Rule: Medicare Program: Policy and Technical Changes To The Medicare Presciption Drug Benefit

Tuesday,
April 15, 2008
Part III
Department of
Health and Human
Services
Centers for Medicare & Medicaid Services
42 CFR Part 423

Medicare Program; Policy and Technical
Changes to the Medicare Prescription
Drug Benefit; Final Rule
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20486 Federal Register / Vol. 73, No. 73 / Tuesday, April 15, 2008 / Rules and Regulations
DEPARTMENT OF HEALTH AND as Medicare Part D), including the guidance on aggregating plan options for
HUMAN SERVICES following: guidance that certain purposes of meeting the net test for
supplies associated with the actuarial equivalence and guidance on
Centers for Medicare & Medicaid administration of insulin are included applying the Medicare supplemental
Services in the definition of a Part D drug; adjustment when calculating actuarial
guidance regarding the statutory equivalence.
42 CFR Part 423 exclusion from the definition of a Part In addition, new clarifications and
[CMS–4130–F] D drug of any drug when used for the modifications in this final rule include
treatment of sexual or erectile establishing standards with respect to
RIN 0938–AO74 dysfunction, unless that drug is used for the timely delivery of infusible drugs
an FDA-approved purpose other than covered under Part D and modifications
Medicare Program; Policy and sexual or erectile dysfunction; a recent
Technical Changes to the Medicare to the retiree drug subsidy regulations.
statutory change that allows for the This final rule also codifies certain
Prescription Drug Benefit payment of vaccine administration technical corrections to our regulations
AGENCY: Centers for Medicare & under Part D for Part D covered and clarifies our intent with respect to
Medicaid Services (CMS), HHS. vaccines; and guidance on plan-to-plan certain preamble discussions in a prior
ACTION: Final rule. reconciliation and reconciliation with a final rule implementing the Medicare
payer other than the Part D plan of prescription drug benefit.
SUMMARY: This final rule codifies record. This final rule also codifies
clarifications of existing policies clarifications of existing policies EFFECTIVE DATES: These regulations are
associated with the Medicare associated with the Retiree Drug effective on June 9, 2008.
Prescription Drug Benefit (also known Subsidy (RDS) program, including FOR FURTHER INFORMATION CONTACT:
Alissa DeBoy (410) 786–6041 ............................ General questions regarding the final rule.
Vanessa Duran (410) 786–8697 ........................ Subpart B—approval of marketing and materials and enrollment forms; procedures to deter-
mine and document creditable status of prescription drug coverage; Subpart C—the defini-
tion of a long-term care facility; the definition of a contracted pharmacy network; the waiver
or reduction of Part D cost-sharing by pharmacies; access to covered Part D drugs, includ-
ing adequate access to home infusion pharmacies; Subpart E—organization compliance
with State law and preemption by Federal law; and Subpart K—application procedures and
contracts with Part D plan sponsors.
Gregory Dill (312) 353–1754 .............................. Subpart C—definition of a Part D drug, including the exclusion of drugs used to treat erectile
dysfunction, the exclusion of drugs related to morbid obesity, supplies associated with the
delivery of insulin into the body, and vaccine administration fees.
Meghan Elrington (410) 786–8675 ..................... Subpart F—timing of payments.
Deondra Moseley (410) 786–4577 ..................... Subpart G—payment appeals; and Subpart P—low-income benchmark premium amount, and
premium subsidy for late enrollment penalty.
Deborah Larwood (410) 786–9500 .................... Subpart J—coordination of Part D plans with other prescription drug coverage.
John Scott (410) 786–3636 ................................ Subpart M—grievances, coverage determinations, and appeals.
Christine Hinds (410) 786–4578 ......................... Subpart P—premiums and cost-sharing subsidies for low-income individuals.
David Mlawsky (410) 786–6851 ......................... Subpart R—payments to sponsors of retiree prescription drug plans.
Christine Hinds (410) 786–4578 ......................... Subpart S—special rules for States.
SUPPLEMENTARY INFORMATION: service of the U.S. Government Printing 2. Requirements Related to Qualified
Copies: To order copies of the Federal Office. The Web site address is http:// Prescription Drug Coverage (§ 423.104)—
Register containing this document, send www.access.gpo.gov/fr/. Waiver or Reduction of Part D Cost-
your request to: New Orders, sharing by Pharmacies
Table of Contents 3. Access to Covered Part D Drugs
Superintendent of Documents, P.O. Box (§ 423.120)
371954, Pittsburgh, PA 15250–7954. I. Background
A. Requirements for Issuance of a. Applicability of Some Non-Retail
Specify the date of the issue requested Pharmacies to Standards for Convenient
and enclose a check or money order Regulations
Access
B. General Overview
payable to the Superintendent of b. Adequate Access to Home Infusion
II. Provisions of the Proposed Rule With an Pharmacies
Documents, or enclose your Visa or Analysis and Response to Public
Master Card number and expiration C. Subpart F—Submission of Bids and
Comments Monthly Beneficiary Premiums: Plan
date. Credit card orders can also be A. Subpart B—Eligibility and Enrollment Approval—Timing of Payments
placed by calling the order desk at (202) 1. Approval of Marketing Materials and (§ 423.293(a))
512–1800 (or toll free at 1–888–293– Enrollment Forms (§ 423.50) D. Subpart G—Payments to Part D Plan
6498) or by faxing to (202) 512–2250. 2. Procedures To Determine Creditable Sponsors for Qualified Prescription Drug
The cost for each copy is $10. As an Status of Prescription Drug Coverage Coverage: Payment Appeals
alternative, you can view and (§ 423.56) (§ 423.350(b))
photocopy the Federal Register B. Subpart C—Benefits and Beneficiary E. Subpart I—Organization Compliance
document at most libraries designated Protections With State Law and Preemption by
as Federal Depository Libraries and at 1. Definitions (§ 423.100) Federal Law—Waiver of Certain
a. Part D Drug Requirements to Expand Choice
many other public and academic (1) Erectile Dysfunction (ED) (§ 423.410)
libraries throughout the country that (2) Morbid Obesity F. Subpart J—Coordination of Part D With
receive the Federal Register. This (3) Insulin Inhalation Drugs and Supplies Other Prescription Drug Coverage
Federal Register document is also (4) Vaccine Administration Fee 1. Application of Part D Rules to Certain
available from the Federal Register b. Long-Term Care Facilities Part D Plans on and After January 1,
online database through GPO Access, a c. Contracted Pharmacy Network 2006 (§ 423.458)
Federal Register / Vol. 73, No. 73 / Tuesday, April 15, 2008 / Rules and Regulations 20487
2. Coordination of Benefits With Other regulations based on the previous comments on the May 2007 proposed
Providers of Prescription Drug Coverage publication of a Medicare proposed or rule. Commenters included health plans
§ (§ 423.464) interim final regulation. Section and health plan associations,
a. Coordination of Benefits With Rural 1871(a)(3)(B) of the Act also states that
Health Clinics pharmacies and pharmacist
b. Coordination of Benefits With Part D the timelines for these regulations may associations, prescription benefit
Plans and Other Payers vary, but shall not exceed 3 years after managers (PBMs), physicians and other
G. Subpart K—Application of Procedures publication of the preceding proposed health care professionals, beneficiary
and Contracts with Part D Plan Sponsors or interim final regulation, except under advocacy groups, representatives of
1. General Provisions (§ 423.504)— exceptional circumstances. This final hospitals, Part D beneficiaries, and
Submission of Bids rule finalizes provisions set forth in the
2. Contract Provisions (§ 423.505) others.
May 25, 2007 proposed rule (72 FR
3. Failure To Comply With the 29403), hereinafter referred to as the In this final rule, we address all
Dissemination of Information May 2007 proposed rule. In addition, relevant comments we received
Requirements Grounds for Contract regarding the provisions of our
Termination (§ 423.509(a)(9))
this final rule has been published
H. Subpart M—Grievances, Coverage within the 3-year time limit imposed by proposed rule with the exception of the
Determinations, and Appeals section 1871(a)(3)(B) of the Act. provisions on what may be included in
1. Definitions (§ 423.560) Therefore, we believe our final rule is in the drug costs Part D sponsors use as the
2. Expediting Certain Coverage accordance with the Congress’ intent to basis for calculating beneficiary cost
Determinations (§ 423.570) ensure timely publication of final sharing and reporting drug costs to CMS
3. Expediting Certain Redeterminations regulations. for the purposes of reinsurance
(§ 423.584) reconciliation and risk sharing, as well
4. Right to an ALJ Hearing (§ 423.610) B. General Overview
I. Subpart P—Premiums and Cost-Sharing as submitting bids to CMS. We are not
The Medicare Prescription Drug finalizing these provisions at this time.
