, where some number of contracts would have to be assigned
1- or 2-star ratings. Indeed, in any given year, it is possible for all
Part C and D sponsors to achieve at least three-star summary ratings
under the scoring methodology. Furthermore, a review of the summary
plan ratings over the past 3 years would reveal that there are very few
1-star contracts and that a 3-star rating or better was achieved by a
strong majority of contracts.
Comment: Several commenters stated that the annual plan ratings are
a flawed mechanism for determining contract compliance because the
measures used to calculate the ratings are based on data from different
timeframes. That is, the measures do not provide a consistent
``snapshot'' of performance over a uniform evaluation period.
Response: We use the most recent data available to calculate the
summary plan ratings each year, and a broad range of measures are
necessary to provide a comprehensive picture of a sponsor's
performance. In fact, the majority of plan ratings posted in October of
a given year reflect findings from the most recent completed contract
year (that is, there is a gap of only about 9 months between completion
of a measure and the posting of the star rating). However, for some
performance measures there is necessarily some greater lag time between
data collection and analysis. The 3 consecutive year requirement should
afford sponsors sufficient time to make operational changes that would
be reflected in data used to calculate plan ratings by the end of the
3-year period.
We also note that in August 2010, the CMS Hearing Officer issued an
opinion in favor of an organization that appealed CMS' denial of its
contract qualification application based on a review of the
organization's contract performance (including its plan ratings) during
the 14 months preceding the application submission date. (In the Matter
of United Healthcare Insurance Company, Docket No. 2011 C/D App 1-10.)
Among its arguments, the organization asserted that CMS should not
include plan ratings as a factor in assessing past contract performance
because the ratings were based on conduct that occurred prior to the
14-month look-back period. The Hearing Officer addressed this argument
in a footnote to the opinion where he stated that,
* * * in future similar circumstances * * * CMS could reasonably
consider an organization out of compliance for failure to meet
established performance metrics, even if a portion of the data used
to evaluate compliance is technically derived from instances outside
the 14 month window.
Comment: Several commenters stated that CMS should provide advanced
notice of each year's plan rating measures so that plan sponsors can
develop and implement operational policies that will allow the sponsor
to successfully meet the performance standards of each measure. A
commenter noted that CMS released the measures for the CY 2012 plan
ratings in late 2011, just prior to posting the results of the CY 2012
ratings.
Response: We have already informed sponsors that we will release
the plan rating measures at the start of each calendar year. For
example, on December 20, 2011, CMS issued, through the Health Plan
Management System (HPMS), a request to drug and health plan sponsors
for comments on our proposed measures for the CY 2013 plan ratings. In
the memorandum we stated that we expected to publish the final set of
CY 2013 measures in April 2012 along with a discussion of proposed
measures for the CY 2014 ratings.
Comment: A number of commenters noted that CMS should take into
consideration the characteristics (for example, income, age, health) of
each sponsor's enrollees when assessing performance. For example, CMS
should develop measures specifically tailored to account for the unique
populations served by SNP plans.
Response: We have frequently considered the adoption of modifying
the plan rating standards to account for unique differences in the
characteristics of certain plan membership profiles. However, we have
not yet found any statistical support for the special treatment of
certain plans under the plan rating methodology.
The 2011 Part C and D plan rating results, for example, provide no
support for the argument that MA organizations offering SNPs face
special challenges in achieving good star ratings. The plan rating
results for all Part D contracts, when broken down into three
categories by percentage of SNP enrollment per contract (SNP enrollment
less than 50 percent, SNP enrollment greater than 50 percent, and SNP
enrollment 100 percent of total contract enrollment) show that
approximately 15 percent to 18 percent in each category receive less
than 3 stars. The Part C results are slightly more mixed but still show
that contracts with SNP enrollment receiving less than 3 stars are
decidedly in the minority relative to their peers. Among the same
enrollment percentage categories described for Part D, the percentage
of Part C contracts with low star ratings ranged from approximately 15
percent to 29 percent. Interestingly, the rate of less than 3 star
performers drops when SNP enrollment increases from 50 percent or more
to exactly 100 percent. That is, contracts with only SNP members tend
to have strong performance, equal to contracts with fewer than 50
percent SNP members.\1\ Therefore, we can easily conclude based on
these data that having SNP members in a contract does not pull down
summary plan rating results for either the Part C or Part D ratings.
---------------------------------------------------------------------------
\1\ CMS conducted this analysis based on plan enrollment data
available at https://www.cms.gov/PrescriptionDrugCovGenIn/06_PerformanceData.asp and plan rating data available at https://www.cms.gov/MCRAdvPartDEnrolData/.
---------------------------------------------------------------------------
Comment: A few commenters noted that the regulation should exempt
from termination those sponsors that are showing improvement but have
not yet reached 3 stars in the third year.
Response: Such an interpretation is unworkable as sponsors could
avoid termination for as long they can demonstrate improvement without
meeting the 3-star standard.
Comment: A commenter stated that CMS should provide midyear reports
to sponsors of their progress on plan ratings.
Response: The data collection for several of the measures are only
once a year, so it is not possible to make midyear assessments of a
sponsor's plan rating performance. Sponsors should consider the plan
ratings CMS issues each year to be interim reports during the 3-year
period preceding possible contract termination.
Comment: A commenter stated that CMS should release plan ratings
before bids are due so that sponsors about to be terminated do not
expend resources on preparation for upcoming plan year.
Response: We cannot adjust our plan rating analysis and publication
schedule solely to accommodate sponsors with two consecutive years of
low ratings. Those organizations should review their operations and
make their own assessment of the likelihood of achieving a rating of at
least 3 stars after the submission of a contract qualification
application.
Comment: A few commenters supported this provision, but also
expressed their concern that its application will reduce the
availability of low premium plans which are often low-rated. The
commenters also referenced a study by Avalere Health
[[Page 22115]]
(released on October 19, 2011; https://www.avalerehealth.net/wm/show.php?c=&id=890) that found that 52 percent of the stand-alone PDPs
eligible for LIS auto assignment and reassignment have a 2 or 2.5-star
rating during 2012. None of those plans has a 5-star rating and 16 have
a 4-star rating.
Response: We have analyzed the 2012 contracts rated below 3 stars
and found no correlation between low rated plans and low premiums.
However, to the extent that the Avalere study suggests that Part D
plans to which LIS beneficiaries are assigned tend to achieve
disproportionately lower ratings, we believe that the threat of
termination provides the correct incentive to these plan sponsors. That
is, we can force sponsors that might otherwise ignore their plan
ratings, content to compete solely on price or operate in Medicare
markets with little or no competition, to dedicate the resources and
attention necessary to provide at least a satisfactory level of
services to their members. For LIS plans in particular, this new
authority makes it clear that focusing solely on bidding below the
annual benchmark to keep LIS enrollment high is no longer a viable
long-term Part D business strategy.
Comment: A commenter stated that CMS should add a measure based on
how often the sponsor makes exceptions and appeals determinations in
favor of the beneficiary.
Response: The plan ratings already include measures, based on
sponsors' IRE results, of how often the IRE agrees with a sponsor's
decision to deny a claim. We believe this measure is effective in
achieving the same goal suggested by the comment; measuring the extent
to which the plan sponsor is making correct decisions about its
members' Part D drug coverage.
Comment: A commenter stated that CMS should assign dual-eligible
beneficiaries only to plans rated at more than 3 stars.
Response: This comment concerns CMS' process for automatically
assigning and reassigning dual-eligible beneficiaries to stand-alone
PDPs with premiums set at or below the regional benchmark. It does not
concern the use of the establishment of the plan ratings as a contract
requirement or as a basis for contract termination and therefore is
outside the scope of the proposed regulatory change.
Comment: A commenter stated that CMS should provide information on
how it monitors 4Rx data and LIS status for beneficiaries.
Response: We have provided and will continue to provide this
information to sponsors through the Health Plan Management System
(HPMS) related to our monitoring of 4Rx data and LIS status accuracy.
Comment: A commenter stated that it supports the inclusion of
measures related to enrollment, LIS, and MTM.
Response: This comment is a recommendation for the inclusion of
certain measures in the Part D plan rating methodology. As it does not
have a bearing on the use of the current plan ratings as administrative
and management requirements under the Part C and D programs or as a
basis for contract termination, the comment is outside the scope of the
proposed regulatory change.
After consideration of the public comments received, we are
finalizing the policy without modification.
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)
In accordance with Sec. 422.502(b) and Sec. 423.503(b),
applicants with current or prior contracts with CMS are subject to
denial of their applications if they fail to comply with the
requirements of the Part C or D programs during the preceding 14
months, even if the 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 Sec. 422.502(b)(2) and
Sec. 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.
We proposed to further refine our 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 non-renewed 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 Sec. 422.510 and Sec. 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 non-renewal are specified in Sec.
422.506(b) and Sec. 423.507(b), and include the same list of
violations, plus several others. Nevertheless, despite the seriousness
of termination and CMS-initiated non-renewal 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 Sec. 422.502(b)(1) and Sec.
423.503(b)(2) to determine whether an application from a previously
terminated or CMS-non-renewed organization is approvable. These
provisions limit the period of time we can review for purposes of
assessing past performance to 14 months. 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 Sec. 422.506(a)(4), Sec. 422.508(c),
Sec. 422.512(e), Sec. 423.507(a)(3), Sec. 423.508(e), and Sec.
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 non-renewal should be no less
than in the case of a voluntary termination or non-renewal. 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 proposed 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
[[Page 22116]]
selection of 38 months accounts for a 3-year 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 proposed adding new paragraphs at Sec. 422.502(b)(3) and at Sec.
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 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 re-contracting 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 us in
prohibiting and preventing each such organization from manipulating 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 with the previous non-renewing
organization. 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 manipulation by
organizations whose contracts have been terminated or non-renewed by
CMS, we proposed to add new paragraphs at Sec. 422.502(b)(4) and at
Sec. 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 non-renewed 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
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 non-compliance
(resulting in CMS-initiated terminations and non-renewals) for a more
reasonable period of time.
Comment: Some commenters recommended that CMS delete the proposed
language authorizing CMS to deny applications from entities whose
covered persons had also served as covered persons for a contract
terminated or non-renewed in the prior 3 years. Commenters stated that
the provision is overly broad and may unfairly cover individuals who,
for example, join the board shortly before CMS terminates or nonrenews
a contract.
Response: We appreciate commenters' concerns. However, it is
incumbent on prospective directors and shareholders to conduct proper
due diligence concerning a sponsor's Part C and D compliance history
prior to accepting a board appointment or purchasing a substantial
number of shares of stock. Also, as discussed in the preamble to the
proposed rule, the ``covered person'' definition was adopted previously
under the two-year ban that follows a contract's voluntary non-renewal.
It is important to apply the same standard to CMS-initiated
terminations and non-renewals in order to maintain consistency and
prevent entities from manipulating the Part C and D contract
application process.
Comment: Many commenters expressed general support for the proposed
language, including the language related to ``covered persons''.
However, several expressed concern that the 3-year look back period is
too short. They suggested a 10-year look back period instead.
Response: We appreciate the commenters' support. However, we
believe that extending the look back period to 10 years would be unduly
punitive, as that would effectively exclude a terminated or non-renewed
sponsor from the Part C or D programs for 10 years. Our intent in
adopting this provision was in part to remedy the disparity in
consequences between sponsor-initiated non-renewals and CMS-initiated
terminations or non-renewals. As discussed in the proposed rule, we
believe that the 3-year ban on Part C or D program participation
created by the 38-month past performance look-back period meets that
goal by imposing some administrative penalty where none existed for
operating a Medicare contract so poorly. It also makes certain that the
penalty was greater than that associated with voluntary non-renewal.
Three years is also a reasonable period of time during which a
terminated or non-renewed sponsor could make improvements to its
organization in preparation for providing quality services should it
elect to re-enter the Part C and D markets. We believe that a 10-year
exclusion period goes well beyond what is necessary to achieve our
policy goals and could be viewed as excessively harsh by health and
drug plan sponsors and the communities they serve.
Comment: Several commenters remarked that the 14-month look back
period for past performance analysis was too short.
Response: The 14-month look back period for the past performance
analysis of all Part C and D contract applicants was established
through previous rulemaking. As the regulatory change described here
concerns a modification to the length of the look back period only for
applicants with previous CMS-terminated contracts, comments concerning
all other types of applicants are outside the scope of the proposed
rule.
Comment: A few commenters expressed concern that entities would
attempt to get around the 3-year look back period for contracts
terminated or non-renewed by CMS by voluntarily non-renewing their
contracts before CMS terminates them.
Response: We appreciate commenters' concerns. We will be mindful of
organizations attempting to avoid the consequences of the new provision
by voluntarily non-renewing. However, we believe that this type of
manipulation is unlikely because voluntary non-renewal already carries
with it a 2-year ban.
After consideration of the public comments received, we are
finalizing these provisions as proposed.
[[Page 22117]]
D. Improving Program Efficiencies
We believe that finalizing the regulations discussed in this
section will reduce regulatory burdens for MA organizations, Part D
sponsors, and cost contractors; lower transaction costs; and reduce
waste and unnecessary spending--all of which will, in turn, help keep
costs down and improve the quality of care received by Medicare
beneficiaries. Non-renewing cost contractors will also save money
because we are finalizing a rule that eliminates the regulatory
requirement to purchase print advertising announcing their non-
renewals. We are also finalizing more flexible rules regarding agent/
broker compensation, which means MA organizations and Part D sponsors
will no longer be tied to historic agent/broker compensation amounts
and may save transaction and other costs. Finalized regulations that
enable daily cost-sharing of prescription drugs will not only save
money for the Part D Program and those beneficiaries who discover
during their initial fills that certain drugs do not work for them, but
will also result in fewer unwanted drugs that create problems of
disposal or safekeeping.
The finalized proposals mentioned previously and others are
outlined in Table 5.
Table 5--Provisions To Improve Program Efficiencies
--------------------------------------------------------------------------------------------------------------------------------------------------------
Part 417 Part 422 Part 423
Preamble section Provision ---------------------------------------------------------------------------------------------------------
Subpart Section Subpart Section Subpart Section
--------------------------------------------------------------------------------------------------------------------------------------------------------
II.D.1............... Cost Contract Plan Subpart L............ 417.492 N/A................. N/A N/A................. N/A
Public Notification
Requirements in Cases
of Non-Renewal.
II.D.2............... New Benefit Flexibility N/A.................. N/A Subpart C........... 422.102 N/A................. N/A
for Certain Dual
Eligible Special Needs
Plans (D-SNPs).
II.D.4............... Clarifying Coverage of N/A.................. N/A Subpart C........... 422.100 N/A................. N/A
Durable Medical 422.111
Equipment.
II.D.5............... Broker and Agent N/A.................. N/A Subpart V........... 422.2274 Subpart V........... 423.2274
Requirements.
II.D.6............... Establishment and N/A.................. N/A N/A................. N/A Subpart D........... 423.100
Application of Daily 423.104
Cost-Sharing Rate as 423.153
Part of Drug
Utilization Management
and Fraud, Abuse and
Waste Control Program.
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Cost Contract Plan Public Notification Requirements in Cases of Non-
Renewal (Sec. 417.492)
Section 1876 of the Act provides 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 Sec. 417.492,
which sets forth rules that apply to non-renewal 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 current Sec.
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 proposed removing
the current requirements at Sec. 417.492(a)(1)(iii) and (b)(1)(iii)
for non-renewing cost-contracting plans (in voluntary non-renewal
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 was 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.
Comment: A commenter wrote that waiving the requirement for
printing a public non-renewal notice would have virtually no cost
savings to a plan.
Response: Although we do believe there will be some savings
associated with not having to print a public notice, we also believe
that the provision will reduce unnecessary burden on plans.
Comment: A commenter stated that retaining the public notification
requirement could help ensure that beneficiaries have more knowledge
about plan changes.
Response: Because plans are still required to contact each enrollee
when non-renewing a plan for the upcoming year, we believe that
beneficiaries will continue to have sufficient notification.
After consideration of the public comments received, we are
finalizing the policy without modification.
2. New Benefit Flexibility for Certain Dual Eligible Special Needs
Plans (D-SNPs) (Sec. 422.102)
Section 2602(c) of the Affordable Care Act charged us with making
Medicare and Medicaid work together more effectively to improve patient
care and lower costs. In our October 11, 2011 proposed rule (76 FR
63018), we proposed to give certain SNPs additional flexibility with
respect to plan design as a means of furthering this goal of better
integrating care for dual eligible beneficiaries.
Section 1852(a)(3) of the Act and our regulations at Sec. 422.2,
Sec. 422.100(c)(1), and Sec. 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 ``mandatory supplemental
benefit'' that is included in an MA plan for every enrollee who joins
the plan, as opposed to optional supplemental benefits which are
offered to all enrollees, but for which coverage is only provided to
enrollees who choose to pay for the optional benefit. In our October
11, 2011 proposed rule, we proposed providing certain fully integrated
dual eligible SNPs (FIDE-SNPs) with the flexibility to offer additional
supplemental benefits because 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. In order to implement this proposal, we
proposed amending Sec. 422.102 to add a new paragraph (e) specifying
that, subject to our approval, and as specified annually by us, certain
fully integrated dual eligible SNPs (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
provided under Medicare and Medicaid for the
[[Page 22118]]
dual eligible population. All such benefits would also have to
otherwise be consistent with the rules for supplemental benefits under
Part 422, including Sec. 422.2, Sec. 422.100(c)(1), and Sec.
422.102.
We proposed limiting the new supplemental benefits flexibility
offered under this provision to FIDE SNPs defined at Sec. 422.2 that
are currently operational, operated in the previous contract year, and
meet certain CMS criteria including, but not limited to, being of high
quality (as defined by CMS in future guidance). We believed that this
approach would be most consistent with the objective of keeping
beneficiaries at risk of institutionalization in their homes and
preventing health status decline that results in additional utilization
of health services, and lowering costs for the Medicaid and Medicare
programs. We also proposed to further limit the additional benefit
flexibility under the proposed rule to those qualified SNPs that serve
only full-benefit dual eligible beneficiaries. We requested comment on
whether extending supplemental benefit flexibilities under our proposed
Sec. 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.
In our proposed rule, we also requested comment on what specific
categories and types of supplemental benefits we should consider for
the purposes of extending benefit flexibility to qualified FIDE SNPs
that would be participating in this initiative, as well as on the
circumstances under which plans should be permitted to offer these
additional supplemental benefits. We also requested 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
additionally requested comment 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 dual eligible population.
No commenters opposed our overall policy proposal to offer new
supplemental benefits flexibility to certain SNPs. We also received no
comments on our planned approach to further implement this policy
through guidance in our final Annual Call Letter and in Chapter 4 of
the Medicare Managed Care Manual.
Comment: In our proposed rule, we requested comment on whether the
benefit flexibility under this provision should be limited to FIDE
SNPs, as defined at 42 CFR 422.2, or whether we should extend it to
other SNP types. Most of the comments that we received on this issue
recommended that we extend this flexibility to all SNP types so that
SNPs could target additional supplemental benefits to special needs
individuals enrolled in chronic SNPs (C-SNPs) and institutional SNPs
(I-SNPs). Some commenters recommended that we extend this benefit
flexibility to all dual eligible SNPs (D-SNPs) so that a larger number
of dual eligible beneficiaries, including those dual eligible
beneficiaries residing in geographic areas without an operational FIDE
SNP, could access additional supplemental benefit offerings. A few
commenters supported our proposal to limit this new supplemental
benefit flexibility to FIDE SNPs only, because they believed that FIDE
SNPs were best positioned to deliver integrated services that prevent
enrollee institutionalization.
Response: After considering the comments we received, we are
finalizing our proposed provision with modification to allow new
supplemental benefit flexibility for certain D-SNPs that meet a high
standard of integration and minimum performance and quality based
standards, where CMS finds that the offering of such benefits would
better integrate care for the dual eligible population. We outline
these integration, contract design, performance, and quality-based
criteria for a D-SNP that would meet this standard in the final CY 2013
Annual Call Letter. We plan to update these criteria annually, as
necessary. We believe that expanding the new supplemental benefit
flexibility to a larger pool of D-SNPs that meet certain standards in
accordance with State policies is consistent with our goal of better
integrating care for dual-eligible beneficiaries. By expanding this
supplemental benefit flexibility beyond FIDE SNPs, more dual eligible
beneficiaries will have access to additional supplemental benefits that
are designed to bridge the gap between Medicare and Medicaid services.
By limiting this flexibility to qualified D-SNPs--all of which must
contract with the State starting in 2013--rather than allowing the
flexibility for all SNP types, we can better ensure that plans will use
this benefits flexibility to increase integration and care
coordination.
Furthermore, we believe that, because D-SNPs must adhere to the
State contract requirements at Sec. 422.107, limiting this new benefit
flexibility to D-SNPs rather than extending it to all SNP types (C-SNPs
and I-SNPs) would not provide an incentive to MA organizations to
create SNPs for the purposes of qualifying for this new benefit
flexibility. Therefore, we are finalizing our proposed rule with
modification to afford all D-SNP types that meet a high standard of
integration and meet minimum performance and quality-based standards
the opportunity to qualify for this new supplemental benefit
flexibility, even if they are not FIDE SNPs. We are modifying our
regulations at Sec. 422.102 to add a new paragraph (e) specifying
that, subject to CMS approval, D-SNPs that meet a high standard of
integration and minimum performance and quality-based standards may
offer additional supplemental benefits beyond those other MA plans may
offer where CMS finds that the offering of such benefits would better
integrate care for the dual eligible population.
Comment: The majority of comments we received on our supplemental
benefit flexibility proposal related to the types and categories of
supplemental benefits that plans would be permitted to offer under this
flexibility. A large number of commenters requested that we include
adult day care services as a category of supplemental benefits that
plans would be permitted to offer under this new supplemental benefit
flexibility. The commenters noted that adult day care services are not
covered by either Medicare or Medicaid in most states. They further
noted that many plans that have experienced reduced utilization of
long-term care services attribute this reduction to their enrollees'
use of adult day care services. Other commenters suggested that we
include assistive devices, nutritional supplements, incontinence
supplies, and primary and secondary prevention services as permissible
types of supplementary benefits under this provision.
Response: We appreciate the commenters' suggestions. We believe
that the additional supplemental benefits that will be available under
this provision may be appropriate to the extent that they assist
Medicare-Medicaid beneficiaries with activities of daily living,
(ADLs), (for example, eating, drinking, dressing, bathing, grooming,
toileting, transferring, and mobility) and/or instrumental activities
of daily living, (IADLs), (for example, managing a home,
transportation, grocery shopping, preparing food, financial management,
and medication management). Additionally, we believe
[[Page 22119]]
that the additional supplemental benefits afforded under this provision
should be those benefits that bridge the gap between Medicare and
Medicaid services and that have the potential to decrease unnecessary
utilization of health care services by the dual eligible population. We
have considered comments that we received in response to our proposed
rule according to the standard we describe previously. We outline
supplemental benefit categories that plans may offer under this
provision, as well as guidance on the scope of these additional
supplemental benefits, in our final CY 2013 Annual Call Letter. We also
note that we will provide qualified D-SNPs with operational guidance on
the bid submission process in future guidance.
Comment: In the proposed rule, CMS requested comment on whether it
should limit this benefit flexibility to D-SNPs that only enroll dual
eligible beneficiaries with full Medicaid benefits. A few commenters
supported the limitation to full-benefit dual eligibles, noting that
these individuals would receive the most benefit from additional
supplemental benefits that are designed to enhance Medicare and
Medicaid service integration. A significant number of commenters felt
that limiting the additional supplemental benefit flexibility to full-
benefit dual eligibles was needlessly restrictive, and would not allow
plans to offer supplemental benefits designed to prevent partial dual
eligibles (that is, dual eligible beneficiaries that do not qualify for
full Medicaid benefits) from declining to full-benefit status.
Response: We agree with commenters' statements that the additional
supplemental benefits that we will allow D-SNPs to offer under this
provision could help prevent partial dual eligible beneficiaries from
spending down to full dual status. We also recognize the potential
value of supplemental benefits for dual eligibles that cycle in and out
of full Medicaid eligibility during the year. We believe that allowing
plans to offer additional supplemental benefits to partial duals would
further our goal of aligning Medicare and Medicaid benefits to prevent
health status decline and prevent unnecessary utilization of acute and
long term care services. Consequently, as noted previously, we are
permitting certain, D-SNPs to offer additional supplemental benefits
even if they are not FIDE SNPs.
Comment: In our proposed rule, we requested comment on how our
proposal would impact costs for dual eligible beneficiaries. All
commenters that commented on this issue recommended that we require
SNPs that offer new supplemental benefits under this provision to
provide these benefits to dual eligible enrollees at zero cost-sharing
and with no increase in premium. Many commenters also recommended that
we prohibit plans from creating new supplemental benefits offerings
that duplicate Medicaid services because plans that offer supplemental
benefits that are identical to Medicaid benefits could modify their
supplemental benefits in a manner that would leave enrollees liable for
higher cost-sharing. These commenters suggested that CMS require SNPs
to describe how the new Medicare supplemental benefits and existing
Medicaid benefits will differ and work together, as a condition of
participating in this new benefit flexibility initiative.
Response: We share commenters' concerns that duplication of
Medicaid benefits in plans' supplemental benefit offerings has the
potential to put dual eligible beneficiaries at risk for higher cost-
sharing. We do not intend for the new supplemental benefits offered
under this provision to duplicate or supplant Medicaid benefits. In
response to such concerns and comments received on the draft CY 2013
Call Letter, our final CY 2013 Call Letter requires qualifying D-SNPs,
to attest, at the time of bid submission, that the additional
supplemental benefit(s) that the SNP describes in its plan benefit
package (PBP) do not inappropriately duplicate an existing service(s)
that enrollees are eligible to receive under a waiver, the State
Medicaid plan, Medicare Part A or B, or through the local jurisdiction
in which they reside. Additionally, in order to evaluate how D-SNPs are
implementing this new benefit flexibility, we indicate that we will
require D-SNPs that participate in this new benefit flexibility
initiative to submit a mandatory quality improvement project (QIP)
under Sec. 422.152(a)(2) on measures related to the goals of this
initiative, as determined by CMS. Finally, in response to the previous
comments urging that benefits offered under the new benefit flexibility
be made available without cost sharing or additional premium charges,
we have added language to Sec. 422.102(e) requiring that benefits be
offered to the beneficiary at no additional cost (that is, zero-cost
sharing and with no attributable premium increase).
Comment: Several commenters recommended that CMS establish a means
of assessing whether the new supplemental benefits offered under this
provision lower costs, reduce unnecessary utilization, and improve
integration of Medicare and Medicaid services.
Response: We agree with commenters' recommendations. CMS will
develop a means for evaluating the effectiveness of this new
supplemental benefit flexibility and will detail our evaluative
methodology in future guidance. We will also provide qualified D-SNPs
with operational guidance at that time.
Comment: A commenter requested clarification on the years that SNPs
must have a State contract in order to qualify under the definition of
``currently operational,'' as discussed in the CY 2012 Annual Call
Letter and the preamble to our proposed rule. Another commenter
suggested that we revise our requirement that SNPs must have operated
in the previous contract year, in order to allow new SNPs to qualify
for this new supplemental benefit flexibility.
Response: We reject the commenter's suggestion that SNPs that have
not operated in the previous contract year should qualify for this new
supplemental benefit flexibility. We are maintaining our requirement
that D-SNPs must have operated in CY 2012 and be operating in CY 2013
in order to qualify to participate in this supplemental benefit
flexibility initiative because, without a record of operation in the
prior contract year, CMS would be unable to determine whether a D-SNP
would meet the minimum eligibility requirements (that is, contract
design, integration, performance, and quality-based requirements) for
this new benefit flexibility. We are updating our regulations at Sec.
422.102(e) to reflect the prior year operation requirement.
Furthermore, we believe that D-SNPs that have not operated for at least
one year would lack the experience necessary to identify supplemental
benefits that would effectively serve the specific needs of their dual
eligible enrollees. D-SNPs must have a State contract in order to
qualify to participate in this initiative. In our final 2013 Annual
Call Letter, we clarify additional operational and contract design
requirements for D-SNPs participating in this benefits flexibility
initiative. Unless otherwise stated, these contract design requirements
apply to the specific SNP plan (that is, SNP plan benefit package), and
not the larger MA contract.
Based on our review of the public comments, we have modified our
proposal as discussed in the previous responses and we have also
modified Sec. 422.102(e).
[[Page 22120]]
3. Application of the Medicare Hospital-Acquired Conditions and Present
on Admission Indicator Policy to MA Organizations (Sec. 422.504)
In the October 11, 2011 proposed rule (76 FR 63049 and 63050), we
proposed 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
believed this proposed change was appropriate in order to bring MA
requirements in line with current HAC-POA policy in the original
Medicare program, as well as--in the near future--to the Medicaid
program.
The HAC-POA policy aims to reduce medical errors, improve quality
of care for beneficiaries, and reduce Medicare expenditures for poor
quality care. We proposed to specifically apply the HAC-POA policy in
the MA program by requiring MA organizations to include appropriate
payment provisions in their contracts with hospital providers. We
believed this would be consistent with the agency goal to further align
the MA and original Medicare programs and the ACA requirements to
expand the HAC-POA policy further to Medicaid and Medicare and to
continue development of value-based purchasing programs.
We proposed to amend Sec. 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 solicited comments
and recommendations on what other issues to consider in finalizing our
proposal to require a payment reduction where payment would be reduced
under the current IPPS HAC-POA policy to MA plans.
Comment: We received 17 comments on the proposal. All commenters
expressed support for the goals of the policy, that is, to ensure
quality within hospitals and reduce costs for unnecessary or poor care.
However, reactions were mixed to the proposal to implement this goal
through the contracting process.
Several commenters representing beneficiaries and health care
professionals expressed support for the proposal and encouraged CMS to
continue efforts to more closely align the MA program with original
Medicare and other public program initiatives consistent with the
National Quality Strategy. A commenter discussed specific HAC
conditions and requested that CMS remove healthcare-associated
infections from the existing HAC policy.
Several commenters representing the MA industry supported the
proposal, stating that implementation would not be burdensome and
expressed their belief that their organization's existing contract
provisions would be sufficient to implement the policy for CY 2013 as
proposed. A commenter requested affirmation of the sufficiency of their
plan's specific contract language. A commenter also recommended that
the HAC-POA payment adjustment should also apply to non-contract
hospital providers.
