Administrative Simplification: Modifications of Health Insurance Portability and Accountability Act of 1996 (HIPAA) National Council for Prescription Drug Programs (NCPDP) Retail Pharmacy Standards; and Modification of the Medicaid Pharmacy Subrogation Standard, 100763-100789 [2024-29138]

Agencies

• DEPARTMENT OF HEALTH AND HUMAN SERVICES
• Office of the Secretary

[Federal Register Volume 89, Number 240 (Friday, December 13, 2024)]
[Rules and Regulations]
[Pages 100763-100789]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-29138]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of the Secretary

45 CFR Parts 162

[CMS-0056-F]
RIN 0938-AU19


Administrative Simplification: Modifications of Health Insurance 
Portability and Accountability Act of 1996 (HIPAA) National Council for 
Prescription Drug Programs (NCPDP) Retail Pharmacy Standards; and 
Modification of the Medicaid Pharmacy Subrogation Standard

AGENCY: Office of the Secretary, Department of Health and Human 
Services (HHS).

ACTION: Final rule.

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SUMMARY: This final rule adopts updated versions of the retail pharmacy 
standards for electronic transactions adopted under the Administrative 
Simplification subtitle of the Health Insurance Portability and 
Accountability Act of 1996 (HIPAA). These updated versions are 
modifications to the currently adopted standards for the following 
retail pharmacy transactions: health care claims or equivalent 
encounter information; eligibility for a health plan; referral 
certification and authorization; and coordination of benefits. This 
final rule also adopts a modification to the standard for the Medicaid 
pharmacy subrogation transaction.

DATES: 
    Effective Date: This final rule is effective on February 11, 2025. 
The incorporation by reference of certain publications listed in the 
rule is approved by the Director of the Federal Register beginning 
February 11, 2025. The incorporation by reference of certain other 
publications listed in the rule was approved by the Director as of 
March 17, 2009.
    Compliance Date: Compliance with this final rule is required 
beginning February 11, 2028.

FOR FURTHER INFORMATION CONTACT: 
    Geanelle G. Herring, (410) 786-4466.
    Christopher S. Wilson, (410) 786-3178.

SUPPLEMENTARY INFORMATION:

I. Executive Summary and Severability

A. Purpose

    We published a proposed rule titled ``Administrative 
Simplification: Modifications of Health Insurance Portability and 
Accountability Act of 1996 (HIPAA) National Council for Prescription 
Drug Programs (NCPDP) Retail Pharmacy Standards; and Adoption of 
Pharmacy Subrogation Standard'' (hereafter referred to as the November 
2022 proposed rule) that appeared in the November 9, 2022, Federal 
Register (87 FR 67634). In that rule, we proposed to adopt 
modifications to the retail pharmacy and Medicaid subrogation 
standards. This final rule adopts modifications to standards for 
electronic retail pharmacy transactions and the Medicaid pharmacy 
subrogation transaction adopted under the Administrative Simplification 
subtitle of the Health Insurance Portability and Accountability Act of 
1996 (HIPAA).
1. Need for the Regulatory Action
    The modified standards adopted in this rule will benefit the health 
care industry by offering more robust data exchange and workflow 
automation, enhanced patient safety, improved coordination of benefits, 
and expanded financial fields, so that entities may not have to 
manually enter free text, split claims, or prepare and submit a paper 
Universal Claim Form. The current retail pharmacy standards adopted in 
2009 remain unchanged. In 2018, the National Committee on Vital and 
Health Statistics (NCVHS) recommended that HHS adopt more recent 
standards to address evolving industry business needs. Consistent with 
the NCVHS recommendations and collaborative industry and stakeholder 
input, we believe the updated retail pharmacy standards we are adopting 
are sufficiently mature for adoption and that covered entities are 
ready to implement them.
2. Legal Authority for the Regulatory Action
    Through subtitle F of title II of HIPAA, Congress added to title XI 
of the Social Security Act (the Act) a new Part C, titled 
``Administrative Simplification,'' which requires the Secretary of the 
Department of Health and Human Services (the Secretary) to adopt 
standards for certain transactions to enable health information to be 
exchanged more efficiently and to achieve greater uniformity in the 
transmission of health information. More specifically, section 1174 of 
the Act requires the Secretary to review the adopted standards and 
adopt modifications to them, including additions to the standards, as 
appropriate, but not more frequently than once every 12 months, unless 
the Secretary determines that the modification is necessary in order to 
permit compliance with the standard, thus providing the legal authority 
for this regulatory action.

B. Summary of the Major Provisions

    The provisions in this final rule adopt the following 
modifications: the NCPDP Telecommunication Standard Implementation 
Guide, Version F6 (Version F6) and equivalent NCPDP Batch Standard 
Implementation Guide, Version 15 (Version 15) and NCPDP Batch Standard 
Subrogation Implementation Guide, Version 10 (Version 10). These 
updated standards will replace the currently adopted NCPDP 
Telecommunication Standard Implementation Guide, Version D, Release 0 
(Version D.0) and the equivalent NCPDP Batch Standard Implementation 
Guide, Version 1, Release 2 (Version 1.2), and NCPDP Batch Standard 
Medicaid Subrogation Implementation Guide, Version 3, Release 0 
(Version 3.0).
    Version 3.0 was adopted to support Federal and State requirements 
for State Medicaid agencies to seek reimbursement from the health plan 
responsible for paying the pharmacy claim after the State Medicaid 
agency has paid the claim on behalf of the Medicaid recipient.
    In the November 2022 proposed rule, we proposed to broaden the 
scope of the subrogation transaction to apply not only to State 
Medicaid agencies but to

[[Page 100764]]

all health plans, such as Medicare Part D, State assistance programs, 
and commercial health plans, attempting to recover reimbursement from 
the responsible payer, and to rename the transaction the Pharmacy 
subrogation transaction. At Sec.  162.1902(b), we proposed to adopt 
Version 10 to replace Version 3.0 as the standard for the subrogation 
transaction. This would have been a modification for State Medicaid 
agencies, and for non-Medicaid health plans this would have been the 
adoption of an initial standard.
    However, compelling comments to the November 2022 proposed rule 
persuaded us to adopt Version 10 solely for State Medicaid agencies. 
While we are not adopting Version 10 for non-Medicaid health plans in 
this final rule, they are permitted to use the standard

C. Summary of Effective and Compliance Dates

    The policies adopted in this final rule are effective 60 days after 
publication of the final rule in the Federal Register.
    In the November 2022, proposed rule, we proposed that all covered 
entities would need to comply with Version F6, Version 15, and Version 
10 beginning 24 months after the effective date of the final rule. For 
Version F6 and Version 15, we are adopting a later compliance date than 
we had proposed, and are including an 8-month transition period:
     Starting August 11, 2027, all covered entities, as agreed 
to by trading partners, may use either Version D.0 and Version 1.2 or 
Version F6 and Version 15 for 8 months as a transition period prior to 
full compliance, which begins 36 months after the effective date of the 
final rule.
     All covered entities must be in compliance with Version F6 
and Version 15 beginning February 11, 2028.
    As noted previously and discussed in section III. of this final 
rule, we are adopting Version 10 to apply solely to State Medicaid 
agencies. This final rule adopts a compliance date for State Medicaid 
agencies to comply with Version 10 that aligns with the compliance date 
for Version F6 and Version 15:
     Starting August 11, 2027, State Medicaid agencies, as 
agreed to by trading partners, may use Version 3.0 or Version 10 for 8 
months as a transition period prior to full compliance, which begins 36 
months after the effective date of the final rule.
     State Medicaid agencies must be in compliance with Version 
10 beginning February 11, 2028.

D. Summary of Costs and Benefits

    The overall cost for affected HIPAA covered entities--independent 
and non-independent pharmacies, pharmacy benefit plans, and State 
Medicaid agencies--to move to the updated versions of the retail 
pharmacy transaction standards and the Medicaid pharmacy subrogation 
transaction standard will be approximately $386.3 million. The cost is 
based on the need for such entities to engage in technical development, 
implementation, testing, and initial training to be prepared to meet a 
compliance date beginning February 11, 2028. As discussed in the 
November 2022, proposed rule, we believe that HIPAA covered entities, 
or their contracted vendors, have already largely invested in the 
hardware, software, and connectivity necessary to conduct the 
transactions with the updated versions of the retail pharmacy standards 
and the Medicaid pharmacy subrogation standard.

E. Severability

    This final rule adopts updated versions of currently adopted 
standards for numerous provisions under aspects of the Administrative 
Simplification subtitle of the Health Insurance Portability and 
Accountability Act of 1996 (HIPAA). Subtitle F of Title II of HIPAA 
added a new Part C to Title XI of the Social Security Act (sections 
1171 through 1179 of the Act, 42 U.S.C. 1320d through 1320d-8). These 
updated versions are modifications to the currently adopted standards 
for the following retail pharmacy transactions: health care claims or 
equivalent encounter information; eligibility for a health plan; 
referral certification and authorization; and coordination of benefits. 
This final rule also adopts a modification to the standard for the 
Medicaid pharmacy subrogation transaction. The provisions adopted would 
be distinct provisions. We believe these distinct processes may 
function independently of each other. To the extent a court may enjoin 
any part of a final rule, the Department of Health and Human Services 
(HHS) intends that other provisions or parts of provisions should 
remain in effect, ensuring the continuity of the regulations. We intend 
that any provision of the requirements described in this section or in 
another section held to be invalid or unenforceable by its terms or as 
applied to any person or circumstance would be construed so as to 
continue to give maximum effect to the provision permitted by law 
unless such holding is one of utter invalidity or unenforceability, in 
which event we intend that the provision would be severable from the 
other finalized provisions described in this section and in other 
sections and would not affect the remainder thereof or the application 
of the provision to persons not similarly situated or to dissimilar 
circumstances.

II. Background

A. Legislative Authority for Administrative Simplification

    This background discussion presents a history of statutory and 
regulatory provisions that are relevant for the purposes of this final 
rule.
    Congress addressed the need for a consistent framework for 
electronic transactions and other administrative simplification issues 
in HIPAA (Pub. L. 104-191, enacted on August 21, 1996). Through 
subtitle F of title II of HIPAA, Congress added to title XI of the Act 
a new Part C, titled ``Administrative Simplification,'' which required 
the Secretary of the Department of Health and Human Services (the 
Secretary) to adopt standards for certain transactions to enable health 
information to be exchanged more efficiently and to achieve greater 
uniformity in the transmission of health information. For purposes of 
this and later discussion in this final rule, we sometimes refer to 
this statute as the ``original'' HIPAA.
    Section 1172(a) of the Act states that ``[a]ny standard adopted 
under [HIPAA] shall apply, in whole or in part, to . . . (1) A health 
plan. (2) A health care clearinghouse. (3) A health care provider who 
transmits any health information in electronic form in connection with 
a [HIPAA transaction],'' which are collectively referred to as 
``covered entities.'' Generally, section 1172 of the Act requires any 
standard adopted under HIPAA to be developed, adopted, or modified by a 
standard setting organization (SSO). In adopting a standard, the 
Secretary must rely upon recommendations of the NCVHS, in consultation 
with the organizations referred to in section 1172(c)(3)(B) of the Act, 
and appropriate Federal and State agencies and private organizations.
    Section 1172(b) of the Act requires that a standard adopted under 
HIPAA be consistent with the objective of reducing the administrative 
costs of providing and paying for health care. The transaction 
standards adopted under HIPAA enable financial and administrative 
electronic data interchange (EDI) using a common structure, as opposed 
to the many varied, often proprietary, transaction formats on which 
industry had previously relied and that, due to lack

[[Page 100765]]

of uniformity, engendered administrative burden.
    Section 1173(g)(1) of the Act, which was added by section 1104(b) 
of the Patient Protection and Affordable Care Act (Affordable Care 
Act), Pub. L. 111-148), further addresses the goal of uniformity by 
requiring the Secretary to adopt a single set of operating rules for 
each HIPAA transaction. Section 1171(9) of the Act defines operating 
rules as ``the necessary business rules and guidelines for the 
electronic exchange of information that are not defined by a standard 
or its implementation specifications.'' Section 1173(g)(1) of the Act 
requires operating rules to be consensus-based and reflect the 
necessary business rules that affect health plans and health care 
providers and the manner in which they operate in accordance with HIPAA 
standards.
    Section 1173(a) of the Act requires that the Secretary adopt 
standards for financial and administrative transactions, and data 
elements for those transactions, to enable health information to be 
exchanged electronically. The original HIPAA provisions require the 
Secretary to adopt standards for the following transactions: health 
claims or equivalent encounter information; health claims attachments; 
enrollment and disenrollment in a health plan; eligibility for a health 
plan; health care payment and remittance advice; health plan premium 
payments; first report of injury; health claim status; and referral 
certification and authorization. The Affordable Care Act additionally 
required the Secretary to adopt standards for electronic funds 
transfers transactions. Section 1173(a)(1)(B) of the Act requires the 
Secretary to adopt standards for any other financial and administrative 
transactions the Secretary determines appropriate. Section 1173(a)(4) 
of the Act requires that the standards and operating rules, to the 
extent feasible and appropriate: enable determination of an 
individual's eligibility and financial responsibility for specific 
services prior to or at the point of care; be comprehensive, requiring 
minimal augmentation by paper or other communications; provide for 
timely acknowledgment, response, and status reporting that supports a 
transparent claims and denial management process; describe all data 
elements in unambiguous terms, require that such data elements be 
required or conditioned upon set terms in other fields, and generally 
prohibit additional conditions; and reduce clerical burden on patients 
and providers.
    Section 1174 of the Act requires the Secretary to review the 
adopted standards and adopt modifications to them, including additions 
to the standards, as appropriate, but not more frequently than once 
every 12 months, unless the Secretary determines that the modification 
is necessary in order to permit compliance with the standard.
    Section 1175(a)(1)(A) of the Act prohibits health plans from 
refusing to conduct a transaction as a standard transaction. Section 
1175(a)(1)(B) of the Act also prohibits health plans from delaying the 
transaction or adversely affecting or attempting to adversely affect a 
person or the transaction itself on the grounds that the transaction is 
in standard format. Section 1175(b) of the Act provides for a 
compliance date not later than 24 months after the date on which an 
initial standard or implementation specification is adopted for all 
covered entities except small health plans, which must comply not later 
than 36 months after such adoption. If the Secretary adopts a 
modification to a HIPAA standard or implementation specification, the 
compliance date for the modification may not be earlier than 180 days 
following the date of the adoption of the modification. The Secretary 
must consider the time needed to comply due to the nature and extent of 
the modification when determining compliance dates and may extend the 
time for compliance for small health plans if he deems it appropriate.
    Sections 1176 and 1177 of the Act establish civil money penalties 
(CMPs) and criminal penalties to which covered entities may be subject 
for violations of HIPAA Administrative Simplification provisions. HHS 
administers the CMPs under section 1176 of the Act and the U.S. 
Department of Justice administers the criminal penalties under section 
1177 of the Act. Section 1176(b) of the Act sets out limitations on the 
Secretary's authority and provides the Secretary certain discretion 
with respect to imposing CMPs. This section provides that no CMPs may 
be imposed with respect to an act if a penalty has been imposed under 
section 1177 of the Act with respect to such act. This section also 
generally precludes the Secretary from imposing a CMP for a violation 
corrected during the 30-day period beginning when an individual knew 
or, by exercising reasonable diligence would have known, that the 
failure to comply occurred.

B. Prior Rulemaking

    We published a final rule entitled ``Health Insurance Reform: 
Standards for Electronic Transactions'' that appeared in the August 17, 
2000, Federal Register (65 FR 50312) (hereinafter referred to as the 
Transactions and Code Sets final rule). That rule implemented some of 
the HIPAA Administrative Simplification requirements by adopting 
standards for electronic health care transactions developed by SSOs, 
and medical code sets to be used in those transactions. We adopted X12 
Version 4010 standards for administrative transactions, and the 
National Council for Prescription Drug Programs (NCPDP) 
Telecommunication Standard Version 5.1 for retail pharmacy transactions 
at 45 CFR part 162, subparts K through R.
    Since initially adopting the HIPAA standards in the Transactions 
and Code Sets final rule, we have adopted a number of modifications to 
them. The most extensive modifications were adopted in a final rule 
titled ``Health Insurance Reform; Modifications to the Health Insurance 
Portability and Accountability Act (HIPAA) Electronic Transaction 
Standards'' that appeared in the January 16, 2009, Federal Register (74 
FR 3296) (hereinafter referred to as the 2009 Modifications final 
rule). Among other things, that rule adopted updated X12 and NCPDP 
standards, moving from X12 Version 4010 to X12 Version 5010, and 
Telecommunication Standard Version 5.1 and equivalent Batch Standard 
Implementation Guide Version 1, Release 1, to Telecommunication 
Standard Version D.0 and Version 1.2. In that rule, we also adopted 
Version 3.0 for the Medicaid pharmacy subrogation transaction. Covered 
entities were required to comply with these standards beginning on and 
after January 1, 2012, with the exception of small health plans, which 
were required to comply on and after January 1, 2013.
    In the Transactions and Code Sets final rule, we defined the terms 
``modification'' and ``maintenance.'' We explained that when a change 
is substantial enough to justify publication of a new version of an 
implementation specification, such change is considered a modification 
and must be adopted by the Secretary through regulation (65 FR 50322). 
Conversely, maintenance describes the activities necessary to support 
the use of a standard, including technical corrections to an 
implementation specification (65 FR 50322). Maintenance changes are 
typically corrections that are obvious to readers of the implementation 
guides, not controversial, and essential to implementation as such, in 
the February 20, 2003 final rule (68 FR 8334) titled, ``Health 
Insurance Reform: Security Standards''.
    Maintenance changes to Telecommunication Standard Version

[[Page 100766]]

D.0 were identified by the industry, balloted and approved through the 
NCPDP, and are contained in a document titled ``Telecommunication 
Version D and Above Questions, Answers and Editorial Updates,'' that 
can be accessed free of charge from the NCPDP website's HIPAA 
Information Section, at  https://member.ncpdp.org/Member/media/pdf/VersionDQuestions.pdf. In an October 13, 2010, Federal Register notice 
titled ``Health Insurance Reform; Announcement of Maintenance Changes 
to Electronic Data Transaction Standards Adopted Under the Health 
Insurance Portability and Accountability Act of 1996'' (75 FR 62684), 
the Secretary announced the maintenance changes and the availability of 
the Telecommunication Standard Version D.0 Editorial and how it then 
could be obtained. The document is a consolidated reference for 
questions that have been posed based on the review and implementation 
of Version D.0.
    In a final rule titled ``Administrative Simplification: 
Modification of the Requirements for the Use of Health Insurance 
Portability and Accountability Act of 1996 (HIPAA) National Council for 
Prescription Drug Programs (NCPDP) D.0 Standard,'' that appeared in the 
January 24, 2020 Federal Register (85 FR 4236) (hereafter referred to 
as the Modification of Version D.0 Requirements final rule), the 
Secretary adopted a modification of the requirements for the use of the 
Quantity Prescribed (460-ET) field Version D.0. The modification 
required covered entities to treat the Quantity Prescribed (460-ET) 
field as required where a transmission uses Version D.0 for a Schedule 
II drug for the following transactions: (1) health care claims or 
equivalent encounter information; (2) referral certification and 
authorization; and (3) coordination of benefits.
    In that rulemaking, the Secretary noted that the NCPDP had 
published an updated telecommunication standard implementation guide, 
the October 2017 Telecommunication Standard Implementation Guide, 
Version F2 (Version F2), that, among other changes, revised the 
situational use of a not used field to specify an even broader use of 
the Quantity Prescribed (460-ET) field. The change described the 
Quantity Prescribed (460-ET) field as ``required only if the claim is 
for a controlled substance or for other products as required by law; 
otherwise, not available for use.'' We explained that we chose not to 
adopt Version F2 at that time because, given the public health 
emergency caused by the opioid crisis and the urgent need to find ways 
to yield data and information to help combat it, we believed it was 
more appropriate to take a narrow, targeted approach while taking 
additional time to evaluate the impact of a new version on covered 
entities.