Subsidies for Low-Income Individuals Benefit (also known as Part D) is a
1. Premium Subsidy Amount (§ 423.780) We intend to revisit this issue in future
voluntary prescription drug benefit
a. Low-Income Benchmark Premium rulemaking and will address the
Amount
program enacted into law on December
8, 2003 in section 101 of title I of the comments at that time. We appreciate
b. Premium Subsidy for Late Enrollment the comments and will take them under
Penalty MMA. The Retiree Drug Subsidy (RDS)
program, which provides payments to consideration as we continue to assess
J. Subpart R—Payments to Sponsors of
Retiree Prescription Drug Plans employer and union sponsors of the underlying policy and its associated
1. Requirements for Qualified Retiree qualified retiree prescription drug plans impact.
Prescription Drug Plans (§ 423.884) for Part D drug costs within certain Most of the comments addressed
a. Application Timing limits, was also enacted as part of MMA. multiple issues. The areas of our
b. Data Match The final rule implementing the proposed rule that we are finalizing that
c. Actuarial Equivalence
provisions of Part D appeared in the received the most comment include the
(1) Medicare Supplemental Adjustment
(2) Noncalendar Year Plans
Federal Register on January 28, 2005, provisions on ensuring adequate access
(3) Benefit Options and these provisions became effective to home infusion pharmacies and the
(4) Submission of Actuarial Attestations March 22, 2005. We hereinafter refer to provisions addressing the coordination
Upon Material Change this rule as the January 2005 final rule. of Part D plans with other prescription
K. Subpart S—Special Rules for States Since publication of the January 2005 drug coverage. Generally, the vast
Eligibility final rule, we have issued several majority of commenters expressed
1. General Payment Provisions— clarifications or interpretations of the
Coordination With Medicare strong support for the provisions of our
final rule by way of interpretive
Prescription Drug Benefits (§ 423.906) proposed rule, declaring them essential
guidance documents. In addition, we
2. States’ Contribution to Drug Benefit to the success and continued operation
have issued guidance explaining how
Costs Assumed by Medicare (§ 423.910) of the Medicare Part D program. This
L. Out-of-Scope Comments we will interpret a change to the Act
that excludes drugs used in the was especially true with regard to our
III. Collection of Information Requirements proposal to establish a standard for the
IV. Regulatory Impact Analysis treatment of erectile dysfunction from
A. Overall Impact Part D, with a certain exception. In timely delivery of home infusion drugs.
B. Anticipated Effects on Health Plans and order to ensure public awareness of our A significant subset of the comments
Pharmacy Benefit Managers (PBMs) policies, as well as to avoid potential regarding home infusion access
C. Alternatives Considered confusion regarding them, we explained suggested even more rigorous standards
D. Accounting Statement many of the respective clarifications or for ensuring the timely delivery of Part
E. Conclusion D infusible drugs.
interpretations in the May 2007
Regulations Text
proposed rule. We also proposed to We also received a significant number
I. Background codify some of these clarifications in of comments that addressed our
regulation, as well as to make certain proposed clarifications on permissible
A. Requirements for Issuance of
technical corrections. Finally, due to activities vis-à-vis provider marketing
Regulations
our experience to date in implementing and the coverage of drugs when used to
Section 902 of the Medicare the Part D program, we proposed several treat morbid obesity. In general,
Prescription Drug, Improvement, and new clarifications of our policy for Part commenters supported our clarifications
Modernization Act of 2003 (MMA) (Pub. D plans on which we specifically or technical corrections. However, on
L. 108–173) amended section 1871(a)(3) invited public comment. some issues, commenters asked for
of the Social Security Act (the Act) and

requires the Secretary, in consultation II. Provisions of the Proposed Rule reinterpretations of the statute.
with the Director of the Office of With an Analysis of and Response to In this final rule, we address
Management and Budget, to establish Public Comments comments received on the May 2007
and publish timelines for the We received approximately 60 items proposed rule largely in the numerical
publication of Medicare final of timely correspondence containing order of the related regulation sections.
A. Subpart B—Eligibility and potential enrollee towards a specific 125). In this final rule, we codify this
Enrollment plan or limited number of plans policy by revising § 423.50(f)(1)(v).
(Medicare Marketing Guidelines, page Comment: A large number of
1. Approval of Marketing Materials and commenters supported our clarification
Enrollment Forms (§ 423.50) 6). Thus, our intent in the preamble of
the January 2005 final rule was to that providers and pharmacies that are
In our May 2007 proposed rule (70 FR acknowledge that providers and contracted with plan sponsors may not
4223), we clarified that when we used pharmacies are free to engage in either market to beneficiaries but may assist in
the term ‘‘market’’ in the preamble to ‘‘assisting in enrollment’’ or enrollment, including participating in
the January 2005 final rule in the ‘‘education,’’ including provider provider promotion activities within the
context of our discussion of the promotional activities as permitted parameters established in the Marketing
approval process for marketing Guidelines, and educate enrollees.
under the Medicare Marketing
materials and enrollment forms, we However, two commenters believed that
Guidelines, but not to ‘‘market’’ to
used it in a more general sense to mean CMS should withdraw this clarification
beneficiaries, as the term is defined in
assisting in enrollment or education given that it is based on a term we use
directed at beneficiaries, and not the Medicare Marketing Guidelines. We
in the Medicare Marketing Guidelines,
marketing per se as the term is maintain this clarification in the final
which is not a regulatory document.
understood to mean in the commercial rule, as noted in our response to
Further, these commenters questioned
context. This clarification was necessary comment. the validity and utility of the Medicare
to distinguish our preamble discussion Additionally, we proposed to clarify Marketing Guidelines in the long-term
and our narrower definition of the term the provision that currently states that care setting.
‘‘marketing’’ in the Medicare Marketing in conducting marketing activities, a Response: The two commenters who
Guidelines, which were issued Part D plan may not ‘‘[u]se providers, asked us to withdraw this clarification
subsequent to our publication of that provider groups, or pharmacies to did so based on arguments about the
final rule. (See Centers for Medicare & distribute printed information validity of the Medicare Marketing
Medicaid Services, Medicare Marketing comparing the benefits of different Part Guidelines, which we believe are
Guidelines for Medicare Advantage D plans unless the providers, provider outside the scope of this regulation. In
Plans (MAs); Medicare Advantage groups or pharmacies accept and the proposed rule and in this final rule,
Prescription Drug Plans (MA–PDs); display materials from all Part D plan we are merely clarifying our policy so
Prescription Drug Plans (PDPs); 1876 sponsors (70 FR 4532).’’ We believed it as to avoid any confusion arising from
Cost Plans http://www.cms.hhs.gov/ was necessary to clarify this provision the broader use of the term ‘‘market’’ in
PrescriptionDrugCovContra/Downloads/ because it was possible to infer from it a response to comment in the January
FinalMarketingGuidelines.pdf (last that when a Part D plan used providers, 2005 final rule.
updated July 25, 2006).) The Guidelines provider groups, or pharmacies to Comment: Several commenters
define ‘‘marketing’’ as ‘‘[s]teering, or distribute printed information supported our proposed revision to
attempting to steer, an undecided comparing the benefits of the Part D § 423.50(f)(1) allowing Part D plans to
potential enrollee towards a plan, or plans with which they contracted, they use providers, provider groups and
limited number of plans, and for which pharmacies to distribute printed
would also have to accept and display
the individual or entity performing information comparing the benefits of
printed information comparing the
marketing activities expects different plans only if those providers,
benefits of different plans with which
compensation directly or indirectly provider groups or pharmacies accept
they did not contract. Our concern was
from the plan for such marketing and display materials from all Part D
that this interpretation could lead to plan sponsors with which they contract.
activities.’’ (Medicare Marketing
situations in which a beneficiary made Two of these commenters were
Guidelines, page 8.) This definition
a plan selection and realized too late especially pleased with our clarification
further clarifies that neither ‘‘[a]ssisting
in enrollment’’ nor ‘‘education’’ that the provider or pharmacist from that providers, provider groups, or
constitute ‘‘marketing’’ as those terms whom they obtained printed pharmacies are not obliged to accept
are defined in The Guidelines (Medicare information about a particular plan was and display any comparative
Marketing Guidelines, page 8). The not in fact contracted with that plan. information regarding those Part D plans
Medicare Marketing Guidelines specify Therefore, in the proposed rule, we with which they do not contract.
that ‘‘assisting in enrollment’’ consists clarified that a Part D plan could use However, another commenter believed
of assisting a potential enrollee with the providers, provider groups, or that instead of requiring providers to
completion of an application and pharmacies to distribute printed accept and display information for every
objectively discussing characteristics of information comparing the benefits of plan with which they have contracted,
different plans to assist a potential different Part D plans, provided those we should allow them to accept and
enrollee with appraising the relative providers, provider groups, or display materials from a reasonable
merits of all available individual plans, pharmacies accepted and displayed cross-section of contracted plans, as
based solely on the potential enrollee’s printed information comparing the long as the provider posts a notice
needs; further, the individual or entity benefits of all the different Part D plans informing beneficiaries that the
performing these activities may not with which they contract. However, the displayed material describes the
receive compensation directly or providers, provider groups, or benefits of only a subset of contracted
indirectly from a plan for such pharmacies were not obliged to accept plans and explains where beneficiaries
assistance in enrollment (Medicare and display any comparative may obtain information on the full array
Marketing Guidelines, page 6). information regarding those Part D plans of benefits available to them.