Response: We thank all commenters for expressing their support and
their concerns and raising important questions for CMS to consider. We
agree with commenters that reducing costs, while striving for high-
quality healthcare for seniors is an important goal of this agency and
for the DHHS. We appreciate the encouragement for CMS to continue
efforts to more closely align the MA program with original Medicare and
other public program initiatives consistent with the National Quality
Strategy. We also recognize that, while many plans may already have
payment systems or contract provisions in place that would accommodate
immediate application of this policy, other payment models, and
contractual structures may not, and would have to be amended to
implement a reduction in payment for occurrences of HAC.
With regard to the comment requesting that CMS remove healthcare-
associated infections from the existing HAC policy, we note that this
comment is not within the scope of this rule. Specific HAC conditions
are considered through public comment annually in the IPPS rule.
With regard to the comment that the HAC-POA policy should also
apply to non-contract providers, we indicated in the October 11, 2011
proposed rule (76 FR 63049 and 63050), that the payment reduction is
already required for payments to non-contract providers. MA plans must
pay non-contract acute care hospital claims the same rate that they
would be paid under the IPPS, and this includes adjustments for HACs
and any other IPPS payment adjustments. This is specified in the MA
Payment Guide for Out-of-Network Payments, available at: https://www.cms.gov/MedicareAdvtgSpecRateStats/Downloads/oon-payments.pdf.
Comment: Some commenters supported application of the policy with
extra time allowed to understand requirements, modify contracts,
redesign payment approaches, and incorporate POA reporting into claims
processing systems. Several commenters requested that CMS set the
deadline for implementation at January 1, 2014.
Response: We appreciate the support for the policy and fully
recognize concerns about the additional time that would be needed in
order to implement the policy. However, we are also cognizant of
concerns expressed by other commenters regarding the operational
implications of the policy, given, for example, the varied payment
structures in place, and the need to modify and execute new contracts.
We will need to fully understand such implications before we are able
to establish a reasonable timeframe for implementing the policy.
Therefore, at this time, we will not finalize the policy as proposed
with a definitive implementation date. Instead, we intend to further
study the implications of extending the HAC-POA policy to the MA
program and, potentially, consider other ways to achieve the goals of
the policy.
Comment: Several commenters were concerned about their ability to
reasonably apply these requirements to non-DRG or fee schedule-based
payment approaches, such as capitated, per diem or percentage-based
models. They were concerned about the burden of ``dissecting'' every
claim in order to calculate a payment and were concerned that every
claim payment would be subject to negotiation with hospitals.
Similarly, a commenter urged CMS to allow MA organizations flexibility
to implement the policy in a way that would not require significant
additional resources.
A commenter stated that MA organizations should not have to
negotiate with hospitals on methodology, (that is, the methodology
should instead be industry standard). Another commenter requested
clarification that this policy would only apply to acute care inpatient
hospitals. A few commenters expressed concerns with ensuring hospital
compliance with reporting of serious adverse events and HACs.
Some commenters requested that plans with capitated payment models
be exempt, stating that, under the capitated payment structure, the
risk has already been placed on providers to reduce
[[Page 22121]]
costly medical errors. A commenter stated that this proposal would
stifle innovation of creative payment arrangements that the private
healthcare industry uses to promote quality and efficiency and could
result in increased costs for beneficiaries. A few commenters claimed
to have specific recommendations for applying the HAC-POA policy goals
to these types of payment structures, but did not provide them in their
comments.
Response: We appreciate the thorough responses from commenters. As
we indicated in the proposed rule, we recognize that there may be
operational challenges to implementing the HAC-POA policy under varied
payment models, which is why we requested specific suggestions and
ideas to consider in order to find the best approach within the MA
program to reduce the occurrence of HAC conditions and encourage
efforts by hospitals to increase quality of care. We believe that
exempting some MA organizations based on their existing payment
structures with hospitals would result in inconsistent application of
the policy and, consequently, failure to advance the goal of reducing
these preventable medical errors. However, we do recognize the
operational concerns expressed by the commenters. Therefore, we believe
that the most prudent approach at this time is to continue to study the
implications of extending the HAC-POA policy to the MA program in order
to determine how best to incorporate the HAC-POA policy and other
quality initiatives into the MA program.
Comment: With respect to the proposal to add this policy as a
contractual requirement through Sec. 422.504(i)(3), a commenter
requested greater transparency and full disclosure to the public with
respect to the types of contractual flexibility that CMS would allow.
Other commenters were concerned about CMS over-regulating MA contracts,
setting precedent for regulating MA financial arrangements and the
burden of contract negotiations. Several commenters stated that
hospital contracting is a multi-year process and that opening the
contract for one provision would subject the entire contract to
renegotiation, potentially resulting in increased costs to MA
organizations, enrollees, and CMS. A commenter was concerned that
smaller MA organizations might be disadvantaged in negotiating this
payment reduction with hospitals.
A few commenters recommended that we revise the proposed rule to
effectuate the policy goals through NCDs or other coverage
requirements, rather than contracting/payment provisions. They argued
that this would allow MA organizations to implement in a manner that is
most appropriate to their provider networks without requiring MA
organizations to make changes to their existing contracts, (for example
through manual provisions). A commenter requested a model notice for MA
plans to issue to hospitals describing the revised coverage policy for
HACs and POA indicator reporting.
Several other commenters requested that CMS withdraw the proposal
and engage in a collaborative effort with MA organizations to develop
alternative approaches to achieve the policy goal of reducing HACs and
securing higher-quality hospital care for beneficiaries in the MA
program.
Response: We thank commenters who offered alternative solutions and
we appreciate the comments expressing concern about opening up
potentially lengthy and costly contract negotiations. We also
understand, based on comments received, that some MA organizations may
already have sufficient contract provisions in place to implement the
policy without further negotiations. However, we agree with commenters
that the proposal requires further consideration and discussion.
Therefore, after consideration of the public comments received, we are
not finalizing the proposed policy at this time. However, we will
continue to explore alternative approaches to achieve a reduction in
HACs, reduce costs for unnecessary medical care and ensure high-quality
hospital care for beneficiaries in the MA program.
4. Clarifying Coverage of Durable Medical Equipment (Sec. 422.100 and
Sec. 422.111)
MA organizations and other stakeholders have asked for our guidance
on whether MA organizations can limit enrollees to specified durable
medical equipment (DME) manufacturers and brands. Some MA organizations
have also asked us whether they could offer lower cost-sharing for
``preferred'' DME products or brands versus ``non-preferred'' DME
products or brands. 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 established 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 the DME brands, items and supplies of specific
(preferred) manufacturers.
Since we understand that some MA organizations are currently
limiting DME coverage to certain brands and manufacturers, we believe
it is important to establish a regulatory framework for the protection
of beneficiaries by ensuring appropriate and adequate MA enrollee
access to DME brands, items, and supplies. Additionally, we believe
that MA plans working with MA clinicians are positioned to increase MA
program efficiencies by allowing plans to negotiate bulk discounts for
high-quality items.
Accordingly, under our authority in section 1856(b)(1) of the Act,
to establish MA standards by regulation, and in section 1857(e) of the
Act, to specify additional contractual terms and conditions the
Secretary may find necessary and appropriate, we proposed the
requirements discussed later in this final rule with comment period,
followed by a discussion of any applicable comments we received on the
proposal.
We received 43 comments in response to our proposed requirements.
Commenters included MA organizations and other industry
representatives, beneficiary advocacy groups, DME manufacturers and
representatives of DME manufacturers, and certain pharmacy groups. The
majority of the comments focused on our proposed beneficiary
protections. We have provided a brief summary of each of the proposed
beneficiary protections to be required of MA plans that elect to limit
provision of DME to specific brands and manufacturers. Each proposed
beneficiary protection is followed by a discussion of applicable
comments on that proposal, if any. Subsequent to this discussion, we
address several additional comments associated with more general issues
related to the proposed rule.
a. Access to Preferred DME Items and Supplies
We proposed requiring that MA organizations wishing to limit
coverage within a specific category of DME to specific brands, items
and supplies of ``preferred'' manufacturers take necessary steps to
ensure that enrollees have access to all preferred manufacturer items
and brands through
[[Page 22122]]
their contracts with their network of DME suppliers. We reflected this
change in proposed Sec. 422.100(l)(2)(i). We received no comments on
this proposal.
b. Medical Necessity Requirements for DME Items and Supplies
In accordance with Sec. 422.112(a)(6)(ii) of the MA program
regulations, MA organizations must have established policies and
procedures that allow for individual medical necessity determinations
if there is a question about whether a service or item, considered
medically necessary by an enrollee's provider, 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 Sec.
422.562(a)(4). Therefore, we proposed requiring MA organizations--to
the extent that they elect to limit coverage of DME brands, items and
supplies to preferred manufacturers--to provide coverage of any DME
brands, items and supply deemed medically necessary, including DME
brands, items, and supplies made by non-preferred manufacturers. We
reflected this change in proposed Sec. 422.100(l)(2)(ii).
Comment: Several commenters were concerned about the burden of the
medical necessity process for enrollees and their providers. A
commenter pointed to our mention of Sec. 422.112(a)(6)(ii) and Sec.
422.562(a)(4) which requires MA organizations to have a medical
director and established policies and procedures that allow for
individual medical necessity determinations at the MA organizational
level. These citations suggested that a formal petition from the plan
is required for medical necessity. Several commenters explicitly asked
that the enrollee's provider have the right to determine medical
necessity. Several commenters requested clarification on the specific
process for a medical-necessity determination; for example, whether the
enrollee petitions the plan for a non-preferred brand and, if so,
within what timeframe response can be expected.
Response: We wish to clarify that the medical necessity process
concerning brand/manufacturer of DME items is the same as that for any
health care service offered by a plan. As we stated in the proposed
rule, we are not adding an exceptions process for DME similar to the
Part D formulary exceptions process. While medical necessity requests
are the same for DME as any other health care service offered by a plan
(that is, they must follow the requirements for medical necessity at
Sec. 422.112(a)(6)(ii), Sec. 422.562(a)(4) and, more generally, the
requirements for organizational determinations at Sec. 422.566), we do
want to clarify that medical-necessity status may be initiated by the
enrollee's provider if the provider believes that a particular brand of
DME is medically necessary. Our purpose in citing Sec.
422.112(a)(6)(ii) and Sec. 422.562(a)(4) was to clarify that plans are
not unconditionally bound by an enrollee provider's medical-necessity
declaration. That is, plans have the right to deny medical-necessity
requests made by the enrollee's provider. However, the enrollee has the
right to an appeal or expedited appeal if the plan denies the
provider's medical-necessity determination. We are also reinforcing
that, as specified in Sec. 422.112(a)(6)(i), requests for medically-
necessary items must be responded to in a timely fashion.
c. Transition Period for Coverage of Non-Preferred DME Items and
Supplies
As provided under Sec. 423.120(b)(3), MA organizations offering an
MA-PD plan and Part D sponsors are required to provide for an
appropriate 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 period is to transition the new enrollee
to a therapeutically-substitutable formulary drug or, alternatively, to
obtain a formulary exception whereby the new Part D plan would continue
to cover the non-formulary drug for the remainder of the plan year for
reasons of medical necessity.
Similarly, we proposed requiring MA organizations to continue to
ensure access to DME brands, items and supplies of non-preferred
manufacturers--such as 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 DME brands, items, and
supplies of non-preferred manufacturers such as wheelchairs, feeding
pumps, and hospital beds. More specifically, the enrollee, during this
90-day transition period, could elect to have the MA plan continue to
provide the DME brand, item or supply from the non-preferred
manufacturer as well as provide all necessary repairs to DME items,
including providing a loaner. Alternatively, the enrollee could
immediately switch to a brand, item, or supply of a preferred
manufacturer. We reflected this change in proposed Sec.
422.100(l)(2)(iii)(A) and Sec. 422.100(l)(2)(iii)(B).
Comment: In the proposed rule we recommended a 90-day transition
period to enable beneficiaries who had used one brand of DME and had to
change brands because their current plan no longer supplies this brand,
to adjust to the change. We solicited comments on the duration of the
transition period. While we received comments that indicated no
transition period was necessary, other commenters agreed with the 90-
day transition period, others suggested durations of 120 days and 6
months.
Response: We believe that the proposed 90-day transition period,
similar to the transition period in the Part D program, strikes the
appropriate balance between ensuring an enrollee's smooth transition to
a new plan while taking into account the ability of the plan to offer
preferred DME items for its enrollees.
Comment: We also received several comments on the appropriateness
of a transition period. A commenter pointed out that it should not be
required for enrollees to continue a former DME brand if new brands
were more efficacious. Another commenter asked if the use of a brand,
item, or supply from a non-preferred manufacturer based on a medical-
necessity determination only applies to the transition period.
Response: Our requirement that plans continue to furnish non-
preferred DME brands that they had formerly was not intended to prevent
a plan enrollee from switching to a different brand, should she or he
so desire. If the enrollee wants to continue using the former brand,
item, or supply, the new plan must furnish it for 90 days. Alternately,
the enrollee may decide to change brands immediately. We also note that
the medical necessity exception and the transition exception are
independent of one another. An enrollee is permitted a 90-day
transition period for a currently non-preferred brand that was used in
the former plan year even if that non-preferred brand is not considered
medically necessary for that individual.
Furthermore, if deemed medically required, the new plan is required
to furnish the specific DME brand, item, or supply regardless of
whether the product was used previously.
d. Midyear Changes to Preferred DME Items and Supplies
We proposed prohibiting MA organizations from making ``negative
changes,'' that is, eliminating coverage
[[Page 22123]]
of a Medicare-covered DME brand, item or supply of a preferred
manufacturer, midyear. However, plans would not be responsible for
involuntary negative changes such as those due to supplier terminations
or sanctions. We also proposed allowing MA organizations to make
``positive changes,'' that is, adding coverage of Medicare-covered DME
brands, items or supplies, midyear. Examples of allowable positive
midyear changes include: Adding new manufacturers' products, providing
substitute DME brands, items and supplies for DME products that are no
longer available, considering new DME technologies, and complying with
national and local coverage determinations for new DME brands, items
and supplies. Plans could also add suppliers midyear. We believe this
strikes the appropriate balance between allowing flexibility for plans
to designate preferred products, while ensuring that changes to the
list of DME brands, items and supplies of preferred manufacturers are
not disruptive to enrollees. We reflected this change in proposed Sec.
422.100(l)(2)(iv).
Comment: We received several comments on midyear changes to DME. A
number of commenters criticized the proposed rule on the grounds that
it would not be sensitive to midyear changes in technology. Other
commenters raised the issue of the effect of supplier termination or
supplier sanctions. Still other commenters asked if suppliers as well
as products could be added midyear.
Response: In the proposed rule we allow the addition, but not the
deletion, of brands and manufacturers midyear. Consequently: (1) Plans
may add DME with innovative new technologies midyear; and; (2) plans
may add midyear suppliers as this would increase brands and
manufacturers available to enrollees. Note, that if a midyear supplier
termination or supplier sanction deprives enrollees of access to
certain brands, items or supplies of preferred manufacturers, the plan
has an obligation to add suppliers midyear in order to maintain
enrollee access.
Comment: A commenter requested that plans be allowed to withdraw
midyear brands and manufacturers based on safety issues.
Response: We agree that plans must exclude items from their
preferred DME list if recalled by a Federal agency, for example, the
FDA, or if CMS determines there is a safety concern. Additionally, if a
plan has concerns regarding the safety of a certain brand or
manufacturer, it should immediately contact the FDA's Center for
Devices and Radiological Health Ombudsman to whom such concerns should
be directed.
e. Appeals
As indicated previously, a medical necessity determination is
initiated by the enrollee's provider. The plan's subsequent denial
could then lead to an appeal or expedited appeal. We proposed to
clarify at Sec. 422.100(l)(2)(v) that a plan's non-coverage of a
particular manufacturer's product or brand of a DME constitutes an
organization determination under Sec. 422.566.
Comment: Several commenters requested that to ensure a proper
balance between costs and access, CMS must incorporate safeguards
around the use of DME formularies similar to those of Part D drug
formularies. These commenters specifically identified the following
Part D safeguards as examples of safeguards that should apply to DME:
(1) Annual review and approval of DME formularies established by
Medicare Advantage Plans by the plans' respective Pharmacy and
Therapeutics Committees; (2) a formal exceptions process for non-
formulary DME items deemed medically necessary for a particular
patient, similar to that employed for Part D drugs pursuant to Sec.
423.578; and, (3) the right of patients to seek review of adverse
determinations related to requested DME brands, items or supplies by an
independent review entity in a manner similar to that utilized for
adverse determinations made by Part D Plans related to Part D drugs.
Response: As indicated in the proposed rule, we studied the
possibility of establishing an exceptions process for DME similar to
the one established for non-formulary Part D drugs under Sec.
423.578(b) and decided that the safeguards we proposed, along with the
ability to appeal brand/manufacturer decisions as coverage
determinations, were the most efficient means to implement this
provision in the context of the MA program. The Part D appeal process
adds an additional level of review to the established appeal process
under subpart M of Part 422 to account for the fact that Part D drugs
in a category of prescription drugs are frequently prescribed based on
the individual's unique requirements and disputes about medical
necessity are more likely. We believed such a process is unnecessary
for DME brands, items and supplies because, unlike Part D drugs, DME is
generally not specific to individuals and, as a result, appeal of
coverage determinations based on brand/manufacturer are infrequent.
Comment: A few commenters requested that, in addition to the right
to appeal non-coverage of non-preferred, medically-necessary DME, CMS
issue guidance on differential cost-sharing between preferred and non-
preferred brands.
Response: As specified in Sec. 422.100(f)(2), MA plans are already
prohibited from designing cost-sharing structures that inhibit access.
We annually publish detailed guidance on acceptable cost-sharing
criteria.
Comment: Several commenters requested that we provide guidance,
similar to guidance in the Part D program, on the criteria for making
an Independent Review Entity (IRE) determination. These commenters also
recommended that access to DME and medical necessity be guiding
principles as part of the IRE determination process.
Response: We agree that access and medical necessity should be two
primary principles guiding IREs in making determinations. For this
reason, we strongly encourage MA plans when formulating their medical-
necessity requirements, as specified at Sec. 422.112(a)(6), to
specifically address how medical-necessity determinations by enrollee
providers should be communicated and addressed. We do not believe it
necessary, however, that IREs be given additional guidance regarding
how to determine claims based on the brand/manufacturer of DME.
Comment: In the proposed rule, CMS supported our decision not to
have a formal exception process for DME denials by citing the following
statistic: Of 12,500 appeals on wheelchairs reviewed by the IRE since
the inception of the IRE appeals process in 2006, only seven related to
brand-specific issues. A commenter suggested that the small number of
brand-specific appeals could be due to our not formerly allowing plans
to limit DME items, such as wheelchairs, by brand and manufacturer.
Response: As indicated in the proposed rule, we have anecdotal
evidence that plans are already limiting DME by brand and manufacturer.
Consequently, we believe this statistic to be supportive of our
proposal.
f. Disclosure of DME Coverage Limitations
As provided under Sec. 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
[[Page 22124]]
benefits. This requirement has been operationalized as the annual
notice of change/evidence of coverage (ANOC/EOC). We would require,
under proposed Sec. 422.100(l)(2)(vi), that MA plans that choose to
limit DME coverage to brands, items, and supplies of preferred
manufacturers, be required to include, in the description of benefits
required under Sec. 422.111(b)(2) and under Sec. 422.111(h)(2)--which
requires the provision of specific information via a toll-free customer
service call center and Internet Web site, and in writing upon
request--disclosures about these DME coverage restrictions and enrollee
rights to the Part C appeals process for requests to obtain medically
necessary DME brands, items, and supplies from non-preferred
manufacturers.
Comment: Several commenters requested clarification on how MA
organizations should disclose the list of DME brands, items, and
supplies of preferred manufacturers. For example, several commenters
asked whether they should be listed in the bid or EOC. These commenters
pointed out that the EOC is a template and consequently a template
change would be required for additional disclosures. Other commenters
asked whether these materials should be listed on plan Web sites or in
the plan finder.
Response: As specified in Sec. 422.111(b)(2) and Sec.
422.111(h)(2), MA plans must disclose all conditions, limitations,
premiums, and cost-sharing for benefits they provide, including DME.
There are already several vehicles for such disclosure in place. We
propose modeling the disclosure requirements for DME by applying
similar disclosure requirements currently used for the Part D
formulary. More specifically, a plan choosing to limit certain DME
products to specific brands and manufacturers would have to maintain a
Web site with current information on DME access. We would also require
that the list of DME brands, items, and supplies of preferred
manufacturers be included in the EOC packet. We will issue guidance on
these matters along with other guidance for proper bid submission.
Comment: A commenter requested that disclosure requirements apply
to any changes in provision of DME such as midyear changes. Another
commenter asked if providing access to only two brands is a limitation
for which notification is required.
Response: We are modeling the disclosure requirements for DME on
the disclosure requirements for the Part D formulary. Consequently, in
addition to the list of brands, items, and supplies of preferred
manufacturers that should be mailed in the EOC packet along with the
Part D formulary, MA plans must have dedicated Web sites listing all
current information on DME provision, including any midyear changes.
Plans must notify enrollees of any contractual limitation in DME
brands, items, supplies, and manufacturers.
Comment: A commenter requested a 60-day notification for any
midyear changes.
Response: The notification requirements for midyear changes
specified in the Medicare Marketing Guidelines are applicable to
midyear changes in DME.
Comment: A commenter asked whether plans must submit their DME
formularies, that is, their list of brands, items, and supplies of
preferred manufacturers, to CMS for prior approval.
Response: As indicated in the proposed rule, we are not applying
the formulary requirements of the Part D program in our DME policies.
Consequently, the submission of bids that includes all supporting
documentation as part of the annual bid review cycle will suffice.
g. Flexibility
Based on comments we received on the proposed rule, and which we
discuss later in this final rule with comment period, we are providing
additional flexibility at 422.100(l)(2)(vii) for CMS to annually review
DME categories. We would also review complaint data and appeals and
grievances data. This would allow us to require full coverage of
certain categories of DME without limitation in brand and manufacturer.
Additionally, such flexibility would allow us to consider and respond
to emerging new technologies, as well as to require full coverage of
categories of DME items typically tailored to meet individual needs.
Comment: Several commenters requested that we exclude orthotics and
prosthetics from the items that MA organizations could limit purchase
of to specific brands and manufacturers. Several commenters requested a
general exclusion of orthotics and prosthetics while other commenters
requested exclusion of specific orthotics and prosthetics. In
particular, several commenters pointed to our use, in the proposed
rule, of ostomy bags as an example of an item that could be subject to
limitation based on brand or manufacturer. One of the commenters asked
if we had intended to include ostomy bags, as they are actually
prosthetics. The other commenters on this issue, while not identifying
ostomy bags as prosthetics, stated that these are not, in fact,
examples of items that are interchangeable and, thus, should not be
subject to limitation based on brand or manufacturer.
Response: When discussing the transition requirement, we mistakenly
included ostomy bags, which are prosthetic devices, in our example of
DME that would be subject to limitation--and thus the transition
requirement--based on brand or manufacturer. In discussing the
transition requirement, a better example would be diabetic supplies. In
this final rule with comment period, we are clarifying that the ability
of MA organizations to limit DME brands, items, and supplies to
specific manufacturers does not apply to orthotics and prosthetics.
Section 1860(s) of the Act specifically distinguishes the authorities
for provision of DME, prosthetics and orthotics. Consequently, our
proposal to allow plans to limit provision of DME brands, items, and
supplies to specific manufacturers would not affect prosthetics and
orthotics. MA organizations must still provide to their enrollees all
medically-necessary prosthetics and orthotics covered under Original
Medicare, Part B. The principal reason for not including orthotics and
prosthetics in the scope of this requirement is that the provision of
orthotics and prosthetics requires clinical care by specially educated
and trained practitioners who utilize those skills to design,
fabricate, and fit custom orthoses and prosthesis. DME, however,
primarily refers to equipment such as wheelchairs (manual and
electric), walkers, scooters, canes, crutches, and home oxygen therapy.
A standard cane from a supplier, for example, is qualitatively
different from receiving a custom-fit orthotic brace molded
specifically for the patient by a skilled provider. We already
recognize this distinction between DME and prosthetics and orthotics in
its quality and supplier standards.
Comment: There was support for the notion that brands of certain
DME such as canes are essentially interchangeable. However, over half
the commenters mentioned specific categories of DME whose brands are
less likely to be interchangeable in terms of quality, consistency in
performance, and ease in repair. Among the 43 comments received, 7
categories of DME were identified for which commenters requested full
coverage without plan limitation: (1) Wheelchairs; (2) diabetic
supplies; (3) Continuous Positive Airway Pressure (CPAP) devices; (4)
patient lifts; (5) speech generating devices; (6) oxygen; and (7)
paddings
[[Page 22125]]
(such as foam mattresses). Additionally, a commenter questioned the
classification of speech-generating devices as DME, rather than
orthotics and prosthetics, citing the Department of Defense and VA
classifications.
Response: We agree that certain categories of DME include items
which are tailored to the individual and are not interchangeable. For
this reason, we intend to conduct an annual review to ascertain which
categories or subcategories of DME require full coverage without
allowance for plan limitation by brand or manufacturer. In making our
decisions, we will identify categories of DME not subject to
limitation, based on a variety of sources. Sources include, but are not
limited to--
Comments on the proposed rule;
Discussions with DMEPOS staff;
Advice from the Chief Medical Officer Center for Medicare,
CMS and DME MAC medical directors; and
Experience from the DMEPOS competitive bidding program and
other Medicare programs.
Based on our review of public comments, we have modified our
proposal by adding new paragraph (l)(2)(vii) to Sec. 422.100 to
specify that plans must comply with CMS' designation of DME items not
subject to limitation based on brand or manufacturer.
We have made two other changes to the regulatory text: (1) at
422.100(l)(2)(iii) we have clarified that transition coverage changes
are at the enrollee's request; and (2) throughout the regulatory text
we use the phrase ``DME brands, items, and supplies of preferred
manufacturers.'' The enrollee's request for transition coverage is
initiated when he or she fills a script and generates a claim for a
particular brand. Our purpose in using the phrase ``DME brands, items,
and supplies of preferred manufacturers,'' is to emphasize that plans
can limit both items and supplies and plans can limit by either: brand,
manufacturer, or both.
Following this discussion are several comments that address more
general issues related to the proposed rule.
Comment: A few commenters were opposed to the proposed rule on
general grounds. They cite section 1801 of the Act which prohibits
supervision over the practice of medicine and section 1802 of the Act
which guarantees basic freedom of choice. Another commenter disagreed
with our authority to allow plans to limit brands and manufacturers,
arguing that section 1852(a)(1)(A) of the Act, allowing MA plans to
contract with networks of providers, specifically applies to providers,
not suppliers.
Response: In the proposed rule--and as clarified further in this
final rule with comment period--we have specifically indicated that a
medical-necessity determination by the enrollee's provider initiates a
process that could allow enrollees access to DME brands, items, and
supplies of non-preferred manufacturers. Hence, we have not interfered
with the practice of medicine. Furthermore, section 1852(a)(1)(A) of
the Act specifically allows plans in the MA program to limit the
providers from which services may be obtained, provided adequate access
is ensured. The statute is silent on limitations of supplier networks.
As we stated in the proposed rule, we believe it is consistent with the
goals of the statute to allow MA plans to contract with networks of
suppliers and to restrict brands and manufacturers provided access is
ensured and are thus exercising our authority under 1856(b)(1) of the
Act, to establish MA standards by regulations, and section 1857(e)(1)
of the Act to impose additional terms and conditions found necessary
and appropriate.
Comment: A commenter believed that the proposed regulation had
given plans arbitrary power and would unnecessarily limit beneficiary
choices. The commenter also believed that MA plans do not have the
necessary knowledge to make decisions about limits on brands, items,
supplies, and manufacturers of DME. Another commenter asked how CMS
would define access to non-preferred brands.
Response: In developing our proposal, we took deliberate steps to
ensure that an MA organization's DME polices not be instituted
arbitrarily and that such policies are fair and transparent to
enrollees. In the proposed rule, we specifically mentioned our goal to
strike ``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.'' Furthermore,
we explicitly proposed at Sec. 422.100(l)(2)(ii), that MA
organizations--to the extent that they elect to limit coverage of DME
items and supplies to specific manufacturers' products or brands--
ensure access to DME by providing coverage of any medically-necessary
DME brand, item, and supply, including DME brands, items, and supplies
made by non-preferred manufacturers. Other requirements, such as the
transition period and the prohibition on removing DME items midyear,
also help ensure that enrollees will continue to have full access to
DME.
Comment: A few commenters requested that we offer the proposed rule
as guidelines rather than regulations. These commenters suggested that,
aside from specific requirements to ensure adequate access, we should
not impose requirements or otherwise oversee functions that have
traditionally been left to the discretion of plans.
Response: We have already given plans much flexibility in choosing
DME; we must also ensure that enrollees continue to have access to
necessary DME. Plans must develop their own medical necessity criteria
and methods for addressing provider determinations of medical
necessity. However, the requirements delineated in the proposed rule,
including disclosure, beneficiary appeal rights and access, have
traditionally been regulatory areas and part of CMS' oversight of
plans. In the proposed rule, we proposed requirements in three other
areas--medical necessity, transition periods, and midyear changes--and
believe these to be important beneficiary protections.
Comment: A commenter pointed out that, although the proposed rule
focuses on reducing out-of-pocket costs for beneficiaries, this concept
could also affect costs for plans.
Response: In the proposed rule we pointed out that some
organizations are already limiting DME to specific brands;
consequently, our proposal would not adversely affect the costs
incurred by these organizations. As we stated in the proposed rule, we
believe this provision will give more flexibility to plans when making
DME choices; if plans wish to offer multiple brands of DME in a
category, this provision would in no way prohibit this. As we also
stated in the proposed rule, we believe this additional flexibility may
permit MA organizations to negotiate bulk discounts with preferred
manufacturers.
Comment: Several commenters pointed out that cost savings was the
only reason mentioned in the proposed rule to allow plans the right to
limit furnishing DME to specific brands and manufacturers. Another
commenter mentioned an MA plan that is currently selecting
manufacturers and brands of diabetic supplies, based on consultation
with clinicians and, consequently, is able to offer products at zero
cost-sharing to its enrollees.