C. Standards Adoption and Modification

    The law generally requires at section 1172(c) of the Act that any 
standard adopted under HIPAA be developed, adopted, or modified by an 
SSO. Section 1171 of the Act defines an SSO as an SSO accredited by the 
American National Standards Institute (ANSI), and specifically mentions 
the NCPDP (the SSO associated with this final rule), that develops 
standards for information transactions, data, or any standard that is 
necessary to, or will facilitate the implementation of, Administrative 
Simplification. Information about the NCPDP's balloting process, the 
process by which it vets and approves the standards it develops and any 
changes thereto, is available on its website, https://www.ncpdp.org.
1. Designated Standards Maintenance Organizations (DSMOs)
    In the Transactions and Code Sets final rule, the Secretary adopted 
procedures to maintain and modify existing, and adopt new, HIPAA 
standards and established a new organization type called the 
``Designated Standard Maintenance Organization'' (DSMO). Regulations at 
45 CFR 162.910 provide that the Secretary may designate as a DSMO an 
organization that agrees to conduct, to the satisfaction of the 
Secretary, the functions of maintaining the adopted standard, and 
receiving and processing requests for adopting a new standard or 
modifying an adopted standard. In a notice titled ``Health Insurance 
Reform: Announcement of Designated Standard Maintenance Organizations'' 
(65 FR 50373), which appeared in the August 17, 2000 Federal Register 
concurrently with the Transactions and Code sets final rule, the 
Secretary designated the following six DSMOs: X12, NCPDP, Health Level 
Seven, the National Uniform Billing Committee (NUBC), the National 
Uniform Claim Committee (NUCC), and the Dental Content Committee (DCC) 
of the American Dental Association.
2. Process for Adopting Initial Standards, Maintenance to Standards, 
and Modifications to Standards
    As noted previously, in general, HIPAA requires the Secretary to 
adopt standards that have been developed by an SSO. The process for 
adopting a new standard or a modification to an existing standard is 
described in the Transactions and Code Sets final rule (65 FR 50344) 
and implemented at Sec.  162.910. Under Sec.  162.910, the Secretary 
considers recommendations for proposed modifications to existing 
standards, or a proposed new standard, if the recommendations are 
developed through a process that provides for: open public access; 
coordination with other DSMOs; an appeals process for the requestor of 
the proposal or the DSMO that participated in the review and analysis 
if either of the preceding were dissatisfied with the decision on the 
request; an expedited process to address HIPAA content needs identified 
within the industry; and submission of the recommendation to the NCVHS.
    Any entity may submit change requests with a documented business 
case to support its recommendation to the DSMO. The DSMO receives and 
manages those change requests, including reviewing them and notifying 
the SSO of its recommendation for approval or rejection. If the changes 
are recommended for approval, the DSMO also notifies the NCVHS and 
suggests that a recommendation for adoption be made to the Secretary.
    The foregoing processes were followed with respect to the standards 
modifications finalized in this rule, which stemmed from the following 
change requests the NCPDP submitted to NCVHS: (1) DSMO request 1201 
that requested replacing Version D.0 and Version 1.2 with the Version 
F2 and Version 15; (2) DSMO request 1202 that requested replacing 
Version 3.0 with Version 10 to be used by Medicaid plans only; and (3) 
DSMO request 1208 that updated DSMO request 1201, and requested 
adopting Version F6, instead of Version F2.
3. NCVHS Recommendations
    The NCVHS, which was established by statute in 1949, serves as an 
advisory committee to the Secretary and is statutorily conferred a 
significant role in the Secretary's adoption and modification of HIPAA 
standards. In 2018, the NCVHS conducted 2 days of hearings seeking the 
input of health care providers, health plans, clearinghouses, vendors, 
and interested stakeholders regarding Version F2 as a potential 
replacement for Version D.0, and Version 15 as a potential replacement 
for Version 1.2. Testimony was also presented in support of replacing 
Version 3.0 with Version 10. In addition to the NCPDP, organizations 
submitting testimony included the Centers for Medicare & Medicaid 
Services on behalf of the Medicare Part D program, the

[[Page 100767]]

National Association of Chain Drug Stores (NACDS), Ohio Medicaid, 
Pharmerica, CVS Health, and an independent pharmacy, Sam's Health 
Mart.\1\
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    In a letter dated May 17, 2018, the NCVHS recommended that the 
Secretary adopt Version F2 to replace Version D.0, Version 15 to 
replace Version 1.2, and Version 10 to replace Version 3.0.\2\ As 
discussed in section III.B. of this final rule, we did not propose to 
adopt Version F2 based on that NCVHS recommendation in our proposed 
rule titled ``Administrative Simplification: Modification of the 
Requirements for the Use of Health Insurance Portability and 
Accountability Act of 1996 (HIPAA) National Council for Prescription 
Drug Programs (NCPDP) D.0 Standard'' that appeared in the Federal 
Register on January 31, 2019 (84 FR 633) because we believed that 
proposing a modification to the retail pharmacy standards required 
further evaluation, including an assessment of the impact of 
implementing the modification, given the many significant changes a 
version change would require covered entities to undertake.
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    The NCVHS held a later hearing, on March 24, 2020, to discuss 
Change Request 1208 that recommended that Version F6 supplant Version 
F2, in regard to the NCVHS's prior recommendation that the Secretary 
adopt Version F2. During the hearing, the NCPDP noted that Version F6 
had resolved several key limitations of Version F2. Significantly, with 
respect to the number of digits in the dollar field, Version F2 did not 
support dollar fields of $1 million or more. Since the NCVHS's May 17, 
2018, recommendation, several new drugs priced at, or in excess of, $1 
million have entered the market, and researchers and analysts 
anticipate that over the next several years, dozens of new drugs priced 
similarly or higher may enter the market, while hundreds of likely 
high-priced therapies, including gene therapies that target certain 
cancers and rare diseases, are under development. To meet emerging 
business needs, the NCPDP updated the Telecommunication Standard to 
support dollar fields equal to, or more than, $1 million and made other 
updates including enhancements to improve coordination of benefits 
processes, prescriber validation fields, plan benefit transparency, 
codification of clinical and patient data, harmonization with related 
standards, and controlled substance reporting, that necessitated the 
new Version F6. The March 24, 2020, NCVHS meeting transcript and 
testimony is available at https://ncvhs.hhs.gov/meetings/full-committee-meeting-4/.
    In a letter dated April 22, 2020,\3\ the NCVHS recommended that the 
Secretary adopt Version F6 to replace Version D.0, provide a 3-year 
pre-implementation window allowing, but not requiring, covered entities 
to use Version F6 beginning at the end of the 3 years, and allowing 
both Versions F6 and D.0 to be used for an 8-month period until a 
compliance date of May 1, 2025, when only Version F6 and Version 15 
could be used. The recommendation letter stated that allowing the 
industry to use either Version D.0 or Version F6 would enable an 
effective live-testing and transition period. The NCVHS recommended 
that the Secretary adopt Batch Standard Versions 15 and 10, as it had 
previously recommended in May 2018. The NCVHS has not, as of 
publication of this final rule, recommended that the Secretary adopt 
any other version of the NCPDP Telecommunication Standard, such as 
Version F7, which is discussed in section III. A. of this final rule.
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III. Provisions of the Final Rule and the Analysis of and Responses to 
Public Comments

    In response to the November 2022 proposed rule, we received 25 
timely pieces of correspondence, which resulted in over 47 unique 
comments from a variety of commenters, including a pharmacy standards 
development organization, data content committees, health plans, health 
care companies, professional associations, technology companies, and 
individuals.
    In this section of this final rule, we present our proposals, a 
summary of the comments received, and our responses to the comments. 
Some of the public comments received in response to the November 2022 
proposed rule were outside of the scope of the proposed rule and are 
not addressed in this final rule.

A. Adoption of the NCPDP Telecommunication Standard Implementation 
Guide Version F6 (Version F6) and Equivalent Batch Standard 
Implementation Guide, Version 15 (Version 15) for Retail Pharmacy 
Transactions

    In the November 2022 proposed rule, we proposed to adopt a 
modification to the current HIPAA retail pharmacy standards for the 
following transactions: (1) health care claims or equivalent encounter 
information; (2) eligibility for a health plan; (3) referral 
certification and authorization; and (4) coordination of benefits. We 
indicated that moving to Version F6 and Version 15 would: allow for the 
accommodation of drug therapies priced at or in excess of $1 million; 
include information needed for prior authorizations and enhancements to 
the drug utilization review (DUR) fields; include new coordination of 
benefits segment fields that would improve the identification of the 
previous payer and its program type, such as Medicare, Medicaid, 
workers compensation, or self-pay programs, which would eliminate the 
need to use manual processes to identify this information; and 
accommodate business needs to comply with other industry requirements, 
among other benefits. For the full discussion, we refer readers to the 
November 2022 proposed rule (87 FR 67638 and 67639).
    We proposed that covered entities conducting the following HIPAA 
transactions would be required to use Version F6:
     Health care claims or equivalent encounter information 
(Sec.  162.1101).
    ++ Retail pharmacy drug claims.
    ++ Retail pharmacy supplies and professional claims.
     Eligibility for a health plan (Sec.  162.1201)--Retail 
pharmacy drugs.
     Referral certification and authorization (Sec.  
162.1301)--Retail pharmacy drugs.
     Coordination of benefits (Sec.  162.1801)--Retail pharmacy 
drugs.
    We note that, as is the case with Version D.0, Version F6 is 
specifically designed for communication between retail pharmacies and 
health plans, as described in the NCPDP Version F6 Telecommunication 
Standard Implementation Guide \4\ and equivalent NCPDP Version 15 Batch 
Standard Implementation Guide. Specifically, the implementation guides 
for Version F6

[[Page 100768]]

and Version 15 specify that those standards support transmissions to 
and from ``providers'' and indicate that a provider ``may be a retail 
pharmacy, mail order pharmacy, doctor's office, clinic, hospital, long-
term care facility, or any other entity, which dispenses prescription 
drugs.'' This means the use cases for the retail pharmacy drugs 
transactions addressed in this Final Rule, including the HIPAA 
requirements for the use of Version F6 and Version 15 we are finalizing 
here, apply only to providers that dispense prescription drugs. That 
is, they do not apply to providers that do not dispense prescription 
drugs.
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    \4\ The Telecommunication Standard Implementation Guide Version 
F6 (Version F6), January 2020 and equivalent Batch Standard 
Implementation Guide, Version 15 (Version 15) October 2017, National 
Council for Prescription Drug Programs.
---------------------------------------------------------------------------

    Comment: A number of commenters supported HHS's proposal to modify 
the currently adopted retail pharmacy standards from Version D.0 and 
Version 1.2 to Version F6 and Version 15. Commenters remarked that it 
has been over 10 years since Version D.0 was adopted for retail 
pharmacy transactions and agreed that the enhancements in the updated 
standards will better meet the present business needs of pharmacies and 
payers, thereby reducing administrative burden. While most commenters 
agreed that adopting Version F6 is appropriate, several suggested that 
HHS instead adopt an even more recently updated NCPDP Telecommunication 
Standard, Version F7 (Version F7). Commenters remarked that the only 
difference between Version F6 and Version F7 is the addition of a field 
that distinguishes between administrative gender (used to indicate the 
sex a person has listed with their insurance company) and clinical sex 
at birth. Commenters noted that the Patient Gender Code field (305-C5) 
in Version F6 includes ``Non-Binary'' as an optional value. While the 
``Non-Binary'' value can be used to support various eligibility and 
enrollment business functions, it does not support gender-specific 
coverage rules or clinical patient safety functions. To address this 
clinical concern, the NCPDP updated Version F6 to Version F7 by adding 
a new field called Sex Assigned at Birth (F32-W8). Commenters urged HHS 
to consider the need for this field and adopt Version F7 in this final 
rule.
    Response: We thank the commenters for their support of our proposal 
to adopt Version F6. While we appreciate comments urging us to adopt 
Version F7 instead of Version F6, as of the publication date of this 
final rule there is no DSMO recommendation to adopt Version F7 in 
accordance with the processes specified in Sec.  162.910(c), nor has 
the NCVHS been asked to consider updating its prior recommendation to 
adopt Version F6. While we did not discuss adopting Version F7 in the 
November 2022 proposed rule, we may address it in future rulemaking. 
therefore, covered entities will be required to use Version F6 only.
    Comment: A commenter acknowledged that adoption of Version F6 would 
reduce industry burden by replacing several free text fields with 
discrete data fields, thus allowing the industry to automate additional 
pharmacy workflows. However, another commenter expressed concern that 
the replacement of free text fields with discrete data fields in 
Version F6 would result in the permitted information being too limited 
or not well-defined. The commenter noted that poorly designed discrete 
data fields potentially lead to unclear communication and confusion, 
which has patient-safety implications. The commenter said that before 
deploying the discrete data fields, the standard should be broadly 
tested by both physicians and pharmacists to ensure clear 
communication.
    Response: HHS consulted with the NCPDP, the SSO associated with 
this rulemaking, and was advised that the free text fields were not 
removed from Version F6. Rather, the free text fields still exist in 
Version F6 and can be used when additional text is needed for 
clarification or detail or when a discrete data field does not exist. 
But, Version F6 provides a format to convey situational plan benefit 
information, previously sent using free text fields, in discrete data 
fields. The discrete data fields, which are on the claim response from 
the payer or PBM to the pharmacy, enable the plan benefit information 
to be better communicated to the pharmacy, which in turn enables the 
pharmacy to better communicate to the patient and the prescriber. The 
use of discrete data fields improves communication of the plan benefit 
information because it does not rely on the pharmacist reading and 
interpreting free text. The types of plan benefit information that are 
communicated via free text fields in Version D.0 and that will be sent 
in discrete data fields in Version F6 are dates (for example, next 
available fill date and prior authorization date), minimum/maximum 
ages, minimum/maximum quantity, minimum/maximum day supply, minimum/
maximum dollar amounts, and maximum or remaining fills. Additional 
detail about formulary alternatives, if applicable, will be 
communicated via the new discrete data fields rather than via free 
text. Such detail includes the required duration of therapy and plan 
benefit tiers.
    It is also important to note that since the new discrete data 
fields are not codified, the information conveyed is not limited to, or 
defined by, a set of values. A codified field is one that that requires 
a value that is defined either in NCPDP's External Code List (ECL) or a 
code set maintained by a non-NCPDP organization (for example SNOMED CT 
values or ICD-10 code values), where only those values may be included 
in the data field. The new discrete data fields do not require a 
defined set of values--they are date fields or fields for a number 
representing, for example, an age, quantity, or dollar amount.
    In light of these updates, we continue to agree with the NCPDP's 
assessment that replacing free text fields with discrete data fields 
for clinical and non-clinical information will enhance patient safety 
processes because there will be less room for interpretation, and, 
therefore, likely less room for the error and confusion that can occur 
with free text fields. By ensuring standardization and enabling 
pharmacy and prescriber system automation and interoperability of 
clinical information, critical pharmacy information will thus be more 
readily identifiable and actionable. Lastly, we believe that adopting a 
later compliance date, including an 8-month transition period, than 
what we had proposed, will allow for the standard to be broadly tested 
by health plans, pharmacies, and pharmacy benefit managers (PBM) to 
ensure clear communication. We discuss the compliance dates in section 
III.C. of this final rule.

B. Modification of the Pharmacy Subrogation Transaction Standard for 
State Medicaid Agencies

    In the November 2022 proposed rule (87 FR 67640), we discussed that 
the 2009 Modifications final rule adopted Version 3.0 as the standard 
for the Medicaid pharmacy subrogation transactions. We discussed how 
State Medicaid agencies sometimes pay claims for which a third party 
may be legally responsible, and where the State is required to seek 
recovery. For the full 2009 Modifications final rule discussion, please 
refer to 74 FR 3296.
1. Modification to the Definition of the Medicaid Pharmacy Subrogation 
Transaction
    The November 2022 proposed rule (87 FR 67640) proposed to broaden 
the scope of the pharmacy subrogation transaction to apply to all 
health plans, not just State Medicaid agencies. In doing so, we 
proposed to modify the name and definition of the transaction to 
reflect the proposed amended requirements. The transaction at 45 CFR 
162.1901 is presently known as the

[[Page 100769]]