‘‘Education’’ is defined in the Medicare with which they did not contract. We Response: Our goal is to ensure that
Marketing Guidelines as informing a stipulated that this clarification would beneficiaries receive the information
potential enrollee about Medicare apply to comparative marketing they need to make a plan selection that
Advantage or other Medicare programs, materials and was in accord with the is based on their particular needs. We
generally or specifically, but not Medicare Marketing Guidelines disagree with the commenter who
steering, or attempting to steer, a (Medicare Marketing Guidelines, page believes that we should allow Part D
plan contracted providers, provider as Part D drugs under § 423.100 when the Act, the drug could be covered for
groups, and pharmacies to accept and they are used for the treatment of sexual the treatment of morbid obesity (70 FR
display materials from only a subset of or erectile dysfunction, unless they are 4230). Both in the May 2007 proposed
plans with which they contract—even if used to treat a condition, other than rule and in this final rule, we clarify that
they direct beneficiaries to resources for sexual or erectile dysfunction, for which agents, when used for anorexia, weight
obtaining information on all plans. We the drug has been approved by the Food loss, or weight gain, are specifically
believe the proposed requirement and Drug Administration (FDA). We excluded from the definition of Part D
strikes a balance between allowing noted that ED drugs would also not drugs. A weight loss agent, even when
providers and pharmacies contracted meet the definition of a Part D drug for not used for cosmetic purposes, is still
with Part D plans to provide enrollment off-label uses that by definition are not ‘‘an agent used for anorexia, weight loss,
assistance and education, while approved by the FDA. This includes or weight gain’’ for purposes of the
ensuring that beneficiaries are provided non-FDA-approved uses—including the exclusion from the definition of Part D
with information about the full array of treatment of a condition other than drug.
plans with which that provider or sexual or erectile dysfunction contained Comment: We received several
pharmacy contracts—not on a limited in one of the compendia listed in comments asserting that the clarification
subset that may reflect the provider’s section 1927(g)(1)(B)(i) of the Act: we made in the proposed rule regarding
financial interest—and can make a plan American Hospital Formulary Service Part D coverage of drugs used to treat a
selection that best meets their needs. Drug Information, United States medically accepted indication of obesity
Accordingly, we have adopted the Pharmacopeia-Drug Information (or its was a reversal of current Part D coverage
revision to § 423.50(f)(1) as set forth in successor publications), and the policy.
the proposed rule. However, we note DRUGDEX Information System. Because Response: We disagree with these
that plans must provide contracted our definition of a Part D drug in commenters. The clarification in our
pharmacies with materials in order for § 423.100(2)(ii) excludes drugs which proposed rule did not expand or change
pharmacies to display their plan may be excluded under section our current policy regarding the
information along with any other 1927(d)(2) of the Act, we also noted that exclusion from the definition of Part D
materials received from other contracted no regulation text change is required to drugs or agents used for anorexia,
plans. implement this new statutory exclusion. weight loss, or weight gain. Our policy
Comment: One commenter asked that with regard to coverage of these drugs
2. Procedures To Determine and we share our interpretation of the has remained consistent since well
Document Creditable Status of statutory ED drug exclusion with our before the Part D benefit was
Prescription Drug Coverage (§ 423.56) independent review entity (IRE). implemented on January 1, 2006 and is
The regulation text of the January Response: Since October 20, 2005, we in accord with the statutory exclusion of
2005 final rule (70 FR 4532) contained have provided information about the ED such drugs from the definition of Part D
a typographical error in § 423.56(b)(6) drug exclusion in our outreach efforts to drug as provided in section 1860D–
that referenced § 423.205 for a definition beneficiaries, advocates, and our own 2(e)(2) of the Act. In the May 2007
of the term ‘‘Medicare supplemental contractors. Our guidance to Part D proposed rule, we simply clarified that
policy.’’ However, the proper reference sponsors on the ED drug exclusion was we had made an error in the preamble
for the definition of the term ‘‘Medicare included in Chapter 6 (‘‘Part D Drugs of the January 2005 final rule by
supplemental policy’’ is § 403.205. and Formulary Requirements’’) of our asserting that weight loss drugs could be
Therefore, we proposed revising the Prescription Drug Benefit Manual, potentially covered under the Part D
regulation text accordingly to state the which is posted on the CMS Web site at program as part of a Part D basic
correct reference—that is, § 403.205. We http://www.cms.hhs.gov/Prescription prescription drug benefit. As discussed
received no comments with regard to DrugCovContra/Downloads/PDBM in the May 2007 proposed rule, we
our proposed revision. Therefore, this Chap6FormularyReqrmts_03.09.07.pdf. corrected this error via guidance to Part
final rule adopts this revision without As a result of our efforts, we believe D sponsors and other stakeholders in
change. stakeholders are now well aware of this July 2005.
statutory change. Comment: A number of commenters
B. Subpart C—Benefits and Beneficiary
asserted that our interpretation of the
Protections (2) Morbid Obesity statutory exclusion of weight loss drugs
1. Definitions (§ 423.100) Section 423.100 defines the term was too narrow and that CMS was not
‘‘Part D drug’’ and excludes from that appropriately distinguishing ‘‘cosmetic’’
a. Part D Drug
definition ‘‘[d]rugs or classes of drugs, weight loss from those clinical
(1) Erectile Dysfunction (ED) or their medical uses, which may be circumstances in which drugs are being
On October 20, 2005, Congress excluded from coverage or otherwise specifically prescribed for an indication
amended section 1860D–2(e)(2)(A) of restricted under Medicaid under of obesity or significant weight
the Act to exclude erectile dysfunction sections 1927(d)(2) or (d)(3) of the Act, management. Other commenters
(ED) drugs from the statutory definition except for smoking cessation agents (70 maintained that Congress intended for
of a Part D drug. Section FR 4534).’’ In the corresponding reimbursement of weight loss drugs
1860D(2)(e)(2)(A) of the Act excludes preamble of the January 2005 final rule when they were used in the treatment
from the definition of Part D drugs those (70 FR 4228), we explained that this list of defined disease states; that given the
drugs or classes of drugs, or their of excluded drugs included agents when potential impact of obesity on American
medical uses, set forth under section used for anorexia, weight loss, or weight health care, as well as Medicare Part A
1927(d)(2) of the Act (other than gain and agents when used for cosmetic coverage of obesity treatments, drugs
subparagraph (E)). The ED drug purposes or hair growth. However, in when used to treat obesity should also
exclusion is cited in section response to comment, we had be covered under Part D; and that Part
1927(d)(2)(K) of the Act. erroneously asserted that to the extent D coverage of drugs used to treat obesity
In the May 2007 proposed rule, we that a drug was dispensed for a would be consistent with guidance and
reiterated that beginning January 1, ‘‘medically accepted indication’’ as decision-making about these drugs by
2007, ED drugs would not be classified described in section 1860D–2(e)(1) of other DHHS agencies (for example, the
National Institute of Health’s (NIH) prevent associated morbidity and approved for the U.S. market.
treatment guidelines regarding obesity mortality, the use of these products Additionally, we received comments
drugs and the Food and Drug cannot be excluded from Part D by indicating that there are insulin
Administration’s (FDA) approval of reference to section 1927(d)(2) of the products administered through routes
drugs indicated for the treatment of Act. A summary of similar potential other than injection in various stages of
obesity). exclusions and their associated research and FDA approval. As a result,
Response: Section 1860D–2(e)(2) of explanations can be found in Appendix we believe our policy on inhaled insulin
the Act specifically excludes from the B of Chapter 6 (Part D Drugs and is still necessary and sound.
definition of a Part D drug agents when Formulary Requirements of our Comment: Most commenters on this
used to treat anorexia, weight loss, or Prescription Drug Benefit Manual), issue supported our proposal to expand
weight gain. Therefore, drugs when which is posted on the CMS Web Site the definition of a Part D drug to cover
used to treat a medical indication of at http://www.cms.hhs.gov/Prescription those supplies directly associated with
morbid obesity are not considered Part DrugCovContra/Downloads/PDBM inhaled insulin. However, other
D drugs. While this statutory exclusion Chap6FormularyReqrmts_03.09.07.pdf. commenters opined that the proposed
may create an inconsistency with regard definition was too narrow and CMS
to treatment approaches for morbid (3) Insulin Inhalation Drugs and should broaden the definition of a Part
obesity under different parts of the Supplies D drug to encompass other potential
Medicare program, Part D coverage With the passage of the MMA, mechanisms or supplies used for
policy is based on completely distinct Congress included within the definition delivery of insulin into the body, such
statutory authority than Parts A and B. of ‘‘Part D drug’’ found in section as novel insulin dosage forms and
We note that similar to other drugs 1860D–2(e) of the Act ‘‘medical supplies delivery systems that are currently
contained in section 1927(d)(2) of the associated with the injection of insulin under review by the FDA. Some
Act that are excluded from the (as defined in regulations of the commenters noted developments in
definition of Part D drugs (other than Secretary).’’ In the January 2005 final diabetes treatment including new
over-the-counter drugs), those Part D rule, we interpreted the term ‘‘medical transdermal, intranasal and aerosolized
plans wishing to provide coverage of supplies associated with the injection of insulin delivery methods. These
weight loss agents may do so as a insulin’’ as comprising syringes, commenters held that by not broadening
supplemental benefit under enhanced needles, alcohol swabs, gauze, and the Part D drug definition to include
alternative coverage, consistent with insulin delivery devices not otherwise insulin delivery supplies that are
§ 423.104(f). covered by Part B, such as insulin pens, currently in the research and
Comment: A number of commenters pen supplies, and needle-free syringes. development pipeline, but which might
asked that CMS clearly state that the On January 27, 2006, the FDA approved someday be FDA-approved, CMS would
Part D exclusion of weight loss drugs the first-ever inhaled insulin product. be burdened with future rulemaking to
will not affect Part D coverage of drugs This inhaled medication is a dry modify the definition of a Part D drug
that may cause weight loss, but whose powder inhaler (‘‘DPI’’) that requires a when new FDA-approved products
primary indication is not for obesity. A patient to place a small amount of came to market. As a result, CMS might
few other commenters noted that our powdered insulin into a hand-held provide a competitive advantage to
exclusion of obesity drugs is chamber that permits inhalation of the manufacturers whose insulin-related
inconsistent with CMS policy regarding insulin into the lungs. Subsequent to the supplies are currently encompassed
Part D coverage of weight loss drugs FDA approval, we reviewed the issues within the definition of a Part D drug
under certain clinical situations (for surrounding inhaled insulin and over other manufacturers whose insulin
example, Part D and Medicaid coverage concluded it would be appropriate to supplies are also related to the direct
for drugs when used to treat cachexia or revise the definition of Part D drug to delivery of insulin into the body but
AIDS wasting). include certain supplies associated with would not be covered under Part D in
Response: Drugs that are excluded the delivery of inhaled insulin. We the absence of a further broadening of
from coverage under Part D when used proposed revising the definition of a the definition of a Part D drug under
as agents for certain conditions may be Part D drug under § 423.100 to include § 423.100.