Response: We agree that a variety of factors--including cost,
access, diverse patient needs, convenience, and medical necessity--
should be part of benefit considerations and overall plan design. We
believe the beneficiary protections we have specified concerning
enrollee access to all
[[Page 22126]]
categories of DME will help ensure that cost is not the sole driving
factor of a plan's DME choices. In addition, we believe that quality
requirements, a robust appeals process, and plan oversight are
important factors in ensuring that enrollees have continued access to
necessary DME.
Comment: Several commenters requested that if an individual
requires multiple DME brands, items, or supplies and one brand, item,
or supply that he or she requires is only available through a supplier
of brands, items, and supplies from non-preferred manufacturers, the
individual should be allowed to obtain all the medically-necessary
brands, items, and supplies from the non-preferred manufacturer. This
would promote efficiency and ease of obtaining brands, items, and
supplies.
Response: The implication of this comment is that it is
inconvenient for the enrollee to have to purchase brands, items, and
supplies from multiple suppliers. We do not agree. Furthermore, since
MA organizations contract with suppliers, they can communicate in
advance the brands and manufacturers that are preferred and
nonpreferred so that suppliers can stock up on these.
Based on our review of public comments, we are finalizing our
proposed provisions with the modifications previously discussed.
5. Broker and Agent Requirements (Sec. 422.2274 and Sec. 423.2274)
Regulations setting forth rules for 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. We 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 also heard that 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. 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 the new entrants may set
compensation at current-day FMV rates and are not tied to 2009
compensation amounts. Therefore, we proposed to modify paragraph (a)
and add a new paragraph (f) to Sec. 422.2274 and Sec. 423.2274 to
allow plan sponsors to annually select their compensation amounts to
reflect rates which are at or below FMV as 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.
Comment: Many commenters expressed support for the proposal to
allow sponsors to annually select agent/broker compensation amounts
which reflect rates at or below the CMS established FMV.
Response: We appreciate the many comments received in support of
this provision.
Comment: A commenter asked whether this provision applies to
section 1876 cost plans.
Response: This provision does apply to section 1876 cost plans
pursuant to Sec. 417.428, Marketing Activities, which states that the
marketing regulations found in subpart V of part 422, which include
this specific requirement, apply to section 1876 cost plans.
Comment: A commenter expressed a concern that the compensation
regulations were driving agents/brokers away from MA and encouraging
them to sell Medigap.
Response: We appreciate the comment and will consider it as we
continue to refine and improve our managed care programs. However, this
comment is beyond the scope of these regulations.
Comment: Several commenters expressed a concern that CMS should be
evaluating its current marketing rules against the Affordable Care Act
and considering the impacts.
Response: We appreciate the comment and will consider it as we
implement the provisions under the Affordable Care Act. However, these
comments are beyond the scope of this regulation.
After consideration of the public comments received, we are
finalizing the provision without modification.
6. Establishment and Application of Daily Cost-Sharing Rate as Part of
Drug Utilization Management and Fraud, Abuse and Waste Control Program
(Sec. 423.100, Sec. 423.104, and Sec. 423.153)
Pursuant to our authority under section 1860D-4(c) of the Act,
which requires PDP sponsors to have cost-effective drug utilization
management and a fraud, abuse, and waste control program in place, we
proposed that Medicare Part D sponsors be required to provide their
enrollees access to a daily cost-sharing rate for prescriptions
dispensed by a network pharmacy for less than a 30 days' supply of
certain covered Part D drugs that: (1) Are for an initial fill of a new
medication; (2) are intended to allow the enrollee to synchronize
refill dates of multiple drugs; or (3) are dispensed in accordance with
Sec. 423.154 (which sets forth the requirements placed on Part D
sponsors with respect to dispensing of prescription drugs in long-term
care facilities beginning January 1, 2013).
As we explained in the proposed rule, current prescribing patterns
and pharmacy benefit management (PBM) payment practices result in most
prescriptions being written by providers, and dispensed by retail
pharmacies, in 30-or-more days quantities. When the full amount
dispensed is not utilized by a beneficiary due to adverse medication
reaction or interaction, or due to failure of beneficiary therapeutic
adherence because of cost, inconvenience, death, or other reason for
discontinuation, it comes at an unnecessary and wasteful cost to the
beneficiary, 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 to the program of chronic medications discontinued after
initial fills could be avoided. In addition, the avoidance of unused
drugs would contribute to diminishing the environmental issues \2\
caused by disposal of unused medications, and opportunities for
[[Page 22127]]
criminal activities and substance abuse \3\ caused by diversion of
unused medications, all of which are growing concerns in the United
States.
---------------------------------------------------------------------------
\2\ See https://www.epa.gov/ppcp for information about
Pharmaceuticals and Personal Care Products as Pollutants (PPCPs) on
the Web site of the U.S. Environmental Protection Agency.
\3\ 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.
---------------------------------------------------------------------------
We observed that, currently, Part D enrollees' cost-sharing
generally is the same whether they receive a 7, 14, or 30 days' supply
of a medication. A daily cost-sharing rate requirement imposed on Part
D sponsors would encourage enrollees and their prescribers to limit
days' supplies, when appropriate, by 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 requesting a trial fill of a prescription for a
new chronic medication, for example, would pay only a portion of the
established cost-sharing amount under his or her Part D benefit plan
that corresponds to the actual number of days supply that was
dispensed. This would be the case whether it was for a 7- or 14-days'
supply, or some other quantity less than 30 days, and this decision
would primarily be at the discretion of the prescriber. Thus, although
a 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 a beneficiary should receive less
than a month's supply of a new medication. Rather, such a decision
should be made solely by the beneficiary 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
especially incentivized to inquire of his or her prescriber whether a
fill of less than a month's supply would be appropriate when first
prescribed a chronic medication. We also believe enrollees would be
most likely to inquire about such a trial fill when faced with high
cost-sharing for such a 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 a drug that has significant side effects and/or is
frequently poorly tolerated.
In such a case, we suggested that the prescriber could write either
one prescription for the initial fill at the prescriber's discretion,
or two prescriptions (for example, one for an initial fill and a second
prescription for a 30 or 90 days' supply; the latter prescription would
be utilized if the enrollee and the prescriber agreed the drug therapy
should be continued after the trial period). Because the two
prescriptions could be written during one office visit, or could be
refilled by the prescriber directly with the beneficiary's pharmacy
after the trial period, as permitted by applicable law, additional
visits to the prescriber would not necessarily be required and would
not need to cause a burden to the beneficiary. We assumed the two-
prescriptions option would be most convenient for the beneficiary and
the prescriber (when appropriate), but sought specific comment on this
assumption. If a beneficiary 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
medication being prescribed should or could be dispensed in a trial
fill, we stated that we would not expect our proposal to have any
adverse effects on beneficiaries' health. However, if the medication
were discontinued after use of the initial fill, the enrollee, as well
as the sponsor, would have avoided the net costs associated with the
unused quantity that would be dispensed under current standard
practices.
While we envisioned, as described previously, beneficiaries
primarily requesting less than a full month's supply when prescribed a
drug for the first time for a chronic condition that is known to have
significant side effects, to be frequently poorly tolerated and
expensive, we did not limit the requirement for Part D sponsors to
establish and apply a daily cost-sharing rate to such medications.
Rather, in the proposed rule, we also identified an additional benefit
of a daily cost-sharing rate requirement, which is the ability to allow
for synchronization of prescriptions. The ability to synchronize
medications should assist beneficiaries in adhering to prescription
treatment regimens that involve multiple medications, and we noted that
at least one study supports this belief. In addition, we believe the
ability to synchronize medications will be convenient for both those
beneficiaries who take advantage of it and their prescribers by
enabling fewer trips to the pharmacy and fewer prescription refill
requests of prescribers from beneficiaries through the ability to
consolidate pharmacy trips and prescriber office visits and phone
calls. We also stated that daily cost-sharing rates also may permit
pharmacies, as opposed to prescribers, to facilitate synchronization of
a beneficiary's medications upon his or her request, and we sought
specific comment as to this possibility, as well as to any issues we
may need to address to facilitate this possibility.
We noted in the proposed rule that we do not expect long-term care
(LTC) beneficiaries to request to synchronize medications, as this was
not our understanding of the LTC environment with respect to
prescribing, and the LTC dispensing rules at Sec. 423.154 require 14
days or less dispensing in LTC facilities in certain instances,
beginning January 1, 2013. However, as noted in the April 2011 final
rule (76 FR 21432), 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.'' Because Part D sponsors would have to
address copayment methodology in connection with the LTC dispensing
requirements, we proposed to supersede our quoted guidance in the April
2011 final rule (76 FR 21432), and thus proposed that the daily cost-
sharing rate requirement would apply to prescriptions dispensed in LTC
facilities, beginning January 1, 2013.
In the proposed rule, we urged the industry to develop coding to be
used by network pharmacies to communicate to sponsors whether a less
than month's 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 stated such
coding would allow
[[Page 22128]]
sponsors to be able to monitor the prevalence and appropriateness of
the dispensing of prescriptions in shorter than a month's supply to
ensure that a pharmacy does not dispense a prescription for 30 days'
supply in stages in order to increase dispensing fees.
We recognized in the proposed rule that establishing and applying a
daily cost-sharing rate to the already small copayments for LIS
beneficiaries would cause such copayments to be the same or even
smaller. We also stated 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 acknowledged in the proposed rule that realized savings from our
daily cost-sharing rate proposal may be partly offset by additional
dispensing fees, and that Part D sponsors would also incur some costs
to program their systems to establish and apply a daily cost-sharing
rate to prescriptions dispensed to enrollees for less than a 30 days'
supply. We cited in the proposed rule a previous review of 2009 PDE
data by us that suggested that just under 32 percent of approximately
78.6 million first fills for chronic medications are not refilled by
Medicare Part D enrollees. We assumed 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, since this
review did not distinguish between community and institutional
settings, to estimate the costs of discontinued medications in
community settings only, 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 long-term care expenses. (We did not estimate
the costs of discontinued medications in the LTC environment since the
daily cost-sharing rate requirement proposed here does not further
change the dispensing requirements in the long-term care setting, which
are applicable January 1, 2013). Consequently, we arrived at an
adjusted total estimated cost of 2009 community-based discontinued
first fills of maintenance chronic medications was estimated at roughly
$1.4 billion.
As noted previously and in the proposed rule, potential savings of
a daily cost-sharing 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 made assumptions
about how many initial fills for new maintenance medications for
chronic conditions will be dispensed in quantities of less than a 30
days' supply, and what the average quantity of such initial fills will
be. We pointed out that these assumptions were highly uncertain,
because it is very difficult to predict beneficiaries' behavioral
response. Having noted this caveat, we assumed 20 percent of initial
fills in 2013 will be for a supply of less than 30 days, trending to
almost 50 percent by 2018, and that the average of such fills will be
for a 15 days' supply. We also applied a dispensing fee rate of
approximately $2 in our estimation. Assuming 32 percent of these first
fills are discontinued, we estimated the potential savings to the Part
D program to be $140 million in FY 2013 alone, and over $2.4 billion
total by 2018. However, because we are revising the applicable date of
this requirement to January 1, 2014, as explained later in this final
rule with comment period, we are revising the cumulative savings in
2018 to roughly $1.8 billion.
We noted in the proposed rule that 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 required to 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 2 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 acknowledged the savings
benefits of the mandatory MaineCare approach, we stated that leaving
the decision to obtain less than a month's supply of a prescription
with the beneficiary and his or her prescriber and pharmacist is a
better approach in light of the voluntary nature of the Medicare Part D
program.
We recognized in the proposed rule that certain medications are
universally accepted in the health care community as not suitable to be
dispensed in amounts less than a 30 days' supply (for example, lotions
and other drugs not in solid form). Therefore, we proposed to further
limit the requirement that sponsors establish and apply a daily cost-
sharing rate 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 long-
term care dispensing requirements, we proposed that the daily cost-
sharing rate requirement would apply to both brand and generic drugs.
Comment: Some commenters were strongly supportive of our proposal,
recognizing as we do that, for Part D plans that use a copayment
structure, there is currently no direct cost incentive for enrollees to
obtain a less than 30 days' supply, and lauding the potential cost-
savings to enrollees and the reductions of waste as a result of our
proposal. A commenter fully endorsed our proposal, stating that its
data led to the MaineCare program, and that after significant effort
was put into addressing initial prescriber confusion, there were
virtually no complaints by either prescribers or patients. This
commenter disagreed, however, that a voluntary approach is the
preferred method, asserting that clinical inertia for continuation of
past prescribing habits and practices may erode our expectations on
savings. A commenter estimated that our proposal could eliminate 1.5
billion pounds of pharmaceutical waste at its source (the preferred
method for improving environmental health) and $1 million in waste
management cost savings, in addition to improving dispensing
efficiencies in terms of time spent. A commenter asserted that an
analysis of our proposal regarding the harmful effects on the
environment should include recognition that humans are part of the
environment and are adversely affected by the diversion, misuse, and
abuse of unused drugs.
Response: We appreciate these supportive comments and estimates and
agree that a daily cost-sharing requirement will lead to significant
cost-savings and waste reduction in the Part D program. We have taken
the
[[Page 22129]]
comments on prescriber education under advisement, but we continue to
believe that the voluntary method is the best way to approach less-
than-30-days' supply dispensing outside the LTC setting in the Part D
program, although we acknowledge our opinion could change after
experience with the voluntary method. We agree that reducing medication
waste will reduce opportunities for medications to be diverted for
misuse and abuse.
Comment: Some commenters stated that we should complete a more
thorough, and prospective assessment of the potential impact of our
proposal to understand the tradeoffs and implications before we proceed
with it. Several commenters, while supporting our proposal's goal to
reduce cost and waste, countered that it would increase dispensing fees
and administrative and programming costs, some suggesting that these
fees/costs would completely or more than offset any realized savings
from the proposal. Another commenter stated that calculating the daily
cost-sharing rate for each enrollee is tremendously burdensome by
necessitating system changes at a substantial cost, stating that the
administrative costs to Part D sponsors are the same regardless of
whether the prescriber writes a prescription for a trial fill or a 30
days' fill, such that administering a trial fill differently than a
complete fill will double the cost to Part D sponsors.
Response: We believe that we have sufficiently accounted for the
tradeoffs and implications of the potential impact of our requirement,
both in the proposed rule and in this final rule with comment period.
In the preamble and the Regulatory Impact Analysis section of the
proposed rule and this final rule with comment period, we specifically
accounted for the additional dispensing fees, as well as the
administrative and programming costs that we believe Part D sponsors
will incur in implementing this requirement. Despite these costs, we
continue to estimate savings in the hundreds of millions each year to
the Part D program.
Comment: Some commenters, while also supportive our of proposal's
goal to reduce fraud, waste and abuse in the Medicare Part D program,
raised various operational concerns in implementing the proposal and
requested a delay or phased-in approach. A commenter requested more
clarification of what constitutes a trial fill. Some commenters
recommended that we simplify our proposal by requiring the application
of the daily cost-sharing rate whenever less than a month's supply of a
covered Part D drug is dispensed (unless an exception applies due to
the type of drug involved), regardless of the reason, which would
obviate the need to document the reason. Some commenters stated that
applicable law permits pharmacists to dispense lesser quantities than
written on certain prescription. Other commenters indicated that
standard identifiers/fields would be needed for physicians, pharmacies,
and plans to communicate regarding initial fills of new medications,
beneficiary synchronization request and daily cost-sharing amounts.
Some commenters pointed out that pharmacies have no reliable way to
learn that a prescription is an initial trial supply of a new
medication, since such information is not routinely conveyed on a
prescription, and pharmacies would not be in a position to notify
sponsors of this fact, even if coding were available.
Another commenter believed that having to capture information from
enrollees could be difficult to reliably implement. Some commenters
thought that our proposal would result in more frequent ``refill too
soon'' DUR edits, including additional PDEs identified as duplicate,
requiring review and justifications, which would result in greater
workload for Part D plans. Commenters also noted that daily cost-
sharing is not an industry standard in prescription drug coverage, and
complications could arise in coordinating benefits with other
prescription drug plans, such as in the case of Employer Group Waiver
Plans (EGWPs). A commenter stated that our proposal may result in
multiple prior authorizations for the same medication. A commenter
noted that our proposal may complicate partial fill straddle claims and
have PDE and TrOOP implications. A few of these commenters noted that
lessons may be learned from implementation of the long-term care
dispensing requirements at Sec. 423.154, which are effective January
1, 2013.
Response: We were persuaded by these commenters that more time is
needed for Part D sponsors, PBMs, their network pharmacies, and
industry standard development organizations to work through the details
of implementation of our requirement. We believe that proper
programming will be crucial to address the technical issues that the
commenters referenced, such as how to calculate cost-sharing when
multiple payers are involved. For these reasons, we have delayed
implementation of the daily cost-sharing rate requirement until January
1, 2014. In addition, we will work with the industry to develop
subregulatory guidance, if and as needed, to address technical
questions arising upon implementation of the requirements, such as the
implications for PDE submissions.
However, to the extent Part D sponsors wish to implement daily
cost-sharing rates for contract year 2013, they may do so on a
voluntary basis before then, for instance, if such implementation would
assist them in complying with the LTC dispensing requirements, rather
than waiting for any lessons that may be learned from such
implementation, since Part D sponsors will have to address cost-sharing
with respect to LTC dispensing in 2013.
In deciding to delay implementation of these requirements for 1
year, we were also persuaded by comments that we should simplify our
requirement and apply it to all drugs dispensed for less than a month's
supply. Without this simplification of the requirement, we agree that
extraordinary processes would have to be created to obtain information
about the reasons less than a month's supply is being dispensed. For
instance, the parties involved in the prescription transaction (for
example, health plans, PBMs and pharmacies) may not know when a
prescription is an initial fill of a new medication, and this
information is not necessarily readily available from the beneficiary
or physician, whereas the days' supply is available from the
prescription. Therefore, we are revising our requirement such that
Medicare Part D sponsors will be required to provide their enrollees
access to a daily cost-sharing rate for prescriptions dispensed by a
network pharmacy for less than a 30-days' supply of covered Part D
drugs (unless an exception applies due to the type of drug involved)
regardless of the reason the prescriptions are so dispensed. This will
obviate the need for health plans, PBMs, pharmacies, physicians, and
beneficiaries to communicate the reasons for the less-than-30-day
supply, and also make it unnecessary to specifically define ``trial
fill.'' This revision also takes into account our understanding that
pharmacists, under applicable law, can currently dispense a smaller
quantity than is written on certain prescriptions at a customer's
request, and thus there may occasionally be other reasons for less than
a month's supply to be dispensed than the three reasons we identified
in the proposed rule. To be clear, the industry can still decide to
develop coding in order to best manage these transactions, but none is
required by this final rule with comment period.
[[Page 22130]]
Comment: A few commenters suggested we adopt a ``copayment by days'
supply'' structure with respect to plans that have a copayment
structure, whereby Part D enrollees would be charged a set copayment
amount based on a range of days dispensed, for example, a $10 copayment
for 1-10 days, and a $20 copayment for 11-20 days and so on. These
commenters asserted that, for a variety of reasons, this structure
would be simpler to implement, including: (1) It would dovetail with
the LTC dispensing requirements at Sec. 423.154; (2) it would not
require the maintenance of an exception drug list; and (3) it would
enable Part D plans to more accurately model and predict drug costs.
Response: We decline to revise our requirement in the manner
suggested by the commenters. We do not believe it would necessarily
dovetail better with the LTC dispensing requirements than our
requirement, as those requirements require the implementation of 14
days' supply or less dispensing, and thus under the commenters'
suggested approach, copayments in an LTC facility could still vary. In
addition, we do not believe our requirement will necessitate an
exception drug list, as we discuss later in this section. Finally, we
believe that creating additional multiple ``copay tiers'' based on the
days' supply dispensed, as suggested, would significantly increase
beneficiary confusion in evaluating benefit packages, which already
contain copayment tiers based on the type of drug.
Comment: Some commenters stated that Part D sponsor and network
pharmacy interests should be aligned in terms of quality of patient
care, reduction of waste and the associated savings with our proposal,
such that the stakeholders should be able to work together to ensure
that certain pharmacies do not game our proposal. Other commenters
stated that pharmacies may dispense a prescription in multiple stages,
even when it is not so prescribed, to generate additional dispensing
fees, and that the net value of any anticipated offsets should include
such manipulation.
Response: The proposed rule recognized the possibility of
manipulation by network pharmacies to increase dispensing fees, and as
noted previously, we urged the industry to develop appropriate coding
so that the pharmacies could communicate the reason for dispensing less
than a month's supply, even though the reason is not required under our
revised, simplified requirement, as described previously. Although we
will not mandate such coding, we do not think it would be unreasonable
for sponsors to ask pharmacies to attest as to why a prescription was
dispensed for less than a month's supply. We would also expect that
sponsors will implement contractual terms and auditing and other
internal controls to detect and prevent fraud, waste, and abuse and to
ensure that pharmacies are not inappropriately splitting prescriptions
to increase dispensing fees, and thus costs to beneficiaries and the
program. We further note that if pharmacies dispense prescriptions in
stages merely in order to increase dispensing fees, they would have to
have the cooperation of the affected beneficiaries, and we do not
anticipate beneficiaries desiring less than a month's supply of a
medication, absent the recommendation of their physicians, to any
significant degree, particularly given the potential inconvenience
involved. Additionally, engaging in this activity may constitute fraud
by the network pharmacy against the Part D sponsors involved and the
Federal government, and we would expect sponsors to take action
appropriate against such activity, such as terminating the pharmacy
from its network. Consequently, we agree with the commenter that
stakeholders' interests should be aligned under our requirement, and we
do not agree that potential additional dispensing fees would completely
or even significantly offset potential savings associated with this
requirement.
Comment: A commenter stated that the purpose of cost-sharing
obligations is to provide beneficiaries with a financial connection
with the health care service they receive, which assists in countering
potential overutilization, and implied that reduced cost-sharing would
be less effective in this regard.
Response: While we agree that cost-sharing obligations create a
financial connection between beneficiaries and the health care services
they receive, we disagree that our requirement would engender
overutilization. On the contrary, under our requirement as revised, a
beneficiary will pay the same cost-sharing for a month's supply of
medication dispensed in multiple stages that the beneficiary would
otherwise pay.
Comment: Other commenters were concerned that Part D enrollees
would be incentivized to obtain a lesser quantity of a medication than
written by their physicians at the pharmacy counter in cases where the
physician would not want the enrollee to take the medication on a trial
basis, which would negatively affect the beneficiary's medication
adherence. A commenter acknowledged that plans that utilize coinsurance
structures already accommodate the concept of assessing a lower cost
share when less than a month's supply is dispensed, and did not
indicate that this causes problems with adherence today.
Response: We are unclear what scenario the commenter is
envisioning, but we presume it to be that a beneficiary who currently
takes a medication will begin to take less because he or she will be
able to pay lower cost-sharing for less than a month's supply. We do
not believe our requirement would cause more instances of this scenario
than currently may be the case. As noted previously, it is our
understanding that, if permitted under applicable law, pharmacists
currently may dispense a lesser quantity than prescribed at a
customer's request, and we are not aware that this possibility
negatively affects medication adherence today. In contrast to lower
cost-sharing incentivizing beneficiaries to take less medication than
they already do, we think lower cost-sharing is just as likely, if not
more likely, to incentivize beneficiaries to begin taking medications
they have avoided altogether due to cost-sharing.
Comment: A commenter stated that physicians are currently allowed
to write prescriptions for a less than a month's supply, and that
reducing Part D enrollees' copayments for such prescriptions will not
incentivize physicians to do so more frequently.
Response: As noted previously, our requirement is directed at
incentivizing beneficiaries, who actually pay the cost-sharing, to
consider along with their prescribers, whether a less-than-30-days'
supply of a new medication would be appropriate. Indeed, we believe
that prescribers are generally unaware of the copayments that their
patients pay for prescriptions. To the extent that prescribers are
aware of cost-sharing today, we would argue that prescribing patterns
are currently influenced by the inflexible cost-sharing arrangements in
prescription drug plans today, so it would not make sense for
prescribers to write for shorter days' supplies if the industry
standard is to charge a whole month's cost-sharing.
Comment: A commenter noted that Part D plans currently have in
place member-friendly provisions that permit members to pay the lesser
of the copayment amount or the cost of the particular Part D covered
drug. Accordingly, if a prescriber were to write a prescription for a
less than a month's supply and the total cost were less than the
member's copayment, the
[[Page 22131]]
member would only be responsible for the lesser amount. The commenter
asserted such provisions are a more appropriate way to ensure that
members receive the benefit of a less than a month's supply option
without increasing administrative burden to plans.
Response: We see these policies as complementary, not alternatives.
We believe the lesser of copayment or cost will generally result in
lower cost-sharing than monthly copayments for relatively less
expensive drugs.
Comment: A commenter requested clarification on support in member
documents, assuming that Plan Finder, Evidence of Coverage, and Summary
of Benefits, would not include detailed information on daily cost-
sharing rates, since they are not the norm.
Response: We intend to include language in future Medicare & You
and the Part D Evidence of Coverage (EOC) documents on availability of
daily cost-sharing rates and on when beneficiaries should consider
taking advantage of them. We are currently reviewing the level of
detail that we think is appropriate to be included in Summaries of
Benefits, as daily cost-sharing rates are optional for the beneficiary
under this requirement. At this point, we do not think that Plan Finder
needs to add this level of complexity, since its purpose is to help
beneficiaries compare costs of their current medications in different
plans--not to price shortened days' supplies of new prescriptions.
Comment: A commenter was concerned that the proposal would be very
confusing to beneficiaries, and that it is predicated on the belief
that prescribers have actual knowledge if patients fill or refill
prescriptions, and that there is an opportunity for these parties to
have meaningful conversations about a medication's relative cost.
Response: As we noted in the preamble to the proposed rule, the
decision to try a medication for less than a month's supply would
generally be made by the Medicare Part D enrollee and his or her
prescriber, and if an enrollee would have difficulty returning to the
pharmacy, or even broaching the subject with his or her prescriber,
then we believe he or she would not seek to obtain a smaller supply of
a medication.
Comment: Some commenters believed our proposal would result in
better adherence, specifically referencing that our proposal would
greatly facilitate current efforts by community pharmacists to achieve
better adherence through refill synchronization. Other commenters
believed that medication adherence would be negatively affected if Part
D enrollees did not return to the pharmacy to pick up the next supply
of a medication, when it was determined by their prescriber that the
medication should be continued after an initial trial fill, for
example. A commenter stated that our proposal seems to run counter to
using adherence rates as a 5-star metric to measure the quality of a
plan's clinical services, and that there is data in the literature that
shows patients may not return to the pharmacy to fill the remainder of
a prescription under circumstances envisioned by our proposal.
Response: We were persuaded by the comments that our requirement
would assist pharmacists in synchronizing Part D medication refill
dates. Also, as noted previously, the policy behind our requirement is
to incentivize the appropriate elimination of unused medication that
our data shows is already present in the Part D program. That is, a
certain percentage of initial fills of maintenance medications for
chronic conditions are not refilled by enrollees, and this indicates
that the medications were not effective, tolerated, or continued, for
whatever reason, and therefore presumably, a portion of the initial
supply was not used, either. The commenter did not specify the
referenced literature, so we are unable to review it, and we would note
that, since daily cost-sharing rates are not the current industry
standard, we are unclear on what data the literature would be based. We
address star ratings later in this section.
Comment: A commenter stated that the prescriber writing two
prescriptions is the method generally employed by community pharmacists
to assist patients in synchronizing the refill dates of multiple
prescriptions and would work for trial fills, as well.
Response: We appreciate the confirmation that this practice is
already familiar to many prescribers and pharmacies.
Comment: A commenter disputed that many beneficiaries would be
willing to undertake the analysis necessary to synchronize multiple
prescriptions and coordinate with their prescribers' offices. Another
commenter stated that beneficiaries can currently synchronize multiple
medications over months, and that allowing refill-too-soon edits to be
overridden could contribute to fraud, waste, and abuse. Another
commenter requested additional clarification from CMS in terms of
medications that beneficiaries are permitted to synchronize, how many
times this may occur per year, what documentation would be needed, and
what safeguards plans may implement at point-of-sale to review such
claims for fraud, waste, and abuse issues, etc.
Response: Our proposal acknowledged that Part D enrollees could
take advantage of daily cost-sharing rates to synchronize multiple
prescriptions on a voluntary basis, likely with pharmacists playing a
role in assisting them, so we do not believe that our requirement
should be modified because some enrollees will not take advantage of it
to synchronize their medications. While beneficiaries may be able to
synchronize medications currently, they are disincentivized from doing
so under current cost-sharing structures that generally assume at least
a month's supply will be dispensed. Under our revised, simplified
requirement, as described previously, Medicare Part D sponsors will be
required to provide their enrollees access to a daily cost-sharing rate
for prescriptions dispensed by a network pharmacy for less than a 30
days' supply of covered Part D drugs (unless an exception applies due
to the type of drug involved), regardless of the reason, unless fraud
is suspected. We believe that beginning this requirement on January 1,
2014 will give sponsors sufficient time to appropriately program their
systems to account for changes to refill-too-soon and other similar
edits. Despite eliminating the requirement to apply a daily cost-
sharing rate only in specific circumstances, such as for
synchronization, we note that our policy does not prevent sponsors from
developing coding requirements or other internal controls to ensure
pharmacists are not splitting prescriptions to increase dispensing
fees.
Comment: A commenter requested that additional information should
be provided on the methodology that will apply when prescribers take
advantage of our proposal to synchronize the dispensing dates of
multiple medications, as this would impact the Adherence Measure in the
Patient Safety Reports because of the different dispensing dates and
alterations in days' supply of the medications, and classify a patient
as not adherent, which would affect Star Rating Measures.
Response: Comments about the star ratings are outside the scope of
this rulemaking, but we do not believe a daily cost sharing rate
requirement would have any negative impact on our ability to measure
medication adherence because, for example, if a Part D enrollee does
not return to the pharmacy for the second fill, he or she will not be
captured in the measure calculation (which requires at least two
[[Page 22132]]
fills of a drug in the classes measured for adherence). Also, we
account for multiple fills for the same drug when the days supply
overlap.