Medicaid pharmacy subrogation transaction and is described as the 
transmission of a claim from a Medicaid agency to a payer for the 
purpose of seeking reimbursement from the responsible health plan for a 
pharmacy claim the State has paid on behalf of a Medicaid recipient. 
The proposal would have changed the name of the transaction to the 
Pharmacy subrogation transaction and defined it as the transmission of 
a request for reimbursement of a pharmacy claim from a health plan that 
paid the claim, for which it did not have payment responsibility, to 
the health plan responsible for the claim.
    Comment: Several commenters responded to our proposal to require 
all health plans, not just State Medicaid agencies to use the HIPAA 
standard for pharmacy subrogation transactions. Most of those 
commenters disagreed with the proposal, but a few supported it and 
specifically expressed support for our proposal to change the name and 
definition of the transaction.
    Response: We appreciate the commenters' input. As discussed in 
section III. B.2. of this final rule, we are not finalizing our 
proposal to require all health plans to use the HIPAA standard for 
pharmacy subrogation transactions, and, therefore, we are not 
finalizing our proposal to change the name and definition of the 
transaction at Sec.  162.1901.
2. Application of NCPDP Batch Standard Subrogation Implementation 
Guide, Version 10 to Non-Medicaid Health Plans
    As discussed previously, the current HIPAA standard, Version 3.0, 
only applies to State Medicaid agencies seeking reimbursement from 
health plans responsible for paying pharmacy claims. In the November 
2022 proposed rule (87 FR 67640), we stated that Version 3.0 does not 
address business needs for other payers and that adopting a more 
broadly applicable subrogation transaction standard would facilitate 
the efficiency and effectiveness of data exchange and transaction 
processes for all payers involved in post-payment of pharmacy claims 
and support greater payment accuracy across the industry.
    Comment: The majority of those who commented on our proposal to 
adopt Version 10 for all health plans expressed support for the 
adoption of Version 10 to replace Version 3.0 for State Medicaid 
agencies but opposed our proposal to adopt the standard to apply to all 
health plans. Commenters believe there are differences between Medicaid 
subrogation and non-Medicaid subrogation that Version 10 does not 
address, such as the different payer order rules that are required for 
non-Medicaid subrogation. They asserted that making Version 10 
available, but not required, for non-Medicaid subrogation transactions 
would allow the pharmacy industry to determine if there are additional 
data elements, use cases, payer order rules, and other guidance needed 
for different subrogation transactions.
    Response: We thank the commenters for their input. As noted in the 
November 2022 proposed rule (87 FR 67640 and 67641), during the March 
2018 NCVHS hearing, several testifiers noted that there was a need to 
expand the use of the subrogation transaction beyond State Medicaid 
agencies based on other payers'--such as Medicare Part D, State 
assistance programs, or private health plans--business needs to seek 
similar reimbursement that could not be accommodated by Version 3.0. A 
testifier noted that a subrogation standard that addresses all payers 
would allow the industry to have a standardized approach to 
subrogation, which ultimately would reduce the manual processes that 
health plans and pharmacies currently use. The testifier added that 
requiring use of a subrogation standard by all health plans would allow 
for better tracking of subrogation efforts, which would improve payment 
accuracy and support cost containment efforts. Another testifier 
advised that expanding the requirement for non-Medicaid health plans to 
use the transaction standard would allow for any PBM to use the 
standard. For these reasons, we proposed that all health plans would be 
required to use Version 10 for pharmacy subrogation transactions.
    Nonetheless, we have decided to adopt Version 10 for State Medicaid 
agencies only and are not requiring non-Medicaid health plans to use a 
subrogation standard for pharmacy subrogation transactions. While 
reviewing commenters' concerns and suggestions, we consulted with the 
NCPDP, the SSO associated with the rulemaking, and found that Version 
10 does not address requirements for all non-Medicaid subrogation 
situations, especially when these situations involve multiple 
commercial health plans. In the ``Health Insurance Reform; 
Modifications to the Health Insurance Portability and Accountability 
Act (HIPAA) Electronic Transaction Standards'' August 2008 proposed 
rule (73 FR 49751), we explained that Federal law requires, with some 
exceptions, that Medicaid be the payer of last resort, which means that 
health plans that are legally required to pay for health care services 
received by Medicaid recipients are required to pay for services 
primary to Medicaid. However, Medicaid agencies will sometimes pay 
claims for which a third party is legally responsible. This occurs when 
the Medicaid agency is not aware of the existence of another coverage, 
and there are also specific circumstances for which State Medicaid 
agencies are required by Federal law to pay claims and then seek 
reimbursement afterward.
    Payer order rules are critical in subrogation transactions since 
they determine the primary or secondary insurer, and, in the case of 
subrogation, a payer needs to know which insurer to bill for the 
payment it incorrectly made. In retrospect, since payer order rules 
aside from Medicaid are not well developed, we believe that Version 10 
is not ready for adoption beyond State Medicaid agency subrogation 
transactions. Although we are not adopting Version 10 for all health 
plans in this rule, we note that the standard is available for use, 
meaning covered entities may use it for non-Medicaid subrogation 
transactions between willing trading partners.
3. Modification of the NCPDP Batch Standard Subrogation Implementation 
Guide, Version 10 Transaction Standard for State Medicaid Agencies
    In the November 2022 proposed rule (87 FR 67641), we proposed to 
replace Version 3.0 with Version 10 as the standard for Pharmacy 
subrogation transactions at Sec.  162.1902(b).
    Comment: As noted previously, commenters agreed that Version 10 
should replace Version 3.0 for Medicaid subrogation transactions but 
opposed requiring its use by non-Medicaid health plans.
    Response: We thank commenters for their input and suggestions. As 
previously discussed, we are adopting the NCPDP Batch Standard 
Subrogation Implementation Guide, Version 10 as the standard for 
Medicaid pharmacy subrogation transactions at Sec.  162.1902(b) to 
apply only to Medicaid pharmacy subrogation transactions.

C. Compliance and Effective Dates

1. Compliance Date for Version F6 and Version 15
    Section 1175(b)(2) of the Act addresses the timeframe for 
compliance with modified standards. The section provides that the 
Secretary must set the compliance date for a modification at such time 
as the Secretary determines appropriate, taking into account the time 
needed to comply due to the nature and extent of the modification, 
though

[[Page 100770]]

the compliance date may not be sooner than 180 days after the effective 
date of the final rule. In the November 2022 proposed rule, we proposed 
that covered entities would need to be in compliance with Version F6 
and Version 15 for retail pharmacy transactions 24 months after the 
effective date of the final rule, which we would reflect in Sec. Sec.  
162.1102, 162.1202, 162.1302, and 162.1802.
    In the November 2022 proposed rule (87 FR 67641), we acknowledged 
that in its April 22, 2020, recommendation letter to the Secretary, the 
NCVHS recommended the following implementation timelines and dates for 
Version F6 and Version 15: \5\
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    \5\ https://ncvhs.hhs.gov/wp-content/uploads/2020/04/Recommendation-Letter-Adoption-of-New-Pharmacy-Standard-Under-HIPAA-April-22-2020-508.pdf.
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     A 3-year pre-implementation window following publication 
of the final rule, allowing (but not requiring) industry use beginning 
at the end of the 3 years (or 36 months).
     Allow both Versions D.0 and F6 and their equivalent batch 
standards, Version 1.2 and Version 15, to be used for an 8-month period 
after the 36-month pre-implementation window, which the NCVHS suggested 
would enable an effective live-testing and transition period.
     Require full compliance, that is, exclusive use of Version 
F6, after the 8-month transition period, following the 36-month pre-
implementation window.
    The NCVHS also recommended a compliance date in May, as opposed to 
January, due to: seasonal organizational burdens associated with the 
end-of-year timeframe, such as processing burden for annual benefit 
plan changes, which are typically effective January 1; unavailability 
of full staff during the holiday season preceding January 1; competing 
administrative obligations requiring information technology (IT)/
operations and corporate resources such as closing out annual books and 
compiling reports; and annual flu season peaks affecting both providers 
and IT/operations staff.
    After carefully considering the NCVHS's recommendation and industry 
testimony on implementation timelines and dates, as well as the 
potential benefits that would be derived from implementing Version F6 
and Version 15 (discussed in section III.A.1. of the November 2022 
proposed rule and section III. of this final rule) as soon as possible, 
we chose not to propose a 3-year pre-implementation compliance window 
or an 8-month transition period. Instead, we proposed a 24-month 
compliance date. We believed that the industry was capable of 
implementing the changes necessary to comply with the updated standards 
by 24 months from the effective date of the final rule, in light of: 
(1) limited industry testimony on any barriers specific to the 
implementation of Version F6; (2) industry testimony on the 
similarities between the level of effort necessary to implement Version 
F2 and Version F6, as discussed in the NCVHS's 2018 recommendation; (3) 
and the limited scope of the modification to only retail pharmacy 
transactions.
    Comment: The majority of commenters opposed the proposed 24-month 
compliance date requirement for Version F6 and Version 15. In response 
to our solicitation for information on barriers the industry may face 
that would require additional time for implementation, commenters noted 
that there were fewer than 100 data element changes between Version 5.1 
and Version D.0, but more than 300 data element changes between Version 
D.0 and Version F6 and their equivalent batch standards, a greater than 
300-percent increase when comparing the two standards. Commenters 
described that the volume of changes affect multiple business 
functions, including, for example, transaction routing, pricing, 
controlled substance billing, Medicare Part D long term care dispensing 
frequencies, coordination of benefits, Medicare eligibility response, 
and reversals, which require expansion of internal databases and system 
updates to build the new data elements into automated claims 
adjudication processes. Commenters noted the updates will require 
extensive internal IT development and testing and external trading 
partner testing across multiple databases and systems before covered 
entities can conduct real-time exchanges in compliance with the 
requirements.
    In addition to the volume of required data element changes, several 
commenters provided detailed information about the complexity of the 
changes. For example, as discussed in section III. of the November 2022 
proposed rule, Version F6 supports drugs priced at and in excess of $1 
million. This change is specific to Version F6 and, therefore, was not 
accounted for in any of the earlier industry testimony regarding 
appropriate timeframes for moving from Version D.0 to Version F2. 
Commenters noted that, to accommodate drugs priced at $1 million and 
up, Version F6 includes 31 expanded pricing fields. To comply with 
these changes, covered entities must ensure that their own systems and/
or their business associates' systems increase database capacity to 
store the expanded field length and have the ability to recognize when 
a ninth digit may be missing across all 31 expanded pricing fields.
    Additionally, Version F6 eliminated 13 distinct patient pay fields 
in Version D.0 and combined them into one qualified, repeating field. 
Commenters suggested that changes necessary to move 13 distinct patient 
pay fields into one pose complex implementation challenges. As a result 
of these financial field changes, commenters believe that the coding 
tasks required to ensure that accurate pricing data is included within 
Version F6 and Version 15-compliant transactions will require 
additional time. Further, commenters noted that should pricing fields 
associated with coordination of benefits transactions not be coded 
correctly as a result of rushed attempts to comply with Version F6 and 
Version 15, it could result in communicating incorrect patient co-
insurance and out-of-pocket calculations to pharmacy providers.
    Some commenters also raised concerns regarding the required changes 
necessary for moving from Version 3.0 to Version 10. Version 10 uses an 
8-digit Issuer Identifier Number (IIN) in place of the 6-digit Bank 
Identification Number (BIN) required by Version 3.0.\6\ As discussed in 
section III. of the November 2022 proposed rule (87 FR 67639), within a 
pharmacy transaction the BIN is a field in the Telecommunication 
Standard that is used for the routing and identification in pharmacy 
claims. These commenters believed that there will need to be system 
updates in order to recognize and process 8-digit IINs, and systems 
will also need to be updated to map all 8-digit IINs to the former 6-
digit BINs. At one time, both Version 5.1 and Version D.0 required the 
use of the BIN in a 6-digit, mandatory, fixed-length field located in 
the header section of the transaction. However, since the adoption of 
Version D.0, the International Organization for Standardization (ISO) 
created the IIN, which was expanded to 8 digits (as opposed to the 6-
digit BIN) to increase the pool of possible identifiers. Version F6 
includes an 8-digit, mandatory, fixed-length field to accommodate 8-
digit IINs and represents the first change to the header section of the 
NCPDP Telecommunication standard since the adoption of Version 5.1 in 
2002. However, commenters were concerned that, should system changes to 
accommodate the new header

[[Page 100771]]

information not be implemented properly, it could result in 
transactions being routed to the wrong PBMs, delaying patient access to 
care.
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    Several commenters also suggested that additional time to comply 
with Version F6 and Version 15 is needed to accommodate competing 
regulatory demands on stakeholder resources. Specifically, commenters 
identified the need to implement updated electronic prescribing 
standards as proposed in the Medicare Program; Contract Year 2024 
Policy and Technical Changes proposed rule,\7\ to develop Application 
Programming Interfaces to support prior authorization transactions as 
proposed in CMS's Advancing Interoperability and Improving Prior 
Authorization Processes proposed rule,\8\ and to implement pharmacy 
changes required under the Inflation Reduction Act of 2022.
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    \7\ https://www.federalregister.gov/documents/2022/12/27/2022-26956/medicare-program-contract-year-2024-policy-and-technical-changes-to-the-medicare-advantage-program.
    \8\ https://www.federalregister.gov/documents/2022/12/13/2022-26479/medicare-and-medicaid-programs-patient-protection-and-affordable-care-act-advancing-interoperability.
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    Finally, most commenters suggested that the Secretary re-consider 
and adopt the NCVHS's recommended implementation timeline, which 
included an additional 8-month period after a 36-month compliance 
timeframe, during which use of both Version D.0 and Version F6 and 
their equivalent batch standards would be allowed. Ultimately, this 
suggestion would result in a 44-month compliance timeframe. Commenters 
explained that this type of flexibility would allow trading partners to 
revert to Version D.0 should initial attempts to comply with Version F6 
reveal gaps within specific use cases that require recoding and testing 
efforts prior to a final compliance date. A commenter stated that 
before finalizing the modification, HHS should consider permitting more 
testing time between physicians and pharmacists to ensure clear 
communication. Another commenter identified that the additional 8-month 
period would be especially beneficial to small, independent pharmacies 
and State health programs, which have traditionally had the most 
difficulty in achieving compliance with new standards.
    Response: We continue to believe that it is prudent to expedite 
compliance with the updated standards to ensure that the industry can 
realize value as soon as possible. However, commenters' detailed 
explanation of the increased level of complexity in moving from Version 
D.0 and Version 1.2 to Version F6 and Version 15, as compared to moving 
from Version 5.1 and Version 1.1 to Version to D.0 and Version 1.2, 
offered in response to the compliance timeframe proposals, persuaded us 
to reconsider whether we were allowing sufficient time for covered 
entities to make system and process updates to accommodate the changes 
in the standards.
    After carefully considering the public comments and reconsidering 
the NCVHS's recommended implementation timelines and dates, we are 
attempting to strike a balance by finalizing a longer compliance 
timeline than we proposed, though not as long as that advocated by some 
commenters, and also including a transition period. We are finalizing a 
36-month compliance date, which includes an 8-month transition period 
during which covered entities may use both Version D.0 and Version F6. 
We premised our decision on the fact that most commenters echoed the 
NCVHS's recommendations and suggested that HHS should provide a 3-year 
pre-implementation window following publication of the final rule, 
allowing (but not requiring) industry use beginning at the end of the 3 
years and allowing both Versions D.0 and F6 to be used for an 8-month 
period after the 3-year pre-implementation window, which would enable 
an effective live testing and transition period. We anticipate that, in 
order to enable covered entities to use both standards during the 
permitted 8-month transition period, trading partner agreements will 
have to be implemented so health plans, processors, PBMs and 
pharmacies, and software vendors can set up the appropriate editing and 
formatting of the transactions. With the exception of the requirements 
set forth in Sec.  162.915, regarding certain specifics that may not be 
included in them, we do not dictate the terms of trading partner 
agreements but expect that health plans and pharmacies will continue to 
collaborate on processes to adjudicate these claims during the 
permitted 8-month transition.
    Finally, it is important to note that HHS received comments 
stressing the importance of covered entities taking steps as soon as 
possible to become prepared to move to the updated versions of the 
Telecommunication and Batch Standards so as to be ready soon to take 
advantage of their significant improvements.
    The 2009 Modifications final rule provided covered entities 
approximately 36 months from the final rule's effective date to comply 
with Version D.0 and Version 1.2, though the proposed rule had proposed 
a 24-month compliance date. In support of the increased compliance 
timeframe that we finalized, we stated that the competition for 
resources to make system and business process changes necessary to 
comply with both the modified pharmacy transactions standard and 
Version 5010 at the same time necessitated the additional 12 months. 
While we acknowledge that the level of complexity and volume of changes 
between Version D.0 and Version F6 and their equivalent batch standards 
far exceed those between Version 5.1 and Version D.0 and their 
equivalent batch standards, they do not far exceed the volume and 
complexity of changes necessary to concurrently comply with updated 
pharmacy and X12 standards. As such, we do not believe these changes 
necessitate a compliance timeframe exceeding 36 months. Therefore, we 
disagree with commenters that a total of 44 months is necessary to 
comply with the modified pharmacy transaction standards finalized in 
this rule. Additionally, we are persuaded by commenters, and now agree 
with the April 22, 2020, NCVHS recommendation letter, which was based 
on consideration of industry feedback, that advised the Secretary to 
consider an 8-month transition period. The NCVHS suggested that an 8-
month transition period is necessary and sufficient to support a 
successful and timely transition, stating in its recommendation letter 
that, should covered entities identify errors in their systems and 
processes after moving Version F6 and Version 15 into production, the 
transition period would allow them, if needed, to revert to Version D.0 
and Version 1.2 to avoid stops in business functions and delays in 
patient access to care.
    As stated at the beginning of this preamble, this final rule is 
effective 60 days after publication in the Federal Register. The 
effective date is the date on which the policies set forth in this 
final rule take effect. The compliance date is the date on which 
covered entities are required to implement the policies adopted in this 
rule. The final transition and compliance dates for Version F6 and 
Version 15 at Sec. Sec.  162.1102, 162.1202, 162.1302 and 162.1802 are 
as follows:
     All covered entities may, as agreed to by trading 
partners, use either Version D.0 and Version 1.2 or Version F6 and 
Version 15 beginning August 11, 2027.
     All covered entities must comply with only Version F6 and 
Version 15 beginning February 11, 2028.

[[Page 100772]]

2. Compliance Dates for Version 10
    As discussed in section III.B. of this final rule, we are not 
finalizing our proposal to broaden the scope of the Medicaid pharmacy 
subrogation transaction to apply to all health plans. Therefore, we 
discuss here only the compliance date for State Medicaid agencies to 
comply with Version 10.
    As previously noted, with respect to State Medicaid agencies, 
Version 10 is a modification of the currently adopted standard, Version 
3.0. Section 1175(b)(2) of the Act requires the Secretary to set the 
compliance date for a modification to a standard at such time as the 
Secretary determines appropriate, but no sooner than 180 days after the 
effective date of the final rule in which we adopt that modification. 
We proposed to align the compliance date for Version 10 with the 
compliance date for Version F6 and Version 15 to reduce confusion and 
administrative burden. Therefore, we proposed to reflect at Sec.  
162.1902(b) that State Medicaid agencies would be required to comply 
with Version 10 beginning 24 months after the effective date of the 
final rule.
    Comment: A majority of commenters agreed that the implementation 
timeline for Version 10 needs to align with the implementation timeline 
for the NCPDP Telecommunication Standard. Commenters suggested a longer 
implementation timeframe for Version F6 and Version 15 (described 
earlier), they suggested the Secretary implement a 36-month compliance 
timeframe, followed by an 8-month period where both Version 3.0 and 
Version 10 could be used as agreed to by trading partners.
    Response: HHS agrees that it is important to align the transition 
period and compliance date for Version 10 and for the NCPDP 
Telecommunication standard. We understand that without employing 
burdensome workarounds it would be difficult for State Medicaid 
agencies to comply with Version 10 for Medicaid subrogation 
transactions prior to complying with F6 and Version 15. As such, we 
believe that aligning the compliance timeframes will reduce confusion 
for, and burden on, State Medicaid agencies. This includes establishing 
an 8-month transition period where State Medicaid agencies may, as 
agreed to by trading partners, use either Version 3.0 or Version 10. 
The changes required for State Medicaid agencies to comply with Version 
10 are minimal, as discussed in section III.B.3. of the November 2022 
proposed rule.
    After careful consideration of the comments received, at Sec.  
162.1902, we are finalizing the compliance date for Version 10 as 
beginning February 11, 2028, which aligns with the timeline we are 
adopting for Version F6 and Version 15. In addition, at Sec.  162.1902, 
we are finalizing that beginning August 11, 2027, which is 8 months 
before the compliance date, State Medicaid agencies may, as agreed to 
by trading partners, use either Version 3.0 or Version 10 for Medicaid 
pharmacy subrogation transactions.