considered covered when used to treat ‘‘[s]upplies that are directly associated Response: We agree that our proposed
other conditions not specifically with delivering insulin into the body rule too narrowly construed what
excluded by section 1927(d)(2) of the through inhalation, such as the constitutes medical supplies associated
Act, provided they otherwise meet the inhalation chamber used to deliver the with delivery of insulin into the body
requirements of section 1860D–2(e)(1) of insulin.’’ We also indicated that our for purposes of the definition of a Part
the Act and are not otherwise excluded proposed change to the definition of a D drug under § 423.100. Moreover, we
under section 1860D–2(e)(2)(B) of the Part D drug was crafted consistent with believe that Congress intended to ensure
Act. A Part D drug’s clinical side effect our intention to narrowly construe what diabetics’ access to insulin by providing
of weight loss would not permit its constitutes medical supplies associated for coverage of the medical supplies
exclusion via section 1927(d)(2) of the with the delivery of insulin into the directly associated with delivering
Act since the drug’s use was not body in order to avoid an inappropriate insulin into the body. In light of
prescribed for that purpose. expansion of the Part D benefit. Thus, continuing medical research and
We have previously stated that we do we stated in the preamble to our development of alternative mechanisms
not consider prescription drug products proposed rule that we would expect Part for insulin delivery, we believe it is
being used to treat AIDS wasting and D sponsors to apply drug utilization consistent with Congressional intent
cachexia as either agents used for management tools to ensure the that our definition of these supplies
weight gain or agents used for cosmetic appropriate use of these supplies. encompass all products that are directly
purposes. Given the clinical While we have learned since the associated with the delivery of insulin
complexities associated with AIDS publication of our May 2007 proposed into the body, including future potential
wasting and cachexia, and the rule that marketing of the first inhaled delivery mechanisms, and not limit
documented therapeutic action of these insulin product may be discontinued, coverage to supplies associated with the
drugs to work beyond weight gain and the fact remains that this product is still only two mechanisms of insulin
delivery (injection and inhalation) would expect Part D sponsors to apply beneficiary outreach materials with
available to diabetics today. drug utilization management tools to specific information on Part D vaccine
Consequently, we have removed our inhaled insulin supplies. These administration reimbursement,
reference to the specific route of commenters stated that the application including the addition of a section to
administration, ‘‘through inhalation,’’ in of such pharmacy based edits would the annual evidence of coverage (EOC)
the definition of a Part D drug at impede access to these inhaled insulin notice that was mailed to all currently
§ 423.100(i)(iv). Instead, our definition supplies for beneficiaries who are enrolled beneficiaries in advance of the
of a Part D drug will encompass appropriately qualified for this insulin 2008 Part D contract year. We have also
supplies that are directly associated delivery mechanism. Many of these incorporated information regarding Part
with delivering insulin into the body, same commenters stated that inhaled D vaccine administration into our
such as the inhalation chamber used to insulin supplies should be provided free provider programs and have conducted
deliver the insulin. We believe this of any utilization management tools to a number of national level outreach
modification will obviate the need for maximize use of this new therapy. programs addressing the availability of
continued future rulemaking to ensure Response: We remind these reimbursement under Part D for this
coverage of supplies that are directly commenters that all Part D sponsors, new benefit in 2008. We have generated
associated with delivery of insulin into with the exception of Medicare MedLearn Matters Articles on Part D
the body. In addition, we believe that Advantage private fee-for-service (PFFS) vaccines and vaccine administration for
our revised definition of the term Part plans, are required under § 423.153(b) to display on the CMS Web site (http://
D drug will level the playing field for establish reasonable and appropriate www.cms.hhs.gov/MLNMattersArticles/
the manufacturers of novel drug utilization management programs. downloads/SE0727.pdf). We have also
administration insulin supplies while As we stated in the May 2007 proposed issued guidance to Part D sponsors on
avoiding an inappropriate expansion of rule, sponsors should ensure the vaccine administration so they can
the Part D benefit to insulin-related appropriate and prudent use of all Part prepare for covering these services and
supplies in which the relationship to D drugs, including supplies associated address beneficiary questions. We plan
delivery into the body is more indirect. with the direct delivery of insulin into on continuing various tiers of
We have retained the example of the the body and the use of drug utilization communication on Part D vaccine
inhalation chamber in the definition of management tools, is appropriate to administration into 2008 and
a Part D drug under § 423.100 only as prevent inappropriate coverage and subsequent years.
an example of a product that is directly utilization of insulin-related supplies. In Comment: One commenter asked that
associated with the delivery of insulin general, inhaled insulin supplies have we monitor billing and payment for Part
into the body. either a specific life span based on the D vaccine administration over the next
Comment: A few commenters number of doses or actuations they several months to identify and resolve
suggested that we clarify that our deliver or, for more durable items, a issues that may arise with
proposed modification of the definition manufacturer’s recommended life span implementation of this new benefit
of a Part D drug excludes any insulin ranging from a few months to a year or under Part D.
delivery device covered under the Part more with proper cleaning and Response: We agree with this
B durable medical equipment benefit. maintenance. It is therefore appropriate comment. We intend to work very
Response: Paragraph (2)(i) of our for a sponsor to evaluate claims for closely with our Part D sponsors on
existing definition of a Part D drug inhaled insulin supplies that are resolving any issues that arise with
already excludes from Part D coverage submitted for a period less than their covering Part D vaccine administration
those drugs for which payment as so recommended life span or period of use. in 2008 and subsequent years. We have
prescribed and dispensed or developed a number of communication
administered to an individual is (4) Vaccine Administration Fee
channels to solicit feedback from
available for that individual under Part On December 20, 2006, the Tax Relief various stakeholders regarding the
A or Part B. We believe that further and Health Care Act of 2006 was signed ongoing implementation of this new
clarification of this exclusion is into law. Section 202(b) of that benefit, and we will take appropriate
unnecessary. legislation amended the definition of a actions to address any issues with our
Comment: We received comments Part D drug at section 1860D–2(e)(1)(B) Part D sponsors as they occur.
asking that CMS issue separate guidance of the Act to include a reference to Comment: One commenter
indicating whether any novel insulin- vaccine administration on or after specifically suggested that we amend
related product will be covered under January 1, 2008. In the May 2007 § 423.100 to add the following language
Part D. proposed rule (72 FR 29406) we to the definition of a Part D drug under
Response: We disagree that we should indicated that we would amend the paragraph (1)(v) of that definition: ‘‘and
issue product-specific Part D coverage definition of Part D drug to conform to for vaccine administration on or after
guidance for all new FDA approvals. the statutory change. Accordingly, in January 1, 2008, its administration.’’
Part D sponsors and their Pharmacy and this final rule, we have amended the Response: We agree with this
Therapeutics (P&T) Committees are definition of a Part D drug to include a comment. We are changing the
required to evaluate new FDA-approved reference to vaccine administration on definition of a Part D drug at § 423.100
products and make timely coverage or after January 1, 2008, consistent with to conform to the statutory change made
determinations that are consistent with the statute. by the Tax Relief and Health Care Act
the definition of a Part D drug under Comment: One commenter suggested of 2006 to section 1860D–2(e)(1)(b) of
§ 423.100. While we provide Part D we increase our outreach efforts the Act. Accordingly, we are modifying
sponsors with tools to assist sponsors regarding the availability of vaccine § 423.100 to include vaccine
with their reviews of new products, administration under Part D. administration for Part D-covered
coverage determinations are ultimately a Response: We agree with this vaccines on or after January 1, 2008.
Part D sponsor’s responsibility. comment and have employed a number
Comment: A number of commenters of methods to ensure that beneficiaries b. Long-Term Care Facilities
asked that we retract the statement we and providers are aware of this statutory In the January 2005 final rule (70 FR
made in our proposed rule that we change. We have updated our 4534), the term ‘‘long-term care facility’’
is defined in § 423.100 as a ‘‘skilled policy clarification but noted that there contract might be necessary to ensure
nursing facility as defined in section were significant practical implications. convenient access for the enrollees in
1819(a) of the Act, or a medical For example, plans might not receive question. This would particularly be the
institution or a nursing facility for notice that their members are IMD case if the facility’s contracted
which payment is made for an patients until after prescriptions have pharmacy makes a good faith effort to
institutionalized individual under been filled and claims are submitted. negotiate but the sponsor does not
section 1902(q)(1)(B) of the Act.’’ Both this and the fact that most of these quickly finalize a contract. We
However, in our corollary discussion of facilities use only in-house, State-run emphasize that plans will not be
that term in the preamble of the January pharmacies to fill prescriptions often compliant with our LTC convenient
2005 final rule (70 FR 4236), we prevent plans from anticipating the access standard if they do not provide
inadvertently omitted institutions for need for contracts with these access to covered Part D drugs via a LTC
mental disease (IMDs) from the list of institutional LTC pharmacies. Another pharmacy in their network for all of
facilities that meet the definition of a commenter echoed this statement, their enrollees who reside in LTC
long term care (LTC) facility. noting that Part D sponsors have facilities.