Comment: A commenter stated that our proposal should not apply to
controlled substances because prorating cost-shares is not permitted.
More specifically, this commenter stated that multiple prescriptions
for the same controlled substance may not be permitted under state law,
including post-dating one for future dispense, and that pharmacists
cannot change quantities dispensed on prescriptions for controlled
substances.
Response: To the extent that applicable Federal and/or State law
prohibits two prescriptions from being written simultaneously for the
same medication, a prescription from being refilled by a physician
directly with the pharmacy, and/or a lesser quantity than was
prescribed from being dispensed, our requirement would not supersede
such law. Therefore, we have revised the regulation text so that the
daily cost-sharing rate requirement applies to a prescription presented
by an enrollee at a network pharmacy for a covered Part D generic or
brand drug that may be dispensed for a supply less than 30 days under
applicable law.
Comment: A commenter supported application of our proposal to LTC
dispensing, asserting it would create consistency in the claims and
billing processes, which could otherwise be chaotic if inconsistent
approaches are adopted by Part D sponsors. Another commenter was
opposed, stating strong concerns that LTC pharmacies would have to
expend considerable staff time and cost creating paper invoices for
extremely nominal amounts and collecting LIS fees, many of which go
uncollected anyway.
Response: As noted previously, based on comments received, this
requirement will not begin until January 1, 2014. However, Part D
sponsors can voluntarily choose to apply a daily cost-sharing rate in
the LTC setting in 2013 or not, or for that matter, in the retail
setting or not. Beginning January 1, 2014, under our revised,
simplified requirement, as described previously, Medicare Part D
sponsors will be required to provide their enrollees with access to a
daily cost-sharing rate when the covered Part D drug may be dispensed
by a network pharmacy for less than a 30 days' supply (unless an
exception applies due to the type of drug involved), regardless of the
reason, unless fraud is suspected. Thus, there is no longer any
reference to the LTC dispensing requirements in the regulation text. We
note that, because Part D sponsors must offer a uniform benefit, we are
unable to exempt Part D enrollees residing in LTC facilities from the
requirement. Moreover, we agree with the commenter who stated that a
consistent approach among Part D sponsors in the LTC setting with
respect to cost-sharing is ideal and note that our requirement does not
address when daily cost-sharing amounts would have to be collected from
LTC beneficiaries. Thus, LTC pharmacies and facilities may implement
consolidated monthly cost-sharing collection irrespective of the cost-
sharing methodology assessed on claims. We also note that the majority
of Part D enrollees in LTC have no copays.
Comment: A commenter stated that LTC customers routinely request
synchronization of patient medications for their residents and asked
that we clarify that the ability to synchronize refills is available to
LTC customers.
Response: Under our revised, simplified requirement, as described
previously, the ability to synchronize refills will be available in LTC
settings.
Comment: A commenter expressed support for LIS beneficiaries to
continue making nominal copayments for prescriptions filled for less
than a month and recommended that we consider capping total cost-
sharing amounts for such beneficiaries who take multiple medications,
since the combined cost of daily-cost-sharing could jeopardize the
ability to comply with such prescription drugs regimens.
Response: Under our requirement, LIS enrollees would not pay any
more in cost-sharing for a month's supply of medication than they would
otherwise. However, we are revising our proposed definition of ``daily
cost-sharing rate'' to make this clearer, as indicated by the
underlining later in this final rule with comment period. Thus, with
respect to copayments, ``daily cost-sharing rate'' is defined as ``the
established monthly copayment under the enrollee's Part D plan, divided
by 30 or 31 and rounded to the nearest lower dollar amount, if any, 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
would otherwise be the case.'' We have added the ``if any'' language
specifically in recognition that some daily cost-sharing rates may be
below $1. We do not have authority under the statute to cap aggregate
LIS cost-sharing, except as provided after the out-of-pocket threshold
has been met.
Comment: Some commenters expressed concern about the effect of our
proposal on the already very low cost-sharing payments of some Part D
enrollees. Commenters noted that, because many plans have cost-sharing
on the preferred generic tier that is lower than the LIS brand cost-
sharing, our proposal would cause the copayments of enrollees other
than just LIS enrollees to be nominal, particularly with respect to
generic medications, and with respect to some dual-eligibles, and the
copayments might even round down to $0, depending upon on the days
supply prescribed by the prescriber. Several commenters asserted that
generics should be exempted from our proposal due to their low-cost-
sharing and the cost associated with dispensing them. A commenter
offered an alternate proposal for LIS enrollees, which was to require
Part D sponsors to offer a 15 days' supply for half the normal
copayment since dividing their already nominal copayments by 30 days
could be impractical.
Response: While we recognize that generics are generally associated
with low cost-sharing, not all generics may be, and we believe our
requirement should apply to all medications (unless an exception
applies due to the type of drug involved). Moreover, the MaineCare
program cited previously achieved savings even with the inclusion of
generic drugs. We also remind stakeholders that our requirement applies
to Part D sponsors, but beneficiaries are not required to avail
themselves of this option. Therefore, if beneficiaries are not
sufficiently incentivized by the lowered cost-sharing applicable to a
less-than-month's supply of medication, they presumably will not ask
their prescribers to write a prescription for less than a month's
supply or their pharmacists to dispense one. Even if beneficiaries do
ask in some instances, the volume of unused drugs that must be
discarded will be reduced, even if the costs are not less.
Nevertheless, we expect this requirement, even as revised, to be most
attractive to enrollees when their drugs are relatively more expensive
and for maintenance medications for chronic conditions. We do not
believe that that these nominal cost-sharing scenarios would occur very
often. However, recognizing that this requirement may result in nominal
cost-sharing amounts for a less than month's supply, or none, if Part D
sponsors choose to round the applicable copayment down to $0, we have
added, ``if any'' after ``rounded to the nearest lower dollar amount,''
in the definition of ``daily cost-sharing rate.'' This change
recognizes that, in the case of LIS enrollees, or other enrollees for
that matter, there will not be a ``lower dollar
[[Page 22133]]
amount'' when making the calculation required by the definition if the
``established monthly copayment'' is lower than the $30 to $31 range.
Comment: A commenter stated that if a plan's preferred generic cost
share is $2, the pro-rated cost share would be $.46 for a 7 days'
supply of the medication, which would be rounded up to $1, so the
enrollee would be paying half the regular cost-share for a 1 week
supply.
Response: The commenter is not correct. Under our proposed
definition of ``daily cost-sharing rate,'' as applied to a monthly
copayment, $2 would be divided by 30 (or 31) and then rounded to the
nearest lower dollar amount ($0), or to another amount (for example,
$0.06), but in no event to an amount which would require the enrollee
to pay more for a month's supply than would otherwise be the case. In
other words, the Part D sponsor can alternatively choose to round to
$0.06 or $0, since another figure, for instance $0.07, is a daily cost-
sharing rate (or any higher amount) that, when applied to a 30 days'
supply, would cause the enrollee to pay $2.10 (or more) for a 30 days'
supply, which is not permitted under the proposed definition. Thus, the
copayment for a 7-day supply in this example (based on 30 days being a
month's supply) would be $0.42 or $0. We note that this definition also
does not allow for rounding to the higher dollar amount, as was done in
the example given by the commenter. However, for further clarity, we
have further revised the regulation text to add the word ``lower.''
Comment: Some commenters requested that we provide more rounding
guidance.
Response: We will consider addressing rounding in more detail in
guidance, and we will consider suggestions from the industry as
appropriate in the development of any such guidance.
Comment: A commenter stated that including the coinsurance
calculation in the definition of ``daily cost-sharing rate'' is
incorrect and unnecessary, because a coinsurance percentage already
applies to the allowed amount (for example, sum of ingredient cost,
dispensing fee, vaccine administration fee, and sales tax). A commenter
requested clarification that for drug tiers using coinsurance, the
proposal would result in no change in the coinsurance percentage as
enrollee cost-sharing would simply be determined via mathematics, as
well as our expectations on ``daily cost-sharing rates'' for plan
designs that include coinsurance with a minimum, maximum, or both.
Response: We agree and have revised Sec. 423.100 and Sec.
423.153(b) accordingly so that, with respect to coinsurance, ``daily
cost-sharing rate'' is defined as the established coinsurance
percentage under the enrollee's Part D plan, and so that it is not
multiplied by the days supply actually dispensed. We also confirm that
coinsurance percentages would not change under our requirement, nor
would minimum or maximum coinsurance amounts be affected, if applicable
to an enrollee's Part D plan.
Comment: A commenter asked for clarification on whether 30 or 90
days should be used to calculate the daily cost-sharing rate for
copayments for Part D LIS enrollees.
Response: Since a month's supply is typically a 30 to 31 days'
supply, the proposed definition of ``daily cost-sharing rate'' is based
on a month's supply which consists of 30 or 31 days, regardless of
whether the enrollee is an LIS enrollee or not.
Comment: Several sponsors asked how dispensing fees would be
prorated.
Response: If the dispensing fee is included in the copayment, it
will be ``prorated'' by virtue of the copayment being divided under the
calculation in Sec. 423.100 (definition of daily cost-sharing rate) to
establish a daily cost-sharing rate in case of a copayment. With
respect to coinsurance, Sec. 423.100 defines the daily cost-sharing
rate as the established coinsurance percentage under the enrollee's
Part D plan. Thus, to the extent that the established coinsurance
percentage is applied to the dispensing fee, the beneficiary will be
liable for the specified coinsurance percentage of the dispensing fee
for each fill. Therefore, beneficiaries may have a higher liability
under a shorter fill for a given month if the beneficiary has to pay
his/her share of a dispensing fee multiple times under a coinsurance
arrangement.
Comment: Several commenters asked how they should account for
daily-cost sharing in their annual bids.
Response: We believe that Part D sponsors have the requisite
actuarial expertise to adequately estimate the potential effects on
utilization and costs generated by our requirement for their annual
bids. Previously, we stated that our savings assumptions were highly
uncertain, because it is very difficult to predict beneficiaries'
behavioral response. However, we were able to estimate savings based on
our data on first fills for chronic medications that are not refilled,
removing costs associated with the LTC setting, and then making some
assumptions about beneficiaries' response to the daily cost-sharing
rate requirement, while accounting for additional dispensing fees,
which we described previously. We believe sponsors' actuaries will
undertake a similar analysis to account for the daily cost-sharing rate
requirements in Part D plan bids.
Comment: A few commenters requested that a list of drugs excepted
from the daily cost-sharing rate requirement be provided by CMS or
claims processors.
Response: As we noted previously, we do not believe our requirement
will cause the need for an exception drug list. The daily cost-sharing
rate requirement would apply to solid oral doses of drugs that may be
dispensed for a supply less than 30 days under applicable law, 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 long-term care dispensing requirements which apply
only to brand drugs, we are proposing here that the daily cost-sharing
rate requirement would apply to both brand and generic drugs. We
believe the industry has the expertise to administer this policy
without our assistance.
Comment: A commenter stated that certain drug therapies in solid
oral dosage forms are inappropriate for dispensing in less than 30
days' supplies, because they take longer to be effective.
Response: We believe prescribers will know when writing for a
limited days supply is appropriate and will not do so when not
clinically appropriate.
After consideration of the public comments received, we are
finalizing our daily cost-sharing rate proposal with the following
modifications previously noted. Therefore, we have revised the
definition of ``daily cost-sharing rate'' in Sec. 423.100. ``Daily
cost-sharing rate'' means, as applicable, the established--(1) monthly
copayment under the enrollee's Part D plan, divided by 30 or 31 and
rounded to the nearest lower dollar amount, if any, or to another
amount, but in no event to an amount that would require the enrollee to
pay more for a month's supply of the prescription than would otherwise
be the case; or (2) coinsurance percentage under the enrollee's Part D.
In addition, we will revise Sec. 423.104 by adding a paragraph (i)
to state that a Part D sponsor is required to provide its
[[Page 22134]]
enrollees access to a daily cost-sharing rate in accordance with Sec.
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 will revise Sec. 423.153(b) by adding a new paragraph (4).
Paragraph (4)(i) will require a drug utilization management program to
establish and apply a daily cost-sharing rate to a prescription
presented to a network pharmacy for a covered Part D drug that is
dispensed for a supply of less than 30 days, and in the case of a
monthly copayment, multiplied by the days supply actually dispensed.
Paragraph (b)(4)(i)(A) would limit the requirement to drugs that are in
the form of solid oral doses and may be dispensed for a supply less
than 30 days under applicable law. Paragraph (b)(4)(i)(B) 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 manuals instruction to assist MA organizations and Part D sponsors
in ensuring the proper and efficient administration of the Part C and D
programs. In this section, we are finalizing provisions that 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 6.
Table 6--Provisions To Clarify Program Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Part 417 Part 422 Part 423
Preamble Section Provision ---------------------------------------------------------------------------------------------------------
Subpart Section Subpart Section Subpart Section
--------------------------------------------------------------------------------------------------------------------------------------------------------
II.E.1............... Technical Corrections Subpart K............ 417.422 Subpart B........... 422.60 Subpart B........... 423.56
to Enrollment 417.432
Provisions.
II.E.2............... Extending MA and Part D Subpart K............ 417.427 N/A................. N/A N/A................. N/A
Program Disclosure
Requirements to
Section 1876 Cost
Contract Plans.
II.E.3............... Clarification of, and N/A.................. N/A Subpart C........... 422.101 N/A................. N/A
Extension to Local
Preferred Provider
Plans, of Regional
Preferred Provider
Organization Plan
Single Deductible
Requirement.
II.E.4............... Technical Change to N/A.................. N/A Subpart E........... 422.216 N/A................. N/A
Private
Fee[dash]For[dash]Serv
ice Plan Explanation
of Benefits
Requirements.
II.E.5............... Application N/A.................. N/A Subpart K........... 422.500 N/A................. N/A
Requirements for 422.501
Special Needs Plans. 422.502
Subpart N........... 422.641
422.660
II.E.6............... Timeline for N/A.................. N/A Subpart K........... 422.501 N/A................. N/A
Resubmitting
Previously Denied MA
Applications.
II.E.7............... Clarification of N/A.................. N/A Subpart K........... 422.504 Subpart K........... 423.505
Contract Requirements
for First Tier and
Downstream Entities.
II.E.8............... Valid Prescriptions. N/A.................. N/A N/A................. N/A Subpart C........... 423.100
423.104
II.E.9............... Medication Therapy N/A.................. N/A N/A................. N/A Subpart D........... 423.153
Management
Comprehensive
Medication Reviews and
Beneficiaries in LTC
Settings.
II.E.10.............. Employer Group Waiver N/A.................. N/A N/A................. N/A Subpart J........... 423.458
Plans Requirement to
Follow All Part D
Rules Not Explicitly
Waived.
II.E.11.............. Access to Covered Part N/A.................. N/A N/A................. N/A Subpart C........... 423.120
D Drugs Through Use of
Standardized
Technology and
National Provider
Identifiers.
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Technical Corrections to Enrollment Provisions (Sec. 417.422, Sec.
417.432, Sec. 422.60, and Sec. 423.56)
In our October 11, 2011 proposed rule we proposed a number of
technical corrections to our enrollment regulations (76 FR 63056).
Specifically we proposed the following changes:
At Sec. 417.422(d) (Eligibility to enroll in an HMO or
CMP) and Sec. 417.432(d) (Conversion of enrollment) we proposed to
remove references to signatures thereby ensuring that all of our
regulations conform with allowing cost plans to utilize alternate
enrollment mechanisms.
At Sec. 422.60(c) (Election process) we proposed to
revise an outdated cross-reference.
At Sec. 423.56 (Procedures to determine and document
creditable status of prescription drug coverage) we proposed to remove
an outdated reference to the Annual Coordinated Election Period.
We received no comments on these proposals, and therefore, are
finalizing this provision without modification.
2. Extending MA and Part D Program Disclosure Requirements to Section
1876 Cost Contract Plans (Sec. 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
[[Page 22135]]
Act gives the Secretary the authority to 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 Sec. 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, and waives requirements to review
such materials. In our April 2010 final rule (75 FR 19785), in which we
discuss extending MA marketing requirements to cost contracts, we note
that 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 Sec. 422.111 and Sec.
423.128, respectively, to cost contract plans. As we specified in the
proposed rule, 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 Sec. 422.111 and Sec. 423.128. These provisions
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 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 proposed to extend the disclosure
requirements in Sec. 422.111 and Sec. 423.128 to cost contract plans
by adding a new Sec. 417.427.
Comment: A commenter supported the provision as specified in the
proposed rule.
Response: We thank the commenter for its support.
Comment: A few commenters believe the effective date of 60 days
after publication of the final rule does not allow enough time for
Medicare cost contract plans to implement the new requirements and that
the requirements instead should become effective no sooner than for the
2013 annual election period (that is, in the Fall of 2012).
Response: Although the provisions of the rule are effective 60 days
after publication of the rule, the disclosure requirements are
primarily carried out through the ANOC/EOC, so we would indeed expect
that the disclosure requirements would be implemented during the 2013
annual election period (Fall of 2012), the first such period after the
effective date of the regulations.
Comment: A commenter stated that changing the ANOC/EOC delivery
date from December 1 to 15 days prior to the beginning of the annual
election period would not be appropriate for cost contract plans that
include only Medicare benefits, (that is, no supplemental benefits).
The commenter stated that CMS may not have released the applicable
deductible amounts for the following contract year at the time the ANOC
is required to be distributed, which is a significant issue because
some cost plans mirror Original Medicare cost-sharing amounts.
Response: We will continue to require that cost plans not offering
Part D send the ANOC for member receipt by December 1. It was not our
intention to change this date for cost plans. We will clarify this in
forthcoming plan guidance. All cost plans offering Part D must
currently follow the MA ANOC timelines, and must send the ANOC for
member receipt 15 days before the beginning of annual coordinated
election period.
Comment: A commenter notes that, contrary to the MA disclosure
language at Sec. 422.111(b)(7), which states that non-contract
providers submit claims to the MA organization, non-contract providers
would submit claims to the Medicare administrative contractor (MAC),
not the cost contract plan. The commenter asks that we address this
issue in the regulation by establishing a waiver process for MA
provisions that do not apply to cost contract plans.
Response: We will clarify in the cost contract plan EOC that, in
most instances, non-contract providers should submit claims to the MAC,
and not directly to the cost contract plan. Therefore, we do not
believe that it is necessary to establish a general exceptions process
to waive MA requirements.
After consideration of the public comments received, we are
finalizing the policy without modification.
3. Clarification of, and Extension to Local Preferred Provider Plans,
of Regional Preferred Provider Organization Plan Single Deductible
Requirement (Sec. 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 Sec. 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
apply only to 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 proposed to make three changes to our regulations at Sec.
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 extending the RPPO rules to LPPOs.
Specifically, we proposed to clarify the application of the single
deductible differential for in-network services and modify 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 proposed 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
[[Page 22136]]
beneficiaries when they evaluate and select plans for enrollment. In
previous rulemaking, we took 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 proposed to extend to LPPOs the single deductible requirements at
Sec. 422.101(d)(1). We would clarify the rules that would now apply to
both LPPO and RPPO plans as set forth later in this section.
As discussed previously, we proposed to clarify at Sec.
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 proposed amending Sec. 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 to the overall, single plan deductible; and
Choose to exempt, that is, exclude, specific plan-covered
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 regardless of whether 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 in-network physician services to
$100. This LPPO or RPPO could also choose to exclude particular in-
network services from application of the deductible altogether; for
example, all in-network home health services would not be subject to
the deductible.
In our April 2011 final rule (76 FR 21475 and 21476), we
established a new requirement for MA organizations to provide certain
in-network Medicare-covered preventive benefits at zero cost sharing.
As provided under Sec. 422.100(k), MA organizations, including those
offering PPO plans, may not charge deductibles, copayments, or
coinsurance for in-network Medicare-covered preventive services
specified in Sec. 410.152(l). Therefore, we will now require both LPPO
and RPPO plans to exclude preventive services from the single
deductible at Sec. 422.101(d)(1), and will add a new paragraph Sec.
422.101(d)(1)(iv) that explicitly requires LPPO and RPPO plans to
exclude certain Medicare-covered preventive services (as defined in
Sec. 410.152(l)) from the single, combined deductible.
Comment: A commenter supported CMS' proposed clarification of the
rules for RPPO plans with a deductible.
Response: We thank the commenter for its support.
After consideration of the public comment received, we are
finalizing the proposed clarifications of the RPPO deductible and
extension of deductible rules to local PPO plans without modification.
4. Technical Change to Private Fee-for-Service Plan Explanation of
Benefits Requirements (Sec. 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 Sec.
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 Explanation of Benefits (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 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 Sec. 422.216(d)(1) already require PFFS plans to provide an
EOB to enrollees. Our current regulations at Sec. 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 proposed--in our October proposed rule--to
amend Sec. 422.216(d)(1) to state that the EOB requirement for PFFS
plans will be consistent with the MA EOB requirements of Sec.
422.111(b)(12). The standard EOB that we are currently developing and
piloting for most of the 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 Sec. 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 proposed that PFFS plans would continue to furnish EOBs
as they have been, in accordance with Sec. 422.216(d)(1), until we
finalize and implement EOB models for all MA plans.
We did not receive any comments on this provision in the proposed
rule; therefore, we are finalizing this technical change as proposed.
5. Application Requirements for Special Needs Plans (Sec. 422.500,
Sec. 422.501, Sec. 422.502, Sec. 422.641, and Sec. 422.660)
Section 1859(f) of the Act and its implementing regulations specify
several requirements for Special Needs Plans (SNPs). MA organizations
that would like to offer a SNP are required to engage in an intensive
application process to demonstrate that they meet these SNP specific
requirements, including the requirement in Sec. 422.101(f) that MA
organizations offering a SNP implement an evidence based model of care
(MOC) to be evaluated by NCQA; the requirement in Sec. 422.107 that
Dual Eligible SNPs (D-SNPs) have a contract with the State Medicaid
Agencies in the States in which they operate; and the requirement in
Sec. 422.152(g) that SNPs conduct a quality improvement program. SNP
applicants follow the same process in accordance with the
[[Page 22137]]
same timeline as applicants seeking to contract as MA organizations.
Accordingly, we proposed to broaden the regulations on Medicare
Advantage (MA) Application Requirements and Evaluation and
Determination Procedures, in accordance with section 1859(f) of the
Act, to apply to SNP applicants. Specifically, we proposed to revise
the language in Sec. 422.500(a) and Sec. 422.501(a) to specify that
the scope of these provisions include the specific application
requirements for SNPs. We also proposed to add paragraph (iii) to Sec.
422.501(c)(1) to specify the documentation SNP applicants must provide
to complete an application. Furthermore, we proposed to revise Sec.
422.502(a) and Sec. 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
proposed 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 proposed adding a new paragraph (d) to Sec.
422.641, a new paragraph (a)(5) to Sec. 422.660, and a new paragraph
(b)(5) to Sec. 422.660. We believe these proposed changes will 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.
Comment: Commenters expressed their support for our proposals to
ensure that SNP applicants have the same rights and responsibilities as
other MA contract applicants. A commenter specifically noted its
support for consistent rules for all MA options.
Response: We appreciate the commenters' support for this provision,
which makes the rules and appeal rights for SNP applicants consistent
with the rules governing the MA contract application and appeals
process.
Comment: A commenter recommended that we add language to our
application regulations to ensure that an entity that has applied as a
SNP is presumed to have applied as an MA plan. The commenter thought
that such language would be necessary so that the MA organization could
operate an MA plan in the event that the MA organization is not able to
meet the SNP application requirements necessary to operate a SNP.
Response: It has been CMS' longstanding policy that, in order to
offer a SNP, an MA organization must also apply and be approved to
offer an MA Coordinated Care Plan (CCP) in the service area in which it
would like to offer a SNP. (Please note that a prior year's MA
application approval is sufficient to meet this requirement. The plan
is not required to submit a new MA application if it has been
previously approved to offer a CCP in the service area in which it is
applying to offer a SNP.) Accordingly, if an approved MA organization's
SNP application is denied, the plan is nonetheless still authorized to
bid to offer an MA plan for the upcoming contract year. If an MA
organization is applying to offer an MA CCP that is also a SNP, and the
SNP application is denied, the MA organization's MA application must
still be approved. As such, the language requested by the commenter
will not be added to the regulatory text and we will finalize the
policy without modification.
Comment: A commenter requested that we modify our substantive
regulations on the SNP MOC approvals to specify that SNPs can be
approved for multiple years. Another commenter encouraged CMS to
provide States with operational support and regulatory guidance
regarding the D-SNP State contract requirements.
Response: While we appreciate these suggestions, the MOC approval
regulations and D-SNP State contract requirements are outside the scope
of this regulation. We will consider these suggestions as we develop
future rulemakings and guidance.
After review of the public comments, we are finalizing our proposal
without modification.
6. Timeline for Resubmitting Previously Denied MA Applications (Sec.
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 all 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 Sec. 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, as we presently operate on an annual application
cycle. In order to align Sec. 422.501 with current procedures, we
proposed 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
was previously denied in the current contract year's application cycle.
Comment: A commenter recommended that if a SNP application is
denied, the plan should be presumed to have applied for an MA plan;
thus, if the application meets MA requirements, the plan will not have
to reapply as such.
Response: We have addressed the commenter's concern that a SNP
application shall be presumed to be an MA application and approvable if
it meets the MA requirements in the comment and response for our
provision on applications for SNPs in section II.E.5. of this final
rule with comment period.
Comment: The commenter also expressed its support for extending
appeal rights to denied SNP applications.
Response: SNP application requirements and appeal rights are
outside the scope of this provision.
After consideration of the public comments received, we are
finalizing the policy without modification.
7. Clarification of Contract Requirements for First Tier and Downstream
Entities (Sec. 422.504 and Sec. 423.505)
The regulations at Sec. 422.504(i) and Sec. 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 Sec. 422.504(i)
and Sec. 423.505(i) required that all contracts governing the
relationships among a sponsor and all of its delegated entities (that
is, those between the
[[Page 22138]]
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 Sec. 422.504(i) and Sec. 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 Sec. 422.504(i) and
Sec. 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 Sec. 422.504(i) and Sec. 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 than the applicant, in the contract
sections the applicant intended to meet the requirements of Sec.
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 MA organizations 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 Sec. 422.504(i) and Sec.
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 proposed to make explicit
that sponsors can fulfill the requirements of Sec. 422.504(i) and
Sec. 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
proposed to delete the term ``written arrangements'' throughout Sec.
422.504(i) and Sec. 423.505(i) and in each instance replace it with
``each and every contract.''
Comment: An MA organization expressed its concern about the use of
the term ``contract'' throughout the proposed regulatory change. The
organization noted that the term was too narrow and appeared to exclude
less formal arrangements that sponsors use to meet their Part C and D
obligations. For example, some organizations use related parties (for
example, another subsidiary of their parent organization) to perform
delegated functions and those relationships may be governed by
something other than a contract.
Response: We believe that the term ``contract'' best expresses the
nature of the arrangements sponsors must have in place to meet the
requirements of Sec. 422.504(i) and Sec. 423.505(i). Therefore, we
are retaining the proposed language in the final rule. Nonetheless, we
acknowledge that organizations may meet the requirements through the
use of documents that may not be expressly labeled as ``contracts.''
These may include letters of agreement or intercompany agreements.
Sponsors must simply make certain that the documents they use to
memorialize the functions delegated to their first tier, downstream, or
related entities contain language that clearly describes an enforceable
set of plan sponsor rights and subcontractor obligations to the
sponsor, regardless of whether the sponsor is a party to the agreement.
Comment: An MA organization asked that CMS provide more information
about the deficiency that led to the application denial discussed in
the proposed rule.
Response: More discussion of the facts of the application denial
appeal is provided in the CMS Hearing Officer's opinion, In the Matter
of Stonebridge Life Insurance Company, Inc., Denial of Application,
S3502, Docket No. 2010 C/D App. 7. The opinion is posted on the CMS Web
site at https://www.cms.gov/Medicare-Advantage-Prescription-Drug-Plan-Decisions/downloads/2010_CD_App_7.pdf.
Comment: A commenter requested that CMS clarify that sponsors are
not required to directly monitor the performance of all downstream
entities to which they have delegated functions but with which they do
not directly contract.
Response: The commenter is technically correct that the regulations
only require that the contracts that govern the delegated functions
among the sponsor's first tier, downstream, and related entities
contain provisions expressly granting the sponsor the authority to
perform oversight of the activities of the subcontractors. The
regulations do not require the sponsor to exercise that authority. That
said, we remind sponsors that the Part C and D regulations require them
to adopt and implement an effective compliance program which provides
for, among other things, the sponsor to establish an effective system
for monitoring and auditing its first tier and downstream entities to
ensure their compliance with our requirements. We encourages all
sponsors to review their compliance program activities to make certain
that their methods for oversight of their subcontractors are effective
in holding them accountable for Part C and D functions performed on the
sponsors' behalf.
Comment: A commenter requested that CMS provide model contracting
language that meets the subcontracting requirements discussed in the
proposed provision.
Response: The arrangements between a plan sponsor and its first
tier, downstream and related entities are subject to considerable
variation from sponsor to sponsor. Accordingly, the contracts governing
the arrangements must be tailored to reflect their particular features.
For example, some arrangements may require a unique contract where the
plan sponsor is specifically named in the document while others can be
served through a contract template used by a subcontractor that serves
multiple plan sponsors and the sponsors are identified by proper
reference to another document. We believe that it would be, at best,
not useful for CMS to provide model language and at worst,
counterproductive as it could create the temptation for sponsors to use
the model language in their contracts when a specially-tailored set of
terms is needed to properly govern their unique
[[Page 22139]]
arrangements and to meet the Part C and D program requirements.
Comment: A commenter requested that CMS require MA organizations to
provide to their first tier and downstream entities a copy of the
organization's Part C contract with CMS. The commenter stated that such
a requirement would be useful to subcontractors perform their delegated
functions in a manner consistent with the MA organization's contract
with CMS.
Response: The subject of this comment is technically outside the
scope of our proposal. However, we note that our contracts with Part C
and D sponsors consist of uniform terms and conditions for each type of
plan offering. Therefore, we have already responded to this request by
posting on our Web site all of the current Part C and D contract
templates. Subcontractors can now obtain the Medicare plan sponsor
contact terms and conditions directly from CMS.