D. Incorporation by Reference

    This final rule incorporates by reference the following 
implementation guides at 45 CFR 162.920: (1) the Telecommunication 
Standard Implementation Guide Version F6, January 2020, National 
Council for Prescription Drug Programs; (2) the Batch Standard 
Implementation Guide, Version 15, October 2017, National Council for 
Prescription Drug Programs; and (3) the Batch Standard Subrogation 
Implementation Guide, Version 10, September 2019, National Council for 
Prescription Drug Programs.
    The Telecommunication Standard Implementation Guide Version F6 
provides a standard format that addresses data format and content, 
transmission protocol, and other applicable requirements, for the 
electronic submission between pharmacy providers, insurance carriers, 
third-party administrators, and other responsible parties of the 
following transactions, eligibility verification, claim and service 
billing, prior authorization, predetermination of benefits, and 
information reporting (the latter two categories are not HIPAA 
transactions).
    The Batch Standard Implementation Guide Version 15 provides 
practical guidelines and ensures consistent implementation throughout 
the industry of a file submission standard to be used between 
pharmacies and processors, or pharmacies, switches, and processors, 
when using the Telecommunication Standard framework.
    The Batch Standard Subrogation Implementation Guide Version 10 
provides the guidelines and process for payers and PBMs to communicate 
to other payers' reimbursement requests for covered services paid to 
pharmacy providers for which the other payers are responsible.\9\ This 
implementation guide uses the Telecommunication Standard and the Batch 
Standard as frameworks for exchange.
---------------------------------------------------------------------------

    \9\ The September 2019 version is a republication to correct a 
field name--433-DX Patient Paid Amount Reported field name corrected 
to Patient Pay Amount Reported. We will make a reference to this 
information in the ``incorporate by reference'' section.
---------------------------------------------------------------------------

    The materials we incorporate by reference are available to 
interested parties and can be inspected at the CMS Information Resource 
Center, 7500 Security Boulevard, Baltimore, MD 21244-1850. The 
implementation specifications for the retail pharmacy standards, and 
for the batch standard for the Medicaid pharmacy subrogation 
transaction, may be obtained from the NCPDP, 9240 East Raintree Drive, 
Scottsdale, AZ 85260. Telephone (480) 477-1000; FAX (480) 767-1042. 
They are also available through the internet at https://www.ncpdp.org. 
NCPDP charges a fee for all of its Implementation Guides. Charging for 
such publications is consistent with the policies of other publishers 
of standards.

IV. Out of Scope Comments

    We received several comments on subjects that were outside the 
scope of the November 2022 proposed rule. We do not directly respond to 
those types of comments, but we acknowledge them. They are summarized 
in the following list:
     A commenter suggested that HHS consider expanding the 
Referral Certification and Authorization transaction (Sec.  162.1301) 
in order to provide a clear breakdown of the contractual cost of 
medication before a rebate or the patient cost (copay or deductible) is 
paid by the health plan. Another commenter expressed that, in order to 
address these costs, pharmacies should be able to disclose to the 
patient the lowest cost option for the prescribed medication at the 
pharmacy, which should include available discounted prescription drug 
programs resulting in reduced patient cost that is sometimes lower than 
when using the consumer's health insurance prescription drug benefit. 
Another comment suggested that HHS should review drug costs first and 
then consider streamlining drug dispensing.
     A commenter encouraged HHS to work with Congress to allow 
Medicare beneficiaries to use pharmaceutical discount cards and coupons 
the same way commercially insured consumers may.
     A few commenters expressed concern that retail pharmacies 
and health plans may pass the cost of implementing Version F6 to 
consumers by increasing the costs consumers pay for prescription drugs, 
thereby increasing the cost of health insurance premiums.
     A commenter was concerned that the costs associated with 
the proposals

[[Page 100773]]

will raise taxes at a time when inflation is at an all-time high.
     A commenter requested that the cost to update electronic 
health records and e-prescribing platforms to reflect these changes not 
be passed on to physicians.
     A commenter expressed concern that if the updated pharmacy 
standards are adopted, it will limit the use of paper that some retail 
pharmacies continue to utilize. The commenter explained that pharmacies 
that do not have access to ample technology, or those that are 
unfamiliar with the use of technology, would be disadvantaged by these 
proposals. Therefore, the commenter recommended that the best solution 
would be to allow pharmacies the flexibility to choose whether to use 
Version F6 or paper-based claims based on their business practice or 
customer base.

V. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, 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 required 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.

A. Submission of Paperwork Reduction Act (PRA)-Related Comments

    In this rule, we are finalizing the sections that contain proposed 
``collection of information'' requirements as defined under 5 CFR 
1320.3(c) of the PRA's implementing regulations. If regulations impose 
administrative costs on reviewers, such as the time needed to read and 
interpret this final rule, then we should estimate the cost associated 
with regulatory review. We estimate there are currently 104 affected 
entities (which also includes PBMs and vendors). In the November 2022 
proposed rule, we assumed each entity will have four designated staff 
members who will review the entire final rule, meaning there would be 
416 total reviewers. The particular staff members involved in this 
review will vary from entity to entity but will generally consist of 
lawyers responsible for compliance activities and individuals familiar 
with the NCPDP standards at the level of a computer and information 
systems manager. We did not receive any comments and are finalizing 
this rule based on our assumptions.
    Using the wage information from the Bureau of Labor Statistics 
(BLS) for computer and information systems managers (code 11-3021), we 
estimate that the labor cost of having two computer and information 
systems managers reviewing this final rule is $99.93 per hour, 
including fringe benefits and overhead costs (https://www.bls.gov/oes/current/oes_nat.htm). Assuming an average reading speed, we estimate 
that it would take each such individual approximately 4 hours to review 
this final rule. The estimated cost per entity would therefore be 
$799.44 (4 hours x $99.93 x 2 staff), and), and the total cost borne by 
the 104 affected entities would be $83,142 ($799.44 x 104 entities).
    We are also assuming that an entity would have two lawyers 
reviewing this final rule. Using the wage information from the BLS for 
lawyers (code 23-1011), we estimate that their cost of reviewing this 
final rule would be $100.47 per hour per lawyer, including fringe 
benefits and overhead costs (https://www.bls.gov/oes/current/oes_nat.htm). Assuming an average reading speed, we estimate that it 
will take approximately 4 hours each for two lawyers to review this 
final rule. The estimated cost per entity would therefore be $803.76 (4 
hours x $100.47 x 2 staff), and the total cost borne by the 104 
affected entities would be $83,592 ($803.76 x 104 entities).

B. Modification to Retail Pharmacy Standards (Information Collection 
Requirement (ICR))

    The following requirements and burden associated with the 
information collection requirements contained in Sec. Sec.  162.1102, 
162.1202, 162.1302, 162.1802, and 162.1902 of this final rule are 
subject to the PRA. However, this one-time burden was previously 
approved and accounted for in the information collection request 
previously approved under OMB control number 0938-0866 and titled 
``CMS-R-218: HIPAA Standards for Coding Electronic Transactions.''
    OMB has determined that the establishment of standards for 
electronic transactions under HIPAA (which mandate that the private 
sector disclose information and do so in a particular format) 
constitutes an agency-sponsored third-party disclosure as defined under 
the PRA (44 U.S.C. 3501 et seq.) (see 65 FR 50350 (August 17, 2000)). 
With respect to the scope of its review under the PRA, however, OMB has 
concluded that its review will be limited to the review and approval of 
initial standards and to changes in industry standards that will 
substantially reduce administrative costs (see 65 FR 50350 (August 17, 
2000)). This document, which finalizes updates to adopted electronic 
transaction standards that are being used, will constitute an 
information collection requirement because it will require third-party 
disclosures. However, because of OMB's determination, as previously 
noted, there is no need for OMB review under the PRA.
    Should our assumptions be incorrect, this information collection 
request will be revised and reinstated to incorporate any additional 
transaction standards and modifications to transaction standards that 
were previously covered in the PRA package associated with OMB approval 
number 0938-0866.

VI. Regulatory Impact Analysis

A. Statement of Need

    This rule finalizes modifications to standards for electronic 
retail pharmacy transactions and the Medicaid pharmacy subrogation 
transaction adopted under the Administrative Simplification subtitle of 
HIPAA. Under HIPAA, the NCVHS recommends standards to the Secretary 
following review and approval of standards or updates to standards from 
the applicable SSO--in this case, the NCPDP. The Secretary must 
generally promulgate notice-and-comment rulemaking to adopt new or 
updated standards before they can be utilized to improve industry 
processes. On May 17, 2018, the NCVHS recommended that the Secretary 
adopt Version F2 to replace Version D.0, Version 15 to replace Version 
1.2, and Version 10 to replace Version 3.0. On April 22, 2020, the 
NCVHS recommended that the Secretary adopt Version F6 in lieu of 
Version F2, as well as the two batch standard recommendations set forth 
in the May 2018 letter. These standards have been developed through 
consensus-based processes and subjected to public comment which 
indicated, without opposition, that the updates are required for 
current and future business processes. Based on informal communication 
with industry, should the updates to the standards not

[[Page 100774]]

be adopted, industry will need to continue using Version D.0 and 
associated workarounds, including manual claims processing and claims 
splitting for drugs priced at, or in excess of, $1 million.

B. Overall Impact

    We have examined the financial impacts of this rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 14094 on Modernizing Regulatory Review (April 6, 
2023), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (September 
19, 1980; Pub. L. 96-354), section 1102(b) of the 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 (CRA) (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 14094 amends section 3(f) of Executive Order 12866 to define a 
``significant regulatory action'' as an action that is likely to result 
in a rule: (1) that may have an annual effect on the economy of $200 
million or more in any one year, or adversely affecting in a material 
way the economy, productivity, competition, jobs, the environment, 
public health or safety, or State, local, territorial, or tribal 
governments or communities; (2) creating a serious inconsistency or 
otherwise interfering with an action taken or planned by another 
agency; (3) materially altering the budgetary impacts of entitlement 
grants, user fees, or loan programs or the rights and obligations of 
recipients thereof; or (4) raising legal or policy issues for which 
centralized review would meaningfully further the President's 
priorities or the principles set forth in the Executive order.
    Based on our estimates, OMB's Office of Information and Regulatory 
Affairs (OIRA) has determined this rulemaking is 3(f)(1) significant as 
measured by the $200 million or more in any 1 year and meets the 
criteria under 5 U.S.C. 804(2) (Subtitle E of the Small Business 
Regulatory Enforcement Fairness Act of 1996, also known as the 
Congressional Review Act). Accordingly, we have prepared an RIA and 
Regulatory Flexibility Analysis (RFA) that, to the best of our ability, 
presents the revised costs and benefits from the November 2022 proposed 
rule and the impact it will have on small entities.
    We did not receive any comments on the RIA or RFA presented in the 
proposed rule. We adjusted our previous calculations to accommodate a 
3-year implementation timeframe and updated our summary of the RFA 
using updated business data. OMB has reviewed these final regulations 
and provided an assessment of their impact. For details, we refer 
readers to the discussion provided as follows.

C. Detailed Economic Analysis

    While significant efforts were taken to ensure that the cost and 
benefits captured for this rule were accurate, there are a few key 
uncertainty factors that should be considered in reviewing the 
regulatory impact analysis:
1. Data Sources
    The analysis is based in part on industry research conducted in 
2019 and 2020 by the CMS Alliance to Modernize Healthcare (CAMH), a 
Federally Funded Research and Development Center, to assess the costs 
and benefits associated with the potential adoption of Versions F2 and 
F6. As part of this effort, CAMH did the following: identified the 
relevant stakeholders that will be affected by the adoption of a new 
HIPAA standard for retail pharmacy drug transactions; obtained expert 
opinion, expressed qualitatively and quantitatively, on impacts on 
affected stakeholders of moving from the current version to the updated 
standards; and developed a high-level aggregate estimate of stakeholder 
impacts, based on available information from public sources and 
interviews. References to conversations with industry stakeholders in 
the RFA and RIA are based on the interviews conducted by CAMH, unless 
otherwise noted.
    Because the industry has not conducted entity-specific financial 
impact analyses for the adoption of the modified standards in this 
rulemaking, the analysis relies on preliminary assessments from 
industry stakeholders that the conversion to Version F6 will entail 
between two to four times the level of effort as the previous HIPAA 
pharmacy standard conversion from Version 5.1 to Version D.0. Moreover, 
as discussed in connection with comments received on the 2009 
Modifications proposed rule generally, many commenters mentioned 
underestimated costs or overestimated benefits of transitioning to the 
new versions, but few provided substantive data to improve the 
regulatory estimates. In addition, we did not receive any comments on 
assumptions in the November 2022 proposed rule. We are finalizing this 
RIA using the estimates provided in public comments reported in the 
2009 Modifications final rule to develop estimates of the true baseline 
Version D.0 conversion costs applying a Version F6 multiplier.
    With respect to benefits, we are not aware of any available 
information or testimony specifically quantifying cost savings or other 
benefits, although there is ample testimony supporting the business 
need and benefits of the modified standards subject to this rulemaking.
2. Interpreting Cost
    To implement Version F6, pharmacies and vendors will likely hire 
coders, software development and testing specialists, and/or 
consultants to modify their production code and will likely conduct 
employee training to facilitate the use of the new version. These one-
time, out-of-pocket expenditures constitute a cost attributable to the 
final rule. Costs to transmit transactions using the Version F6 
standard after business systems have been modified to implement the 
adopted standard, as well as costs to maintain those systems for 
compliance with the standard, were not factored into the RIA. These 
ongoing costs are currently incurred by affected entities that are 
required to use the current standard and are attributable to conducting 
electronic transactions in general. Therefore, we do not anticipate any 
costs attributable to this final rule after the completion of the final 
3-year compliance timeframe.
    Based on oral and written NCVHS testimony by the retail pharmacy 
industry and pharmacy management system vendors, it was suggested that 
their software development process for a HIPAA standard conversion 
would represent an opportunity cost. We believe Version F6 
implementation will shift the priorities of technical staff at large 
pharmacy firms, potentially delaying other improvements or projects. In 
this scenario, the opportunity cost consists of the time-value of 
delayed projects. Other pharmacies have an ongoing relationship with 
their pharmacy management software vendors. The purchaser generally 
obtains a hardware and software package with an ongoing agreement that 
includes periodic payments for maintenance, updates, upgrades, 
training, installation, financing, etc. Thus, the software is expected 
to evolve, rather than being

[[Page 100775]]

just a one-time installation. The balance between upfront charges and 
monthly maintenance fees more closely resembles a multiyear lease than 
the one-time sale of an off-the-shelf application to a consumer. Thus, 
the parties often contemplate an ongoing supplier relationship in which 
maintenance and upgrades represent an opportunity cost.
    Further, the RIA in the November 2022 proposed rule used average 
costs to assess costs to each industry stakeholder because of their 
availability and verifiability. We did not receive any responses to our 
solicitation for comments related to these assumptions and cost 
interpretations.
3. Anticipated Effects
    The RIA summarizes the costs and benefits of adopting the following 
standards:
     Telecommunications Standard Version F6, replacing Version 
D.0, including equivalent Batch Standard Version 15 for health care 
claims or equivalent encounter information; eligibility for a health 
plan; referral certification and authorization; and coordination of 
benefits transactions.
     Batch Standard Subrogation Implementation Guide, Version 
10 replacing Batch Standard Medicaid Subrogation Implementation Guide, 
Version 3, for Medicaid Pharmacy Subrogation Transactions.
    This RIA amends the RIA from the November 2022 proposed rule, while 
acknowledging any changes made in this final rule, to reflect a 3-year 
compliance date following the effective date of this final rule. All 
other information regarding the details supporting the cost-benefit 
analysis for each of the standards listed previously remains unchanged.
    Table 1 is the compilation of the estimated costs for all of the 
standards adopted in this final rule. To allocate costs over the 3-year 
implementation period, we use a 30-40-20-10 percent allocation of IT 
upgrades and training expenses across the 3-year implementation period. 
We believe that since the effective date of this final rule will be in 
the latter part of 2024, costs will start at that time and go into 
2027.

                Table 1--Estimated Costs ($ millions) for Years 2024 Through 2033 for Implementation of Versions F6 and Version 10 (V10)
--------------------------------------------------------------------------------------------------------------------------------------------------------
      Cost type                Industry             2024       2025       2026      2027     2028     2029     2030     2031     2032     2033    Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
F6...................  Non-Independent Pharmacy   2,828.68   3,838.24   1,919.12     9.56  .......  .......  .......  .......  .......  .......     95.6
                       Independent Pharmacy....       18.3       24.4    1,212.2      6.1  .......  .......  .......  .......  .......  .......     61.0
                       Health Plan.............  .........  .........  .........  .......  .......  .......  .......  .......  .......  .......  .......
                       PBM.....................    3,838.4    5,151.2    2,525.6     12.8  .......  .......  .......  .......  .......  .......    128.0
                       Vendors *...............   2,929.91   3,939.88   1,919.94     9.97  .......  .......  .......  .......  .......  .......     99.7
SV10.................  Health Plan.............  .........  .........  .........  .......  .......  .......  .......  .......  .......  .......  .......
                       Medicaid Agency.........  .........  .........  .........  .......  .......  .......  .......  .......  .......  .......  .......
                       PBM.....................  .........  .........  .........  .......  .......  .......  .......  .......  .......  .......  .......
                       Vendors.................       0.66        0.8        0.4      0.2  .......  .......  .......  .......  .......  .......      2.0
                                                --------------------------------------------------------------------------------------------------------
                          Annual Total.........     115.89     154.52      77.26    38.63  .......  .......  .......  .......  .......  .......    386.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Vendors'' as used in Table 1 refers to pharmacy management system and telecommunication system vendors.

4. Adoption of Version F6 (Including Equivalent Batch Standard Version 
15)
    The objective of this portion of the RIA is to summarize the costs 
and benefits of implementing Version F6.
a. Affected Entities
    Almost all pharmacies and all intermediaries that transfer and 
process pharmacy claim-related information already use Version D.0 for 
eligibility verification, claim and service billing, prior 
authorization, predetermination of benefits, and information reporting 
transaction exchanges (the latter two categories are not HIPAA-standard 
transactions). Pharmacies utilize technology referred to as pharmacy 
management systems that encode Version D.0 to submit these transactions 
for reimbursement on behalf of patients who have prescription drug 
benefits through health and/or drug plan insurance coverage (health 
plans). These submissions are generally routed through two 
intermediaries: a telecommunication switching vendor (switch) and a 
specialized third-party administrator for the health plan, generally a 
PBM.
    Based on the business data from the CAMH, pharmacies have a bimodal 
size distribution. About 99 percent of firms have a single location, 
predominantly the traditional independent, owner-operated storefront, 
and the remainder of fewer than 200 large firms operate an average of 
approximately 150 establishments (locations) each. According to other 
industry data, the largest five pharmacy corporations represent over 
28,000 locations, and the two largest corporations each exceed 9,000 
locations.\10\ However, the business data from the Pharmacy and Drug 
Store segment (NAICS code 456110) may not capture all pharmacy firms 
affected by this final rule.
---------------------------------------------------------------------------

    \10\ 2021 ``U.S. National Pharmacy Market Summary.'' IQVIA. 
https://www.iqvia.com/-/media/iqvia/pdfs/us/publication/us-pharmacy-market-report-2021.pdf.
---------------------------------------------------------------------------

    Pharmacies are typically classified by ownership as either not-
independent or independents. Health data analytics company IQVIA 
estimated \11\ in 2021 that there were 66,083 pharmacies, of which 70 
percent (46,964) were not-independent and 30 percent (19,119) were 
independents. Retail pharmacies, which provide access to the general 
public, comprised the clear majority of pharmacy facility types at 91 
percent (59,395). The five largest pharmacy corporations owned about 40 
percent (close to 29,000) of retail locations. The remaining 8 percent 
of facility types included closed-door pharmacies, which provide 
pharmaceutical care to a defined or exclusive group of patients because 
they are treated or have an affiliation with a special entity such as a 
long-term care facility, as well as central fill, compounding, 
internet, mail service, hospital-based nuclear, and outpatient 
pharmacies. Most of these pharmacy types may be included in Medicare 
Part D sponsor networks. We are aware that the largest pharmacy 
corporations are increasingly likely to operate multiple pharmacy 
business segments (channels), such as retail, mail, specialty, and 
long-term care. We did not receive any responses to our solicitation 
for comments on whether there are meaningful distinctions in cost 
structures or data sources to assist in quantifying entities in these 
segments.
---------------------------------------------------------------------------

    \11\ 2021 ``U.S. National Pharmacy Market Summary.'' IQVIA. 
https://www.iqvia.com/-/media/iqvia/pdfs/us/publication/us-pharmacy-market-report-2021.pdf.