In the May 2007 proposed rule, we experienced difficulty contracting with We understand that there sometimes
clarified that the definition of an LTC certain LTC pharmacies. One may be issues associated with
facility would include an IMD that is a commenter asked us to clarify that we contracting with the in-house, and often
nursing facility or other medical would determine a Part D plan to be in State-run and operated, pharmacies that
institution (which is a term defined at compliance with our convenient access many ICFs/MR, IMDs, and LTC
42 CFR 4435.1009) and receives requirements if it limited itself to hospitals use to provide drugs and
Medicaid payment for its services to an pursuing contracts only with pharmacy services to their patients—for
institutionalized individual under institutional LTC pharmacies that example, multiple claim formats, post-
section 1902(q)(1)(B) of the Act. In other proactively sought inclusion in a plan’s consumption billing, and potential
words, to the extent that a nursing pharmacy network, consistent with the delays in billing due to systems and
facility or medical institution that is an ‘‘any willing pharmacy’’ requirement. other start-up issues—that could delay
IMD has as an inpatient any Another commenter asked us to clarify or complicate contracting negotiations.
institutionalized individual (which that plans would be considered In some States, licensing laws preclude
means any full benefit dual-eligible compliant with the convenient access facilities from obtaining prescription
individual for whom payment is made requirements even if they did not come drugs and LTC services for their
for IMD services under Medicaid to terms with an institutional LTC residents from anywhere but the
throughout a month, as provided in pharmacy, provided they made a good facility’s in-house pharmacy. Further,
section 1902(q)(1)(B) of the Act), that faith effort to contract. States may not be able to agree to certain
IMD will fall within the definition of a standard clauses in some LTC standard
LTC facility in § 423.100. Response: The fact that a Part D plan contracts because of constitutional and
We also clarified that as medical has met our LTC pharmacy network legal restraints on States. For example,
institutions, hospitals (including long- submission requirements as part of the contractual provisions that require
term care hospitals) that receive application approval process does not arbitration may be problematic for
payments under section 1902(q)(1)(B) of preclude it from continuing its States that are legally precluded from
the Act can meet the definition of an contracting efforts with LTC pharmacies going to arbitration. In these situations,
LTC facility. To the extent that as needed. In fact, continued contracting Part D plans should be prepared to
inpatients in these hospitals exhaust likely will be necessary in order for readily negotiate with States to address
their Part A inpatient days benefit, and plans to meet the convenient access these issues. To the extent that plan
payment is no longer available under standard articulated at § 423.120(a)(5). contracting efforts involve
Part A or Part B for drugs that would This is particularly true as plans communication with State-run and
otherwise meet the definition of a Part continue to identify LTC facilities and operated pharmacies, we have
D drug, such drugs are Part D drugs. LTC pharmacies, and as they examine consistently encouraged sponsors to
Consequently, we indicated that Part D their auto-enrollment assignments and coordinate their efforts through a single
sponsors must ensure that they provide incoming enrollments. To the extent point of contact at the State level. We
convenient access to network LTC that a beneficiary is enrolled in a plan provide lists of State contacts for IMDs
pharmacies (which, in the case of a that does not have a contract with a LTC and ICFs/MR on the CMS Web site at
hospital, is typically the hospital’s in- pharmacy that can serve the LTC facility http://www.cms.hhs.gov/
house pharmacy) for all of their in which he or she resides, the PrescriptionDrugCovContra/
enrollees who: (1) Need drugs for which appropriate action for a plan to take is 11_PartDContacts.asp#TopOfPage.
payment is no longer available under to contract with the facility’s contracted Comment: Several commenters
Part A or Part B and otherwise meet the LTC pharmacy or—if that pharmacy will supported our clarification that plans
definition of a Part D drug; and (2) are not sign a contract—with another LTC must provide convenient access to a
inpatients in a hospital where the pharmacy that can serve that facility. In LTC pharmacy to inpatients in hospitals
hospital is a ‘‘medical institution’’ some cases, a retroactive contract may who have exhausted their Part A
under section 1902(q)(1)(B) of the Act be necessary to ensure coverage for inpatient days benefit and whose drugs
and therefore would meet the Part D enrollees in a particular facility. For qualify as Part D drugs given that
definition of an LTC facility. example, if a Part D sponsor becomes coverage is not available under Part A
Comment: Several commenters aware that one or more of its enrollees or Part B. One commenter expressed
supported our clarification that an IMD resides in a LTC facility that is not concern that our policy clarification was
may meet our definition of a long-term serviced by one of its network LTC confusing and could create an
care facility and that, consequently, Part pharmacies and cannot immediately unintended expansion of the Part D
D plans must provide convenient access either identify a network LTC pharmacy benefit. This commenter urged CMS to
to a network long-term care pharmacy to that can serve this particular facility or provide more specific guidance,
the residents of such facilities. One negotiate a contract with the facility’s consistent with the Part D statutory and
commenter supported our proposed contracted LTC pharmacy, a retroactive regulatory framework, regarding the
circumstances under which Part D pharmacy that can serve the LTC facility group health plan, insurance or
coverage would be available to patients in which he or she resides, the otherwise, or a third party payment
who have exhausted their Part A appropriate action for a plan to take is arrangement, as those terms are defined
inpatient days and for whom Part B to contract with the facility’s contracted in § 423.100.
coverage is not available. pharmacy or—if that pharmacy will not In response to numerous requests for
Response: Section 1860D–2(e)(2)(B) of sign a contract—with another network clarification of our policy with regard to
the Act requires the exclusion of LTC pharmacy that can serve that waiver or reduction of Part D cost-
coverage under Part D of any drug for facility. In some cases, a retroactive sharing by network pharmacies,
which, as prescribed and dispensed or contract may be necessary to ensure particularly by safety-net pharmacies,
administered to an individual, payment coverage for enrollees in a particular we clarified in the proposed rule that
would be available under Parts A or B facility. Part D plans will not be although we will generally allow
of Medicare for that individual. In the compliant with our LTC convenient waivers or reductions of Part D cost-
preamble to January 2005 final rule, we access standard if they do not provide sharing by pharmacies to count as
clarified that this requirement meant access to covered Part D drugs via a LTC incurred costs, this will not be the case
that if payment could be available under pharmacy in their network for all of for pharmacies affiliated with entities
Part A or Part B to that individual for their enrollees who reside in LTC whose wrap-around coverage does not
such drug, then it would not be covered facilities. We will take appropriate count as an incurred cost. This includes
under Part D. This means that if an compliance action if LTC enrollees’ pharmacies operated by entities that are
individual could sign up for Parts A or access to covered Part D drugs is group health plans, insurance,
B, payment could be available under compromised due to the unavailability government-funded health programs, or
Part A or Part B, regardless of whether of a network LTC pharmacy. third party payment arrangements with
they actually enrolled. All individuals c. Contracted Pharmacy Network an obligation to pay for covered Part D
who are entitled to premium-free Part A drugs. As noted in our response to
Section 423.100 defines the
are eligible to enroll in Part B. All comments below, we maintain our
‘‘contracted pharmacy network’’ as
individuals who are entitled to Part B position in this final rule.
‘‘pharmacies,’’ including retail, mail-
only are almost never eligible for order, and institutional pharmacies, Comment: One commenter disagreed
premium-free Part A but are eligible to under contract with a Part D sponsor to with our proposed clarification
buy into Part A for a premium. provide covered Part D drugs at regarding the applicability to TrOOP of
Consequently, for all Part D eligible negotiated prices to Part D enrollees. In pharmacy waivers or reductions of Part
individuals, drugs covered under Parts the January 2005 final rule (70 FR 4535), D cost-sharing made by certain entities.