After consideration of the public comments received, we are
finalizing the policy without modification.
8. Valid Prescriptions (Sec. 423.100 and Sec. 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
proposed in our October NPRM 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 proposed, first, to add a definition of the term ``valid
prescription'' to Sec. 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 underscore, as we did in the proposed rule, 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 proposed to add a new paragraph (h) to Sec. 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 discussed previously, 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 final rule with comment period (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 with
information that could be essential to identifying and prosecuting the
particular individuals committing or abetting fraud, waste, or abuse.
Accordingly, we once again would like to take 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.
Comment: A few commenters indicated they supported or agreed with
the provision.
Response: We appreciate the commenters' support of this
codification of our long standing policy.
Comment: A few commenters questioned whether the proposed
regulation would change existing responsibilities and asked CMS to
provide additional guidance. A commenter first pointed out that
pharmacies, not plans, are required by State pharmacy laws to ensure
that prescriptions meet minimum State requirements and should not be
held accountable if a pharmacy fails to fill a prescription pursuant to
applicable laws. The commenter then requested that CMS (1)
``reiterate'' that pharmacies must ensure that prescriptions are valid;
and (2) direct pharmacies to ensure that CMS mandates like NPIs are
included in prescription claims sent to plans.
Response: This regulation does not in any way preempt existing
State requirements or create new Federal requirements. Rather, our
codification of longstanding policy merely specifies in regulation that
applicable State law applies in determining whether a prescription is
valid. Therefore, we disagree with the commenter's suggestion that our
policy takes any position with respect to which parties are responsible
for ensuring prescriptions are valid under applicable State law--the
parties should look to applicable State law on that issue. However, we
would like to note, as has always been the case, that it is up to each
Part D sponsor to determine through its contracting management how to
best ensure that its network pharmacies are complying with the Part D
requirement that prescriptions be valid under applicable State law.
Comment: Several commenters asked CMS to clarify the limits on
audits as related to this proposal. One of these commenters believed
that prescriptions cannot be audited using more strict guidelines than
State law requires and requested that CMS instruct sponsors to stop
``egregious audit practices'' against pharmacies for violations of
requirements not found in State law. Requesting that CMS clarify that
LTC pharmacies being audited should not be required to produce
documentary proof of prescriptions under applicable State laws, another
commenter expressed concern that LTC pharmacies would not be able to
provide sponsors, auditors, and/or CMS with such proof valid under
State law because such prescriptions are typically kept with patient
charts at the LTC setting.
Response: As discussed previously, our proposal was intended to
codify our longstanding policy that applicable State law applies in
determining what constitutes a valid prescription and that Part D
benefits should be available only for otherwise covered drugs that are
dispensed upon a valid prescription. We did not propose rules governing
the conduct of audits by any entities--including plan sponsors.
Comment: A commenter appreciated that CMS encouraged States to
require
[[Page 22140]]
individual NPIs for valid prescriptions. But, after observing that no
States required NPIs for valid prescriptions, the commenter indicated
that pharmacists would be challenged by a large number of prescriptions
lacking appropriate NPIs.
Response: For a response addressing this issue, please see section
II.E.11 of this final rule with comment period (Access to Covered Part
D Drugs Through Use of Standardized Technology and National Provider
Identifiers).
We are finalizing this provision without modification.
9. Medication Therapy Management Comprehensive Medication Reviews and
Beneficiaries in LTC Settings (Sec. 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 (individuals as specified with multiple chronic diseases,
taking multiple covered Part D drugs, and likely to incur certain
annual Part D drugs costs), 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 as part of the MTM services furnished
to targeted beneficiaries to offer, at a minimum, an annual
comprehensive medication review (CMR) that must 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.
As we reiterated in the preamble to the October 11, 2011 proposed
rule, we first explained in our April 2011 final rule (75 FR 21476
through 21478) that beneficiaries residing in long term care (LTC)
facilities who have cognitive impairments may not be able to
participate in CMRs. The current regulations at Sec.
423.153(d)(1)(vii)(B), which were amended in the April 2011 final rule
to reflect certain requirements of the Affordable Care Act, continue to
exempt sponsors from offering interactive, person-to-person
consultations to targeted beneficiaries who reside in LTC settings.
However, the Act, as amended by section 10328 of the Affordable Care
Act, does not provide a basis for creating an exception to the
requirement to offer a CMR based on the setting of care. Since the
Affordable Care Act provision for MTM programs was not effective until
January 1, 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.
In the October 11, 2011 proposed rule, we proposed to revise the
regulation at Sec. 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 a CMR without the beneficiary. When the
beneficiary is cognitively impaired and cannot make decisions regarding
his or her medical needs, we recommended that the pharmacist or
qualified provider reach out to the beneficiary's prescriber,
caregiver, or other authorized individual, such as the resident's
health care proxy or legal guardian, to take part in the beneficiary's
CMR.
Comment: Several commenters questioned how to determine whether a
beneficiary residing in an LTC setting is cognitively impaired or able
to participate in the CMR and suggested that this determination should
be made by or coordinated with the LTC facility or LTC consultant
pharmacist. One of these commenters questioned if documentation of this
determination should be maintained and another suggested revising the
Part D reporting requirements to require Part D sponsors to report the
beneficiaries who opted out of the CMR due to cognitive impairment.
Response: We agree that LTC consultant pharmacists are positioned
to help plan sponsors work with the LTC facility staff to identify
cognitively impaired beneficiaries in LTC settings and determine
whether beneficiaries are capable of participating in a CMR. We
recommend that plan sponsors coordinate with LTC consultant pharmacists
to make these determinations. If asked, plan sponsors should be able to
present documentation or a rationale for these determinations. Any
changes to the Part D reporting requirements are outside the scope of
this regulation.
Comment: A few commenters are opposed to the proposed policy, and a
commenter argued that the CMR requirement in the LTC setting should be
the responsibility of the LTC facility, not plan sponsors, because LTC
facilities are paid to provide care to their patients and have their
own physicians and pharmacists who order and fill the drugs.
Response: The statute specifies that ``prescription drug plan
sponsors shall offer medication therapy management services to targeted
beneficiaries'' and requires interventions ``to increase adherence to
prescription medications or other goals deemed necessary'' and includes
at a minimum ``an annual comprehensive medication review furnished
person-to-person or using telehealth technologies.'' Further, the Act,
as amended by section 10328 of the Affordable Care Act, does not
provide a basis for distinguishing the offering of a CMR based on the
setting of care.
Comment: Several commenters urged CMS that in order to maximize the
efficient use of healthcare resources, the CMR should be performed in
the LTC setting by an LTC consultant pharmacist or that plan sponsors
should coordinate with the consultant pharmacists performing monthly
drug regimen review (DRR) before intervening to resolve potential
medication-related problems identified through the CMR or other MTM
services. Other commenters requested clarification and additional
guidance on the pharmacist or other qualified provider who will perform
the CMR on behalf of the targeted beneficiary in LTC settings and how
this would be implemented. Another commenter questioned if the
pharmacist or other qualified provider performing the CMR is permitted
to be employed by the sponsor or its Pharmacy Benefits Manager (PBM)
and if it is common for the MTM provider to be the PBM, and not the
plan sponsor.
Response: Sponsors may utilize in-house resources or make
arrangements with other resources (such as PBMs, MTM vendors, or
individual pharmacists or other qualified providers) to provide MTM
services and administer their MTM program to targeted beneficiaries. We
agree that LTC consultant pharmacists would be a valuable resource for
the delivery of CMRs to targeted beneficiaries in LTC settings, and
also acknowledge that the potential overlap between the DRR reviews
required in LTC settings and Part D MTM reviews could possibly result
in conflicting reviews. To maximize efficient use of healthcare
resources, we encourage plan sponsors to consider making arrangements
that include the LTC consultant pharmacist in conducting Part D MTM
services for targeted beneficiaries in LTC. Such arrangements could
include direct contracts between the sponsor and consultant pharmacists
(or their
[[Page 22141]]
intermediaries), or indirect contracts between the sponsor's MTM vendor
or PBM and LTC consultant pharmacists (or their intermediaries). We
would like to hear from any parties who may currently be doing this and
how such arrangements have improved care coordination or created
efficiencies. You may contact CMS at partd_mtm@cms.hhs.gov.
Comment: A commenter argued that when the targeted beneficiary in
the LTC setting is unable to participate in the CMR, there should be an
exemption from the CMR standardized format requirements.
Response: Section 423.153(d)(1)(vii)(D) of the regulations requires
standardized format action plans and summaries that comply with
requirements as specified by CMS for the standardized format, to be
provided following each CMR. This applies whether the CMR is provided
to the beneficiary, or to the authorized representative or prescriber
who may take part in the CMR if the beneficiary cannot participate. If
the commenter meant to suggest that no written summary be provided, we
would respond that the need for a CMR is certainly no less vital when
individuals are cognitively impaired and these summaries can serve to
coordinate care.
Comment: A few commenters suggested that CMS consider alternative
approaches to disseminating MTM recommendations in the LTC setting by,
for instance, providing: (1) The findings or recommendations related to
drug therapy to the attending physician and/or nursing staff at the LTC
facility; (2) CMR written summaries and standardized action plans to
the LTC facility; or (3) medication review results to the beneficiary's
medical power of attorney, if applicable.
Response: We appreciate these recommendations. Plan sponsors and
MTM providers may, but are not required to, provide copies of the CMR
written summaries and medication action plans to other HIPAA-covered
entities to coordinate care. Also, a HIPAA covered entity may share a
beneficiary's health information (such as medication review results)
with the beneficiary's personal representative, which includes a person
with medical power of attorney, where that information is relevant to
such personal representation.
Comment: Several commenters focused on outreach to individuals to
participate in the CMR aside from the targeted beneficiary. A commenter
suggested that, even when the beneficiary can participate, the provider
conducting the CMR still should be able to reach out to individuals,
such as the family caregiver, other authorized individual, and
beneficiary's prescriber, to participate in the CMR. A few commenters
suggested that when impairment prevents a targeted LTC beneficiary from
participating in the CMR, CMS should require the provider arranging the
CMR to provide written notice to the individual's health care proxy or
legal representative, while another asked whether telephone or mail
contact was acceptable. Another commenter recommended that if the
targeted beneficiary in the LTC setting is unable to participate, the
caregiver or surrogate should be engaged first, and then the
prescriber, to ensure that the patient's best interests are protected.
Response: While we certainly appreciate an approach that would
allow the beneficiary to be joined by, for instance, family members for
a CMR, we believe it best, when a beneficiary is able to participate,
to leave the decision as to whom he or she wishes to invite to his or
her discretion. In these instances the pharmacist or other qualified
provider may ask the beneficiary for permission to invite other
individuals to the CMR. As to the form of the outreach, sponsors are
responsible for choosing the outreach method, and are expected to use
more than one approach when possible to reach all eligible targeted
beneficiaries, regardless of setting, so they are able to receive MTM
services and a CMR versus only reaching out via passive offers. These
expectations also apply to any outreach to a beneficiary's prescriber,
caregiver, or other authorized individual. Lastly, we do not believe it
would be appropriate to burden the pharmacist or qualified provider
arranging the CMR by specifying the order in which to contact
individuals to represent a beneficiary who cannot participate in the
CMR. This decision should be at the discretion of the provider and is
dependent on the individual beneficiary's needs and situation.
Comment: A commenter recommended that CMS recognize that MTM
services focused on the use of the most appropriate and cost-effective
medications should be the primary goal of MTM in the LTC population.
Response: This comment is outside the scope of this rulemaking, and
therefore, we will not address it in this rule.
Comment: A few commenters suggested that beneficiaries in other
settings may be cognitively impaired or unable to participate in the
CMR (such as hospice patients, beneficiaries being cared for in an
assisted living facility, or at home) and the proposed rule should not
be limited to targeted beneficiaries in the LTC setting.
Response: Targeted beneficiaries in other health care settings are
not excluded from the Part D MTM requirements, and must be offered MTM
services if eligible. The proposal to eliminate the exception to the
requirement to offer a CMR for beneficiaries residing in LTC settings
was necessary in order to bring the existing regulation into compliance
with requirements of section 10328 of the Affordable Care Act.
Accordingly, the proposed revisions to the language of Sec. 423.153(d)
would require Part D sponsors to offer CMRs to all targeted
beneficiaries in all settings. We acknowledge that beneficiaries in
settings other than LTC may suffer cognitive impairments. Therefore, we
encourage MTM programs to adopt similar approaches to furnishing MTM
services to these beneficiaries who may be unable to accept an offer of
a CMR and recommend outreach to the beneficiary's prescriber,
caregiver, or other authorized individual.
Comment: A commenter questioned whom the plan sponsor can contact
to act on behalf of the beneficiary if a call to an LTC facility
results in the plan not being able to reach a beneficiary. The
commenter questioned if the plan sponsor should assume that the
prescriber and/or LTC consultant pharmacist on staff can be called and
a CMR can be completed.
Response: We recommend that when a targeted beneficiary moves to an
LTC facility, Part D plan sponsors should identify the appropriate
contact for each beneficiary, which could be the prescriber, caregiver,
or authorized representative. Alternatively, sponsors could include
this requirement in any arrangements that may be made with the LTC
consultant pharmacist in the conduct of Part D MTM services.
Comment: Several commenters requested clarification about
distinguishing services provided through the existing LTC consultant
pharmacist monthly DRR and those required for targeted LTC
beneficiaries through Medicare Part D MTM and commented that the
efforts are duplicative. Some commenters suggested that plan sponsors
should rely on the consultant pharmacists' review or, alternatively,
sponsors should not be required to conduct CMRs for beneficiaries in
the LTC setting.
Response: As mandated by section 10328 of the Affordable Care Act,
sponsors are required to offer CMRs to all targeted beneficiaries,
including those in LTC settings. While there is
[[Page 22142]]
some potential overlap between the LTC consultant pharmacist monthly
DRR and MTM required for targeted LTC beneficiaries through Part D,
Part D sponsors remain subject to the requirement to furnish MTM
services to all targeted beneficiaries consistent with section 1860D-
4(c)(2) and the regulations at Sec. 423.153(d). Thus, services
required for MTM, such as offering a CMR, which must include an
interactive, person-to-person, or telehealth consultation, are required
for all targeted beneficiaries, including those in LTC settings. In
light of the potential overlap, and to maximize efficient use of
healthcare resources, we encourage plan sponsors to consider making
arrangements that include the LTC consultant pharmacist in the conduct
of Part D MTM services for targeted beneficiaries in LTC settings. We
will provide guidance on the implementation of the MTM requirements and
set service level expectations where necessary.
Comment: Several commenters felt that the recommendation that MTM
providers reach out to the beneficiary's prescriber, caregiver, or
other authorized individual to participate in the CMRs is
administratively burdensome and costly given that plan sponsors cannot
easily identify the LTC resident's health care proxy or authorized
representative, or primary care physician (and their contact
information), and question if this contact information is consistently
captured or reported.
Response: As indicated in an earlier response, we recommend but do
not require that when a beneficiary moves to an LTC facility, Part D
plans identify the appropriate contact for each beneficiary, which
could be the prescriber, caregiver, or authorized representative.
Alternatively, sponsors could include this requirement in any
arrangements that may be made with the LTC consultant pharmacist
regarding the conduct of Part D MTM services. LTC consultant
pharmacists are positioned to help plan sponsors work with LTC facility
staff to identify the resident's authorized representative or
prescriber, particularly in cases where this information is not part of
the Part D enrollment information. We recommend that plan sponsors
coordinate with LTC consultant pharmacists to obtain this information.
Comment: A few commenters requested clarification to distinguish
between an interactive and non-interactive CMR and how it differs from
the current MTM and interactive CMR processes.
Response: The October 11, 2011 proposed rule inappropriately
referred to ``non-interactive CMRs.'' By definition, a CMR is an
interactive consultation with the beneficiary or an authorized
individual, such as their prescriber or caregiver, to review the
beneficiary's medications and must be a real-time interaction. Per the
regulation at Sec. 423.153(d)(1)(vii)(B)(i), the annual comprehensive
medication review with written summaries must include an interactive,
person-to-person, or telehealth consultation performed by a pharmacist
or other qualified provider. While providers are required to offer a
CMR to all beneficiaries, regardless of setting, in the event the
beneficiary is cognitively impaired, the MTM provider is encouraged to
reach out to other appropriate parties to participate in a CMR.
However, in the event the MTM provider is unable to identify another
individual who is able to participate in the CMR, or a beneficiary in
any setting refuses to participate in the CMR, a CMR cannot be
performed, but sponsors are required to perform targeted medication
reviews at least quarterly with follow-up interventions when necessary
and perform prescriber interventions. To make the distinction clear, we
are adding the word ``comprehensive'' before ``medication review'' in
Sec. 423.153(d)(1)(vii)(B)(2). We are also revising Sec.
423.153(d)(1)(vii)(B)(2) to remove the reference to beneficiaries
residing in LTC settings and to state that if a beneficiary is offered
the annual CMR and is ``unable to'' accept the offer to participate,
the pharmacist or other qualified provider ``may'' perform the CMR
``with the beneficiary's prescriber, caregiver, or other authorized
individual'' to clarify that a CMR is voluntary and that a CMR cannot
be performed without participation by the beneficiary, or an individual
authorized to represent the beneficiary.
Comment: A commenter requested that we delay implementation due to
potential bid and cost implications that would impact contract
negotiations with LTC facilities or even the pharmacy providers for LTC
facilities.
Response: We cannot delay implementation of this requirement
because the statute mandates that we implement section 10328 of the
Affordable Care Act by January 1, 2013. Additionally, sponsors were put
on notice regarding this deadline in our April 2011 final rule in which
we stated our plans to undertake additional rulemaking to clarify the
CMR requirements for targeted beneficiaries in LTC settings. However,
we thank the commenter for highlighting that we incorrectly stated in
the proposed rule that we did not anticipate any costs associated with
this change. This was an oversight, and we have revised the regulatory
impact and estimate to acknowledge that there will be a modest increase
in costs to offer CMRs to beneficiaries residing in LTC settings with
written summaries in a standardized format that complies with the
requirements specified by CMS.
After consideration of the comments received in response to this
final rule with comment period, we are adopting the revisions to Sec.
423.153(d)(1)(vii)(B) as proposed with the clarifying changes discussed
previously. The revisions will become effective January 1, 2013.
10. Employer Group Waiver Plans Requirement To Follow All Part D Rules
Not Explicitly Waived (Sec. 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).
Both employers/unions that contract directly with CMS, as well as PDP
sponsors that contract with employers/unions and CMS, may offer
customized employer group PDPs which are referred to collectively as
employer/union-only group waiver plans (EGWPs). 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 employment-based retiree
health coverage in a manner similar to that in which they apply to an
MA plan in relation to employers, including authorizing the
establishment of separate premium 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
[[Page 22143]]
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 proposed to revise Sec. 423.458 by adding a
new paragraph (paragraph (c)(3)) 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.
Comment: While supporting the clarification, a commenter opined
that significant operational challenges exist for EGWPs as they try to
meet Part D requirements in areas including enrollment, formulary
requirements, and transition fill policy. The commenter requested that
CMS establish a forum and process for stakeholders such as EGWPs and
employer groups to raise these issues and re-evaluate the current Part
D requirements in consultation with stakeholders. In calling for
transparency and efficiency, it further requested that CMS publish the
outcome of waiver requests.
Response: We thank the commenter for the support and appreciate
that EGWPs and EGWP sponsors face unique operational issues. We have
already established a forum for stakeholders to raise Part C and D
concerns--the biweekly Part C & D user call--and we would welcome any
questions or concerns that EGWPs, EGWP sponsors, employer groups, or
other interested stakeholders might care to raise. Stakeholders can
email inquiries to the Part C & D user call at
PartDBenefitImpl@cms.hhs.gov.
As to the suggestion that we publish the outcome of waiver
requests, Chapter 12 of the Prescription Drug Benefit Manual (and
Chapter 9 of Medicare Managed Care Manual) describes approved waivers
current as of the date of publication; we also post Part D waivers when
approved by CMS through HPMS. We will take the suggestion to publish
requests for waivers that are denied under consideration.
We are finalizing the provision as proposed with one modification.
In Sec. 423.458, the new paragraph will be designated as paragraph
(c)(4) instead of (c)(3).
11. Access to Covered Part D Drugs Through Use of Standardized
Technology and National Provider Identifiers (Sec. 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 a prescriber identifier 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) 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, we signaled 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'') 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,
including 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.
Not only can all practitioners who are authorized to prescribe Part
D drugs under applicable U.S. State laws acquire an NPI from HHS, but
most are required to do so. 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 May 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 (January 23, 2004, 69 FR 3445). 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 discussed in greater detail later in this
section of the final rule with comment period. In addition, for those
health care providers who do not already have an NPI, obtaining one is
not a burdensome endeavor and is free of charge.
As a measurable indicator, approximately 90 percent of Medicare
Part D claims as reported in 2011 prescription drugs events (PDEs)
submitted to CMS contain valid individual prescriber NPIs--a uniform
identifier--even though CMS permits alternate prescriber IDs at this
time. However, while the vast majority of Medicare Part D claims
contain individual NPIs as of coverage year 2011, 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.
The consistent use of a single validated identifier would enable us
to provide better oversight over possible fraudulent activities. 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 default, 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 pre-analysis and
also would
[[Page 22144]]
introduce potential errors in correctly matching prescribers among
databases.
In light of the foregoing, we proposed to amend Sec. 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.
We also proposed 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 (POS), in order not to impede
Medicare beneficiary access to needed medications. In other words, we
proposed that Part D sponsors may not reject pharmacy claims at point
of sale without prompt follow-up to ensure that the claim has been
resubmitted by the network pharmacy with a corrected and valid
individual prescriber NPI, or new information has been otherwise
received to correct the sponsor's information.
Our proposal meant 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, such as a
prescription 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.
We reminded Part D sponsors that the requirements proposed were on
sponsors, whose responsibility it would be to submit PDEs to CMS with
individual prescriber NPIs. Therefore, we stated that we would expect
that network pharmacies will be permitted to correct any invalid data
before payment for a claim is reversed, if the contract allows such a
reversal. Additionally, we stated that we would expect that any
requirement by a plan sponsor or its contracted PBM on 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. For the
reasons discussed in the following comment and response section, in
response to comments, we are modifying the regulation text to better
accomplish these policy goals.
With respect to requests for reimbursement submitted directly by
Medicare beneficiaries, we proposed that requests for reimbursement
from Medicare beneficiaries be handled in the same manner by Part D
sponsors as claims from pharmacies. Thus, we proposed that sponsors may
not make payment to the beneficiary dependent upon the sponsor's
acquisition of an active and valid individual prescriber NPI, unless
there is an indication of fraud. If the sponsor is unable to
retrospectively acquire an active and valid NPI in connection with a
request for reimbursement submitted by a beneficiary, we proposed that
the sponsor may not seek recovery of the payment from the beneficiary
solely on that basis, unless there is an indication of fraud.
We had 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 our proposal was thus
responsive to those observations. In addition, some pharmacy
representatives have offered that certain States require or accept
other prescriber identifiers, which impedes 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. Therefore, we sought 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. We did not receive any
such comments.
We stated that 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
were 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 three
page application form that primarily seeks only identifying and
location information and is free of charge. We stated that since we
know that prescribers will also be concerned about beneficiary access
to medications, we believed 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 stated our understanding 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 stated our belief 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 in contrast to our proposal with
respect to domestic prescribers, we did not propose to require Part D
sponsors to cover claims involving foreign prescribers without an
active and valid individual prescriber NPI. 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 proposed an
exception to our proposal that the sponsor must pay an otherwise
payable 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, we proposed a
Part D sponsor could reject a claim involving a foreign prescriber who
does not have an NPI at point-of-sale without additional follow-up
requirements.
In fact, in light of our lack of jurisdiction over foreign
prescribers and our motivation to conduct better oversight over
possible fraudulent activities, we stated that we were considering
whether the proposal with respect to foreign prescribers was broad
enough and whether we should instead
[[Page 22145]]
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.
We noted that we were not making such a proposal, but solicited
specific comments on foreign prescribers and the Part D program.
However, we received no comments on this alternative to the foreign
prescriber issue, and therefore we are finalizing our original proposal
as to foreign prescribers.
Comment: Some commenters acknowledged the need for a single,
validated prescriber identifier on PDEs. A commenter elaborated that
our proposal would streamline prescriber identifier validation and
enhance the ability to more effectively track and validate prescription
activity at the individual prescriber level, which will assist in the
identification of potentially fraudulent or inappropriate claims, as
well as in improve the quality of patients' therapeutic outcomes.
Response: We agree with these comments. In addition to assisting
us, we believe our proposal will result in a more streamlined
prescriber validation process for Part D sponsors, PBMs, and network
pharmacies. Routine use of a single identifier will minimize validation
costs and efforts for all entities that collect, review and utilize
this data.
Comment: Some commenters reiterated our observation that not all
prescribers have to obtain an NPI and use it, in particular medical
interns and residents, and these commenters stated that interns and
residents have often used group or supervisor NPIs on prescriptions.
Other commenters stated it was unfair for Part D sponsors to shoulder
the burden of claims for which there is not an active and valid
prescriber NPI. Another commenter stated conversely that, due to the
standards described in the CY 2012 Call Letter regarding prescriber
identifiers, nearly all claims submitted by pharmacies to Part D
sponsors will contain prescriber NPIs by 2013.
Response: As part of our observations in the proposed rule, we
stated that we believe there are actually very few prescribers who
either do not have, or would be unwilling to obtain, an individual NPI
that they will disclose to Part D sponsors and/or their network
pharmacies who need it for standard transactions in order to facilitate
their Medicare patients' access to needed medications. Moreover,
nothing prevents a sponsor from requesting a prescriber to obtain and
disclose an NPI to facilitate a delayed submission of a PDE.
Nevertheless, other strategies are being explored which would require
prescribers who are not currently required to obtain NPIs to be
required to obtain them. We agree with the commenter that there will be
very few instances in which a Part D sponsor would not be able to
submit a PDE to CMS due to the lack of an active and valid individual
prescriber NPI.
Comment: A commenter stated that our request that payers not reject
a claim from a network pharmacy for lack of an active and valid NPI
(unless the issue can be resolved at point of sale) and retrospectively
obtain one, could result in a retroactive denial of the claim, and that
this scenario would not adhere to NCPDP's definition of a paid
response. That is, if the sponsor has or should have had reason to
believe that the identifier on the submitted claim is invalid or not
active, but submits a paid response in such circumstances, this
response would be inconsistent with HIPAA transaction standards,
pursuant to which a paid response may be sent only when the claim
satisfies the payer's requirements for payment. Another commenter
stated that the ``unless the issue can be resolved at point-of-sale''
standard is very unclear.
Other commenters, while acknowledging the beneficiary access issue
should still be considered, requested that we modify the final rule to
allow Part D plans greater flexibility to implement measures to address
claims lacking an active and valid NPI, such as claim rejection at POS,
in order to alert the pharmacy of this fact, and to allow for two-way
communication between the parties when there is an inconsistency
between prescriber identifier databases at the time when the
inconsistency is most readily resolved.
Some commenters expressed appreciation and support for our
statements regarding the fact that the requirement to obtain an active
and valid NPI is imposed on sponsors and our expectation that sponsors
would provide opportunities for network pharmacies to correct any
invalid data before recouping any payment. These commenters also
appreciated and supported our statements regarding any requirements by
Part D sponsors/PBMs for the pharmacies to acquire automated validation
capability to be mutually negotiated. However, these commenters stated
that the practical effect of our proposal not to allow claims rejection
at POS would be that network pharmacies will be forced to bear
recoupment of claims paid by Part D sponsors, when active and valid
NPIs cannot be obtained retrospectively, even when they have done
nothing wrong. These commenters further stated that pharmacies must
generally dispense a medication if the Part D plan provides coverage
under their contact, and they are furthermore not in a position to
refuse these Part D plan/PBM terms, nor terms requiring pharmacies to
obtain a valid NPI for the claim to be payable, which will impose
additional costs on many pharmacies, particularly smaller ones. A
commenter stated that some Part D plans are already imposing
requirements above and beyond current Federal regulations by recouping
pharmacy reimbursement unless the underlying claims contain a valid
individual NPI.
Response: Our proposed policy that payers not reject a claim from a
network pharmacy for lack of an active and valid NPI (unless the issue
can be resolved at point of sale) and to retrospectively obtain one was
to ensure beneficiary access to needed medications in cases when the
NPI issue could not be resolved at point-of-sale. We believed this
scenario would be rare, and that most NPI issues could and would be
resolved at point-of-sale. We have been even more persuaded by
commenters that real time notification of a possible NPI issue or error
is the most efficient process, since the pharmacy is in the best
position to acquire corrected information from the beneficiary and/or
prescriber when filling the prescription. This is because we believe
the pharmacy representative is most motivated to check available data
or contact the prescriber in order to get the claim adjudicated.
Similarly, a prescriber is most motivated to disclose a missing NPI
when the pharmacy is trying to dispense the drug prescribed to his or
her patient.
In addition, in light of the comments received that our proposal
did not allow for claim rejection at POS (even though this is a
misunderstanding of our proposal), we are concerned that this proposed
provision would be implemented by Part D sponsors in such a manner that
sponsors will not undertake efforts at POS to resolve the NPI issue. We
are concerned that sponsors will indicate to network pharmacies that
claims lacking an active and valid individual prescriber NPI are
payable, when the sponsors actually have reason to believe that the NPI
is not active and valid, and then later recoup payment from the
pharmacies pursuant to their agreements. We were especially persuaded
by the commenter who stated that such a scenario would not adhere to
NCPDP's definition of a paid response. That is, if the sponsor has
reason to believe that the identifier on the submitted claim is invalid
or not
[[Page 22146]]
active, but submits a paid response in such circumstances, this
response would be inconsistent with HIPAA transaction standards,
pursuant to which a paid response may be sent only when the claim
satisfies the payer's requirements for payment.