---------------------------------------------------------------------------

[[Page 100776]]

    As noted, pharmacies utilize pharmacy management systems to encode 
Version D.0 for claim-related data exchanges via telecommunication 
switches. Pharmacies that do not internally develop and maintain their 
pharmacy management systems will contract with technology vendors for 
these services. Based in part on communications with industry 
representatives, such as the American Society for Automation in 
Pharmacy, we identified approximately 30 technology firms providing 
computer system design, hosting, and maintenance services in this 
market. Based on testimony provided to the NCVHS, in 2018 this market 
represented approximately 180 different software products.\12\
---------------------------------------------------------------------------

    \12\ NCVHS Hearing on NCPDP Standards and Updates--March 26, 
2018 Virtual Meeting. https://ncvhs.hhs.gov/transcripts-minutes/transcript-of-the-march-26-2018-hearing-on-ncpdp-standards-and-updates/.
---------------------------------------------------------------------------

    Pharmacies also contract with telecommunication switches for 
transaction routing. In addition to routing, switches validate the 
format of pharmacy transactions prior to transmission to the payer and 
then check the payer response to make sure it is formatted correctly 
for the pharmacy to interpret. Based on conversations with industry 
representatives, we identified three telecommunication switches in this 
segment of the market for consideration in the RIA.
    Some healthcare providers that dispense medications directly to 
their patients, known as dispensing physicians, may use Version D.0 to 
submit these outpatient prescription drug claims on behalf of their 
patients to health plans via health plans' PBMs. However, we do not 
believe this practice to be widespread, and, therefore, do not account 
for it in the RIA.
    Health plans generally provide some coverage for outpatient 
prescription drugs, but do not generally contract and transact with 
pharmacies directly. Instead, health plans typically contract with PBM 
firms to receive and process pharmacy claim transactions for their 
enrollees. We believe even the relatively few health plans that 
directly purchase prescription drugs for their own pharmacies utilize 
PBMs, either owned or contracted, to manage billing for drugs and 
pharmacy supplies. Likewise, the Department of Veterans Affairs (VA) 
Pharmacy Benefits Management Services (VA PBM) runs its own PBM unit 
for VA prescription drug operations.
    In the CAMH report, there were 745 Direct Health and Medical 
Insurance Carriers and 27 HMO Medical Centers--a total of 772 health 
plan firms. Comparable data limited specifically to PBMs is not 
available, but, based on Part D experience, we estimated that 
approximately 40 firms conduct some PBM functions involved with 
processing some pharmacy claim transactions. For the RIA, we assumed 
that the VA PBM is in addition to these numbers, but that Medicaid 
claim processing PBMs are included in the 40 firms. Industry trends 
include significant consolidation of firms in these sectors and 
vertical integration among health plans, PBMs, and pharmacies.
b. Costs
(1) Not-Independent Pharmacies
    Pharmacies either internally develop or externally purchase 
pharmacy management information systems to bill and communicate with 
PBMs. Generally, the largest chain pharmacy firms internally develop 
and manage their own pharmacy management system upgrades and 
transaction standard conversion development, implementation, testing, 
and training. However, based on public comments related to Version F6 
submitted to the NCHVS, available at https://ncvhs.hhs.gov/wp-content/uploads/2020/03/Public-Comments-NCPDP-Change-Request-March-2020.pdf, we 
are aware that some chain pharmacy firms (with as many as 1,800 
pharmacies) utilize systems managed by third-party technology vendors. 
The RIA identified the top 25 firms, based on 2021 IQVIA data, as well 
as the VA and the Indian Health Service (IHS), as financing and 
managing their pharmacy system conversion requirements internally, and 
the remainder of chain pharmacy firms relying on their technology 
vendor for technical development, implementation, testing, and initial 
training.
    Although they are not legally considered ``not-independent 
pharmacies,'' we grouped IHS, tribal, and urban facilities with them 
based on conversations with representatives from IHS that suggested 
their costs would be roughly similar to those of not-independent 
pharmacies. IHS manages a significant Federal health information 
technology (HIT) system with a suite of modules, including pharmacy 
dispensing and billing, that supports IHS pharmacies, as well as at 
least 16 urban entities and 114 tribal entities. However, not all of 
these entities include pharmacies. In contrast to other pharmacy 
entities treated as chain pharmacies, we understand that additional 
budget funding may be required for IHS to implement Version F6 within 
the 3-year implementation timeframe. We estimated that IHS would incur 
implementation costs at a level roughly equivalent to the VA system, 
and that this expense will be a marginal cost for the IHS. We also 
understand that approximately another 60 tribal entities and another 25 
urban entities do not utilize the Federal system, but, rather, contract 
with commercial vendors for HIT; although again, not all of these 
entities operate their own pharmacies. As a result, we believe that 
about 60 percent of these smaller IHS, tribal, and urban entities (51) 
will rely on existing maintenance agreements with commercial vendors 
for implementation and, like smaller not-independent pharmacies, will 
incur direct implementation costs to support user training costs. We 
solicited comments on our assumptions and did not receive any to the 
contrary.
    Based on the data from the CAMH report, there were 190 firms 
classified as Pharmacies and Drug Stores with more than 500 employees, 
representing 27,123 establishments. This classification does not 
include grocery store pharmacies, which were elsewhere reported to 
number 9,026 in 2017, and to be decreasingly offered by smaller grocery 
chains in 2020.\13\ The business data from the CAMH report includes 72 
firms classified as Supermarkets and Other Grocery (except Convenience) 
Stores with more than 5,000 employees, which we assumed is a proxy for 
the number of such firms still offering grocery store pharmacies in 
2020. (The Census Bureau and Bureau of Labor Statistics [BLS] include 
``big box'' department stores in this category.) Thus, the RIA assumed 
a total of 262 (190+72) chain pharmacy firms based on this data. Since 
we assume 25 firms would manage their Version F6 conversion costs 
internally, we estimated the remainder of 237 (262-25) would rely upon 
their technology vendor.
---------------------------------------------------------------------------

    \13\ The Pharmacist Is Out: Supermarkets Close Pharmacy 
Counters: Regional grocery chains get squeezed by consolidation, 
shrinking profits in prescription drugs. By Sharon Terlep and Jaewon 
Kang. Wall Street Journal. Updated Jan. 27, 2020 6:18 p.m. ET. 
Accessed 10/13/2020 at: https://www.wsj.com/articles/the-pharmacist-is-out-supermarkets-close-pharmacy-.
---------------------------------------------------------------------------

    Based on conversations with a variety of industry representatives, 
we understand that these larger firms retain the technical staff and/or 
contractors that will undertake the Version F6 conversion efforts as an 
ongoing business expense. Consequently, in

[[Page 100777]]

practice, the cost estimates developed in this section do not represent 
new additional expenditures for these firms, but, rather, opportunity 
costs for these resources that would otherwise be deployed on other 
maintenance or enhancement projects.
    As previously noted, industry estimates of the costs of conversion 
from current Version D.0 to Version F6 have been in the form of 
multiples of the costs for the Version 5.1 to Version D.0 conversion. 
As a technical matter, we assumed these informal multiples account for 
inflation. In a presentation to the NCVHS,\14\ the NCPDP indicated that 
stakeholders' input indicated the level of effort and cost for Version 
F6 to be at least double that of implementing NCPDP D.0. In public 
comments to the NCVHS, a retail pharmacy association stated that 
implementation costs would vary significantly among different pharmacy 
corporations based on size, scope of services provided, and business 
models, and that hardware, software, and maintenance costs allocated 
specifically to Version F6 are estimated to be in the tens of millions 
of dollars. One of the largest pharmacy corporations estimated costs 
associated with Version F6 implementation to be three to four times 
higher than the implementation of Version D.0, also in the tens of 
millions of dollars. This commenter explained that much of these higher 
costs is related to the expanded dollar fields, the structure of new 
fields that require database expansion, and updates to many integrated 
systems. Another of the largest pharmacy corporations with integrated 
PBM functions offered preliminary estimates in the range of two to 
three times greater than the Version D.0 conversion and noted that the 
expanded dollar fields would impact all of the following systems: point 
of service claim adjudication, all associated financial systems, 
internal and external reporting programs, help desk programs, member/
client portals, and integrated data feeds. This same stakeholder stated 
that the size of the transactions has also increased considerably due 
to the inclusion of new segments and repeating fields and would require 
new database storage hardware.
---------------------------------------------------------------------------

    \14\ NCVHS Full Committee Hearing, March 24-25, 2020. https://ncvhs.hhs.gov/meetings/full-committee-meeting-4/p.
---------------------------------------------------------------------------

    The 2009 Modifications final rule discussed receiving estimates of 
$1.5 million and $2 million from two large national pharmacy 
corporations and elected to use an estimate of $1 million for large 
pharmacy corporations and $100,000 for small pharmacy corporations in 
the first implementation year. That rule also discussed a few public 
comments disputing these large chain estimates,\15\ suggesting in one 
case an alternative $2 million estimate inclusive of Version 5010 
costs, and, in another, a 2-year cost of $4.9 million without 
specification of which costs were included. Another retail pharmacy 
commenter that self-identified as neither a not-independent nor an 
independent estimated a cost of implementation of both standards of 
$250,000, with 90 percent of the cost attributable to Version 5010 and, 
thus, $25,000 attributable to Version D.0. Using these estimates, we 
developed a rough estimate of the true baseline Version D.0 conversion 
costs and then applied a Version F6 multiplier. Comments were not 
received on our approach.
---------------------------------------------------------------------------

    \15\ 74 FR 3319 (January 16, 2009).
---------------------------------------------------------------------------

    We believe that Version F6 conversion costs for pharmacies 
corporations will be differentiated in three general categories: (1) 
the largest retail pharmacies operating in multiple pharmacy channels; 
(2) other midsize retail pharmacies operating primarily in either the 
open-door retail and/or another single pharmacy channel; and (3) 
smaller retail pharmacies. Starting with the point estimates discussed 
in the Version D.0 rulemaking and making some upward adjustments to 
address potential underestimation, we estimate that--
     The two largest retail pharmacy corporations incurred a 
baseline (Version D.0) cost of $2 million;
     The 23 midsize retail pharmacy corporations, the VA, and 
IHS pharmacy operations incurred a baseline cost of $1 million; and
     The 237 smaller retail pharmacy corporations incurred a 
baseline cost of $25,000.
    Based on the 2x-4x multiplier estimates described previously, we 
assumed a midpoint 3x multiplier for the estimated 25 larger retail 
pharmacies corporations and the VA that will finance and manage their 
system conversion requirements internally; consequently, we estimate 
that over the 3-year implementation period--
     Two retail pharmacy corporations will incur all internal 
Version F6 conversion costs of (3*$2 million), or $6 million each; and
     The 25 retail pharmacy-corporations (23 midsized chains, 
the VA, and IHS) will incur all internal Version F6 conversion costs of 
(3*$1 million), or $3 million each.
    Based on a CAMH environmental scan conducted with industry 
representatives, we understand that most pharmacy firms rely on their 
pharmacy management system vendor for conversion planning, development, 
implementation, testing, and initial (primary) training. CAMH's 
environmental scan suggested that pharmacies would likely need to make 
some investments in staff training but will likely not have an increase 
in direct upfront software costs because system software updates are 
usually factored into the ongoing contractual fees for operating and 
maintenance costs of their pharmacy systems. Thus, we understand that 
HIPAA modification efforts are generally already priced into vendor 
maintenance agreements and fee structures, and we assume there will be 
no increases specifically due to the Version F6 conversion in these 
ongoing costs to pharmacies. We believe that primary training is 
developed or purchased at the firm level and may be deployed at the 
establishment level in secondary employee in-service training slots. We 
believe that this training does not scale along with the conversion 
costs, but, rather, with the size of the organization in terms of 
locations and employees. As summarized in Table 2, using the generally 
uncontested estimates from the Version D.0 rulemaking adjusted for 
inflation,\16\ we estimate that: 237 smaller retail pharmacies and 51 
urban and tribal entity pharmacies (a total of 288 pharmacies) would 
incur Version F6 conversion training costs of ($25,000 x 1.20) or 
$30,000 each on average, generally in the second year of the 3-year 
implementation period.
---------------------------------------------------------------------------

    \16\ Based on inflation from January 2010 to September 2020: 
https://www.bls.gov/data/inflation_calculator.htm.

[[Page 100778]]



                                            Table 2--Pharmacy Corporations' Costs of Conversion to Version F6
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          D.0 Cost       Inflation     Adjusted D.0        D.0 Cost       Conversion cost   Number of       Total F6
 Version F6 conversion cost category   baseline ($ in    adjustment   baseline ($ in    multiplier for   per entity ($ in    affected   conversion costs
            by chain size                 millions)     to baseline      millions)        Version F6         millions)       entities    ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All (largest).......................               2.0          N/A               2.0                 3               6.0            2              12.0
All (midsize).......................               1.0          N/A               1.0                 3               3.0           25              75.0
User Training (smaller).............             0.025          1.2              0.03               N/A              0.03          288               8.6
                                     -------------------------------------------------------------------------------------------------------------------
    Total...........................  ................  ...........  ................  ................  ................          315              95.6
--------------------------------------------------------------------------------------------------------------------------------------------------------

(2) Independent Pharmacies
    As noted previously, the 2021 IQVIA data included 66,083 
pharmacies, of which 30 percent (19,119) were independently owned. We 
recognize that this classification is not identical to the use of the 
term independent community pharmacy; however, we are not aware of 
publicly available data to help us segment this market further. We know 
from the data in the CAMH environmental scan there were 19,044 pharmacy 
firms with fewer than 500 employees, representing 20,901 
establishments. Since we did not receive any comments on our 
assumptions, for the purposes of this final rule, firms with more than 
500 employees represent chains, and those with fewer than 500 employees 
represent independently owned open- or closed-door pharmacies.
    We understand that these smaller pharmacies predominantly rely on 
their pharmacy system vendors for upgrades, including HIPAA standard 
version conversion planning, development, implementation, testing, and 
primary training. In return, they pay ongoing maintenance and 
transaction fees. As discussed previously with respect to some chain 
pharmacies, we understand that Version F6 conversion efforts will 
already be priced into existing maintenance agreements and fee 
structures. Therefore, we do not believe there will be increases in 
these ongoing costs to independent pharmacies as the result of the 
Version F6 conversion, and we believe pharmacy direct costs would 
generally be comprised of training and other miscellaneous expenses. As 
with retail pharmacies, we believe that primary training is developed 
or purchased at the firm level and deployed at the establishment level 
in secondary employee in-service training slots. We further assumed 
that this training does not scale along with the conversion costs, but, 
rather, with the size of the organization in terms of locations and 
employees. For this reason, we believe that the few system users in 
very small pharmacies would be trained directly by the pharmacy 
management system vendor, and no secondary training costs will be 
required for such small firms.
    As noted previously, a commenter on the 2009 Modification proposed 
rule \17\ that self-identified as neither a chain nor an independent 
pharmacy estimated implementation costs of both Version 5010 and 
Version D.0 standards of $250,000, with 90 percent of the costs 
attributable to Version 5010. Thus, one non-chain pharmacy estimated 
conversion costs for Version D.0 of about $25,000. Although we do not 
know the size or complexity of this organization, this level would not 
be inconsistent with our understanding that the costs of an NCPDP 
Telecommunication Standard conversion will be borne by the pharmacy 
management system vendors and that smaller pharmacy conversion costs 
will consist primarily of user training expense. Referring to the 2017 
Census business data, almost 90 percent (17,016 out of 19,044) of these 
pharmacy firms had fewer than 20 employees, while the remainder (2,028) 
had between 20 and 499. Therefore, we believe that 17,016 small 
pharmacy firms will incur opportunity costs for employee time spent in 
training and 2,028 pharmacy firms will incur secondary training 
expenses. As summarized in Table 3, assuming baseline training costs 
per independent pharmacy with 20 or more employees of $25,000, and a 
cumulative inflation adjustment of 20 percent,\18\ we estimate that 
2,028 independently owned pharmacies will incur Version F6 conversion 
training costs of ($25,000 x 1.20) or $30,000 each on average, in the 
first and second year of the 3-year implementation period.
---------------------------------------------------------------------------

    \17\ 74 FR 3317 (January 16, 2009).
    \18\ Based on inflation from January 2010 to September 2020 
https://www.bls.gov/data/inflation_calculator.htm.

                                             Table 3--Independent Pharmacy Costs of Conversion to Version F6
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    Inflation      Adjusted D.0         D.0 Cost       Conversion cost     Number of        Total F6
  Version F6 conversion cost   D.0 Cost baseline   adjustment     baseline ($ in     multiplier for    per entity ($ in    affected     conversion costs
           category             ($ in millions)    to baseline      millions)          Version F6         millions)        entities     ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
User Training................             0.025           1.2               0.03                N/A               0.03         2,028                 61
--------------------------------------------------------------------------------------------------------------------------------------------------------

(3) Health Plans and PBMs
    We believe that health plans should see minimal changes in their 
operations and workflows between Version D.0 and Version F6. Health 
plans contract with processors/PBMs for conducting online eligibility 
verification, claim and service billing, predetermination of benefits, 
prior authorization, and information reporting transaction exchange 
types and transaction record storage. While health plans (or their 
other vendors) supply PBMs with eligibility records and receive data 
from PBMs containing data derived from claims, they are not typically 
parties to the exchange of the HIPAA pharmacy transactions. Based on 
NCVHS testimony with stakeholders and in the development of an 
environmental scan on the impact of this update to the pharmacy 
standards, we understand that HIPAA standard conversion costs are 
already priced into ongoing contractual payment arrangements between 
health plans and PBMs and will not be increased specifically in 
response to the Version F6 conversion.