A and B are available if they choose to we made a technical error by This commenter believes that our
pay the appropriate premiums. inadvertently omitting clarifying clarification penalizes Part D sponsors
However, drugs provided in an language indicating that a pharmacy in that, as non-profit organizations, have
inpatient setting to an individual who a contracted pharmacy network must be historically and responsibly provided
has exhausted his or her lifetime licensed. We view this change as financial assistance (and now pharmacy
inpatient hospital benefit under Part A necessary in order to bring it in line waivers) to financially needy members
are not drugs that could be covered with our term ‘‘retail pharmacy’’ which as part of their mission. The commenter
under Part A for that individual. Unlike requires that a retail pharmacy be recommended that CMS either allow all
a beneficiary who, for example, chooses ‘‘licensed.’’ We proposed revising the or no pharmacy waived cost-sharing to
not to buy into Part B, there is no way definition of ‘‘contracted pharmacy count toward TrOOP, since every
for an individual who has exhausted his network’’ to state that a pharmacy pharmacy is affiliated with one or more
or her Part A inpatient stay benefit to participating in a contracted pharmacy Part D sponsors and any pharmacy
obtain coverage under Part A for his or network must be licensed. waiver can serve the economic interests
her drugs. Thus, once a Part D enrollee We received only one comment on of both the pharmacy and the sponsor.
exhausts his or her Part A inpatient days this clarification, which supported our The commenter believes it is preferable
benefit, any drugs that cannot be proposed revision. Accordingly, we are for CMS to develop standards under
covered under Part B are Part D drugs adopting the revised definition of which Part D sponsors could—through
provided they otherwise meet the ‘‘contracted pharmacy network’’ as set cost-sharing waivers granted by
definition of a Part D drug at § 423.100. forth in the proposed rule without affiliated network pharmacies—assist
The LTC convenient access standard is change. non-LIS eligible enrollees with a
implicated when these individuals demonstrated financial need and have
reside in hospitals that meet our 2. Requirements Related to Qualified that waived cost-sharing count toward
definition of a LTC facility. However, Prescription Drug Coverage TrOOP.
because we envision it will be rare (and (§ 423.104)—Waiver or Reduction of Response: We disagree with this
typically unforeseen) that an individual Part D Cost-Sharing by Pharmacies commenter’s recommendation. While
exhausts his or her inpatient Part A In the January 2005 final rule (70 FR we appreciate the fact that some Part D
hospital benefit and remains 4240), we stated that we would allow sponsors are non-profit entities with
hospitalized—and that the hospital waivers or reductions of cost-sharing by charitable missions, we note that a
meets the definition of a LTC facility— pharmacies to count as incurred costs. pharmacy owned and operated by an
we expect that the need to contract with However, our statement was limited to insurer is acting on behalf of an insurer.
hospital pharmacies to provide Part D pharmacies that are not also acting as Because a Part D drug costs paid or
drugs to these individuals will be quite other wrap-around coverage that reimbursed by an insurer, as that term
rare, and that contracting will be generally would not count toward is defined in § 423.100, cannot count as
undertaken only on an as-needed basis. incurred costs (or true-out-of-pocket, an incurred cost, per the definition of
As discussed elsewhere in this (TrOOP) costs). We did not intend to the term ‘‘incurred cost’’ in § 423.100,
preamble, to the extent that a allow pharmacy waivers to count as allowing pharmacy waivers funded by
beneficiary is enrolled in a plan that incurred costs in cases where a an insurer to count toward an enrollee’s
does not have a contract with a LTC pharmacy also meets the definition of a TrOOP balance would essentially be an
end run around our rules regarding tracking their enrollees’ TrOOP this prohibition simply because it is
incurred costs. expenditures. contracted with a Part D sponsor as a
Comment: Two commenters did not We view Medicare and Medicaid DSH network pharmacy. We note that any
support our policy clarification funds essentially as adjustments to the cost-sharing associated with non-Part D
regarding the applicability to TrOOP of Medicare and Medicaid reimbursements drugs covered under a supplemental
pharmacy waivers or reductions of Part these facilities already receive for benefit does not meet the definition of
D cost-sharing made by safety-net covered services. In other words, receipt an incurred cost per the definition of
pharmacies, including Federally- of Medicaid or Medicare DSH payments that term in § 423.100 and, therefore,
qualified health centers (FQHCs). Given by a hospital does not, in and of itself, any pharmacy waiver or reduction of
that many safety-net providers are fully render a DSH facility (and any Part D such cost-sharing would have no impact
or partially funded through government network pharmacy it owns or operates) on a beneficiary’s TrOOP balance in any
grants, their waivers or reductions of a ‘‘government-funded health program.’’ case.
cost-sharing may leave many low- Even though DSH funds are not
considered government funding streams 3. Access to Covered Part D Drugs
income individuals unable to reach the (§ 423.120)
catastrophic coverage portion of their that would render an entity a
Part D benefits. These commenters government-funded health program, a. Applicability of Some Non-Retail
assert that although safety-net providers DSH hospitals may be government- Pharmacies to Standards for Convenient
rely on a variety of revenue sources— funded health programs given other Access (§ 423.120(a)(2))
both public and private—to provide government funding streams they
receive. An entity that receives DSH In the January 2005 final rule (70 FR
health care services, unlike other 4537), we made a technical error in
programs identified as ‘‘government- funds but uses non-DSH government
funding streams to provide to or pay on § 423.120(a)(2) by inadvertently
funded health programs’’ in the referring to ‘‘rural health clinics’’ as
preamble to the January 2005 final rule, behalf of an individual the costs of Part
D drugs will still meet our definition of ‘‘rural health centers.’’ The correct
FQHCs do not necessarily use terminology for those facilities is ‘‘rural
government funds to pay the cost of Part a government-funded health program,
and any reduction or waiver of Part D health clinics.’’ Accordingly, we
D drugs and should not necessarily be proposed to revise the regulatory text to
categorized as government-funded cost-sharing that it offers will not count
toward a Part D enrollee’s TrOOP correctly reference these entities in
health programs. One of these § 423.120(a)(2) by removing the phrase
balance. The same logic applies to
commenters believes that recent ‘‘rural health centers’’ and adding in its
FQHC pharmacies, meaning that cost-
operational guidance released by CMS place ‘‘rural health clinics.’’ We
sharing waivers or reductions applied
indicating that DSH funds could count received no comments with regard to
by an FQHC or other safety-net provider
toward TrOOP further supports its this proposed revision. Therefore, this
pharmacy that uses government funding
position that health center-subsidized final rule adopts the proposed revision
streams to provide or pay on behalf of
cost-sharing should count toward to § 423.120(a)(2) without change.
an individual the costs of Part D drugs,
TrOOP. The commenter asserts that the
the costs of these drugs will not count b. Adequate Access to Home Infusion
receipt of any source of Federal funding
toward a beneficiary’s TrOOP balance. Pharmacies (§ 423.120(a)(4))
should not automatically result in Comment: One commenter asked us
excluding health center cost-sharing to clarify that only cost-sharing We proposed to codify in regulation,
from TrOOP expenditures. reductions that are in fact paid for by at § 423.120(a)(4) (70 FR 4537), guidance
Response: Payments made for Part D group health plans, government-funded that we issued with regard to access to
enrollees’ Part D cost-sharing by any health programs, or other third party home infusion pharmacies by Part D
entity—including an FQHC or other payment arrangements will not count sponsors subsequent to our publication
safety-net pharmacy—that has an toward ‘‘incurred costs’’ and that cost- of the January 2005 final rule. This
obligation to pay for covered Part D sharing waivers by a pharmacy, even if codification would ensure that our
drugs on behalf of Part D enrollees, or the pharmacy is affiliated with a payer, regulations provide specificity to the
which voluntarily elects to use public will count toward incurred costs. This requirement that Part D enrollees
funds, in whole or in part, for that commenter is particularly concerned receive adequate access to Part D-
purpose, will not count toward that that this language could be covered home infusion therapy. We
beneficiary’s TrOOP expenditures. We misconstrued to disallow waivers by specifically proposed to revise
understand that safety-net providers use pharmacies that are affiliated with Part § 423.120(a)(4) to expressly require that
a mix of private and public revenue D sponsors providing supplemental a Part D plan’s contracted pharmacy
sources to provide health care services benefits under enhanced alternative network provide adequate access to
and prescription drugs. As we stated in coverage. The commenter also stated home infusion pharmacies through a
the January 2005 final rule, to the extent that this prohibition should apply only contracted pharmacy network that, at a
that an entity pays for the cost of drugs if the reduction or waiver is part of the minimum: (1) Is capable of delivering
using a mix of private and public funds, coverage provided by a health plan or home infused drugs in a form that can
the entity is considered a government- other third party payment arrangement, be administered in a clinically
funded health program, and all of its and not a waiver funded by the appropriate fashion; (2) is capable of
Part D drug spending is excluded from affiliated pharmacy itself. providing infusible Part D drugs for both
TrOOP. However, if an entity can Response: As we have previously short-term acute care and long-term
demonstrate to a Part D sponsor that it stated, pharmacy waivers or reductions chronic care therapies; and (3) ensures
uses only non-public funds to pay for of Part D cost-sharing will count toward that the professional services and
the cost of Part D drugs, that sponsor TrOOP when the pharmacy waiving or ancillary supplies necessary for home
may allow for cost-sharing waivers or reducing the Part D cost-sharing does infusion therapy are in place before
reductions in cost-sharing paid for by not meet the definition of a group health dispensing home infusion drugs.
that entity’s pharmacies to count toward plan, insurance, government-funded In addition, we invited comments on
TrOOP. Part D sponsors remain health program, or party to a third party the specification of a reasonable
ultimately accountable for correctly payment. A pharmacy is not subject to timeframe for the timely delivery of
home infusion drugs under Part D. We fees at § 423.100, which does not with this requirement, their home
proposed a new requirement, at encompass professional services, infusion network pharmacies may seek
§ 423.120(a)(4)(iv) of the proposed rule, supplies, or equipment related to the and rely upon assurances from another
that Part D plan sponsors provide administration of home infusion drugs, entity (such as a home health agency,
covered home infusion drugs within 24- to bolster its argument that the DME supplier, or discharging hospital)
hours of discharge from an acute care professional services and ancillary that the supplies and services in
setting. Except as otherwise noted supplies are not Part D-covered and, as question have been arranged. Under our
below, this final rule adopts the such, outside the scope of benefits Part regulations at § 423.153(c), a Part D
requirements related to ensuring D sponsors are responsible for providing sponsor must have established quality
adequate home infusion access set forth or even coordinating. Instead, this assurance measures and systems to
in our proposed rule. Although the coordination should be the clinical reduce medication errors and adverse
requirement for the timely delivery of responsibility of those health care drug interactions, and to improve
home infusion drugs covered under Part providers—including hospitals, home medication use. We consider the follow-
D will be effective within 60 days of this health agencies, outpatient facilities, up to ensure that home infusion
final rule’s appearance in the Federal and physician offices—that are supplies and services are in place
Register, Part D sponsors will not be responsible for the implementation of essential to ensuring that home infused
expected to implement this provision continued care following a patient’s drugs are administered in a clinically
until January 1, 2009. discharge from an acute care setting. appropriate manner. Because this
Comment: A number of commenters Response: Although the Part D benefit follow-up improves the use of home
supported our proposal to codify in does not cover equipment, supplies, and infusion medications and facilitates
regulation how Part D sponsors were to professional services associated with home infusion therapy more generally,
ensure that enrollees have adequate home infusion therapy, it does cover the we believe it is a minimum quality
access to home infusion pharmacies. ingredient costs and dispensing fees assurance standard under § 423.153(c).