For these reasons, and in response to comments, we are revising our
policy and the regulation text to require a Part D sponsor to ensure
that the lack of an active and valid individual prescriber NPI on a
network pharmacy claim does not unreasonably delay a beneficiary's
access to a covered Part D drug. Sponsors will be required to so ensure
in the following manner: (1) A sponsor must communicate at point-of-
sale whether or not the prescriber NPI is active and valid; (2) if the
sponsor communicates that the prescriber NPI is not active and valid,
the sponsor must permit the pharmacy to confirm that the NPI is active
and valid, or in the alternative, to correct it; (3) if the pharmacy
confirms that the prescriber NPI is active and valid or corrects it,
the sponsor must pay the claim if it is otherwise payable; and (4) if
the pharmacy cannot or does not correct or confirm that the prescriber
NPI is active and valid, the sponsor must require the pharmacy to
resubmit the claim (when necessary), which the sponsor must pay, if it
is otherwise payable, unless there is an indication of fraud or the
claim involves a prescription written by a foreign prescriber (where
permitted by State law).
We would expect the back-and-forth between a sponsor and network
pharmacy described previously to take no more than 24 hours, which
means that sponsors will have to have controls in place to make sure
network pharmacies resubmit claims where the sponsor has communicated
an issue with the NPI and a pharmacy cannot or does not correct or
confirm that the NPI is active an valid. We note that in practice
today, pharmacy customers are not infrequently asked to return to the
store later the same day or the next to pick up a prescription to allow
time to resolve a claim adjudication or stock replenishing issue. Thus,
we would consider a 24-hour timeframe to be timely access to outpatient
medications. We also note that it is standard retail pharmacy practice
to dispense a few doses of medication when these delays occur if the
customer needs immediate access to the drug.
We believe these revisions preserve our policy that beneficiaries
not be denied access to needed medications, while making it clearer
that the requirement to obtain active and valid prescriber NPIs is
imposed on Part D sponsors. At the same time, we believe these
revisions respond to commenters' concerns by clarifying what we meant
when we stated that NPI issues must be resolved at point-of-sale. In
addition, in response to commenters' concerns that pharmacies will be
unscrupulously subjected to payment recoupment for claims that do not
contain an active and valid NPI when the requirement to obtain one is
on sponsors, we are further revising the regulation text to state that
a Part D sponsor must not later recoup payment from a network pharmacy
for a claim that does not contain an active and valid individual
prescriber NPI on the basis that it does not contain one, unless the
sponsor: (1) Has complied with the POS requirements previously
described ; (2) has verified that a submitted NPI was not in fact
active and valid; and (3) the agreement between the parties explicitly
permits such recoupment. We believe that this revision will further
ensure that Part D sponsors engage in the point-of-sale NPI validation
that we are requiring for the reasons stated previously.
Comment: A commenter requested that we instruct Part D plans that
they are not allowed to mandate the use of individual NPIs on Part D
claims. Other commenters requested that CMS do just that.
Response: Because this rule requires Part D sponsors to submit an
active and valid prescriber NPI with a PDE, Part D sponsors may require
that the NPI be submitted on claims by network pharmacies. However, as
described previously, Part D sponsors will be required to communicate
at the point-of-sale about the status of the NPI and will, under
certain circumstances, be required to pay an otherwise payable claim,
even if it does not contain an active and valid prescriber NPI.
Comment: Some commenters stated that following up with prescribers
to obtain NPIs creates an administrative burden on plans, especially
when considering CMS PDE submission requirements.
Response: We agree that this requirement imposes a new
administrative burden on Part D sponsors. However, as we have stated
previously, we believe that it is important to ensure that we have
active and valid individual prescriber NPIs to allow us to better
combat fraud and abuse. Therefore, we believe the benefit of this
requirement outweighs the burden. Moreover, we expect that prescribers
will readily respond to both pharmacy and sponsor activities to correct
invalid data, and that any corrective action needed will substantially
and rapidly decline over time, thus decreasing the burden on all
parties. In light of the revision to our proposal to require NPI
validation by sponsors at point-of-sale, as described previously, we
believe there will be relatively little additional follow-up
administration effort required on the part of sponsors that would
interfere with timely PDE submission to CMS.
Comment: A few commenters requested clarification of the meaning of
``active and valid.''
Response: By an ``active and valid'' NPI, we mean that the NPI
number is in the expected format/sequencing for such numbers and is
listed as an active identifier in the National Plan and Provider
Enumeration System (NPPES).
Comment: A commenter stated that we should prohibit group NPIs from
being used on Part D prescriptions. Other commenters stated that
prescribers should have to use individual NPIs on their prescriptions.
Response: Prescriptions are regulated by State law as noted in
section II.E.8. of this final rule with comment period. We do not
regulate prescriptions. At this time, we are not aware of any State
that requires each electronic or written prescription to include the
prescriber's group or individual NPI in order for that prescription to
be valid. However, we would again like to take 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.
Comment: Some commenters stated that CMS should notify all
prescribers that pharmacies cannot fill Part D prescriptions unless
they provide an active and valid individual NPI.
Response: We encourage sponsors not to permit their network
pharmacies to refuse to accept prescriptions when a prescriber has not
disclosed an active and valid NPI, although we cannot prohibit a
pharmacy from independently doing so. However, we do not anticipate
that pharmacies will engage in this practice, as we have revised this
requirement so that sponsors must provide information at POS regarding
whether a submitted NPI is not active and valid, and to prohibit
recoupment by the sponsor if it has not provided this information.
Thus, since pharmacies will have an opportunity to correct or resolve
apparent discrepancies concerning the validity of NPIs, and if they do,
will not be subject to recoupment, we believe pharmacies will be able
to manage the risk of nonpayment by sponsors and will not refuse
prescriptions. Also, options are being explored to require NPIs for
those few prescribers who are not currently required to obtain NPIs,
and who do not
[[Page 22147]]
voluntarily do so, in order to facilitate their patient access to Part
D drugs, even though we believe there are very few prescribers in this
category.
Comment: A commenter believed that our proposal would actually
undermine its purpose to achieve better oversight over possible
fraudulent activities, as well as other program oversight objectives,
since PDE records would no longer constitute a comprehensive database
of drugs covered under the Part D program. In other words, we
understood this commenter to assert that plans will not submit
significant numbers of PDEs for lack of an active and valid prescriber
NPI.
Response: We disagree. As noted previously, most prescribers
already have and disclose NPIs, and we believe that number will
increase after current efforts in 2012 to correct invalid prescriber
identifiers on file with pharmacies. Also, options are being explored
to require NPIs for those few prescribers who are not currently
required to obtain NPIs, and who do not voluntarily do so, in order to
facilitate their patient access to Part D drugs. Thus, we believe the
commenter's projected risk of sponsors not submitting PDE records due
to missing or invalid NPIs, leading to incomplete Part D drug
utilization records on file with CMS, will not materialize.
Comment: Several commenters stated that there is no single,
thorough, complete, and accurate database that contains up to date and
validated prescriber NPIs, including NPPES, which also lacks all the
data elements needed, such as DEA numbers, which causes editing issues
in a real-time adjudication environment. One of the commenters stated
that NPPES information should be disseminated and available to plans on
a weekly basis, with deactivated NPIs noted, including the rationale
for and date of deactivation. This commenter also stated that CMS
should work with HHS Office of Inspector General (OIG) to ensure
excluded individuals are identified in NPPES, as well as to create an
NPI reference on the HHS-OIG excluded provider list.
Response: The primary purpose of the NPPES is to collect
information needed to uniquely identify individual and organization
health care providers, assign NPIs to those health care providers,
maintain and update the information about the health care providers,
and disseminate the information according to the NPPES Data
Dissemination Notice. NPPES data is available to the public via the NPI
Registry and is updated daily. In addition to the NPI Registry, CMS
provides a monthly NPPES downloadable file.
NPPES was designed in a way to meet its intended purpose in the
most feasible way and was not intended to be a one-stop database for
all prescriber identifiers. Also, sanction data were not included in
the data element list published in the final NPI rule published January
23, 2004, and therefore, are not included in the NPPES data element
list today. However, we do acknowledge the advantages of the additional
information desired by sponsors, such as the date and reason for
deactivation of an NPI, and we are exploring the feasibility of
improving the information available regarding the deactivated NPIs.
Comment: A commenter stated that a grace period should be allowed
to address the processing of claims with deactivated NPIs, such as when
a prescriber has retired or passed away. This commenter suggested that
rather than rejecting the claims, sponsors could send an information
edit to notify pharmacies of the time period when it will begin to
reject claims that contain the prescriber NPI, and pharmacies could
then inform beneficiaries to find a new prescriber with an active
individual NPI.
Response: An informational edit during a grace period for an NPI
deactivated due to death or retirement might be a prudent practice,
since we understand some States permit refills when the prescription
was written before the prescriber's retirement or death. We will
provide additional guidance in the future, if necessary on this point.
We take no position on whether a pharmacy should encourage a
beneficiary to find a new prescriber with an active NPI.
Comment: A commenter supported the proposal to not permit recovery
of beneficiary payment on beneficiary-submitted requests for
reimbursement when retroactive acquisition of the prescriber NPI has
not been successful, as a means to protect beneficiary access to drug
therapy prescribed by his or her physician. Another commenter was
pleased that beneficiaries will not be negatively impacted by such lack
of an NPI for a PDE.
Response: We appreciate the support for our proposal.
Comment: A commenter was pleased that we chose not to require
Medicare Part D prescribers to enroll in Medicare which supports
beneficiary access and obviates the need for physicians to engage in a
credentialing process for which they are not compensated.
Response: We appreciate the support for our proposal.
Comment: A few commenters supported our proposal regarding foreign
prescribers. Another commenter stated the proposal was essential for
prohibiting claims payment on prescriptions involving foreign
prescribers. One commenter noted that there is no database of foreign
prescribers.
Response: We thank the commenters for their support. Under our
proposal, as revised in response to other comments, if a foreign
prescriber has an active and valid NPI that is submitted on the claim,
a Part D sponsor must pay the claim, if it is otherwise payable and
applicable State law permits prescriptions from foreign prescribers.
However, if the NPI is not active and valid and the pharmacy cannot
correct the NPI for a foreign prescriber, then the sponsor does not
have to require the pharmacy to resubmit the claim (when necessary) and
is not required to pay it (if it is otherwise payable). This is
consistent with our proposal that sponsors could not reject a claim
lacking an active and valid NPI unless the claim involved a
prescription written by a foreign prescriber. We acknowledge that there
is no database of foreign prescribers; however, we do not believe the
lack of such a database would hinder sponsors' compliance.
Comment: Some commenters requested a delay in the NPI requirement.
Response: We were not persuaded by the comments we received that we
should delay the prescriber NPI requirement for PDEs. In particular, we
considered that ninety percent of PDEs as of coverage year 2011 already
contain prescriber NPIs, according to CMS data, and weighed that
against the importance of a single prescriber identifier to assist in
fighting potential fraud in the Part D program.
After consideration of the public comments received, we are
finalizing our proposal with the modifications noted previously.
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 adding a
new paragraph (c)(5)(i) which requires 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)(ii) will require a Part D
plan sponsor to ensure that the lack of an active and valid individual
prescriber NPI on a network pharmacy claim does not unreasonably delay
a beneficiary's access to a covered Part D drug by taking the steps
described in a new
[[Page 22148]]
paragraph (c)(5)(iii). New paragraph (c)(5)(iii) requires that the
sponsor communicate at point-of-sale whether or not a submitted NPI is
active and valid; paragraph (c)(5)(iii)(A)(1) and (2) will require, if
the sponsor communicated that the NPI is not active and valid, that the
sponsor must permit the pharmacy to confirm that the NPI is active and
valid, or in the alternative, to correct it. If the pharmacy confirms
that the NPI is active and valid or corrects the NPI, paragraph
(c)(5)(iii)(B)(1) will require the sponsor to pay the claim, if it is
otherwise payable. Paragraph (c)(5)(iii)(B)(2) will require, if the
pharmacy cannot or does not correct or confirm that NPI is active and
valid, that the sponsor must require the pharmacy to resubmit the claim
(when necessary), which claim the sponsor must pay, if it is otherwise
payable, unless there is an indication of fraud or the claim involves a
prescription written by a foreign prescriber (where permitted by State
law).
New paragraph (c)(5)(iv) will prohibit a Part D sponsor from later
recouping payment to a network pharmacy for a claim that does not
contain an active and valid individual prescriber NPI on the basis that
it does not contain one unless the sponsor: (1) Complied with paragraph
(c)(5)(ii) and (iii); (2) verified that a submitted NPI was not in fact
active and valid; and (3) the agreement between the parties explicitly
permits such recoupment.
New paragraph (c)(5)(v) will prohibit a Part D sponsor, with
respect to requests for reimbursement submitted by Medicare
beneficiaries, from making payment to the beneficiary dependent upon
the sponsor's acquisition of an active and valid individual prescriber
NPI, unless there is an indication of fraud. It will further prohibit a
Part D sponsor from seeking recovery of any payment to the beneficiary
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. As noted previously, these changes would be
effective for PDEs submitted by Part D sponsors on January 1, 2013 or
later.
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.
The following sections of this document contain paperwork burden
but not all of them are subject to the PRA for reasons noted.
A. ICRs Regarding the Coverage Gap Discount Program (Sec. 423.100,
Sec. 423.505(b), Sec. 423.1002, and Part 423 Subpart W)
Section 1860D-14(d)(6) of the Act exempts this section from PRA
requirements.
B. ICRs Regarding the Inclusion of Benzodiazepines and Barbiturates as
Part D Drugs (Sec. 423.100)
In accordance with section 175 of MIPPA, which amended section
1860D-2(e)(2)(A) of the Act, we proposed to revise the definition of
Part D drug at Sec. 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.
Part D plan sponsors will 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 will be included in the PRA package
entitled, Formulary Submission for Medicare Advantage (MA) Plans and
Prescription Drug Plans (PDP) for Contract Year (CY) 2013 (OCN 0938-
0763).
Comment: A few commenters believed that they would be burdened
because they would need to apply prior authorization to determine
whether barbiturates covered specific indications. A commenter pointed
to an increased number of appeals, while the other foresaw an increased
number of documents related to indication determinations. A commenter
also noted that the change would impact SNPs because these medications
are typically available without prior authorization under their medical
assistance benefit.
Response: It is outside of the scope of this proposed rule to
comment on the use of prior authorization for this purpose. However, we
do not believe that this inclusion will increase the burden of any plan
in any significant way because sponsors must always ensure that they
cover drugs only when used for medically accepted indications. Making
this determination is no different for barbiturates than for other
drugs. As to the SNP concerns, we are complying with the statutory
requirement, and because Part D coverage requirements for SNPs are not
different from those for other MA-PDs, this requirement applies
consistently across plan types.
After considering the public comments received, we are finalizing
the policy without modification.
C. ICRs Regarding Pharmacy Benefit Manager's Transparency Requirements
(Sec. 423.514)
Consistent with the statutory requirements under section
1150A(b)(3), we proposed to add an additional data element to the DIR
data reporting requirements: 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, also known as PBM spread. In the 2010
DIR reporting requirements, we collected PBM spread amounts aggregated
to the plan benefit package level. We believe that with the addition of
PBM spread amounts for retail pharmacies and PBM spread amounts for
mail order pharmacies to the existing DIR reporting requirements, Part
D sponsors will meet the requirements to report the elements in Sec.
423.514(d)(4) through (6). Beyond this change, no additional DIR
reporting will be required pursuant to section 1150A of the Act. We did
not receive any comments on increased burden due to reporting PBM
spread. We are finalizing as proposed reporting of this data element,
also known as PBM spread.
In addition, section 1150A(b)(1) of the Act requires PBMs and Part
D sponsors to report the percentage of all prescriptions that were
provided through retail pharmacies compared to mail order pharmacies
and 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). We explored the ideas
commenters submitted for CMS to provide crosswalks or derive the
pharmacy type data from existing data sources and
[[Page 22149]]
determined that we could crosswalk National Provider Identifiers with a
file from the National Council for Prescription Drug Programs to
determine the percentage of all prescriptions that were provided
through retail pharmacies as compared to mail order pharmacies as
required under Sec. 423.514(d)(2). However, this approach cannot be
used to categorize independent, chain, supermarket, and mass
merchandiser pharmacies because they are not standard pharmacy
classifications captured in industry databases or files. Thus, while we
are finalizing Sec. 423.514(d)(3) as proposed, we will issue further
subregulatory guidance regarding this reporting requirement before
requiring Part D sponsors to submit this information.
D. ICRs Regarding Good Cause and Reinstatement Into a Cost Plan (Sec.
417.460)
Our proposal in Sec. 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 rule would not impose any new
information collection requirements. We received no comments on the
cost burden of the collection of information requirements related to
this proposal and therefore are finalizing this provision without
modification.
E. ICRs Regarding Requiring MA Plans Issuance of Member ID Cards (Sec.
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 proposed to expressly require MA plans 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 (Sec. 423.56)
We are amending a calculation at Sec. 423.56 to be consistent with
the calculation of the actuarial value of qualified retiree
prescription drug coverage found at Sec. 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
requirement. There is no new information collection burden on
organizations.
We received no comments on the cost burden of the collection of
information requirements related to this proposal and therefore are
finalizing this provision without modification.
G. ICRs Regarding Who May File Part D Appeals With the Independent
Review Entity (Sec. 423.600 and Sec. 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
(Sec. 417.801)
This section does not impose any new information collection
requirements.
I. ICRs Regarding Termination or Non-Renewal of a Medicare Contract
Based on Consistent Poor Plan Performance Ratings (Sec. 422.510 and
Sec. 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.
J. ICRs Regarding 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)
We have modified the past performance review period described in
Sec. 422.502(b) and Sec. 423.503(b) (by adding new paragraphs at
Sec. 422.502(b)(3) and at Sec. 423.503(b)(3) as well as Sec.
422.502(b)(4) and at Sec. 423.503(b)(4)) to include among the factors
that may support a CMS denial of a contract application those CMS-
initiated terminations or non-renewals 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 Certain Dual Eligible
Special Needs Plans (SNPs) (Sec. 422.102)
Under Sec. 422.102(e), we would allow certain dual SNPs meeting a
high standard of integration and minimum performance and quality based
standards, 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. The collection of benefit design
information via PBP software is currently approved under OCN 0938-0944.
We are seeking to revise this control number to incorporate the
additional use of this information that is described in this section of
the final rule with comment period.
Additionally, in order to evaluate how D-SNPs are implementing this
new benefit flexibility, we indicate that we will require D-SNPs that
participate in this new benefit flexibility initiative to submit a
mandatory quality improvement project (QIP) on measures related to the
goals of this initiative, as determined by CMS. The burden associated
with this requirement is the time and effort that qualifying D-SNPs
would put forth to develop and submit a QIP, which is currently
approved under OCN 0938-1023 (CMS form 10209). We are assuming
that this process would be completed by one MA organization staff
person receiving a median hourly wage rate of $37.58, which is
equivalent to the median hourly wage rate that the BLS currently
reports for a management analyst. Adding the standard OMB figures of 12
percent for overhead and 36 percent for benefits, respectively, we
estimate an hourly cost of $55.61 to comply with this requirement.
Based on our existing estimates of the QIP submission burden, we
estimate that it would take each SNP approximately 15 hours to complete
each QIP, resulting in an aggregate
[[Page 22150]]
burden of 1,095 hours (15 hours multiplied by 73 D-SNPs) for the 73 D-
SNPs that we believe may qualify to offer additional supplemental
benefits under this new benefit flexibility initiative. Therefore, we
estimate that D-SNPs participating in this initiative will incur an
aggregate cost of $60,892 ($55.61 per hour multiplied by 1,065 hours)
in order to comply with this additional QIP submission requirement. We
are seeking to revise our collection approved under OCN 0938-1023 to
account for this new requirement for certain D-SNPs participating in
this benefits flexibility initiative.
L. ICRs Regarding Clarifying Payment to Providers in Instances of
Hospital-Acquired Conditions (HACs) (Sec. 422.504)
We proposed to require MA organizations provide in their contracts
with hospitals that payments for Part A hospital services will be
reduced 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.
We believe that plans already have some operational systems in place to
facilitate implementation of the requirement. For example, MA
organizations are already required to pay non-contract provider
hospitals the amount that they will receive for services under original
Medicare, including any applicable reductions for HACs. Also, beginning
January 3, 2012, MA plans 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 Sec. 422.310(d).
This information is collected using the HIPAA 5010, which is already in
use by hospital providers for FFS claims and contains fields for POA
indicator reporting. While this requirement is subject to the PRA, the
diagnosis, POA indicator information, and other claims information is
already collected as part of the encounter data collection process, and
this burden is currently approved under OCN 0938-1054.
Additionally, we expressed our belief that hospitals will already
be familiar with POA reporting and will 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 will be incurred by plans in the normal course of their
business activities.
We received no comments on the information collection requirements
associated with this proposal. However, based on the comments received
on the proposed policy, we are not finalizing this proposal. We will
continue to not only consider alternate strategies for reducing
hospital-acquired conditions in hospitals that provide care to MA
enrollees, but also strive toward aligning quality initiatives in the
Medicare and Medicare Advantage programs.
M. ICRs Regarding Clarifying Coverage of Durable Medical Equipment
(Sec. 422.101(a) and Sec. 422.112(a))
Under Sec. 422.100(l), we proposed 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 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 Sec. 422.111 and the burden
associated with it was formerly approved under OCN 0938-0753 which
expired November 30, 2011. We are seeking to reinstate this collection
in order to account for the new DME disclosure requirement.
N. ICRs Regarding Broker and Agent Requirements (Sec. 422.2274 and
Sec. 423.2274)
At Sec. 422.2274 and Sec. 423.2274, we proposed 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 proposed 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 was formerly approved under OMB control number
(OCN) 0938-0753 which expired November 30, 2011. We are seeking to
reinstate this collection.
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 (Sec. 423.100, Sec. 423.104 and Sec.
423.153)
In accordance with section 1860D-4(c) of the Act, we are revising
Sec. 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, under certain circumstances, 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 requirement, the enrollee and his or her
prescriber generally will decide if a medication supply of less than 30
days will be appropriate, and if so, the cost-sharing for the
medication will be prorated by the Part D sponsor based on the days
supply dispensed. Since obtaining a supply of a medication for less
than 30 days is optional for the enrollee and his or her prescriber,
the collection of information burden imposed by these regulations on
either Part Medicare D enrollees or their prescribers is negligible.
Moreover, any burden associated with this proposal on sponsors related
to the required data entry in the PBP software will 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) 2014, since we are delaying the
effective date of this requirement until January 1, 2014.
After consideration of the public comments received, none of which
[[Page 22151]]
specifically addressed this collection of information burden section,
we are modifying this requirement as discussed in section II.D.6. of
this final rule with comment period (Establishment and Application of
Daily Cost-Sharing Rate as Part of Drug Utilization Management and
Fraud, Abuse and Waste Control Program (Sec. 423.100, Sec. 423.104
and Sec. 423.153)). However, we are not modifying these ICRs, since
the collection of information burden imposed by this final rule with
comment period will still be negligible, and any burden associated with
it will still be captured elsewhere.
P. ICRs Regarding Technical Corrections to Enrollment Provisions (Sec.
417.422, Sec. 417.432, Sec. 422.60, and Sec. 423.56)
At Sec. 417.422, Sec. 417.432, Sec. 422.60, and Sec. 423.56 we
are proposed technical changes that correct cross-references that
should have been updated in previous rulemaking. These changes do not
establish any new rules or requirements for cost or Part D plans. They
merely update regulatory cross-references that were overlooked in
previous rulemaking. As a result, these changes do not impose any new
information collection requirements.
Q. ICRs Regarding Applying MA and Part D Disclosure Requirements to
Cost Contract Plans (Sec. 417.427)
We proposed to extend the disclosure requirements in Sec. 422.111
and Sec. 423.128 to cost contract plans. Our regulations at Sec.
422.111 and Sec. 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 Sec. 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 Web sites.
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 Sec.
422.111(a)(2) of the MA program regulations and Sec. 423.128(a)(3) of
the Part D program 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 7. 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 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
expiration date.
R. ICRs Regarding Clarification of and Extension of Regional Preferred
Provider Organization Plan Single Deductible Requirements to Local
Preferred Provider Plans (Sec. 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 (Sec. 422.216(d)(1))
Section 1852(k)(2)(c) of the Act and Sec. 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 proposed to
amend Sec. 422.216(d)(1) to state that the EOB requirement for PFFS
plans would be consistent with the MA EOB requirements of Sec.
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 Sec.
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 proposed that PFFS plans would
continue to furnish EOBs as they have been, in accordance with Sec.
422.216(d)(1), until we finalize and implement EOB models for all MA
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 Sec.
422.111(b)(12).
T. ICRs Regarding Authority To Deny SNP Applications and SNPs Appeal
Rights (Sec. 422.500)
Our proposed amendments to Sec. 422.500(a), Sec. 422.501(a),
Sec. 422.501(c)(1)(iii), Sec. 422.502(a) and Sec. 422.502(c) would
give CMS the authority to deny SNP applications that fail to
demonstrate that the MA organization meets the requirements of Sec.
422.2, Sec. 422.4(a)(1)(iv); Sec. 422.101(f); Sec. 422.107, if
applicable; and Sec. 422.152(g). The burden associated with this
requirement is the time and effort required by an MA organization
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. We are seeking to renew this
collection.
Our proposed amendments to Sec. 422.641 provide the procedures for
making and reviewing certain contract determinations, while our
proposed amendments to Sec. 422.660 establish the circumstances under
which an MA organization may request a hearing before a CMS hearing
officer. We proposed 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 and none of these denials
were
[[Page 22152]]
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 all
MA organizations, in the aggregate, that have 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 7.
We are revising the PRA package currently approved under OCN 0938-0935,
with a January 31, 2012 expiration date, to account for this burden. We
are seeking to renew this collection.
U. ICRs Regarding Timeline for Resubmitting Previously Denied MA
Applications (Sec. 422.501)
This section does not impose any new information collection
requirements.
V. ICRs Regarding Contract Requirements for First Tier and Downstream
Entities (Sec. 422.504 and Sec. 423.505)
We proposed to modify the regulations at Sec. 422.504(i) and Sec.
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 MA organizations 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 MA organizations 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.
W. ICRs Regarding Valid Prescriptions (Sec. 423.100 and Sec. 423.104)
Our proposed definition of ``valid prescription'' in Sec. 423.100
and requirement of a ``valid prescription'' in Sec. 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 MA
organizations 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 MA organizations, 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 (Sec. 423.153)
Current regulations require that unless a beneficiary is in a LTC
setting, the comprehensive medication review (CMR) must include an
interactive, person-to-person, 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 a CMR. Accordingly, we proposed a
change to Sec. 423.153 permitting the sponsor to allow the pharmacist
or other qualified provider to perform the CMR without the beneficiary
in cases when the beneficiary is in a LTC facility and is cognitively
impaired and thus, cannot accept the sponsor's offer of a CMR . We
anticipated that the impact of this proposed revision would 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 a CMR before administering it.
We incorrectly stated in the proposed rule that we did not
anticipate any costs or savings associated with this change. However,
there will be a modest increase in costs based on the requirement to
offer CMRs to beneficiaries residing in LTC settings with written
summaries and provide the summaries and action plans for these
beneficiaries in a standardized format that complies with the
requirements specified by CMS. We estimate that 215,000 beneficiaries
in LTC settings are eligible for MTM services and 10 percent (21,500)
of those beneficiaries will receive an annual CMR. We also estimate
that the average CMR requires 35 minutes to complete and the average
hourly compensation (including fringe benefits, overhead, general and
administrative expenses and fee) of the MTM provider is $120.
Therefore, the estimated total annual cost of providing CMRs in LTC
settings is $1,504,140 (21,500 CMRs x 0.583 hours/CMR x $120/hour). The
estimate reflects costs previously calculated in the OCN 0938-1154.
Y. ICRs Regarding Coordination of Part D Plans With Other Prescription
Drug Coverage (Sec. 423.458)
We proposed 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 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 (Sec.
423.120)
The inconsistent use of identifiers that have not been validated
has hindered efforts to combat fraud and abuse. Therefore, we will
require, effective January 1, 2013, that Part D sponsors must include
active and valid individual prescriber NPIs as identifiers in PDEs
submitted to CMS. Since Part D sponsors are already required to include
a prescriber identifier on PDEs submitted to CMS, there is no new
collection of information burden imposed by this proposed regulation.
Furthermore, the change 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,
since the requirement is imposed on Part D sponsors. After
consideration of the public comments received, none of which
specifically addressed this collection of information burden section,
we are modifying this requirement as discussed in section II.E.11. of
this final rule with comment period, Access to Covered Part D Drugs
Through Use of Standardized Technology and National Provider
Identifiers (Sec. 423.120). However, we are not modifying these ICRs
since, again, no new collection of information burden is imposed by
this requirement.
[[Page 22153]]
Table 7--Estimated Fiscal Year Reporting, Recordkeeping and Cost Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hourly
OMB Burden per Total labor cost Total Total
Regulation sections control Respondents Responses response annual of labor cost capital/ Total cost
No. (hours) burden reporting ($) maintenance ($)
(hours) ($) costs ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
417.427................................ 0938-0753 20 20 12 240 44.22 10,613 N/A 10,613
422.102................................ 0938-1023 73 73 15 1,095 55.61 60,893 N/A 60,893
422.500................................ 0938-0935 4 4 8 32 250.00 8,000 N/A 8,000
423.153................................ .......... 21,500 21,500 0.583 12,534.5 120.00 1,504,140 N/A 1,504,140
----------------------------------------------------------------------------------------------------------------
Total.............................. .......... 21,597 21,597 ........... 13,901.5 ........... .......... N/A 1,583,646
--------------------------------------------------------------------------------------------------------------------------------------------------------
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.
AA. Additional Information Collection Requirements--Independence of LTC
Consultant Pharmacists
In the proposed rule we imposed collection of information
requirements as outlined in the regulation text and specified earlier
in this section. However, we also made reference to associated
information collection requirements that were not presented in the
regulation text of the proposed rule. In our October 11, 2011 proposed
rule (76 FR 63067), we discussed the information collection
requirements related to the changes we considered that would require
each LTC facility to employ or obtain the services of a consultant
pharmacist who was not employed, under contract, or otherwise
affiliated with the facility's pharmacy, a pharmaceutical manufacturer
or distributor, or any affiliate of these entities.
Comment: Many commenters noted that the services performed by LTC
consultant pharmacists are more extensive than the drug regimen reviews
and include activities such as destroying unused medications, checking
storage areas, conducting exit conferences, providing in-service
education to nursing staff, observing medication distribution, and
attending meetings. Commenters stated the full range of consultant
pharmacist services need to be considered in determining the burden
associated with the new requirements.