[[Page 100779]]

    All PBMs will experience some impacts from the Version F6 
conversion, involving IT systems planning and analysis, development, 
and external testing with switches and trading partners. A PBM 
commented to the NCVHS that the most significant impact will be the 
expansion of the financial fields to accommodate very expensive drug 
products with charges greater than $999,999.99. Another PBM processor 
representative indicated in a conversation that the impact on payers/
processors would depend on the lines of business they support--that 
entities supporting Medicare Part D processing will have the most work 
to do but will also get the most value from the transition. The extent 
to which these activities will be handled by in-house resources or 
contracted out may vary by organization. Based on other conversations, 
we understand that, from the PBM perspective, the Version F6 conversion 
adds fields that increase precision and machine readability; rearranges 
some things to make processing more efficient and flexible in the long 
run; implements more efficient ways to accomplish workarounds that 
payers already have in place (so the changes in the transactions would 
map to back-end system fields and logic already in place); and involves 
relatively few structural changes.
    PBMs may manage prescription drug coverage for a variety of lines 
of business, including commercial health plans, self-insured employer 
plans, union plans, Medicare Part D plans, the Federal Employees Health 
Benefits Program, State government employee plans, State Medicaid 
agencies, and other \19\ fee-for-service entities. While details on 
internal operating systems are proprietary, we believe that the three 
largest PBMs that controlled 75 percent of 2018 market share \20\ (not 
including the VA) have contractual agreements supporting all or most 
drug coverage lines of business and host the most variants in legacy 
operating platforms, customer-specific processing requirements, and 
scope of customer service requirements--involving all the information 
exchange types supported by the NCPDP Telecommunications Standard. In 
the November 2022 proposed rule, we assumed that the remaining three of 
the top six PBMs, responsible for another 20 percent of market share, 
have lesser operating system complexity, but also provide services for 
multiple lines of business and a full scope of information exchange 
types. We also assumed that the VA PBM is comparable to these midsize 
PBMs. We assumed that the remainder of the PBM market is comprised of 
approximately 33 (40-7) smaller PBMs supporting one or more lines of 
business and information exchange types. Since we did not receive 
comments, we are moving forward with our assumptions.
---------------------------------------------------------------------------

    \19\ Pharmacy Benefit Managers (PBMs): Generating Savings for 
Plan Sponsors and Consumers. Prepared for the Pharmaceutical Care 
Management Association (PCMA). February 2020. https://www.pcmanet.org/wp-content/uploads/2020/02/Pharmacy-Benefit-Managers-Generating-Savings-for-Plan-Sponsors-and-Consumers-2020-1.pdf.
    \20\ CVS, Express Scripts, and the Evolution of the PBM Business 
Model. Drug Channels. May 29, 2019. https://www.drugchannels.net/2019/05/cvs-express-scripts-and-evolution-of.html.
---------------------------------------------------------------------------

    Public commenters to the 2009 Modifications proposed rule regarding 
the D.0 conversion, self-identifying as large PBMs, estimated that 
costs for their upgrades would be more than $10 million and $11 
million, respectively. As a result of these comments, we revised our 
estimates up to $10.5 million for each large PBM company and maintained 
the original assumption of $100,000 in conversion costs for smaller 
specialty PBMs,\21\ as we received no comments critical of that 
estimate. Based on updated data on market share, we believe more 
segments in the PBM industry will account for the consolidation and 
growth of midsize entities that comprise the second tier of market 
share and assume their costs to be less than half those of the largest 
PBMs due to lesser complexity of structure and operations. Therefore, 
using the Version D.0 revised estimates as anchors, we believe the 
following:
---------------------------------------------------------------------------

    \21\ 74 FR 3320 (January 16, 2009).
---------------------------------------------------------------------------

     The largest three PBMs incurred baseline (Version D.0) 
conversion costs of $10.5 million.
     The 3 next-largest PBMs and the VA PBM incurred baseline 
conversion costs of $4 million.
     The remaining 33 PBMs incurred baseline costs of $500,000.
    As previously noted, industry estimates of the costs of conversion 
from Version D.0 to Version F6 have been expressed as multiples of two 
to four times the costs for the Version 5.1 to Version D.0 conversion. 
However, several PBM commenters to the NCVHS suggested the lower end of 
this range. This would be consistent with our understanding that many 
of the changes involve mapping current back-end work-around systems to 
newly codified data, as opposed to building substantial new 
functionality from scratch. However, expansion of all existing 
financial fields to accommodate larger numbers will involve changes to 
many interrelated systems. As summarized in Table 4, using a 2x 
multiplier, we estimate that over the 3-year implementation period--
     The largest 3 PBMs would incur Version F6 conversion costs 
of (2*$10.5 mil), or $21 million each;
     The next 3 midsize PBMs and the VA PBM or four firms, 
would incur Version F6 conversion costs of (2*$4 mil), or $8 million 
each; and
     The remaining 33 PBMs would incur Version F6 conversion 
costs of (2*$500,000), or $1 million each.
    The following comments were received on the subject, followed by 
our responses to those comments.
    Comment: A commenter noted that the assumption about lesser 
operating system complexity is not valid for all smaller PBMs. The 
commenter noted that many mid-sized and smaller PBMs support multiple 
lines of business--commercial, health plan, Medicare Part D, Medicaid, 
labor, etc. and have complexity on par with larger PBMs, such that the 
assumptions that mid-size PBMs' cost would be 38 percent less than that 
of a large PBM and that smaller PBMs' cost would be only 4.7 percent of 
the cost of the largest PBMs is not valid. These changes represent a 
similar burden for midsize and smaller PBMs and, the commenter noted, 
was the main rationale for its requesting that HHS consider an extended 
implementation timeframe.
    Response: We recognize that some mid-size and smaller PBMs do 
support multiple lines of business and may incur costs above those 
estimated in the RIA. As the commenter recommends, we have finalized a 
compliance date beyond the proposed compliance timeline. However, the 
commenter did not provide cost estimates that would justify amending 
the estimates within the RIA.
    Comment: A commenter asserted that the assumption that HIPAA 
standard conversion costs are already priced into ongoing contractual 
arrangements between health plans and PBMs and SaaS vendors is also not 
valid. The commenter indicated that a set of changes as significant as 
Version F6 presents is not a business-as-usual change that can easily 
be absorbed into mid-size or small PBM or SaaS routine operations.
    Response: While we recognize that, outside of pre-existing contract 
rates, nothing prevents a mid-size or small PBM from charging 
pharmacies for conversion to Version F6, this does not contradict 
information that CAMH gathered from industry representatives confirming 
that generally these costs are factored into ongoing contractual fees 
and will likely not result in an increase

[[Page 100780]]

in direct, upfront software costs to pharmacies.

                                                     Table 4--PBM Costs of Conversion to Version F6
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          D.0 Cost       Inflation     Adjusted D.0        D.0 Cost       Conversion cost   Number of       Total F6
 Version F6 conversion cost category   baseline ($ in    adjustment   baseline ($ in    multiplier for   per entity ($ in    affected   conversion costs
             by PBM size                  millions)     to baseline      millions)        Version F6         millions)       entities    ($ in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All (largest).......................              10.5          N/A              10.5                 2                21            3                63
All (midsize).......................               4.0          N/A               4.0                 2                 8            4                32
All (smaller).......................               0.5          N/A               0.5                 2                 1           33                33
                                     -------------------------------------------------------------------------------------------------------------------
    Totals..........................  ................  ...........  ................  ................  ................           40               128
--------------------------------------------------------------------------------------------------------------------------------------------------------

(4) Vendors
    As previously discussed, pharmacies that do not internally develop 
and maintain their pharmacy management systems contract with technology 
vendors for these services. We believe there are approximately 30 
technology firms providing computer system design, hosting, and 
maintenance services in this market, with different companies serving 
one or more market segments, such as retail, mail, long-term care, or 
specialty pharmacy. Software vendors often have commitments to their 
clients to maintain compliance with the latest adopted pharmacy 
transaction standards. They must incorporate these standards into their 
software systems; otherwise, they would not be able to sell their 
products competitively in the marketplace. These systems cannot 
properly support their users using outdated standards or missing key 
functionalities which the industry has identified as essential to 
business operations. We understand that vendors anticipate upgrades to 
these standards, and the cost of updating the software is incorporated 
into the vendor's routine cost of doing business and product support 
pricing. As discussed in the context of independent pharmacies, based 
on conversations with a variety of industry representatives, we 
understand that future HIPAA standard conversion efforts are often 
already priced into existing maintenance agreements and fee structures 
for their customers. However, the marginal costs of the conversion will 
be borne by these vendor entities.
    We understand from conversations with industry representatives that 
system update costs are usually embedded into operating costs, where 
they represent opportunity costs for vendors that offset the resources 
to add new features (system enhancements) that their clients may 
request. Updating systems will take some, but not all, resources 
currently doing system enhancements and improvements and move them over 
to ensuring compliance with the new standards. In the 2009 
Modifications final rule,\22\ we explained that we received no comments 
from pharmacy software vendors in response to the solicitation of 
comments on expected Version D.0 conversion costs, actual costs for 
vendor software upgrades, and any downstream impact on covered 
entities. In addition, we did not receive comments on the November 2022 
proposed rule. Therefore, we believe it is likely that firms will 
continue to decline to share this type of proprietary and market-
sensitive data. Thus, we continue to not have comparable anchors from 
prior impact analyses for cost estimates. However, in the public 
comments submitted to the NCVHS, one pharmacy software vendor with 
multiple product lines provided a preliminary estimate of approximately 
50,000 man-hours to make the Version F6 changes. We are not aware of 
publicly available data segmenting this industry, so we assume this one 
estimate is representative of the industry on average. Using this 
estimate and a mean hourly wage rate of $54 from BLS data \23\ and 
rounding to the nearest million, we estimate that over the 3-year 
implementation period: 30 pharmacy management system firms will incur 
Version F6 conversion costs of approximately $3 million each for 
software planning, development, and testing.
---------------------------------------------------------------------------

    \22\ 74 FR 3320 (January 16, 2009).
    \23\ Bureau of Labor Statistics. May 2019 National Occupational 
Employment and Wage Estimates United States. Mean hourly rates for 
Computer Network Architects, Software Developers and Software 
Quality Assurance Analysts and Testers, and Computer Support 
Specialists. https://www.bls.gov/oes/current/oes_nat.htm#15-0000.
---------------------------------------------------------------------------

    We further believe that these pharmacy system vendor firms will 
incur 80 hours of training costs for each pharmacy client firm at a 
mean hourly wage rate of $28.51 (also from the BLS data), the product 
rounded to $2,300. Thus, we believe that in the fourth year of the 3-
year implementation period: 30 pharmacy management system firms will 
incur Version F6 training costs of $2,300 for 2,265 clients (237 small 
pharmacies and 2,028 independent pharmacy corporations), or $5,210,000 
in total for this industry segment.
    In addition, both pharmacies and PBMs contract with 
telecommunication switches for transaction validation and routing. 
Based on conversations with industry representatives, we believe there 
are three switches in this segment of the market. We are not aware of 
any data to help us estimate their costs of system upgrades, but 
believe their costs are less than those of chain pharmacies and PBMs. 
We estimate that over the 3-year implementation period, three 
telecommunication switching vendors would incur Version F6 conversion 
costs of $1.5 million each. These other vendor costs are summarized in 
table 5.

                             Table 5--Other Vendor Costs of Conversion to Version F6
----------------------------------------------------------------------------------------------------------------
                                                                                    Number of
                                                                  Conversion cost    affected       Total F6
              Version F6 conversion cost category                per entity ($ in  entities or  conversion costs
                                                                     millions)        sites      ($ in millions)
----------------------------------------------------------------------------------------------------------------
Pharmacy Management System IT Implementation...................               3.0           30              90.0
Pharmacy Management System User Training.......................            0.0023        2,265               5.2
                                                                ------------------------------------------------

[[Page 100781]]

 
    Subtotal...................................................  ................  ...........              95.2
----------------------------------------------------------------------------------------------------------------
Telecommunication Switches.....................................               1.5            3               4.5
                                                                ------------------------------------------------
    Total......................................................  ................  ...........              99.7
----------------------------------------------------------------------------------------------------------------

    In summary, total estimated Version F6 conversion costs are 
summarized in Table 6.

       Table 6--Total Industry Costs for Conversion to Version F6
------------------------------------------------------------------------
                                     Number of       Total F6 conversion
    Conversion cost category      affected entity        costs ($ in
                                      (firms)             millions)
------------------------------------------------------------------------
Chain Pharmacies...............                315                  95.6
Independent Pharmacies.........             19,044                  61.0
Health Plans...................                772  ....................
PBMs...........................                 40                 128.0
Pharmacy Management System                      30                  95.2
 Vendors.......................
Telecommunication Switches.....                  3                   4.5
                                ----------------------------------------
    Total......................  .................                 384.3
------------------------------------------------------------------------

c. Benefits
    Industry commentary on benefits related to the Version F6 
conversion is available in two segments: first, the 2018 NCVHS 
testimony and industry representative interviews related to the then-
proposed Version D.0 to Version F2 conversion, and second, the 2020 
NCVHS testimony and public comments related to the revised Version F6 
proposal. Both sets of evidence portray industry consensus that 
updating the HIPAA pharmacy standards is necessary for current and 
future business needs at a significant, but unavoidable, cost. 
Commentaries describe numerous non-quantifiable benefits, such as 
enabling compliance with regulatory requirements, facilitating the 
transmittal of additional codified and interoperable information 
between stakeholders that would benefit patient care and care 
coordination, and powering advanced data analytics and transparency. 
Some changes will result in operational efficiencies over manual 
processes, but will also entail greater manual effort to collect 
information and input data at an offsetting cost. We are not aware of 
any assertions or estimates of industry cost savings attributable to 
the Version F6 conversion and did not receive any comments on our 
assumptions. For pharmacy management system vendors and switches, we 
believe upgrading existing systems for the Version F6 conversion is a 
cost of doing business and retaining customers and does not involve 
cost savings.
(1) Pharmacies
    Initial automation of pharmacy coordination of benefits 
transactions was a large part of the previous Version 5.1 to Version 
D.0 conversion. Further refinement of this type of information is 
included in the Version F6 conversion. Additional fields are expected 
to improve the flow of information between pharmacies and payers and 
allow for more accurate billing to the correct entity. However, better 
information does not translate into savings as directly as the initial 
transition from manual to fully electronic processes. Moreover, 
commenters to the 2009 Modifications final rule suggested that even 
those minor levels of savings (1.1 percent of pharmacist time) may have 
been overestimated.\24\ Some of the less quantifiable benefits include 
enabling more integration with back-office systems, more informative 
data analytics, better forecasting, and stronger internal controls over 
both proper payments and compliance with contractual requirements. For 
instance, better information on adjudicated payer types allows 
pharmacies to identify and apply insurance program-specific coverage 
requirements more accurately.
---------------------------------------------------------------------------

    \24\ 74 FR 3320 (January 16, 2009).
---------------------------------------------------------------------------

    Other changes, such as more structured communication between 
pharmacies and payers to resolve prescriber-identifier validation 
activities at the point of sale, or to better enable compliance with 
Federal and State limitations on filling and refilling controlled 
substance prescriptions, would enable better compliance with Drug 
Enforcement Administration and CMS rules without PBMs having to resort 
to claim rejections. In general, many of these changes are expected to 
support pharmacy efficiency improvements, reduce some manual workflow 
processes related to Food and Drug Administration-mandated Risk 
Evaluation and Mitigation Strategy (REMS) data collection and use, 
reduce the time required to resolve claim rejections and transaction 
attempts, and reduce recoupment risk on audits.\25\ However, these 
efficiencies may not necessarily translate directly to cost savings for 
pharmacies, as other changes require more data collection, greater 
pharmacy staff communication with prescribers, and inputting more 
coding than required previously. We did not receive any comments on our 
estimates

[[Page 100782]]

of quantifiable savings related to these efficiencies. Improvements 
like the expanded financial fields would avoid future manual processes 
needed to enter free text, split claims, or prepare and submit a paper 
Universal Claim Form; however, million-dollar claims are quite rare 
today, and, thus, it seems this change may not represent significant 
cost savings over current processes. But, as noted earlier, their 
numbers are expected to increase, and, without this functionality, the 
risk of billing errors could potentially increase. Moreover, these 
types of drugs will likely be dispensed by a small percentage of 
pharmacies, so the benefits will likely not be generally applicable to 
all pharmacies.
---------------------------------------------------------------------------

    \25\ S. Gruttadauria. (March 26, 2018). ``NCPDP 
Telecommunications Standard vF2 Written Testimony.'' Available: 
https://ncvhs.hhs.gov/wp-content/uploads/2018/05/Session-A-Gruttadauria-Written.pdf.
---------------------------------------------------------------------------

    Pharmacy and pharmacy vendor commenters to the NCVHS noted that 
other types of changes will benefit patients by enhancing pharmacy and 
payer patient care workflows through the replacement of many clinical 
free text fields with discrete codified fields. This will enable 
automation that can trigger real-time workflows that could aid in goals 
such as combatting the opioid crisis or communicating relevant therapy-
related information for at-risk patients. Improvements will support 
better patient care and safety through more accurate patient 
identification and enhanced availability and routing of benefit and DUR 
information. For instance, new response fields for DUR messaging and 
Formulary Benefit Detail help to convey clinical information such as 
disease, medical condition, and formulary information on covered drugs. 
This will enable pharmacists to have more informative discussions with 
patients and provide valuable information about alternative drug or 
therapy solutions. We believe that some of this data exchange will 
eliminate manual processes and interruptions and will also enable 
additional required pharmacist interventions to be added contractually, 
which could not occur previously. Thus, we conclude that the changes 
available through the Version F6 conversion will allow pharmacies to 
improve the accuracy and quality of their services but may not generate 
significant cost savings from a budgeting perspective.
(2) Health Plans and PBMs
    The benefits that could accrue to health plans and PBMs mirror the 
improvements that could accrue to pharmacy efficiencies discussed 
previously. Better information flows and interoperability could enable 
more efficient benefit adjudication, enhanced communications with 
trading partners and patients, and better data. Better data could 
improve payment accuracy, regulatory compliance, and advanced analytics 
for forecasting, coordination of care, and patient safety. For 
instance, better information on adjudicated payer types could support 
more accurately identifying other payers involved in the transaction. 
Improved information on other payers could result in cost avoidance by 
avoiding duplication of payment and by preventing Medicare from paying 
primary when it is the secondary payer. However, improved patient and 
alternative payer identification could also increase the transparency 
of the identification of payers secondary to Medicare and increase 
costs from other payers' subrogation in some circumstances. The ability 
to automate the processing of very expensive drug claims would avoid 
more cumbersome processes, but the absolute volume of such claims may 
not be enough to generate significant savings. We are not aware of any 
studies or estimates of cost savings for health plans or PBMs 
attributable to the Version F6 conversion, nor are we aware of public 
comments describing any such cost savings. Furthermore, in testimony to 
the NCVHS, the NCPDP noted the importance of Version F6 for achieving 
broader (but difficult to quantify) healthcare transformation goals: it 
improves the structure to support the clinical evaluation of 
prescription products and planned benefit transparency, which are key 
components for achieving expected healthcare outcomes related to value-
based care, digital therapeutics, social determinants of health, and 
other areas of health innovation.\26\ Thus, we conclude that while the 
benefits of adopting Version F6 are necessary for meeting current and 
future business needs and policy goals, we are unable to monetize these 
benefits in the form of cost savings. We solicited comments on whether 
there were significant quantifiable benefits or cost savings that 
should be included in our analysis and did not receive any feedback on 
our assumptions.
---------------------------------------------------------------------------

    \26\ National Committee on Vital and Health Statistics 
Transcript March 24, 2020, 10:00 a.m.-5:30 p.m. ET. https://ncvhs.hhs.gov/wp-content/uploads/2020/05/Transcript-Full-Committee-Meeting-March-24-2020.pdf.
---------------------------------------------------------------------------

5. Adoption of Batch Standard Subrogation Implementation Guide, Version 
10
a. Introduction
    As mentioned earlier, Version 3.0 was adopted to support Federal 
and State requirements for State Medicaid agencies to seek 
reimbursement, when they had made payment first, from the correct 
responsible health plan. We proposed to replace Version 3.0 with 
Version 10 as the standard for Pharmacy subrogation transactions at 
Sec.  162.1902(b). We indicated that, for State Medicaid agencies, 
adopting Version 10 would be a modification from Version 3.0. We 
proposed to adopt Version 10 for all health plans based on industry 
stakeholders' reports that there was a need to expand the use of the 
subrogation transaction because the adopted standard only applied to 
State Medicaid agencies and did not address the business needs for non-
Medicaid agencies such as Medicare Part D, State assistance programs, 
or private health plans that would seek similar reimbursement. 
Stakeholders also stated that a broader subrogation transaction would 
facilitate the efficiency and effectiveness of data exchange and 
transaction processes for all payers involved in post-payment of 
pharmacy claims and would support greater payment accuracy across the 
industry.
    However, in this final rule we have decided that we will adopt 
Version 10 but will only require State Medicaid agencies, not all 
health plans, to use it.
b. Affected Entities
    Medicare Part D requires real-time coordination of benefits, and we 
understand that these processes, as well as responsibility for managing 
subrogation (primarily for Medicaid retroactivity), are generally 
contracted through PBMs. Other payers, such as State Medicaid agencies 
and commercial insurers, are more likely to contract with payment 
integrity/financial recovery vendors. As of March 2018, there was 
evidence that some state Medicaid agencies managed this activity 
directly,\27\ but we are not aware of publicly available information on 
whether this is, or would still be, the case for the Version 10 
implementation timeframe. Likewise, we understand the VA PBM does not 
coordinate benefits in real time, but contracts with a payment 
integrity/financial recovery firm for retrospective subrogation in some 
circumstances. We believe there are four firms in the specialized 
pharmacy benefit payment integrity/financial recovery industry, with 
most of the business volume concentrated in one firm.
---------------------------------------------------------------------------