As specified in § 423.120(a)(4), we
Commenters specifically expressed associated with infused Part D drugs.
expect that Part D sponsors will meet
support for our proposals to codify We disagree with the position that,
the requirements for ensuring adequate
requirements that Part D plans ensure because coverage under the Part D
home infusion access through their
that their network pharmacies are benefit is limited to the ingredient cost
contracted home infusion pharmacies.
capable of delivering home infused and dispensing fees associated with a However, we clarify that, as provided in
drugs in a manner than can be Part D infusible drug, it is not within the § 423.505(i), Part D sponsors remain
administered in a clinically appropriate scope of a Part D sponsor’s ultimately responsible for compliance
fashion; provide infusible Part D drugs responsibilities (or its home infusion with all Part D requirements, even when
for both short-term and long-term network pharmacies’ responsibilities) to they delegate services or activities to a
chronic care therapies; and ensure that ensure that the items and services that contractor such as a network pharmacy,
the professional services and ancillary are necessary for providing home and that delegation of any of their Part
supplies necessary for home infusion infusion therapy are in place prior to D responsibilities must be consistent
therapy are in place before dispensing delivery of a home infusion drug. It is with the requirements of § 423.505(i)(4).
Part D home infusion drugs. However, poor clinical practice to simply deliver Coverage under the Part D benefit is
several other commenters requested a drug to an enrollee without assurances limited to the ingredient cost and
clarification regarding our proposed that these items and services— dispensing fees associated with a Part D
language at § 423.120(a)(4)(iii), which regardless of their source of coverage— infusible drug. Although the Part D
would require Part D plans to ensure have been arranged for prior to benefit does not cover equipment,
that their network pharmacies receive dispensing a Part D home infusion drug. supplies, and professional services
assurances that the professional services We clarify that neither Part D plans nor associated with home infusion therapy,
and ancillary supplies necessary for their network pharmacies must directly there are instances in which some of the
home infusion therapy be in place prior make arrangements for the provision of supplies and professional services can
to delivery of a Part D home infusion the components needed to safely be covered under Part A or Part B. If a
drug. Some of these commenters administer home infusion drugs (save Medicare beneficiary is under an active
recommended that we clarify that Part for delivery of the drug itself) prior to home health plan of care and is
D plans—and not their network an enrollee’s discharge from an acute receiving Medicare home health
pharmacies—are ultimately responsible care setting; generally, facility discharge services, the cost of some of the infusion
for ensuring this requirement is met. planners, in collaboration with a supplies (if the infusion is provided via
One commenter believed it was patient’s physician, are responsible for gravity feed method) and the
incumbent upon us to clarify that ensuring that those components have professional services are included in the
contracted pharmacies providing Part D been arranged for upon a patient’s Medicare home health 60-day episode
enrollees with home infusion drugs discharge. However, when plans’ home payment. A list of supplies consolidated
need not make arrangements for the infusion network pharmacies do not under the home health prospective
ancillary supplies and professional themselves supply the necessary payment system (HH PPS) is available
services themselves and that, instead, supplies and services (which, again, are on the CMS home health Web site at
could meet the requirement by seeking not covered under the Medicare Part D http://www.cms.hhs.gov/
and relying upon assurances from the benefit), the Part D sponsor through its HomeHealthPPS/
discharging entity that infusion therapy home infusion network pharmacy 03_coding&billing.asp#TopOfPage.
supplies and services had been delivering the infusible Part D drug Comment: We received a significant
arranged. Another commenter believed must, at a minimum, ensure that number of comments regarding our
that this proposed requirement fell another entity, such as a home health proposed requirement in
outside the scope of the responsibilities agency, DME supplier, or the § 423.120(a)(4)(iv) of the proposed rule
of both Part D sponsors and their discharging hospital, has arranged for that Part D plans provide covered home
contracted pharmacies. This commenter the provision of these supplies and infusion drugs within 24 hours of
pointed to the definition of dispensing services. In order for sponsors to comply discharge from an acute care setting.
Many commenters supported this acute care setting, and not by either the prepared, ready-to-use premixed
proposed new requirement. Two next required dose or within 24 hours formats or pharmacy filled single-use
commenters expressed concern that the of discharge. We believe our proposed infusion devices, as these formats
proposed requirement is unfair and timely delivery requirement struck a promote enhanced patient safety.
burdensome to the extent that it applies reasonable balance between ensuring Response: We agree that Part D
directly to the Part D plan itself. the timely delivery of drugs needed for sponsors should not implement
Because these commenters contend that home infusion therapy and ensuring coverage restrictions that unduly limit
our proposed requirement would result plan compliance with our standard. access to infusible Part D drugs. CMS,
in plans having to build costly reporting Because the timing of the next required
in conjunction with industry partners,
processes and protocols to ensure dose post-discharge will vary by
compliance by contracted pharmacies, has identified a list of acute care drugs
beneficiary and by drug, monitoring
they recommend that we clarify that that are most commonly utilized in the
compliance with a ‘‘next available dose’’
Part D sponsors will be in compliance home infusion setting. This list is
requirement would be very difficult. For
with this provision if they include a available as part of our formulary
this reason, we are maintaining our
requirement in their network pharmacy proposed requirement that plans guidance to Part D sponsors in Chapter
contracts that pharmacies provide provide delivery of home infusion drugs 6 of our Prescription Drug Benefit
covered home infusion drugs within the within 24 hours of discharge. However, Manual (see http://www.cms.hhs.gov/
timeframes established by CMS. we did find some merit to the point PrescriptionDrugCovContra/Downloads/
A number of other commenters raised by one commenter that the next PDBMChap6FormularyReqrmts_03.09.
recommended that CMS strengthen its required dose could be later than within 07.pdf). The use of these drugs or drug
proposed requirement such that plans 24 hours after discharge from an acute classes often results in an earlier
must provide covered home infusion care setting and that it would be unfair hospital discharge and reduced health
drugs by the next required dose because to penalize a plan that did not deliver care costs, and rapid access to these
patients that are discharged on home the necessary home infusion drug until agents is imperative to these health care
infusion therapy that is administered sometime after the 24 hours post- transitions. It is our expectation that
more frequently than at 24-hour discharge have elapsed, even if such Part D sponsors will not implement
intervals may not receive their drugs in delivery is consistent with the policies that could potentially delay or
a clinically acceptable timeframe. These prescription as written. For this reason, restrict beneficiary access to these
commenters believe that modification of our final rule modifies our proposed important agents. In general, should
this requirement would bring it in line requirement by requiring delivery prior authorization or other utilization
with industry best practices to make within 24 hours after discharge, unless management edits apply to any of these
infusion drugs available by either the the next required dose, as prescribed, is agents, we expect Part D sponsors to
next required dose or within 24 hours. required to be administered later than handle these edits in an expedited
Another commenter expressed concern 24 hours after discharge. Plans may manner in order to facilitate hospital
that the establishment of a 24-hour contractually delegate the responsibility discharge within appropriate
requirement is arbitrary and could for ensuring timely delivery of home timeframes. To the extent that we
create situations in which a contracted infusion drugs to their network receive complaints from plan enrollees
pharmacy is required to deliver pharmacies provided they meet the or providers indicating that this is not
products well in advance of the next requirements of § 423.505(i) regarding the case, we will investigate and follow-
scheduled dose. This commenter
relationships with pharmacies or other up with plans to ensure they are
recommended that we modify our
providers, related entities, contractors, complying with our requirements. We
proposed requirement such that plans
subcontractors, and first tier and note, as well, that we expect Part D
must ensure that the prescribed infusion
downstream entities. We also clarify plans to include multiple strengths and
drugs are delivered at the later of 24
that in order to comply with dosage forms, when available, for each
hours after discharge or the time the
§ 423.120(a)(4)(iv), a Part D plan or one drug included in each drug category or
product is required for the first post-
of its home infusion network class on their formularies. This includes
discharge dose. Finally, several
pharmacies must receive notification those dosage forms commonly used in
commenters asked us to clarify that the
from a facility discharge planner or a long term care and home infusion
provision of home infusion drugs within
24-hours of discharge from an acute care similar entity of an acute care discharge settings.
setting should be contingent on the and the need for home infusion therapy.