Response: We appreciate these comments and will use them to inform
possible future rulemaking regarding the LTC consultant pharmacist
requirements. However, after considering the public comments received,
we are not finalizing this provision at this time.
V. Regulatory Impact Analysis
A. Statement of Need
The purpose of this final rule with comment period 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 final rule with comment period will--(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 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 final rule with comment period 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 final
regulation are located in the Collection of Information section
(section IV. of this final rule with comment period).
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 final 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.
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 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
[[Page 22154]]
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 will be reached by the requirements in this final rule
because this final rule will have minimal impact on small entities.
Therefore, an analysis for the RFA will not be prepared because the
Secretary has determined that this final rule with comment period will
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 604 of the RFA. For purposes of section
1102(b) of the Act, we define a small rural hospital as a hospital that
is located outside of a metropolitan statistical area and has fewer
than 100 beds. We are not preparing an analysis for section 1102(b) of
the Act because the Secretary has determined that this final rule with
comment period will 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 was approximately $136 million. This final rule
with comment period 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 final rule with comment period imposes substantial
direct requirement costs on State and local governments, preempts State
law, or otherwise has Federalism implications.
After considering the public comments received, we are not
finalizing two of the provisions included in the proposed rule--
Application of Medicare Hospital-Acquired Conditions and Present on
Admission Indicator Policy to MA organizations, and Independence of LTC
Consultant Pharmacists. We estimated that the impact of the former
provision would be negligible and received no comments on our estimate.
We estimated the costs and savings associated with the consultant
pharmacist independence provision and stated that we believed the costs
and benefits would be offsetting. Some commenters disagreed with our
estimates. However, we agree with the many commenters who claimed that
the requirement for consultant pharmacists to be independent would be
highly disruptive to the industry, but would not solve drug
overutilization and inappropriate prescribing in LTC, because others,
such as LTC facility staff and physicians, contribute significantly to
the problem. Therefore, although we believe changes are necessary and a
requirement for consultant pharmacist independence is part of the right
approach, we are not finalizing the requirement in this rule. Since we
are not finalizing these two provisions, they have no impact on this
final rule with comment period.
In Table 8, 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 final rule with comment period. The provisions with the most
significant costs (costs greater than $100 million from FY 2013 through
FY 2018) in this final rule with comment period are the Medicare
Coverage Gap Discount Program (Discount Program), and the Inclusion of
Benzodiazepines, and Barbiturates as Covered Part D drugs.
The total costs of the Discount Program for the periods beginning
FY 2013 through FY 2018 are estimated to be $31.1 billion, and the
total costs of the inclusion of benzodiazepines and barbiturates is
$1.9 billion.
Tables 9, 10, and 11 detail the costs by cost-bearing entity.
Specifically, Table 9 describes costs and savings to the Federal
government, Table 10 describes costs to MA organizations and/or PDP
sponsors and third party entities, Table 11 describes costs to
pharmaceutical manufacturers, and Table 12 describes savings to States.
As a result, when considering both the costs and savings associated
with the provisions of this final rule with comment period, we conclude
with a net cost estimate of $31.3 billion for FY 2013 through FY 2018.
C. Anticipated Effects
1. Medicare Coverage Gap Discount Program
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). In general, 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.
a. Required Payment of Gap Discounts
We believe that there will be significant costs to manufacturers
from paying the required discounts to beneficiaries while in the
coverage gap. We estimate that aggregate discounts from pharmaceutical
manufacturers will be $29.7 billion during FY 2013 through
[[Page 22155]]
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
inducing additional use of more expensive brand name drugs by improving
beneficiary adherence as a result of the lower out-of-pocket costs by
increasing use of brand name instead of generic drugs. The increased
use of brand name drugs will increase Medicare costs by increasing the
number of beneficiaries reaching the Part D catastrophic threshold and
thereby, increasing the cost of plan benefits. We estimate that the
Discount Program will increase Medicare costs by $1.3 billion during FY
2013 through FY 2018.
It is important to note that these estimated Medicare costs do not
include costs related to the Affordable Care Act provisions that
revised the Part D benefit structure to close the coverage gap. These
provisions not only revised the coinsurance amount, but also 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 will also incur costs as a result of
specific obligations under the Discount Program Agreement. The Discount
Program Agreement must be signed by all participating manufacturers and
provides the terms and conditions for timely payment of discounts,
disputes and appeals, penalties, and termination of the Agreement. In
order to comply with the Discount Program Agreement, manufacturers will
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. This will require them to establish
connectivity with the Discount Program third party administrator (TPA)
to receive quarterly invoices and file disputes, and obtain access to
the CMS Health Plan Management System (HPMS) to update and maintain
contact and labeler code information. However, manufacturers already
have existing systems and perform similar activities as a result of
their experience with Medicaid and Tricare. We estimate that analyzing
and paying the quarterly invoices will require 0.5 FTEs. We estimate
that the cost to manufacturers will 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 x
0.5 FTE x 240 manufacturers x 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 will 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 will be
a marginal increase in resources focused on accounting and computer
system operations and maintenance. We estimate that the additional
resources required will be 0.5 FTEs, on average, per Part D sponsor. We
estimate that the total cost to Part D sponsors will be $63,360 (annual
salary for insurance carrier compliance officer according to Bureau of
Labor Statistics) plus 48 percent for fringe benefits and overhead x
0.5 FTE per Part D sponsor x 270 Part D sponsors x 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 will 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 final rule. Further, we
believe that the carrying cost of distributing the discounts to
beneficiaries will be offset by prospective payments from us as
previously described.
We believe that the additional workload associated with this final
regulation will 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 reporting and recordkeeping. We estimate that Part D
sponsors will increase resources the equivalent of 0.5 additional FTEs
to accomplish these tasks. We estimate the cost to Part D sponsors will
be $63,360 (annual salary for insurance carrier compliance officer
according to Bureau of Labor Statistics) plus 48 percent for fringe
benefits and overhead x 270 Part D sponsors x 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 final regulation will 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 will be accommodated by
the additional resources that we earlier linked to the Discount Program
Agreement. Therefore, we are not estimating an additional economic
impact to manufacturers from this provision.
5. Beneficiary Dispute Resolution
The final rule will 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 will 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, will result in accurate discounts that will generate few
beneficiary appeals and will be accommodated within existing resources.
6. Compliance Monitoring and Civil Money Penalties
The final regulations require CMS to impose penalties if a
manufacturer does not pay gap discounts that are owed according to the
terms of the Discount Program Agreement. We believe that, in general,
manufacturers will pay the quarterly invoice according to the terms
within the Discount Program Agreement and, therefore; we expect very
few instances where manufacturers are levied a civil money penalty.
Accordingly, we assume that monetary penalties will be levied on only a
very small percent of all discount payments, estimated to be
approximately 0.03 percent, for a total of $9.64 million in civil money
penalties imposed over the period FY 2013 through FY 2018.
7. Termination of Discount Program Agreement for Part D Program
We believe that we will rarely find it necessary to terminate an
agreement. Upon termination, covered Part D drugs
[[Page 22156]]
of the manufacturers will be excluded from the Part D program and the
manufacturer potentially will suffer a significant reduction in
revenue. We have experience with similar programs and believe that the
potential reduction of revenue will encourage manufacturers to resolve
our concerns. This will tend to avoid terminations and the associated
fiscal effects. Consequently, we estimate that there will be no
material costs to manufacturers due to potential agreement terminations
during the period FY 2013 through FY 2018.
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 proposed
to revise the definition of Part D drug at Sec. 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 provision, Part D plan sponsors will be required to
submit information in their formulary files indicating that they will
cover these drugs. We estimated 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 will increase
proportional to the current overall Part D level.
9. Good Cause and Reinstatement Into a Cost Plan
At Sec. 417.460(c)(3) we proposed to allow beneficiaries who have
been disenrolled from their cost plans for nonpayment of premium or
other charges imposed by the plan for deductible and coinsurance
amounts the opportunity to be reinstated into their plan if they can
establish good cause for nonpayment of cost-sharing. CMS (or its
designee) will 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. We
received no comments on the regulatory impact analysis of this proposal
and therefore are finalizing this provision without modification.
10. Determination of Actuarially Equivalent Creditable Prescription
Drug Coverage
We are clarifying our regulations at Sec. 423.56 to define
creditable prescription drug coverage consistent with the calculation
of the actuarial value of qualified retiree prescription drug coverage
found at Sec. 423.884(d). Since this is a clarification to an existing
calculation that is already being utilized by organizations providing
creditable coverage, there will be no cost impact on these
organizations.
We received no comments on the regulatory impact analysis of this
proposal and are finalizing this provision without modification.
11. Who May File Part D Appeals With the Independent Review Entity
The changes to Sec. 423.600 will allow prescribing physicians and
other prescribers to request IRE reconsiderations on behalf of Part D
plan enrollees and the corresponding change to Sec. 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 will 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 prescriber-initiated IRE appeals, which would
be partially offset by a decrease in enrollee-initiated 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 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 for 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 all Part D plan sponsors of approximately $75,000 ($25 per file
x 3,000 additional files = $75,000), or a total of $450,000 from FYs
2013 through 2018.
Comment: CMS received a few comments on the regulatory impact
analysis of this proposal. A commenter, citing the greater number of
IRE reconsideration requests under the MA program and linking that in
part to providers' ability to initiate appeals, urged CMS to consider
additional administrative costs associated with this change. Another
commenter specifically noted the increased burden placed on plan
sponsors' appeals departments as a result of having to prepare a larger
number of case files for the IRE.
Response: We agree that compared to the Part D program, the MA
program has a significantly higher number of IRE appeal requests.
However, this is not a result of provider appeals, because in the MA
program, providers do not technically have a right to appeal an adverse
plan reconsideration to the IRE. Instead, in MA, all adverse plan
reconsiderations are auto-forwarded to the IRE for review. We are not
proposing that all adverse redeterminations in the Part D program be
auto-forwarded to the IRE. The burden estimate already includes a
discussion of the burden associated with the increased number of
reconsiderations as a result of the proposed change and the increased
number of cases that plan sponsors will need to prepare for shipment to
the IRE. Thus, we believe that we have accurately accounted for the
estimated burden increase related to this provision, both for the
government and plan sponsors, and are finalizing this provision without
modification.
[[Page 22157]]
12. Termination for Continued Lower-Than-3-Star-Ratings
We have the authority under section 1857(c)(2) of the Act to
terminate contracts with a MA organization 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 at
least a 3-star 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 will 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
Sec. 422.502(b) and Sec. 423.503(b) (by adding new paragraphs at
Sec. 422.502(b)(3) and at Sec. 423.503(b)(3) as well as Sec.
422.502(b)(4) and at Sec. 423.503(b)(4)) to include among the factors
that may support a CMS denial of a contract application those CMS-
initiated terminations or non-renewals that became effective within the
38 months preceding the submission of a new application.
The changes made to this regulation will 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
In our October 11, 2011 proposed rule (76 FR 63071), we discussed
the anticipated effects of the changes we considered that would require
each LTC facility to employ or obtain the services of a consultant
pharmacist who was not employed, under contract, or otherwise
affiliated with the facility's pharmacy, a pharmaceutical manufacturer
or distributor, or any affiliate of these entities.
Comment: Some commenters disagreed with our belief that the costs
and benefits associated with this provision would be offsetting.
Instead, they contended that the requirement for independent consultant
pharmacists would create a financial burden for facilities and
consultant pharmacists and that the requirement would cost, not save,
money.
Response: We are not finalizing the requirement for consultant
pharmacists to be independent in this rule. However, we appreciate the
comments on our impact analysis and will consider the information
provided in the process of possible future rulemaking on this issue.
15. New Benefit Flexibility for Certain Dual Eligible Special Needs
Plans (D-SNPs) (Sec. 422.102)
We estimate that our modification of Sec. 422.102(e) to allow
certain D-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 $137.7 million between FY 2013 and FY 2018.
These Federal and State savings estimates are based on our assumption
that, based on the eligibility standards we establish, approximately 73
D-SNPs will qualify to participate in this initiative, representing a
total of approximately 507,000 enrollees in 2011. We estimate that D-
SNPs participating in this initiative will incur a small cost of
approximately $0.07 million annually in order to comply with the QIP
reporting requirements that we are requiring for eligible D-SNPs as a
condition of participating in this initiative. Accounting for these
administrative costs to MA organizations, we estimate this provision
will result in an aggregate savings to the health care sector of
$137.22 million between FY 2013 and FY 2018.
While we acknowledge that the current authority for all SNPs,
including D-SNPs, to restrict enrollment to special needs individuals
(under section 1859(f)(1) of the Act), expires at the end of the 2013
contract year, we report the impact of this provision from FYs 2013
through 2018, to be consistent with the scoring of other provisions of
this rule. We note that this impact may vary based on Congressional
action.
We are basing our analysis of the potential cost impacts of the D-
SNP benefit flexibility initiative on our experience with HMO
integrated care model demonstrations for Medicare-Medicaid 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, 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 demonstration, 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 short-stay nursing home
admissions as compared to dual eligibles both within
[[Page 22158]]
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 D-SNPs that participate in this benefit flexibility initiative
will reduce their bids by 2 percent on average--1 percent medical and 1
percent margin--as a result of our proposed changes to Sec.
422.102(e). Applying the per-capita savings to the projected enrollment
for these qualified D-SNPs, we project $131.6 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 qualified D-SNPs will be permitted to offer
under our proposed changes to Sec. 422.102(e) will 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, Minnesota, and Wisconsin demonstrations, we believe that
the flexibility for D-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
enrollment for D-SNPs that would qualify to participate in this
initiative, we estimate Federal and State Medicaid savings of $6.12
million for the 6-year period between FY 2013 and FY 2018 as a result
of this provision.
Finally, as detailed in the section III. Information Collection
Requirements, of this final rule with comment period, we estimate an
annual cost of $60,893 to MA organizations as a result of this
provision's requirements. This cost reflects the administrative cost,
including burden hours and staff wage rates, that participating D-SNPs
would incur in order to complete and submit the additional QIP that we
are requiring as a condition of participating in this benefits
flexibility initiative. We estimate that these requirements will cost
MA organizations approximately $0.36 million from FYs 2013 through
2018.
16. Application of the Medicare Hospital-Acquired Conditions and
Present on Admission Indicator Policy to MA Organizations (Sec.
422.504)
We proposed to require MA organizations 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 will 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.
Based on the comments received, we are not finalizing this
proposal, but will continue to consider alternate strategies for
reducing hospital-acquired conditions in hospitals that provide care to
MA enrollees and strive toward aligning quality initiatives in the
Medicare and Medicare Advantage programs.
17. Establishment and Application of Daily Cost-Sharing Rate as Part of
Drug Utilization Management and Fraud, Abuse, and Waste Control Program
As discussed in section II.D.6. of this final rule with comment
period, 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 the adjusted
total estimated cost of 2009 community-based discontinued first fills
of chronic medications was roughly $1.4 billion. In light of this cost,
we proposed to revise Sec. 423.153(b)(4) to provide that a Medicare
Part D sponsor's drug utilization management program must establish and
apply a daily cost-sharing rate, under certain circumstances, to a
prescription presented 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 will decide if a medication supply of less than 30
days will be appropriate, and if so, the daily cost-sharing rate for
the medication will be applied by the Part D sponsor based on the days
supply dispensed.
Potential savings of a daily cost-sharing rate requirement on Part
D sponsors will come from a reduction of the estimated $1.4 billion in
costs noted above which will be offset by some additional dispensing
fees. We previously estimated the potential savings to the Part D
program to be $140 million in 2013 alone, and over $2.4 billion total
by 2018 as described in section II.D.6. of this final rule with comment
period. However, because we are revising the applicability date of this
requirement to January 1, 2014, we have updated the cumulative savings
in 2018 to roughly $1.8 billion, as also noted in section II.D.6. of
this final rule with comment period.
Aside from the additional dispensing fees, 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 x
80). The estimated cost associated with such reprogramming is the
estimated number of hours multiplied by the estimated hourly rate of
$145.37 (Department of Labor, Bureau of Labor Statistics, Computer
Software Engineers-Applications), which equals $465,184.
We did not receive any comments on this specific section, and are
finalizing the requirement as discussed in section II.D.6. of this
final rule with comment period.
18. Technical Corrections to Enrollment Provisions
We proposed technical changes that correct cross-references that
should have been updated in previous rulemaking. These changes are
technical corrections and do not represent a burden for small
businesses, rural hospitals, States, or the private sector. We received
no comments on the regulatory impact analysis of this proposal and,
therefore, are finalizing this provision without modification.
19. MA and Part D Disclosure Requirements to Cost Contract Plans
We are proposing to extend the disclosure requirements in Sec.
422.111 and Sec. 423.128 to cost contract plans. Our regulations at
Sec. 422.111 and Sec. 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
[[Page 22159]]
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 respect to dissemination of explanations of
benefits, customer service call centers, and Internet Web sites.
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 will
be affected annually by this requirement, resulting in a total annual
burden of 240 hours. We estimate, based on an hourly wage of $21.93
(hourly rate for a GS-10 step 1) plus 48 percent for fringe benefits
and overhead, that this requirement will result in a total annual
burden of $7,789 rounded. We did not receive public comments on the
regulatory impact for this provision but are revising it to more
accurately reflect the labor associated with the provision. In the
October 2011 proposed rule, we based costs on the activities of a
compliance officer instead of those of a GS-10 step 1.
20. Denials of SNP Applications and SNP Appeal Rights
We estimate that the proposed provision will 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 will 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 will 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 2 years, we estimate that approximately 4 denied applicants
will 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, The estimated annual cost to all
of the MA organizations, the aggregate, that have been denied to offer
a SNP associated with this provision (assuming an attorney billing $250
per hour) is $8,000 (32 hours x $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 Sec. 422.504(i) and Sec. 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 MA organizations 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 Sec.
422.504(i) and Sec. 423.505(i). Thus, the regulation has been changed
to address this need. Specifically, we deleted the term ``written
arrangements'' throughout Sec. 422.504(i) and Sec. 423.505(i) and in
each instance replace it with ``each and every contract.''
The proposed changes will 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 Sec. 423.100 proposed definition of ``valid prescription''
and the Sec. 423.104 requirement of a ``valid prescription,'' we will
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 will not result in any
additional costs. Not only have we expected that prescriptions will 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 MA
organizations or Part D sponsors and pharmacies) likely also require
valid prescriptions. In light of the above realities, it is not
unreasonable to presume that MA organizations, Part D sponsors, PBMs,
and pharmacies are already taking steps to write prescriptions that are
valid under applicable State law. Accordingly, we do not believe
codifying the valid prescription requirement will change current
practices.
23. Medication Therapy Management Comprehensive Medication Reviews and
Beneficiaries in LTC Settings
Current regulations require that unless a beneficiary is in a LTC
setting, the comprehensive medication review (CMR) must include an
interactive, person-to-person, 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 a CMR. Accordingly, we proposed a
change to Sec. 423.153 to require that Part D sponsors offer a CMR to
beneficiaries in LTC settings, but permitting the sponsor to allow the
pharmacist or other qualified provider to perform the CMR without the
beneficiary in cases when the beneficiary is in a LTC facility and is
cognitively impaired and thus, cannot accept the sponsor's offer of a
CMR. We anticipated that the impact of this proposed revision would
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 a CMR before administering it. We incorrectly
stated in the October 2011 proposed rule that we did not anticipate any
costs or savings associated with this change. However, there will be a
modest increase based on the requirement to offer CMRs to beneficiaries
residing in LTC settings with written summaries and provide the
summaries and action plans in a standardized format that complies with
the requirements specified by CMS. We estimate that 215,000
beneficiaries in LTC settings are eligible for MTM services and 10
percent of those beneficiaries will receive an annual CMR. We also
estimate that the average CMR requires 35 minutes to complete and the
average hourly compensation (including fringe
[[Page 22160]]
benefits, overhead, general and administrative expenses and fee) of the
MTM provider is $120 (labor cost per CMR is $70), and that it costs
$0.91 to print and mail a CMR summary in CMS' standardized format.
Therefore, the estimated total annual cost of providing CMRs in LTC
settings is $1,524,565 ($70.91/CMR x 21,500 CMRs). The estimate
reflects costs previously calculated in the OCN 0938-1154.
24. Coordination of Part D Plans With Other Prescription Drug Coverage
The regulation will 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 proposed to require, effective January 1, 2013, that Part
D sponsors include only active and valid individual prescriber NPIs as
identifiers in PDEs submitted to CMS.
The impact associated with these proposed regulations is: (1) The
annual cost for PBMs and plan organizations to 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 active and valid
prescriber NPIs. We estimated 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 x 160,000). However, preliminary results of an analysis
of coverage year 2011 PDEs submitted to date conducted by a contractor
to CMS indicate that approximately 90 percent already 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
$5,120,000 (6,400,000 x 0.8).
With respect to PBMs and plan organizations that decide to build
their own databases of active and valid prescriber NPIs (or to contract
with network pharmacies for prescriber validation services), we assume
that they will only do so if the cost is equal to or less than
contracting with a commercial vendor for such services, and therefore,
no estimation of the costs to do so is necessary.
Since approximately 90 percent of PDEs for coverage year 2011
submitted to CMS already contain valid individual NPIs, an estimated 95
percent of physicians have an NPI, and prescribers may voluntarily
obtain an NPI to facilitate coverage of their patients' prescriptions,
we estimate negligible costs associated with any PDE that cannot be
submitted to CMS for lack of an NPI.
After consideration of the public comments received, we are
modifying this requirement as discussed in section II.E.11. of this
final rule with comment period (Access to Covered Part D Drugs Through
Use of Standardized Technology and National Provider Identifiers (Sec.
423.120)). However, we are not modifying this regulatory impact
analysis, since none of the comments received specifically addressed
this analysis, and we believe our modifications do not necessitate a
change to this analysis.
Table 8--Estimated Aggregated Costs to the Health Care Sector by Provision for Fiscal Years 2013 Through 2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal year ($ in millions) Total ($ in
Provision(s) Regulation ------------------------------------------------------------------------ millions) FYs
section(s) 2013 2014 2015 2016 2017 2018 2013-2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
Medicare Coverage Gap Agreement..................... 423.2315 3,760.00 4,260.00 4,810.00 5,440.00 6,050.00 6,730.00 31,050.00
Payment Processes for Part D Sponsors............... 423.2320 12.66 12.66 12.66 12.66 12.66 12.66 75.96
Provision of Applicable Discounts................... 423.2325 12.66 12.66 12.66 12.66 12.66 12.66 75.96
Compliance and Civil Money Penalties................ 423.2340 1.18 1.32 1.48 1.67 1.88 2.11 9.64
Other Manufacturer Costs............................ 423.2315 13.03 13.03 13.03 13.03 13.03 13.03 78.18
Inclusion of Benzodiazepines and Barbiturates as 423.100 200.00 280.00 300.00 330.00 360.00 390.00 1,860.00
Part D Covered Drugs...............................
Who May File Part D Appeals with the Independent 423.600 1.05 1.05 1.05 1.05 1.05 1.05 6.30
Review Entity......................................
Benefit Flexibility for Certain Dual Eligible 422.102 -30.71 -28.67 -21.71 -20.16 -17.99 -17.98 -137.22
Special Needs Plans (SNPs).........................
Establishment and Application of Daily Cost-Sharing 423.100 0.50 -150.00 -260.00 -360.00 -460.00 -580.00 -1,809.50
Rate as Part of Drug Utilization Management and 423.104 .......... .......... .......... .......... .......... .......... ..............
Fraud, Abuse and Waste Control Program............. 423.153 .......... .......... .......... .......... .......... .......... ..............
Add language specific to SNP applications to give 422.500 0.01 0.01 0.01 0.01 0.01 0.01 0.06
CMS the clear authority to deny SNP applications
and to give SNPs appeal rights.....................
Apply MA and Part D disclosure requirements to cost 417.427 0.01 0.01 0.01 0.01 0.01 0.01 0.06
contract plans.....................................
Access to covered Part D drugs through the use of 423.120 5.12 5.12 5.12 5.12 5.12 5.12 30.72
standardized technology and NPIs...................
MTM Comprehensive Medication Reviews in LTC Settings 423.153 1.52 1.52 1.52 1.52 1.52 1.52 9.12
---------------------------------------------------------------------------------------------------
[[Page 22161]]
Total Impact ($ in millions).................... .......... 3,977.03 4,408.71 4,875.83 5,437.57 5,979.95 6,570.19 31,249.28
--------------------------------------------------------------------------------------------------------------------------------------------------------
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 9--Estimated Costs and Savings to the Federal Government by Provision for FYs 2013 Through 2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal year ($ in millions) Total ($ in
Provision(s) Regulation ------------------------------------------------------------------------ millions) (FYs
section(s) 2013 2014 2015 2016 2017 2018 2013-2018)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Medicare Coverage Gap Agreement..................... 423.2315 160.00 190.00 210.00 260.00 260.00 260.00 1,340.00
Inclusion of Benzodiazepines and Barbiturates as 423.100 200.00 280.00 300.00 330.00 360.00 390.00 1,860.00
Part D Covered Drugs...............................
Who May File Part D Appeals with the Independent 423.600 0.97 0.97 0.97 0.97 0.97 0.97 5.84
Review Entity......................................
Establishment and Application of Daily Cost-Sharing 423.100 0.00 -150.00 -260.00 -360.00 -460.00 -580.00 -1,810.00
Rate as Part of Drug Utilization Management and 423.104 .......... .......... .......... .......... .......... .......... ..............
Fraud, Abuse and Waste Control Program............. 423.153 .......... .......... .......... .......... .......... .......... ..............
Benefit Flexibility for Certain Dual Eligible 422.102 -29.80 -27.63 -20.76 -19.08 -17.16 -17.13 -131.56
Special Needs Plans (SNPs)--Medicare...............
Benefit Flexibility for Certain Dual Eligible 422.102 -0.67 -0.64 -0.59 -0.55 -0.52 -0.53 -3.50
Special Needs Plans (SNPs)--Federal Medicaid.......
---------------------------------------------------------------------------------------------------
Total ($ in millions)........................... .......... 330.50 292.70 229.62 211.34 142.29 53.31 1,260.78
--------------------------------------------------------------------------------------------------------------------------------------------------------
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 MA Organizations and Part D Sponsors by Provision for FYs 2013 Through 2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs per fiscal year ($ in millions) Total (FYs
Provision(s) Regulation ------------------------------------------------------------------------ 2013-2018) ($
section(s) 2013 2014 2015 2016 2017 2018 in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Payment Processes for Part D Sponsors............... 423.2320 12.66 12.66 12.66 12.66 12.66 12.66 75.96
Provision of Applicable Discounts................... 423.2325 12.66 12.66 12.66 12.66 12.66 12.66 75.96
Who May File Part D Appeals with the Independent 423.600 0.08 0.08 0.08 0.08 0.08 0.08 0.45
Review Entity......................................
Establishment and Application of Daily Cost-Sharing 423.100 0.5 0 0 0 0 0 0.5
Rate as Part of Drug Utilization Management and 423.104 .......... .......... .......... .......... .......... .......... ..............
Fraud, Abuse and Waste Control Program............. 423.153 .......... .......... .......... .......... .......... .......... ..............
Benefit Flexibility for Certain Dual Eligible 422.102 0.06 0.06 0.06 0.06 0.06 0.06 0.36
Special Needs Plans (SNPs)--Medicare...............
Apply MA and Part D Disclosure Requirements to Cost 417.427 0.01 0.01 0.01 0.01 0.01 0.01 0.06
Contract Plans.....................................
Add language specific to SNP applications to give 22.500 0.01 0.01 0.01 0.01 0.01 0.01 0.06
CMS the clear authority to deny SNP applications
and to give SNPs appeal rights.....................
Access to covered Part D drugs through the use of 423.120 5.12 5.12 5.12 5.12 5.12 5.12 30.72
standardized technology and NPIs...................
MTM Comprehensive Medication Reviews in LTC Settings 423.153 1.52 1.52 1.52 1.52 1.52 1.52 9.12
---------------------------------------------------------------------------------------------------
Total ($ in millions)........................... .......... 32.62 32.12 32.12 32.12 32.12 32.12 193.19
--------------------------------------------------------------------------------------------------------------------------------------------------------
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 Costs to Manufacturers by Provision for Fiscal Years 2013 Through 2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs per fiscal year ($ in millions) Total (FYs
Provision(s) Regulation ------------------------------------------------------------------------ 2013-2018) ($
section(s) 2013 2014 2015 2016 2017 2018 in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Medicare Coverage Gap Agreement..................... 423.2315 3,600.00 4,070.00 4,600.00 5,180.00 5,790.00 6,470.00 29,710.00
Other Manufacturer Costs............................ 423.2315 13.03 13.03 13.03 13.03 13.03 13.03 78.18
Compliance and Civil Money Penalties................ 423.2340 1.18 1.32 1.48 1.67 1.88 2.11 9.64
---------------------------------------------------------------------------------------------------
[[Page 22162]]
Total ($ in millions)........................... .......... 3,614.21 4,084.35 4,614.51 5,194.70 5,804.91 6,485.14 29,797.82
--------------------------------------------------------------------------------------------------------------------------------------------------------
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 12--Estimated Savings to States by Provision for Fiscal Years 2013 Through 2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
Savings per fiscal year ($ in millions) Total savings
Regulation ------------------------------------------------------------------------ (FYs 2013-
Provision(s) section(s) 2018) ($ in
2013 2014 2015 2016 2017 2018 millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefit Flexibility for Certain Dual Eligible 422.102 -0.50 -0.48 -0.44 -0.41 -0.39 -0.40 -2.62
Special Needs Plans................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
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.
D. Expected Benefits
1. Medicare Coverage Gap Discount Program Agreement
The rule codifies a number of requirements that must be included in
the manufacturer Discount Program Agreement that generally must be
signed by a manufacturer to allow Part D coverage of the manufacturers
applicable drugs. These requirements are fundamental to ensuring that
participating manufacturers pay all applicable discounts for applicable
drugs received by applicable beneficiaries while in the coverage gap.
We believe that a well-implemented Discount Program will increase
beneficiary adherence to medication regimens that can improve their
health by lowering their pharmaceutical costs at the point-of-sale.