    \27\ NCVHS Hearing on NCPDP Standards and Updates--March 26, 
2018 Virtual Meeting. https://ncvhs.hhs.gov/transcripts-minutes/transcript-of-the-march-26-2018-hearing-on-ncpdp-standards-and-updates/.
---------------------------------------------------------------------------

    Based on a CAMH environmental scan conducted with industry 
representatives, we understand that the

[[Page 100783]]

demand for subrogation today differs by third-party line of business. 
Third-party commercial payer contracts are less likely to have a 
comparable retroactivity-of-coverage issue and, due to the rising cost 
of health insurance, are increasingly less likely to have enrollees 
covered under more than one insurance program or policy. For these 
reasons, we understand that third-party commercial payers are more 
likely to subrogate with workers' compensation, auto insurance, or 
other non-healthcare insurance-related parties, rather than with other 
healthcare payers.
    While pharmacies are not users of the subrogation standard, they 
are potentially affected by any further expansion of the standard from 
Medicaid to all third-party payers. This is because one alternative to 
subrogation involves the payer that paid in error recouping funds from 
pharmacies and transferring the effort and risk of rebilling the 
appropriate payer to the pharmacy.
c. Costs
(1) Third-Party Payers (Includes Plan Sponsors and PBMs)
    The bulk of the work to implement Version 10 for many third-party 
payers has been previously addressed in costs associated with 
implementing Version F6, specifically its equivalent batch standard, 
Version 15. Based on conversations with industry representatives 
familiar with the subrogation standards, we understand that the changes 
in Batch Standard Subrogation Version 10 have been undertaken to 
preserve the integrity of the standard for Medicaid purposes while 
allowing for the collection of a limited number of new data elements to 
assist with other payer subrogation, particularly for Part D sponsors. 
The changes between Version 3.0 and Version 10 are not extensive, so we 
believe this change will not have significant effects on State Medicaid 
agencies or their vendors.
    We also believe that health plans that desire to pursue 
prescription drug claim subrogation have already contracted with PBMs 
or other contractors that have implemented Version 3.0, or some 
variation on this standard, on a voluntary basis. However, testimony 
provided at the March 2018 NCVHS hearing indicated that some payers had 
not yet implemented the batch processing software, and would have 
additional IT system, administrative, and training costs to convert to 
Version 10. We are not aware of the specific payers to which this 
remark referred, and, thus, several years later, we have no basis on 
which to estimate the number of additional payers or State Medicaid 
agencies that could potentially adopt the standard for the first time 
with Version 10, nor do we know if any such payers might instead 
contract with a vendor to manage this function on their behalf while 
implementing Version 10. As with PBM and vendor contractual 
arrangements discussed previously, we assume that HIPAA standard 
conversions have been priced into ongoing contractual payment 
arrangements and will not increase costs to third-party payers as a 
result of converting to Version 10. We solicited comments to help us 
understand the impacts of converting to Version 10 on State Medicaid 
agencies or any health plans that have not previously implemented NCPDP 
batch standards and/or Subrogation Version 3.0. We also solicited 
comments on our assumptions on the impacts on State Medicaid agency 
vendors in general, as well as data with which to quantify any 
additional impacts beyond the Version F6 conversion estimates provided 
previously and did not receive any comments.
    Based on conversations with industry representatives, we further 
understand that health plans already engaged in subrogation, 
particularly Part D PBMs. Version 10 provides more requirements for use 
of the standard and how to populate the fields to increase 
standardization.
(2) Vendors
    As noted previously, State Medicaid agencies, commercial third-
party payers, and the VA generally contract with four payment 
integrity/financial recovery firms for subrogation. We believe, based 
on conversations with industry representatives, that these firms 
generally utilize Version 3.0 today, and will have to invest in Version 
F6 batch standard upgrades to implement Version 10 and prepare to 
potentially accept subrogation from other third-party payers. These 
firms were not included in the previous vendor estimates. We are not 
aware of studies or public comments that describe costs related to 
their activities and requirements. We believe these vendors will incur 
a minority of the costs associated with the Version F6 conversion and 
some internal data remapping expense. Table 7 summarizes the other 
vendor costs of conversion over the 3-year implementation period. In 
the November 2022 proposed rule, we estimated that four payment 
integrity/financial recovery vendors would incur Version F6, equivalent 
Batch Standard, Version 15, and other Version 10 conversion costs of 
$500,000 each. We did not receive any comments based on our 
assumptions; and therefore, we are finalizing the other vendor costs.

                             Table 7--Other Vendor Costs of Conversion to Version 10
----------------------------------------------------------------------------------------------------------------
                                                                                                     Total F6
                                                                 Conversion cost     Number of      conversion
                   Conversion cost category                       per entity ($      affected        costs ($
                                                                    millions)        entities       millions)
----------------------------------------------------------------------------------------------------------------
Payment Integrity/Financial Recovery Vendors.................                0.5             4              2.0
----------------------------------------------------------------------------------------------------------------

d. Benefits
(1) Third-Party Payers
    The primary benefits for third-party payers are the opportunity to 
reduce claims costs when another party is also responsible for the 
claims, and the avoidance of cumbersome manual processes. However, we 
are not aware of studies or public comments that help us estimate the 
frequency and size of this benefit. Prescription drug claims tend, on 
average, to be for much smaller amounts than medical claims, such as 
those for hospital admissions, and we believe many payers may pursue 
subrogation only on the more expensive claims. Discussion at the March 
2018 NCVHS hearing indicated that about 5 percent of health care 
memberships across the country have multiple insurance coverage. By 
using national drug expenditures, the volume of claim reconciliation 
and savings opportunities could easily exceed a billion dollars and the 
need for this subrogation standard is critical for effective processing 
(as the subrogation transaction standard proposal was not revised in 
2020, we do not have more recent testimony

[[Page 100784]]

updating this estimate). However, additional testimony at that same 
hearing \28\ suggested there is not a huge cost savings opportunity 
left for commercial subrogation but, instead, an occasional need that 
will be facilitated by a standardized approach. We did not receive 
comments to quantify the incremental benefits of extending Version 10.
---------------------------------------------------------------------------

    \28\ Transcript-Standards Subcommittee Hearing-NCPDP Standards 
Updates-March 26, 2018. Accessed 05/14/2021 at: https://ncvhs.hhs.gov/transcripts-minutes/transcript-of-the-march-26-2018-hearing-on-ncpdp-standards-and-updates/.
---------------------------------------------------------------------------

(2) Pharmacies
    As noted previously, while pharmacies are not users of the 
subrogation transactions standard, they could potentially benefit from 
further expansion of the standard from State Medicaid agencies to all 
third-party payers if additional payers that are currently recouping 
overpayments from pharmacies instead were to transition to a 
subrogation approach. However, we are not aware of any studies or 
public comments that would help us estimate the likelihood or size of a 
potential change of this nature. We solicited but did not receive any 
comments to help us understand the extent to which the adoption of 
Version 10 may affect pharmacies.

E. Regulatory Review Cost Estimate

    One of the costs of compliance with a final rule is the necessity 
for affected entities to review the rule in order to understand what it 
requires and what changes the entity will have to make to come into 
compliance. We believe that 104 affected entities will incur these 
costs, as they are the entities that will have to implement the adopted 
changes, that is, those entities that are pharmacy organizations that 
manage their own systems (27), pharmacy management system vendors (30), 
PBMs (40), telecommunication switch vendors (3), and payment integrity/
financial recovery vendors (4). The staff involved in such a review 
will vary from entity to entity but will generally consist of lawyers 
responsible for compliance activities and individuals familiar with the 
NCPDP standards. Using the Occupational Employment and Wages for May 
2022 from the BLS for lawyers (Code 23-1011) and computer and 
information system managers (Code 11-3021),\29\ we believe that the 
national average labor costs of reviewing this rule are $100.47 and 
$99.93 per hour, respectively, including other indirect costs and 
fringe benefits. We believe that it will take approximately 4 hours to 
review this rule. The estimated costs per entity would therefore be 
$1,603.20 (4 hours each x 2 staff x $100.47 plus 4 hours x 2 staff x 
$99.93), and the total cost borne by the 104 affected entities would be 
$166,733 ($1,603.20 x 104 affected entities), which sums to $1 
different from the identical math at section V.A. because the two 
calculations are rounded separately.
---------------------------------------------------------------------------

    \29\ Bureau of Labor Statistics. May 2022 National Occupational 
Employment and Wage Estimates United States. Mean hourly rates for 
Computer Network Architects, Software Developers and Software 
Quality Assurance Analysts and Testers, and Computer Support 
Specialists. Accessed 9/12/2023 at: https://www.bls.gov/oes/current/oes113021.htm#top.
---------------------------------------------------------------------------

F. Accounting Statement and Tables

    As required by OMB Circular A-4 (available at https://www.whitehouse.gov/wp-content/uploads/2023/11/CircularA-4.pdf), in 
Table 8 we present an accounting statement showing the classification 
of the annualized costs associated with the provisions of this final 
rule. Monetary annualized non-budgetary costs are presented at the 2 
percent discount rate.

                                          Table 8--Accounting Statement
             [Classification of estimate costs and benefits from FY 2024 to FY 2033 ($ in millions)]
----------------------------------------------------------------------------------------------------------------
               Category                                  Primary estimate                          Source
----------------------------------------------------------------------------------------------------------------
Qualitative (un-quantified benefits)..  Wider adoption of standards; increased             RIA.
                                         productivity due to decrease in manual
                                         processing; reduced delays in patient care.
Annualized monetized costs: * 2%        $97..............................................  RIA.
 Discount.
----------------------------------------------------------------------------------------------------------------
* Opportunity costs will be borne by the entities that will have to implement the proposed changes, that is,
  those entities that are pharmacy organizations that manage their own systems, pharmacy management system
  vendors, PBMs, telecommunication switch vendors, and payment integrity/financial recovery vendors. Some
  marginal user training costs will be borne by other pharmacies.

G. Regulatory Flexibility Analysis (RFA)

    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. Individuals and States are not included in 
the definition of a small entity. Furthermore, the economic impact 
assessment of small entities is based on HHS's practice in interpreting 
the RFA to consider effects economically ``significant'' only if 
greater than 5 percent of providers reach a threshold of 3 to 5 percent 
or more of total revenue or total costs.
    The North American Industry Classification System (NAICS) was 
adopted in 1997 and is the current standard used by the Federal 
statistical agencies related to the U.S. business economy. Using the 
2022 SBA small business size regulations and Small Business Size 
Standards by NAICS Industry tables at 13 CFR 121.201, we have presented 
in Table 9 the covered entities and their vendors affected by this 
final rule.

     Table 9--SBA Size Standards for Applicable NAICS Industry Codes
------------------------------------------------------------------------
                              NAICS U.S. industry     SBA size standard
        NAICS code                   title             ($ in millions)
------------------------------------------------------------------------
456110...................  Pharmacies and Drug                      37.5
                            Stores.
524114...................  Direct Health and                        47.0
                            Medical Insurance
                            Carriers (Health Plans).
621491...................  HMO Medical Centers                      44.5
                            (Health Plans).
524292...................  Third Party                              45.5
                            Administration of
                            Insurance and Pension
                            Funds (PBMs).
541512...................  Computer Systems Design                  34.0
                            Services (Pharmacy
                            Management System
                            Vendors).

[[Page 100785]]

 
518210...................  Data Processing,                         40.0
                            Hosting, and Related
                            Services
                            (Telecommunication
                            Switches).
524298...................  All Other Insurance                      30.5
                            Related Activities
                            (Payment Integrity/
                            Financial Recovery).
------------------------------------------------------------------------

    This change in retail pharmacy transaction standards will apply to 
many small, covered entities in the Pharmacy and Drug Store segment 
(NAICS code 456110). However, based on information obtained by CAMH 
during its conversations with industry experts, we understand that 
small pharmacies generally rely on ongoing arrangements with certain 
specialized computer system design services vendors (a subset of NAICS 
code 541512) to integrate the standards into their pharmacy management 
software and systems as a routine cost of doing business. Therefore, 
these covered entities may not bear the bulk of the costs attributable 
to the adopted changes. Instead, as detailed later in this RIA, 
generally the costs applicable to small pharmacies are expected to be a 
portion of the costs for user training for some firms. The pharmacy 
management system vendors are not covered entities, and we are not 
aware of publicly available data to comprehensively identify these 
entities and, where applicable, parent firm size. Other types of 
covered entities providing pharmacy services, such as the subset of 
grocery stores with pharmacies, cannot be clearly identified within 
NAICS data, as such data are not collected in this detail, but are 
included in our estimates for larger entities. Conversely, institutions 
with outpatient pharmacies (for example, hospitals) also cannot be 
clearly identified by NAICS data but are not included in our analysis, 
since we believe such institutions are generally part of larger 
organizations that do not meet the SBA definition. One exception to 
this belief is the IHS, urban, and tribal facilities with pharmacies 
that bill prescription drug plans, which we address later in this 
analysis.
    For purposes of this RIA, the definition of an entity most closely 
resembles the Federal statistical agencies' concept of a firm.\30\ A 
firm consists of one or more establishments under common ownership. An 
establishment consists of a single physical location or permanent 
structure.\31\ Thus, a chain drug store or chain grocery store 
constitutes a single firm operating multiple establishments. Using the 
2017 Census Bureau Annual Business Survey estimates of firms, sales, 
and receipts by NAICS sector (available at https://www.census.gov/programs-surveys/abs.html, and hereafter referred to as Census business 
data), we have attempted to estimate the number of small pharmacy 
entity firms and provide a general discussion of the effects of the 
proposed regulation. We solicited industry comments on these 
assumptions and did not receive any.
---------------------------------------------------------------------------

    \30\ www.bls.gov/opub/mlr/2016/article/establishment-firm-or-enterprise.htm.
    \31\ www.census.gov/programs-surveys/susb/technical-documentation/methodology.html.
---------------------------------------------------------------------------

1. Number of Small Entities
    Based on the CAMH environmental scan that found a total of 19,234 
total pharmacy firms, we believe that just over 19,000 pharmacy firms 
qualify as small entities, though communications with industry 
representatives suggest that figure may overestimate the current 
industry small entity landscape. Available data do not permit us to 
clearly distinguish small pharmacy firms from firms that are part of 
larger parent organizations, but we use employee size as a proxy for 
the firm size subject to the SBA size standard. For purposes of this 
analysis, we believe the firms with more than 500 employees (190) 
represent chain pharmacies, and those with fewer than 500 (19,044) 
employees represent independently owned open- or closed-door 
pharmacies. The 19,044 firms with fewer than 500 employees represented 
20,901 establishments and accounted for total annual receipts of $70.69 
billion and average annual receipts of $3.7 million per firm. This is 
well below the SBA standard of $37.5 million. By contrast, the 190 
firms with 500 or more employees represented 27,123 establishments and 
accounted for over $210.97 billion in annual receipts, and thus, 
average annual receipts of $1.1 billion. Therefore, we believe 19,044 
pharmacy firms qualify as small entities for this analysis.
    In 2017, the Census Bureau counts 745 entities designated as Direct 
Health and Medical Insurance Carriers and 27 as Health Maintenance 
Organization (HMO) Medical Centers. We believe that these 772 firms 
represent health plans that sponsor prescription drug benefits. Of the 
745 Carriers, those with fewer than 500 employees (564) accounted for 
$35 billion in total and over $62 million in average annual receipts, 
exceeding the SBA size standard of $44.5 million. Comparable data on 
the eight smaller HMO Medical Centers is not available due to small 
cell size suppression. Although health plan firms may not qualify as 
small entities under the SBA receipts size standard, they may under 
non-profit status. However, we are not aware of data that would help us 
understand the relationship between health plan firm and ownership tax 
status to quantify the number of such firms. In any case, as explained 
in more detail later in this RIA, we do not estimate that health plans 
will generally bear costs associated with the changes in this final 
rule, as their contracted transaction processing vendors (generally 
PBMs) will be responsible for implementing the changes, and, generally, 
based on conversations with the industry, we do not believe their 
contractual terms will change as the result. Therefore, although we 
cannot estimate the number of health plan firms that may meet the small 
entity definition using non-profit status, generally we do not believe 
such entities will bear costs attributable to the changes.
    In addition to the covered entities, we estimate 30 pharmacy 
management system vendors, 40 PBM vendors, three telecommunications 
switching vendors, and four payment integrity/financial recovery firms 
would be affected by the proposed changes to their clients. We are not 
aware of comprehensive publicly available data detailed enough to 
quantify the size of these remaining entities, but we believe that the 
affected firms are, generally, part of larger organizations. We 
solicited comments with respect to our assumptions and did not receive 
any feedback.
2. Cost to Small Entities
    To determine the impact on small pharmacies, we used data obtained 
in the development of the CAMH environmental scan on the number of 
firms with fewer than 500 employees and user training cost estimates 
developed using public comments on prior rulemaking and updated for 
inflation. As discussed earlier in this RIA, we assumed that the clear 
majority of pharmacy firms are small entities that

[[Page 100786]]

rely on their contracted pharmacy management system vendors to absorb 
HIPAA standard version conversion costs in return for ongoing 
maintenance and transaction fees. We believe that pharmacy firms will 
have direct costs related to Version F6 user training and that it will 
vary in relation to employee size; that the vast majority (89 percent) 
of small pharmacy firms with fewer than 20 employees will receive all 
necessary user training from vendors; and that the remaining 10 percent 
of small pharmacy firms (2,028) with 20 or more employees will have 
additional staff user training expense totaling $30,000 on average in 
the second year of the implementation period. As shown in Table 10, the 
overall impact on small covered entity pharmacies and drugstores (NAICS 
446110) with less than 500 employees reflects an estimated cost 
percentage of revenue per firm of 0.81 percent. Pharmacies and drug 
stores with less than 500 employees represent approximately 99 percent 
of all pharmacies and drug stores, including large pharmacies and drug 
stores with greater than 500 employees. Further analysis shows that 
pharmacies and drugstores with less than 100 employees represent 98 
percent of all pharmacies and drugstores. These pharmacies and 
drugstores, with less than 100 employees, are estimated to have a cost 
percentage of revenue per firm of 0.86 percent. Also, pharmacies and 
drugstores with less than 20 employees represent 89 percent of all 
pharmacies and drugstores. These pharmacies and drugstores, with less 
than 20 employees, are estimated to have a cost percentage of revenue 
per firm of 1.10 percent. The highest cost percentage of revenue per 
firm of 2.25 percent is estimated to impact pharmacies and drugstores 
with less than 5 employees, which represents 36 percent of all 
pharmacies and drugstores. All other small entity pharmacy and 
drugstore enterprise sizes show a cost percentage of revenue per firm 
below 1 percent. Therefore, as shown in Table 10, the implementation 
cost of this final rule on small, covered entity pharmacies and 
drugstores falls below HHS's practice in interpreting the RFA to be 
economically ``significant,'' since it does not reach the threshold of 
3 to 5 percent or more of total revenues.