2. Payment Processes for Part D Sponsors
The rule requires CMS to facilitate distribution of the applicable
discount to beneficiaries by requiring that CMS provide an interim
discount payment to Part D sponsors. That interim discount payment will
be subsequently reconciled against manufacturer payments for discounts
provided to beneficiaries. This provision will help Part D sponsors
maintain operations with minimal, if any, effect on cash flow. This
will help ensure that Part D sponsors provide the applicable discount
to applicable beneficiaries at point-of-sale.
3. Provision of Applicable Discounts on Applicable Drugs for Applicable
Beneficiaries
The rule requires Part D sponsors to calculate the applicable
discount that should be provided to applicable beneficiaries in the
coverage gap. Applicable beneficiaries will, 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 will likely
automate discount calculations, potentially reducing errors and the
need for beneficiaries to file an appeal that challenges the discount
amount.
4. Manufacturer Discount Payment Audits and Dispute Resolution
We believe that the audit and dispute programs will 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 and stable Discount Program will help beneficiaries plan
their finances and health care costs over time.
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 will 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 will 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 will generally comply with
the terms of the Discount Program 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 will 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
This final rule with comment period requirement to change the
actuarial value calculation for creditable coverage to exclude the
additional value of gap coverage consistent with the determination of
the RDS actuarial value of prescription drug coverage will enable
beneficiaries who switch from an RDS plan or other creditable
prescription drug coverage to a Part D plan to do so without incurring
a late enrollment penalty.
10. Who May File Part D Appeals With the Independent Review Entity
The changes to Sec. 423.600 and Sec. 423.602 will allow
physicians and other prescribers to request IRE reconsiderations on
behalf of Part D plan enrollees. These changes will
[[Page 22163]]
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 an enrollee's behalf, it
will further improve the enrollee's access to the Part D appeals
process and assist enrollees in obtaining coverage of medically
necessary medications.
11. Termination for Lower-Than-Three-Star-Performance Ratings
The benefit of this change is that we will 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 will 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. Benefit Flexibility for Certain Dual Eligible Special Needs Plans
(SNPs)
We believe that allowing certain dual eligible SNPs that meet high
integration and performance based standards to offer supplemental
benefits beginning contract year 2013 will 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.
14. 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 chronic medications,
particularly those with higher cost-sharing and that are known to
frequently be poorly tolerated. As noted previously, we believe trial
fills will result in the avoidance of unused drugs, reduce drug costs,
diminish the environmental issues 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 will 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.
We received no specific comments on this section.
15. Apply MA and Part D Disclosure Requirements to Cost Contract Plans
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 will ensure that the
beneficiaries have information to help them make best choices for their
health care needs.
16. 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 will ensure
that the only MA organizations 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.
17. Clarification of Contract Requirements for First Tier and
Downstream Entities
This clarification ensures that the MA organizations and Part D
sponsors retain the necessary control and oversight over their
delegated entities, thereby strengthening the programs and protecting
Medicare beneficiaries.
18. Valid Prescriptions
By removing any doubt as to the appropriate source of law to
consult when determining whether a prescription is valid, this
regulation will benefit federal law enforcement agencies. We do not
believe, however, that there is a quantifiable monetary value to easing
prosecutions in this manner.
19. Medication Therapy Management Comprehensive Medication Reviews and
Beneficiaries in LTC Settings
The expected benefits of the revisions to Sec. 423.153 are that
Part D sponsors will be required to offer all targeted beneficiaries in
LTC facilities the opportunity to participate in a CMR, but in the
event the beneficiary is cognitively impaired and unable either to
respond to the offer or to participate in a 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.
20. Coordination of Part D Plans With Other Prescription Drug Coverage
We are clarifying the regulation at Sec. 423.458 regarding the
application of waivers to EGWPs. We expect that this clarification will
benefit Medicare beneficiaries enrolled in such plans by ensuring them
the same protections as those afforded Medicare beneficiaries enrolled
in individual market Part D plans where such protections have not been
explicitly waived.
[[Page 22164]]
21. 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.
We received no specific comments on this section, and therefore are
not modifying our policy based on such comments. However, we are
modifying our proposal, as described in section II.E.11. of the final
rule with comment period, Access to Covered Part D Drugs through Use of
Standardized Technology and National Provider Identifiers (Sec.
423.120), based on general comments we received.
E. Alternatives Considered
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 will involve a
third party administrator directly adjudicating the discount payment to
pharmacies. In this model, the pharmacy will submit the Part D claim to
the Part D sponsor and receive information on the response that will
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 will 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.
3. Determination of Actuarially Equivalent Creditable Prescription Drug
Coverage
We clarified our regulations at Sec. 423.56 to define creditable
prescription drug coverage consistent with the calculation of the
actuarial value of qualified retiree prescription drug coverage found
at Sec. 423.884(d). This is a clarification to an existing calculation
that is already being used by organizations providing creditable
coverage, therefore, there is no cost impact on these organizations.
4. Who May File Part D Appeals With the Independent Review Entity
As previously mentioned, the changes to Sec. 423.600 and Sec.
423.602 will 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
by the IRE on behalf of their patients. 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
prescribing physicians or prescribers and can create an unintended
barrier to enrollees accessing the appeals process. Consequently, we
are finalizing the change previously highlighted in this 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 will 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 Certain Dual Eligible Special Needs
Plans (SNPs)
In our proposed rule, we considered affording this benefit
flexibility only to those plans that met the definition of a fully
integrated dual eligible special needs plan (FIDE SNP) as defined at 42
CFR 422.2. We also proposed limiting this benefit flexibility to only
those FIDE SNPs that enrolled dual eligible beneficiaries that received
full Medicaid benefits. In this final rule with comment period, we are
not limiting this benefit flexibility to FIDE SNPs, but are instead
allowing D-SNPs that meet integration and performance-based standards
established by CMS to qualify for this benefit flexibility. We believe
that expanding this flexibility to a larger pool of D-SNPs that are
integrating care for dual eligible beneficiaries is still consistent
with our overall objective of preventing institutionalization, and will
give more dual eligible beneficiaries across the country access to
these additional 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 sought specific comment
on this belief.
Comment: A few commenters offered a ``copayment by days supply''
alternative.
Response: For these reasons discussed in section II.D.6. of this
final rule with comment period (Establishment and Application of Daily
Cost-Sharing Rate as Part of Drug Utilization Management and Fraud,
Abuse and Waste Control Program), we decline to adopt this alterative.
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
[[Page 22165]]
effective ``no-cost'' means to achieving it.
10. Valid Prescriptions
We did not consider alternatives for this regulation as it reflects
existing state laws.
11. Medication Therapy Management Comprehensive Medication Reviews and
Beneficiaries in LTC Settings
Section 10328 of the Affordable Care Act requires that a CMR be
offered to all targeted beneficiaries, regardless of setting. Thus, the
only alternative to this revision would be to have the pharmacist or
provider attempt to perform a CMR with a LTC resident who is not
capable of participating. However, by requiring a CMR to be offered to
all targeted beneficiaries residing in LTC our revisions to the
regulations will give 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 CMR, the beneficiary will still benefit from having a
CMR performed by a pharmacist or other qualified provider with the
beneficiary's prescriber and/or caregiver without interacting with the
beneficiary.
12. Coordination of Part D Plans With Other Prescription Drug Coverage
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.
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 were
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 is not in line with Congressional intent regarding the use
of NPIs as provider identifiers.
Comment: A commenter supported our policy to not require physicians
to enroll in Medicare in order for their prescriptions to be covered by
the Part D program.
Response: We appreciate the commenter's support.
After consideration of the other public comments received, we are
modifying this requirement as discussed in section II.E.11. of this
final rule with comment period, (Access to Covered Part D Drugs Through
Use of Standardized Technology and National Provider Identifiers (Sec.
423.120)).
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 the
proposed rule for FY 2013 through 2018.
Table 13--Accounting Statement: Classification of Estimated Costs and Savings, From FY 2013 to FY 2018
[$ In millions]
----------------------------------------------------------------------------------------------------------------
Transfers
--------------------------------------------------------
Category Units discount rate
-------------------------------------- Period covered
7% 3%
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers......................... $220.3 $214.5 FYs 2013-2018
--------------------------------------------------------
From Whom To Whom?..................................... Federal Government to MA Organizations and Part D
Sponsors
--------------------------------------------------------
Annualized Monetized Transfers......................... -$0.44 -$0.44 FYs 2013-2018
--------------------------------------------------------
From Whom To Whom?..................................... States to Medicaid Providers
----------------------------------------------------------------------------------------------------------------
Costs (All other provisions)
--------------------------------------------------------
Units discount rate
-------------------------------------- Period covered
7% 3%
----------------------------------------------------------------------------------------------------------------
Annualized Costs to MA organizations and Part D $32.2 $32.2 FYs 2013-2018
Sponsors..............................................
Annualized Costs to Manufacturers...................... $4,853.7 $4,916.9 FYs 2013-2018
----------------------------------------------------------------------------------------------------------------
(* Monetized figures in 2011 dollars.)
In accordance with the provisions of Executive Order 12866, the
Office of Management and Budget reviewed this final rule with comment
period.
List of Subjects
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
Administrative practice and procedure, Health facilities, Health
maintenance organizations (HMO), Medicare, Penalties, Privacy, and
Reporting and recordkeeping requirements.
42 CFR Part 423
Administrative practice and procedure, Emergency medical services,
Health facilities, Health maintenance organizations (HMO), Health
professionals, Medicare, Penalties,
[[Page 22166]]
Privacy, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services amends 42 CFR chapter IV as set forth below:
PART 417--HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL
PLANS, AND HEALTH CARE PREPAYMENT PLANS
0
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.
0
2. Section Sec. 417.422 is amended by revising paragraph (d) to read
as follows:
Sec. 417.422 Eligibility to enroll in an HMO or CMP.
* * * * *
(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;
* * * * *
0
3. Subpart K is amended by adding Sec. 417.427 to read as follows:
Sec. 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 Sec.
422.111 and Sec. 423.128 apply to Medicare contracts with HMOs and
CMPs under section 1876 of the Act.
(b) In applying the provisions of Sec. Sec. 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.
0
4. Section 417.432 is amended by revising paragraph (d) to read as
follows:
Sec. 417.432 Conversion of enrollment.
* * * * *
(d) Application form. The individual who is converting must
complete an application form or another CMS-approved election mechanism
as described in Sec. 417.430(a).
* * * * *
0
5. Section 417.460 is amended by adding paragraphs (c)(3) and (4) to
read as follows:
Sec. 417.460 Disenrollment of beneficiaries by an HMO or CMP.
* * * * *
(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 such reinstatement is
a change in the individual's circumstances subsequent to the
involuntary disenrollment for non-payment of premiums.
* * * * *
Sec. 417.492 [Amended]
0
6. Section 417.492 is amended as follows:
0
A. In paragraph (a)(1)(i), ``;'' is removed and ``; and'' is added in
its place.
0
B. In paragraph (a)(1)(ii), ``; and'' is removed and ``.'' is added in
its place.
0
C. By removing paragraph (a)(1)(iii).
0
D. By removing paragraph (b)(1)(iii).
0
7. Section 417.801 is amended by revising paragraph (d)(1)(ii) to read
as follows:
Sec. 417.801 Agreements between CMS and health care prepayment plans.
* * * * *
(d) * * *
(1) * * *
(ii) The HCPP is not in substantial compliance with the provisions
of the agreement, applicable CMS regulations, or applicable provisions
of the Medicare law. This includes, but is not limited to, the
following:
(A) Failure to provide for and document adequate access to
providers.
(B) Failure to comply with CMS requirements concerning provision of
data and maintenance of records.
(C) Failure to comply with financial requirements specified at
Sec. 417.806; or
* * * * *
PART 422--MEDICARE ADVANTAGE PROGRAM
0
8. The authority citation for part 422 continues to read as follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
Sec. 422.60 [Amended]
0
9. In Sec. 422.60, paragraph (c)(1) is amended by removing the
reference ``Sec. 422.80'' and adding in its place the reference
``Sec. 422.2262''.
0
10. Section 422.100 is amended by adding paragraph (l) to read as
follows:
Sec. 422.100 General requirements.
* * * * *
(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 DME brands, items, and supplies of preferred manufacturers
provided the MA organization ensures all of the following:
(i) Its contracts with DME suppliers ensure that enrollees have
access to all DME brands, items, and supplies of preferred
manufacturers.
(ii) Its enrollees have access to all medically-necessary DME
brands, items, and supplies of non-preferred manufacturers.
(iii) At the enrollees' request, 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 DME brands,
items, and supplies of non-preferred manufacturers.
(B) Provide for the repair of DME brands, items, and supplies of
non-preferred manufacturers.
(iv) It makes no negative changes to its DME brands, items, and
supplies of preferred manufacturers during the plan year.
(v) It treats denials of DME brands, items, and supplies of non-
preferred manufacturers as organization determinations subject to Sec.
422.566.
(vi) It discloses DME coverage limitations and beneficiary appeal
rights in the case of a denial of a DME brand, item, or supply of a
non-preferred manufacturer as part of the description of benefits
required under Sec. 422.111(b)(2) and Sec. 422.111(h).
(vii) It provides full coverage, without limitation on brand and
manufacturer,
[[Page 22167]]
to all DME categories or subcategories annually determined by CMS to
require full coverage.
0
11. Section 422.101 is amended by revising paragraph (d)(1) to read as
follows:
Sec. 422.101 Requirements relating to basic benefits.
* * * * *
(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-of-network 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 other plan-covered items and services from the
single deductible described in paragraph (d)(1)(i) of this section.
(iv) Must waive all Medicare-covered preventive services (as
defined in Sec. 410.152(l)) from the single deductible described
paragraph (d)(1)(i) of this section.
* * * * *
0
12. Section 422.102 is amended by adding paragraph (e) to read as
follows.
Sec. 422.102 Supplemental benefits.
* * * * *
(e) Supplemental benefits for certain dual eligible special needs
plans. Subject to CMS approval, dual eligible special needs plans that
meet a high standard of integration and minimum performance and
quality-based standards may offer additional supplemental benefits,
consistent with the requirements of this part, where CMS finds that the
offering of such benefits could better integrate care for the dual
eligible population provided that the special needs plan--
(1) Operated in the MA contract year prior to the MA contract year
for which it is submitting its bid; and
(2) Offers its enrollees such benefits without cost-sharing or
additional premium charges.
0
13. Section 422.111 is amended by adding paragraph (i) to read as
follows:
Sec. 422.111 Disclosure requirements.
* * * * *
(i) Provision of information required for access to covered
services. MA plans must issue and reissue (as appropriate) member
identification cards that enrollees may use to access covered services
under the plan. The cards must comply with standards established by
CMS.
0
14. Section 422.216 is amended by revising paragraph (d)(1) to read as
follows:
Sec. 422.216 Special rules for MA private fee-for-service plans.
* * * * *
(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
Sec. 422.111(b)(12).
* * * * *
0
15. Section 422.500 is amended by revising paragraph (a) to read as
follows:
Sec. 422.500 Scope and definitions.
(a) Scope. This subpart sets forth application requirements for
entities 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.
* * * * *
0
16. Section 422.501 is amended as follows:
0
A. By revising paragraph (a).
0
B. In paragraph (c)(1)(i) by removing ``; or'' and adding in its place
``.''.
0
C. By adding paragraph (c)(1)(iii).
0
D. By revising paragraph (e).
The addition and revisions read as follows:
Sec. 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.
* * * * *
(c) * * *
(1) * * *
(iii) For Specialized MA Plans for Special Needs Individuals,
documentation that the entity meets the requirements of Sec. Sec.
422.2; 422.4(a)(1)(iv); 422.101(f); 422.107, if applicable; and
422.152(g) of this part.
* * * * *
(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.
* * * * *
0
17. Section 422.502 is amended as follows:
0
A. In paragraph (a)(1), by 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''.
0
B. In paragraph (b)(1), by 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''.
0
C. By adding paragraphs (b)(3) and (4).
0
D. In paragraph (c) introductory text, by 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''.
0
E. By revising paragraphs (c)(2) and (c)(3)(i).
The additions and revision read as follows:
Sec. 422.502 Evaluation and determination procedures.
(b) * * *
(3) If CMS has terminated, under Sec. 422.510, or non-renewed,
under Sec. 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
[[Page 22168]]
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, 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;
* * * * *
0
17. Section 422.504 is amended as follows:
0
A. By adding paragraphs (a)(17) and (18).
0
B. By revising paragraphs (i)(3)(iii), (i)(4)(i), (ii), (iii), (iv)
introductory text and (i)(5).
The additions and revisions read as follows:
Sec. 422.504 Contract provisions.
* * * * *
(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.
* * * * *
(i) * * *
(3) * * *
(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.
(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.
(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--
* * * * *
(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.
* * * * *
0
18. Section 422.510 is amended by adding paragraph (a)(14) to read as
follows:
Sec. 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.
* * * * *
0
19. Section 422.641 is amended by adding paragraph (d) to read as
follows:
Sec. 422.641 Contract determinations.
* * * * *
(d) A determination that an entity is not qualified to offer a
Specialized MA Plan for Special Needs Individuals as defined in
Sec. Sec. 422.2 and 422.4(a)(1)(iv).
0
20. Section Sec. 422.660 is amended by adding paragraphs (a)(5) and
(b)(5) to read as follows:
Sec. 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
Sec. 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 Sec. Sec. 422.2;
422.4(a)(1)(iv); 422.101(f); 422.107, if applicable; and 422.152(g) of
this part.
* * * * *
0
21. Section 422.2274 is amended as follows:
0
A. By revising paragraph (a)(1)(i).
0
B. By removing and reserving paragraph (a)(1)(ii).
0
C. By revising paragraph (a)(1)(iii).
0
D. By adding paragraph (f).
The revisions and addition read as follows:
Sec. 422.2274 Broker and agent requirements.
* * * * *
(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).
* * * * *
(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
0
22. The authority citation for part 423 continues to read as follows:
Authority: Secs. 1102, 1860D-1 through 1860D-43, and 1871 of the
Social Security Act (42 U.S.C. 1302, 1395w-101 through 1395w-153,
and 1395hh).
0
23. Section 423.56 is amended by revising paragraphs (a) and (f)(3) to
read as follows:
Sec. 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
[[Page 22169]]
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.
* * * * *
(f) * * *
(3) Prior to the commencement of the Annual Coordinated Election
Period as defined in Sec. 423.38(b); and
* * * * *
0
24. Section 423.100 is amended as follows:
0
A. By adding in alphabetical order the definition of ``Daily cost-
sharing rate.''
0
B. By revising paragraph (2)(iii) of the definition of ``Incurred
costs.''
0
C. In paragraph (2)(ii) of the definition of ``Part D drug,'' by
removing the phrase ``smoking cessation agents'' and adding in its
place the phrase ``smoking cessation agents; barbiturates when used to
treat epilepsy, cancer, or a chronic mental health disorder; and
benzodiazepines''.
0
D. By revising the definition of ``Supplemental benefits.''
0
E. By adding in alphabetical order the definition of ``Valid
prescription.''
The additions and revision read as follows:
Sec. 423.100 Definitions.
* * * * *
Daily cost-sharing rate means, as applicable, the established--
(1) Monthly copayment under the enrollee's Part D plan, divided by
30 or 31 and rounded to the nearest lower dollar amount, if any, or to
another amount, but in no event to an amount that would require the
enrollee to pay more for a month's supply of the prescription than
would otherwise be the case; or
(2) Coinsurance percentage under the enrollee's Part D.
* * * * *
Incurred costs * * *
(2) * * *
(ii) Under State Pharmaceutical Assistance Program (as defined in
Sec. 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 Sec. 423.2305) or under the Medicare Coverage
Gap Discount Program (as defined in Sec. 423.2305); or
* * * * *
Supplemental benefits means benefits offered by Part D plans, other
than employer group health or waiver plans, that meet the requirements
of Sec. 423.104(f)(1)(ii).
* * * * *
Valid prescription means a prescription that complies with all
applicable State law requirements constituting a valid prescription.
0
25. Section 423.104 is amended by adding paragraphs (h) and (i) to read
as follows:
Sec. 423.104 Requirements related to qualified prescription drug
coverage.
* * * * *
(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. Beginning January 1, 2014, a Part D
sponsor is required to provide its enrollees access to a daily cost-
sharing rate in accordance with Sec. 423.153(b)(4).
0
26. Section 423.120 is amended by adding paragraph (c)(5) to read as
follows:
Sec. 423.120 Access to covered Part D drugs.
* * * * *
(c) * * *
(5)(i) A Part D sponsor must submit to CMS only a prescription drug
event (PDE) record that contains an active and valid individual
prescriber NPI.
(ii) A Part D sponsor must ensure that the lack of an active and
valid individual prescriber NPI on a network pharmacy claim does not
unreasonably delay a beneficiary's access to a covered Part D drug, by
taking the steps described in paragraph (c)(5)(iii) of this section.
(iii) The sponsor must communicate at point-of-sale whether or not
a submitted NPI is active and valid in accordance with this paragraph
(c)(5)(iii).
(A) If the sponsor communicates that the NPI is not active and
valid, the sponsor must permit the pharmacy to--
(1) Confirm that the NPI is active and valid; or
(2) Correct the NPI.
(B) If the pharmacy--
(1) Confirms that the NPI is active and valid or corrects the NPI,
the sponsor must pay the claim if it is otherwise payable; or
(2) Cannot or does not correct or confirm that the NPI is active
and valid, the sponsor must require the pharmacy to resubmit the claim
(when necessary), which the sponsor must pay, if it is otherwise
payable, unless there is an indication of fraud or the claim involves a
prescription written by a foreign prescriber (where permitted by State
law).
(iv) A Part D sponsor must not later recoup payment from a network
pharmacy for a claim that does not contain an active and valid
individual prescriber NPI on the basis that it does not contain one,
unless the sponsor--
(A) Has complied with paragraphs (c)(5)(ii) and (iii) of this
section;
(B) Has verified that a submitted NPI was not in fact active and
valid; and
(C) The agreement between the parties explicitly permits such
recoupment.
(v) With respect to requests for reimbursement submitted by
Medicare beneficiaries, a Part D sponsor may not make payment to a
beneficiary dependent upon the sponsor's acquisition of an active and
valid individual prescriber NPI, unless there is an indication of
fraud. If the sponsor is unable to retrospectively acquire an active
and valid individual prescriber NPI, the sponsor may not seek recovery
of any payment to the beneficiary solely on that basis.
* * * * *
0
27. Section 423.153 is amended as follows:
0
A. In the introductory text for paragraph (b) by removing the phrase
``that -'' and adding in its place the phrase ``that address all of the
following:''.
0
B. In paragraph (b)(1) by removing ``;'' and adding in its place ``.''.
0
C. In paragraph (b)(2) by removing ``; and'' and adding in its place
``.''.
0
D. By adding paragraph (b)(4).
0
E. By revising paragraph (d)(1)(vii)(B).
The addition and revision read as follows:
Sec. 423.153 Drug utilization management, quality assurance, and
medication therapy management programs (MTMPs).
* * * * *
(b) * * *
(4)(i) Establishes a daily cost-sharing rate and applies it to a
prescription presented to a network pharmacy for a covered Part D drug
that is dispensed for a supply less than 30 days, and in the case of a
monthly copayment, multiplies the daily cost-sharing rate by the days
supply actually dispensed--
(A) If the drug is in the form of a solid oral dose, subject to
paragraph (b)(4)(i)(B) of this section and may be dispensed for a
supply less than 30 days under applicable law;
(B) The requirements of this paragraph (b)(4)(i) do not apply to
either of the following:
[[Page 22170]]
(1) Solid oral doses of antibiotics.
(2) 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.
(ii) [Reserved]
* * * * *
(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 is offered the annual comprehensive medication
review and is unable to accept the offer to participate, the pharmacist
or other qualified provider may perform the comprehensive medication
review with the beneficiary's prescriber, caregiver, or other
authorized individual.
* * * * *
0
28. Section 423.458 is amended by adding paragraph (c)(4) to read as
follows:
Sec. 423.458 Application of Part D rules to certain Part D plans on
or after January 1, 2006.
* * * * *
(c) * * *
(4) 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)(3)
of this section.
* * * * *
0
29. Section 423.501 is amended by adding the definition of ``Bona fide
service fees'' in alphabetical order to read as follows:
Sec. 423.501 Definitions.
* * * * *
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 drug.
* * * * *
0
30. Section 423.503 is amended as follows:
0
A. In paragraph (b)(1), by removing the phrase ``If a Part D'' and
adding in its place ``Except as provided in paragraphs (b)(2), (3), and
(4) of this section, if a Part D''.
0
B. Adding paragraphs (b)(3) and (4).
The additions read as follows:
Sec. 423.503 Evaluation and determination procedures for applications
to be determined qualified to act as a sponsor.
* * * * *
(b) * * *
(3) If CMS has terminated, under Sec. 423.509, or non-renewed,
under Sec. 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.
* * * * *
0
31. Section 423.505 is amended as follows:
0
A. By adding paragraphs (b)(24) through (26).
0
B. By revising paragraphs (i)(3) introductory text, (i)(3)(iii),
(i)(3)(v), and (i)(4)(i) through (iv).
The addition and revisions read as follows:
Sec. 423.505 Contract provisions.
* * * * *
(b) * * *
(24) Provide applicable beneficiaries with applicable discounts on
applicable drugs in accordance with the requirements in subpart W of
Part 423.
(25) Maintain 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) Maintain 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 D performance measure scores.
* * * * *
(i) * * *
(3) Each and every contract governing Part D sponsors and first
tier, downstream, and related entities, must contain the following:
* * * * *
(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.
* * * * *
(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.
* * * * *
(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.
* * * * *
0
32. Section 423.509 is amended by adding paragraph (a)(13) to read as
follows:
Sec. 423.509 Termination of contract by CMS.
* * * * *
(a) * * *
(13) Achieves a Part D summary plan rating of less than 3 stars for
3 consecutive contract years. Plan ratings issued by CMS before
September 1,
[[Page 22171]]
2012 are not included in the calculation of the 3-year period.
* * * * *
0
33. Section 423.514 is amended as follows:
0
A. By redesignating paragraphs (d) through (g) as paragraphs (g)
through (j), respectively.
0
B. By adding new paragraphs (d), (e), and (f).
The additions read as follows:
Sec. 423.514 Validation of Part D reporting requirements.
* * * * *
(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 Sec.
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 and 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, 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.
* * * * *
0
34. Section 423.600 is amended by revising paragraphs (a) through (c)
to read as follows:
Sec. 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
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.
* * * * *
0
35. Section 423.602 is amended by revising paragraph (a) to read as
follows:
Sec. 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.
* * * * *
0
36. Section 423.1000 is amended by adding paragraph (a)(3) to read as
follows:
Sec. 423.1000 Basis and scope.
* * * * *
(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.
* * * * *
0
37. Section 423.1002 is amended by revising the definition of
``Affected party'' to read as follows:
Sec. 423.1002 Definitions.
* * * * *
Affected party means any Part D sponsor or manufacturer (as defined
in Sec. 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.
* * * * *
0
38. Section Sec. 423.2274 is amended as follows:
0
A. By revising paragraph (a)(1)(i).
0
B. By removing and reserving paragraph (a)(1)(ii).
0
C. By revising paragraph (a)(1)(iii).
0
D. By adding paragraph (f).
The revisions and addition read as follows:
[[Page 22172]]
Sec. 423.2274 Broker and agent requirements.
* * * * *
(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 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.
* * * * *
(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).
* * * * *
(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.
0
39. Subpart W is added to read as follows:
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.
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.
Sec. 423.2300 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.
Sec. 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 Sec. 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 user.
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 and type.
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-of-network
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 Sec. 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 Sec. 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.
Sec. 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
Sec. 423.2315(b).
(3) Have entered into and have in effect, under terms and
conditions specified by CMS, a contract with the TPA.
[[Page 22173]]
(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.
Sec. 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 Sec. 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
learning of a new code assigned by the FDA.
(5) Collect, have available, and maintain appropriate data,
including data related to manufacturer's labeler codes, FDA drug
approvals, FDA NDC Directory listings, NDC last lot 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
Sec. 423.2330.
(7) Electronically list and maintain up-to-date electronic FDA
listings of all NDCs of the manufacturer, including providing timely
information about discontinued drugs to enable the publication of
accurate information regarding what drugs, identified by NDC, are in
current distribution.
(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)
of this section 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 Sec. 423.2345, the
initial period of a Discount Program Agreement is 24 months and the
agreement is automatically renewed for a 1-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 Sec. 423.2305) for purposes of
administering the program.
Sec. 423.2320 Payment processes for Part D sponsors.
(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.
Sec. 423.2325 Provision of applicable discounts.
(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
Sec. 423.100).
(ii) Whether a Part D drug is an applicable drug (as defined in
Sec. 423.100).
(iii) The amount of the applicable discount (as defined in Sec.
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) 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
in-network paper claims, if such claims are payable under the Part D
plan.
(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 Sec. 423.100) have been applied to the claim for an
applicable drug.
(2) No applicable discount is available if supplemental benefits
(as defined in Sec. 423.100) eliminate the coverage gap so that a
beneficiary has zero cost-sharing.
(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 Sec. 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. For long-term
care and home infusion pharmacies, the date of dispensing can be
interpreted as the date the pharmacy
[[Page 22174]]
submits the discounted claim for reimbursement.
Sec. 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 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, NDC last lot
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.
(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 Sec. 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 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.
Sec. 423.2335 Beneficiary dispute resolution.
The Part D coverage determination and appeals process as described
in Sec. Sec. 423.558 through 423.638 applies to beneficiary disputes
involving the availability and amount of applicable discounts under the
Discount Program.
Sec. 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. 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:
(1) A description of the basis for the determination.
(2) The basis for the penalty.
(3) The amount of the penalty.
(4) The date the penalty is due.
(5) The manufacturer's right to a hearing (as specified in Sec.
423.1006).
(6) 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 timeframe for requesting an
ALJ hearing as specified in Sec. 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) of section of 1128A of the Act)
apply to CMPs under this section to the same extent that they apply to
a CMP or procedure under section 1128A(a) of the Act.
Sec. 423.2345 Termination of Discount Program Agreement.
(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 (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.
[[Page 22175]]
(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.
(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 Sec. 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: March 15, 2012.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: March 28, 2012.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2012-8071 Filed 4-2-12; 4:15 pm]
BILLING CODE 4120-01-P