        Table 10--Analysis of the Implementation Cost on Small Covered Entity Pharmacies and Drug Stores
                                                 [NAICS 446110]
----------------------------------------------------------------------------------------------------------------
                                                                                                Cost percentage
                       Enterprise size                              Firms         Receipts      of revenue  per
                                                                                  ($1,000)            firm
----------------------------------------------------------------------------------------------------------------
<5 employees.................................................           6,940       9,232,985               2.25
5-9 employees................................................           5,776      16,700,443               1.04
10-14 employees..............................................           2,963      12,978,849               0.68
15-19 employees..............................................           1,337       7,599,680               0.53
<20 employees (separate category)............................          17,016      46,511,957               1.10
20-24 employees..............................................             661       4,673,350               0.42
25-29 employees..............................................             380       3,464,669               0.33
30-34 employees..............................................             224       2,324,169               0.29
35-39 employees..............................................             151       1,759,613               0.26
40-49 employees..............................................             204       2,610,831               0.23
50-74 employees..............................................             185       2,942,040               0.19
75-99 employees..............................................              77       1,509,958               0.15
<100 employees (separate category)...........................          18,898      65,796,587               0.86
100-149 employees............................................              59       2,060,372               0.09
150-199 employees............................................              28         806,821               0.10
200-299 employees............................................              33       1,190,264               0.08
300-399 employees............................................              15         480,045               0.09
400-499 employees............................................              11         353,254               0.09
<500 employees (separate category)...........................          19,044      70,687,343               0.81
----------------------------------------------------------------------------------------------------------------
Source: Census Bureau. 2017 Economic Census.

    As stated in section V.F. of the November 2022, proposed rule, we 
outlined the various alternative policy considerations to adopting 
Version F6. Specific to reducing costs to small entities, we considered 
staggering the implementation dates for Version F6 among the affected 
entities that utilize the NCPDP transaction standard. But we chose not 
to propose that alternative because pharmacies, PBMs, and health plans 
all rely on the information transmitted through the retail pharmacy 
transactions, and if any one of these three entities will not be using 
the same standard version at the same time, the information needed to 
process claims and check eligibility would be deficient. Pharmacies 
need the most current eligibility data from the plans to determine 
correct coverage and payment information. Plans and PBMs would suffer 
because they would not have the most current information reflected 
through the claims data to maintain the beneficiaries' most current 
benefits.
3. Conclusion
    As referenced earlier in this section, the RFA is considered 
economically significant only if greater than 5 percent of providers 
reach a threshold of 3 to 5 percent or more of total revenue or total 
costs. We conclude that the cost impact from this final rule on small 
pharmacy entities does not exceed this threshold. In Table 10, we 
illustrate that small covered entity pharmacies and drugstores with 
less than 500 employees may experience a cost percentage of revenue per 
firm of 0.81 percent, pharmacies and drugstores with less than 100 
employees may experience a cost percentage of revenue per firm of 0.86 
percent, pharmacies and drugstores with less than 20 employees may 
experience a cost percentage of revenue per firm of 1.10 percent, and 
finally pharmacies and drugstores with less than 5 employees may 
experience a cost percentage of 2.25 percent. Based on the foregoing 
analysis, we invited public comments on the analysis and requested any 
additional data that would help us determine more accurately the impact 
on the various categories of entities affected by this final rule but 
did not receive any. Therefore, the Secretary has certified that this 
final rule will not

[[Page 100787]]

have a significant economic impact on a substantial number of small 
entities.
    In addition, section 1102(b) of the Act requires us to prepare an 
RIA if a rule will 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. This final rule will not affect the operations of a 
substantial number of small rural hospitals because these entities are 
not involved in the exchange of retail pharmacy transactions. 
Therefore, the Secretary has certified that this final rule will not 
have a significant impact on the operations of a substantial number of 
small rural hospitals.

H. Unfunded Mandates Reform Act of 1995 (UMRA)

    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 would require spending more in any 1 
year than threshold amounts in 1995 dollars, updated annually for 
inflation. In 2024, that threshold is approximately $183 million. This 
final rule does not contain unfunded mandates that will impose spending 
costs on State, local, or tribal governments in the aggregate, or by 
the private sector, in excess of more than $183 million in any 1 year. 
In general, each State Medicaid agency and other government entity that 
is considered a covered entity will be required to ensure that its 
contracted claim processors and payment integrity/financial recovery 
contractors update software and conduct testing and training to 
implement the adoption of the modified versions of the previously 
adopted standards. However, information obtained by CAMH during its 
conversations with industry experts supports that the costs for these 
services will not increase as a result of the proposed changes. Our 
understanding is that HIPAA standard conversion costs are already 
priced into ongoing contractual payment arrangements between health 
plans, contracted claim processors, and payment integrity/financial 
recovery contractors.

I. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. This final rule will not have a substantial direct effect 
on State or local governments, preempt State law, or otherwise have a 
Federalism implication because, even though State Medicaid agency 
contractors will be converting to a modified version of an existing 
standard with which they are already familiar, we believe that any 
conversion costs, will, generally, be priced into the current level of 
ongoing contractual payments. State Medicaid agencies, in accordance 
with this final rule, will have to ensure that their contracted claim 
processors or PBMs successfully convert to Version F6 and that their 
payment integrity/financial recovery contractors make relatively minor 
updates to subrogation systems to collect and convey some new fields to 
conduct subrogation initiated by other payers using Version 10. With 
respect to subrogation for pharmacy claims, this final rule will not 
add a new business requirement for States, but rather will update a 
version of the standard to use for this purpose that will be used 
consistently by all health plans.

J. Alternatives Considered

    As stated in the November 2022 proposed rule (87 FR 67643), we 
considered a number of alternatives to adopting Version F6 and Version 
10 and chose to proceed with the provisions in this rule after 
identifying significant shortcomings with each of the alternatives.
    One alternative we considered was to not propose to adopt Version 
F6 and continue to require the use of Version D.0. We also considered 
waiting to adopt Version F6 at a later date since we recently published 
a final rule in 2020 modifying the requirements for the use of Version 
D.0 by requiring covered entities to use the 460-ET field for retail 
pharmacy transactions denoting partial fill of Schedule II drugs. We 
did not proceed with either alternative because we believe that, were 
we to do so, the industry would continue to use a number of workarounds 
that increase burden and are contrary to standardization. We also 
believe that the number of, and use of, these workarounds will continue 
to increase if we do not adopt Version F6. Therefore, we choose not to 
proceed with these alternatives because we believe the adoption of 
Version F6 would support interoperability and improve patient outcomes.
    In the November 2022 proposed rule, we considered proposing a 
compliance date longer than 24 months for covered entities to comply 
with Version F6. However, we chose to propose a 24-month compliance 
date with an 8-month transition period based on industry suggestions 
for implementing Version F6 as soon as possible in a manner that would 
be more feasible. We also considered proposing staggered implementation 
dates for Version F6, whereby covered entities using the retail 
pharmacy transactions would have different compliance dates.
    We believe this alternative would not support standardization since 
pharmacies, PBMs, and health plans all rely on the information 
transmitted in the retail pic in pharmacy subrogation transactions to 
continue using the proprietary electronic and paper formats currently 
in use. We chose not to proceed with this alternative due to industry 
concerns regarding uniformity among all payers.
    Finally, based on industry feedback, in this final rule, we decided 
to adopt the standards proposed in the November 2022 proposed rule with 
a compliance date of 3 years after the effective date. The compliance 
timeframe will include an 8-month transition. However, we are not 
requiring the use of Version 10 (Medicaid subrogation) for all health 
plans.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on November 7, 2024.

List of Subjects in 45 CFR Part 162

    Administrative practice and procedures, Electronic transactions, 
Health facilities, Health insurance, Hospitals, Incorporation by 
reference, Medicaid, Medicare, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, the Department of Health 
and Human Services amends 45 CFR part 162 as set forth below:

PART 162--ADMINISTRATIVE REQUIREMENTS

0
1. The authority citation for part 162 continues to read as follows:

    Authority: 42 U.S.C. 1320d--1320d-9 and secs. 1104 and 10109 of 
Pub. L. 111-148, 124 Stat. 146-154 and 915-917.


0
2. Section 162.920 is amended by--
0
a. Revising the introductory text and paragraph (b) introductory text; 
and
0
b. Adding paragraphs (b)(7) through (b)(9).
    The revision and additions read as follows:

[[Page 100788]]

Sec.  162.920  Availability of implementation specifications and 
operating rules.

    Certain material is incorporated by reference into this subpart 
with the approval of the Director of the Federal Register under 5 
U.S.C. 552(a) and 1 CFR part 51. To enforce any edition other than that 
specified in this section, the Department of Health and Human Services 
(the Department) must publish a document in the Federal Register and 
the material must be available to the public. All approved 
incorporation by reference (IBR) material is available for inspection 
at the Centers for Medicare & Medicaid Services (CMS) and at the 
National Archives and Records Administration (NARA). Contact CMS at: 
7500 Security Boulevard, Baltimore, Maryland 21244; phone: (410) 786-
6597; email: [email protected]. For information 
on the availability of this material at NARA, visit www.archives.gov/federal-register/cfr/ibr-locations or email [email protected]. The 
material may be obtained from the following sources:
* * * * *
    (b) Retail pharmacy specifications and Medicaid pharmacy 
subrogation implementation guides. The implementation specifications 
for the retail pharmacy standards and the implementation specifications 
for the batch standard for the Medicaid pharmacy subrogation 
transaction may be obtained from the National Council for Prescription 
Drug Programs, 9240 East Raintree Drive, Scottsdale, AZ 85260. 
Telephone (480) 477-1000; FAX (480) 767-1042. They are also available 
through the internet at www.ncpdp.org. A fee is charged for all NCPDP 
Implementation Guides. Charging for such publications is consistent 
with the policies of other publishers of standards. The transaction 
implementation specifications are as follows:
* * * * *
    (7) The Telecommunication Standard Implementation Guide Version F6 
published January 2020; as referenced in Sec. Sec.  162.1102; 162.1202; 
162.1302; 162.1802.
    (8) The Batch Standard Implementation Guide, Version 15, published 
October 2017; as referenced in Sec. Sec.  162.1102; 162.1202; 162.1302; 
162.1802.
    (9) The Subrogation Implementation Guide for Batch Standard, 
Version 10, republished September 2019; as referenced in Sec.  
162.1902.

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3. Section 162.1102 is amended by--
0
a. In paragraph (c), by removing the phrase ``For the period on and 
after the January 1, 2012,'' and adding in its place the phrase ``For 
the period from January 1, 2012 through August 11, 2027,'';
0
b. In paragraph (d), by removing the phrase ``For the period on and 
after September 21, 2020,'' and adding in its place the phrase, ``For 
the period on and after September 21, 2020 through August 11, 2027,''; 
and
0
c. Adding paragraphs (e) and (f).
    The additions read as follows:


Sec.  162.1102  Standards for health care claims or equivalent 
encounter information transaction.

* * * * *
    (e) For the period from August 11, 2027 through February 11, 2028, 
both of the following:
    (1) The standards identified in paragraphs (c) and (d) of this 
section.
    (2) The following standards:
    (i) Retail pharmacy drug claims. The NCPDP Telecommunication 
Standard Implementation Guide Version F6, January 2020 and equivalent 
NCPDP Batch Standard Implementation Guide, Version 15, October 2017 
(both incorporated by reference in Sec.  162.920).
    (ii) Dental health care claims. The ASC X12 Standards for 
Electronic Data Interchange Technical Report Type 3--Health Care Claim: 
Dental (837), May 2006, ASC X12N/005010X224, and Type 1 Errata to 
Health Care Claim: Dental (837) ASC X12 Standards for Electronic Data 
Interchange Technical Report Type 3, October 2007, ASC X12N/
005010X224A1 (both incorporated by reference in Sec.  162.920).
    (iii) Professional health care claims. The ASC X12 Standards for 
Electronic Data Interchange Technical Report Type 3--Health Care Claim: 
Professional (837), May 2006, ASC X12N/005010X222 (incorporated by 
reference in Sec.  162.920).
    (iv) Institutional health care claims. The ASC X12 Standards for 
Electronic Data Interchange Technical Report Type 3--Health Care Claim: 
Institutional (837), May 2006, ASC X12N/005010X223, and Type 1 Errata 
to Health Care Claim: Institutional (837) ASC X12 Standards for 
Electronic Data Interchange Technical Report Type 3, October 2007, ASC 
X12N/005010X223A1 (both incorporated by reference in Sec.  162.920).
    (3) Retail pharmacy supplies and professional services claims. (i) 
The NCPDP Telecommunication Standard Implementation Guide Version F6, 
January 2020 and equivalent NCPDP Batch Standard Implementation Guide, 
Version 15, October 2017 (both incorporated by reference in Sec.  
162.920).
    (ii) The ASC X12 Standards for Electronic Data Interchange 
Technical Report Type 3-Health Care Claim: Professional (837), May 
2006, ASC X12N/005010X222 (incorporated by reference in Sec.  162.920).
    (f) For the period on and after February 11, 2028, the standards 
identified in paragraph (e)(2) of this section.

0
4. Section 162.1202 is amended by--
0
a. In paragraph (c), by removing the phrase ``For the period on and 
after the January 1, 2012,'' and adding in its place the phrase ``For 
the period from January 1, 2012 through August 11, 2027,''; and
0
b. Adding paragraphs (d) and (e).
    The additions read as follows:


Sec.  162.1202  Standards for eligibility for a health plan 
transaction.

* * * * *
    (d) For the period from August 11, 2027 through February 11, 2028, 
both of the following:
    (1) The standards identified in paragraph (c) of this section.
    (2) The following standards:
    (i) Retail pharmacy drugs. The NCPDP Telecommunication Standard 
Implementation Guide Version F6, January 2020 and equivalent NCPDP 
Batch Standard Implementation Guide, Version 15, October 2017 (both 
incorporated by reference in Sec.  162.920).
    (ii) Dental, professional, and institutional health care 
eligibility benefit inquiry and response. The ASC X12 Standards for 
Electronic Data Interchange Technical Report Type 3--Health Care 
Eligibility Benefit Inquiry and Response (270/271), April 2008, ASC 
X12N/005010X279 (incorporated by reference in Sec.  162.920).
    (e) For the period on and after February 11, 2028, the standards 
identified in paragraph (d)(2) of this section.

0
5. Section 162.1302 is amended by--
0
a. In paragraph (c), by removing the phrase ``For the period on and 
after the January 1, 2012,'' and adding in its place the phrase ``For 
the period from January 1, 2012 through August 11, 2027,'';
0
b. In paragraph (d), by removing the phrase ``For the period on and 
after September 21, 2020, ``and adding in its place the phrase, ``For 
the period on and after September 21, 2020 through August 11, 2027''; 
and
0
c. Adding paragraphs (e) and (f).
    The additions read as follows:


Sec.  162.1302  Standards for referral certification and authorization 
transaction.

* * * * *
    (e) For the period from August 11, 2027 through February 11, 2028, 
both of the following:

[[Page 100789]]

    (1) The standards identified in paragraph (c) and (d) of this 
section.
    (2) The following standards:
    (i) Retail pharmacy drugs. The NCPDP Telecommunication Standard 
Implementation Guide Version F6, January 2020 and equivalent NCPDP 
Batch Standard Implementation Guide, Version 15, October 2017 (both 
incorporated by reference in Sec.  162.920).
    (ii) Dental, professional, and institutional request for review and 
response. The ASC X12 Standards for Electronic Data Interchange 
Technical Report Type 3--Health Care Services Review--Request for 
Review and Response (278), May 2006, ASC X12N/005010X217, and Errata to 
Health Care Services Review--Request for Review and Response (278), ASC 
X12 Standards for Electronic Data Interchange Technical Report Type 3, 
April 2008, ASC X12N/005010X217E1 (both incorporated by reference in 
Sec.  162.920).
    (f) For the period on and after February 11, 2028, the standards 
identified in paragraph (e)(2) of this section.

0
6. Section 162.1802 is amended by--
0
a. In paragraph (c), by removing the phrase ``For the period on and 
after the January 1, 2012,'' and adding in its place the phrase ``For 
the period from January 1, 2012 through August 11, 2027'';
0
b. In paragraph (d), by removing the phrase ``For the period on and 
after September 21, 2020,'' and adding in its place the phrase ``For 
the period on and after September 21, 2020 through August 11, 2027''; 
and
0
c. Adding paragraphs (e) and (f).
    The additions read as follows:


Sec.  162.1802  Standards for coordination of benefits information 
transaction.

* * * * *
    (e) For the period from August 11, 2027 through February 11, 2028, 
both of the following:
    (1) The standards identified in paragraphs (c) and (d) of this 
section.
    (2) The following standards:
    (i) Retail pharmacy drug claims. The NCPDP Telecommunication 
Standard Implementation Guide Version F6, January 2020 and equivalent 
NCPDP Batch Standard Implementation Guide, Version 15, October 2017 
(both incorporated by reference in Sec.  162.920).
    (ii) Dental health care claims. The ASC X12 Standards for 
Electronic Data Interchange Technical Report Type 3--Health Care Claim: 
Dental (837), May 2006, ASC X12N/005010X224, and Type 1 Errata to 
Health Care Claim: Dental (837) ASC X12 Standards for Electronic Data 
Interchange Technical Report Type 3, October 2007, ASC X12N/
005010X224A1 (both incorporated by reference in Sec.  162.920).
    (3) Professional health care claims. The ASC X12 Standards for 
Electronic Data Interchange Technical Report Type 3--Health Care Claim: 
Professional (837), May 2006, ASC X12N/005010X222 (incorporated by 
reference in Sec.  162.920).
    (4) Institutional health care claims. The ASC X12 Standards for 
Electronic Data Interchange Technical Report Type 3--Health Care Claim: 
Institutional (837), May 2006, ASC X12N/005010X223, and Type 1 Errata 
to Health Care Claim: Institutional (837) ASC X12 Standards for 
Electronic Data Interchange Technical Report Type 3, October 2007, ASC 
X12N/005010X223A1 (incorporated by reference in Sec.  162.920).
    (f) For the period on and after February 11, 2028, the standards 
identified in paragraph (e)(2) of this section.

0
7. Section 162.1902 is revised to read as follows:


Sec.  162.1902  Standard for Medicaid pharmacy subrogation transaction.

    The Secretary adopts the following standards for the Medicaid 
pharmacy subrogation transaction:
    (a) For the period from January 1, 2012 through August 11, 2027--
The NCPDP Batch Standard Medicaid Subrogation Implementation Guide, 
Version 3.0, July 2007 (incorporated by reference at Sec.  162.920).
    (b) For the period from August 11, 2027 through February 11, 2028--
    (1) The standards identified in paragraph (a) of this section; and
    (2) The NCPDP Subrogation Implementation Guide for Batch Standard, 
Version 10, September 2019 (incorporated by reference at Sec.  
162.920).
    (c) For the period on and after February 11, 2028, the standard 
identified in paragraph (b) of this section.

Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2024-29138 Filed 12-12-24; 8:45 am]
BILLING CODE 4150-28-P