However, we do not believe that Part D Comment: One commenter
pharmacy being notified of the encouraged CMS to conduct a study on
discharge by the enrollee or acute care sponsors must build ‘‘costly reporting
processes and protocols’’ to comply Part D enrollees’ access to home
provider prior to the discharge. infusion drugs and their out-of-pocket
Response: We recognize that home with our requirement at
§ 423.120(a)(4)(iv). expenditures.
infusion therapy may serve as a vehicle
to promote early hospital discharge. Comment: Two commenters urged us Response: Access to home infusion
Although we have learned—in our to ensure that Part D sponsors do not drugs is important. We plan to continue
discussions with home infusion implement policies that could to assess the adequacy of home infusion
providers—that best practices involve potentially delay or restrict beneficiary pharmacy access based on an evaluation
the availability of infusion services access to home infusion therapies, such of plans’ home infusion pharmacy
upon discharge from an acute care as imposing prior authorization or networks. We also plan to aggressively
setting either by the next required dose utilization management edits on home respond to beneficiary and provider
complaints alleging compromised
or within 24 hours of the discharge, we infusion therapies, in order to facilitate

deliberately chose to phrase our a timely and efficient hospital access. As we continue to implement
proposed requirement at discharge. Another commenter asked us the Part D benefit, we will consider
§ 423.120(a)(4)(iv) such that home to instruct plans to make available other ways of monitoring access to
infusion drugs were to be provided through their network pharmacies home home infusion drugs to ensure it is
within 24 hours of discharge from an infusion drugs in manufacturer- adequate.
C. Subpart F—Submission of Bids and E. Subpart I—Organization Compliance reference facilities described in section
Monthly Beneficiary Premiums: Plan With State Law and Preemption by 1861(aa)(2) of the Act, and the correct
Approval—Timing of Payments Federal Law—Waiver of Certain terminology for those facilities is rural
(§ 423.293(a)) Requirements To Expand Choice health clinics. Accordingly, we
(§ 423.410) proposed to correct the reference to
We proposed a technical correction to In accordance with section 1860D– these entities in § 423.464(f)(1)(vii) by
§ 423.293(a) (70 FR 4546) to reflect the 12(c)(2)(B) of the Act, which describes removing the phrase rural health centers
statutory requirement that all the the special waivers available for the and adding in its place rural health
provisions of section 1854(d) of the Act 2006 and 2007 plan years, we proposed clinics. We did not receive any public
apply in the same manner as they apply to revise § 423.410(d) to correct an error. comments on our proposed correction to
under Part C of Title XVIII of the Act. We believe that the statute requires only § 423.464(f)(1)(vii) and are therefore
Section 1860D–13(c)(1) of the Act states a substantially complete (rather than a adopting the correction as proposed.
that, with two exceptions not fully complete) application to have been b. Coordination of Benefits With Part D
particularly relevant to this discussion, submitted to the applicable state in Plans and Other Payers
the provisions of ‘‘section 1854(d) shall order for an applicant to be granted the
We proposed to codify in § 423.464(f)
apply to PDP sponsors and premiums special waiver for 2006 and 2007.
guidance we have already issued to Part
(and any late enrollment penalty) under Therefore, we proposed to correct the
D sponsors addressing coordination of
this part in the same manner as they regulatory language to require that an
benefits requirements in cases that
apply to MA organizations and applicant submit a substantially
involve another Part D plan that is not
beneficiary premiums under part C, completed application to the state in
the correct Part D plan of record or
except that any reference to a Trust order for the applicant to be eligible for
another payer that has incorrectly paid
Fund is deemed for this purpose a the § 423.410(d) waiver. We received no
as primary for a covered Part D drug for
reference to the Medicare Prescription comments regarding our proposed
an enrolled beneficiary. In accordance
change. Therefore, this final rule adopts
Drug Account.’’ Section 1854(d)(1) of with sections 1860D–24(a)(1) and (b) of
the proposed revision to § 423.410(d)
the Act requires an organization to the Act, § 423.464(a) of the regulations
without change.
permit the payment of both basic and extends the coordination of benefits
supplemental premiums on a monthly F. Subpart J—Coordination of Part D requirements in section 1860D–23 of the
basis. This concept is reflected in the Plans With Other Prescription Drug Act applicable to Part D plans vis-à-vis
Part C regulations at § 422.262(e). In Coverage State Pharmaceutical Assistance
accordance with the statutory mandate, Programs (SPAPs) to other entities
1. Application of Part D Rules to Certain
we have already required plans to providing prescription drug coverage.
Part D Plans on and After January 1,
permit beneficiaries to pay their We proposed to clarify § 423.464(f)(1) to
2006 (§ 423.458)
premiums on a monthly basis. We state that included among the entities
We proposed to revise providing other prescription drug
proposed to make a technical correction § 423.458(d)(2)(ii) because we coverage with which Part D plans must
to § 423.293(a) to cite both § 422.262(f) inadvertently omitted a reference to coordinate are other Part D plans.
and § 422.262(e). We did not receive any section 1894 of the Act in describing the Although Part D plans are already
comments on the proposed changes to statutory authority for the benefits obligated to coordinate with group
§ 423.293(a) and therefore adopt the offered by a Program of All Inclusive health plans, as provided in
changes as final without modification. Care for the Elderly (PACE) § 423.464(f)(1)(ii), we believed this
organization. As published in the revision formalizes our implicit
D. Subpart G—Payments to Part D Plan
January 2005 final rule (70 FR 4552), recognition of other Part D plans as
Sponsors for Qualified Prescription § 423.458(d)(2)(ii) referenced only
Drug Coverage: Payment Appeals other entities providing prescription
section 1934 of the Act when describing drug coverage with which a
(§ 423.350(b)) benefits provided by PACE beneficiary’s correct Part D plan of
In the January 2005 final rule (70 FR organizations. In fact, PACE operates record must coordinate.
4550), we made a technical error in under both the Medicare and Medicaid We also proposed to amend
statutes, and all descriptions to PACE § 423.464(f) by adding a fifth paragraph
§ 423.350(b). In this paragraph, we
benefits should refer to both sections that clarifies that Part D plans
inadvertently used the phrase ‘‘notice of
1894 and 1934 of the Act. We therefore coordinate benefits with other Part D
the adverse determination’’ when we
proposed to revise § 423.458(d)(2)(ii) so plans through the reconciliation process
said that the request for reconsideration that it refers to benefits offered by a we have developed for 2006, which
for a payment determination must be PACE organization under both sections involves making payments to other Part
filed within 15 days from the date of the 1894 and 1934 of the Act. We received D plans on the basis of the covered plan-
notice of the adverse determination. The no comments on our proposed revision paid and low-income cost-sharing
term ‘‘notice of the adverse to § 423.458(d)(2)(ii) and are therefore subsidy amounts reported to them by
determination’’ is not relevant here. We adopting it as proposed. CMS with respect to transferred
proposed to revise the regulation text to enrollees. Payments made by the Part D
instead cite to the notice of final 2. Coordination of Benefits With Other
Providers of Prescription Drug Coverage plans as part of this reconciliation
payment for risk adjustment, process would be made without regard
reinsurance, low-income cost sharing (§ 423.464)
to the plan’s formulary or drug
subsidies, or risk-sharing payments a. Coordination of Benefits With Rural utilization review edits.
under §§ 423.343(b), 423.343(c), Health Clinics
In addition, we proposed modifying

423.343(d) or 423.336, respectively. We In the January 2005 final rule (70 FR § 423.464(f) by adding a sixth paragraph
did not receive any comments on the 4553), we made a technical error in that would require Part D sponsors to
proposed changes to § 423.350(b), and § 423.464(f)(1)(vii) by inadvertently coordinate benefits on a timely basis
therefore, adopt the changes as final referring to rural health clinics as rural with other third parties and use CMS-
without modification. health centers. In fact, our intent was to developed reconciliation processes,
when established, in situations in which Comment: Another commenter agreed the most narrow and rudimentary of
a payer other than the correct Part D with our proposed clarification, but information concerning the bidding
plan of record pays for covered Part D recommended that CMS require that process, our intent was to cite in its
drug costs as a primary payer. Except as reconciliation processes with non-Part D entirety the much broader list found
otherwise provided below, the final rule sponsors include the submission of under § 423.265 (Submission of bids
adopts the revisions to § 423.464(f) set claims-level data to the Part D plan and related information). Accordingly,
forth in our proposed rule. sponsors. The commenter notes that we proposed to correct the reference in
Comment: Many commenters claims-level data is required for the § 423.504(a) to cite all of § 423.265 (72
supported our proposed clarification accurate calculation of beneficiary true FR 29412). We received no comments
and codification of previously issued out-of-pocket costs, prescription drug regarding our proposed correction.
guidance on Part D plan sponsor event data reporting, and payment Therefore, the final rule adopts the
coordination of benefits with other reconciliation with CMS. revision to § 423.504 set forth in our
payers. Several commenters, in Response: While we appreciate the proposed rule.
expressing their support, noted the importance of claims-level data to
2. Contract Provisions (§ 423.505)
importance of the reconciliation reconciliation with non-Part D payers,
processes in avoiding pharmacy reversal we do not have the authority to regulate We proposed to correct the citation
and claims re-adjudication. One the activities of non-Part D payers. Also, for the False Claims Act in § 423.505.
commenter agreed with the proposed we do not believe it would be The correct reference to the False
codification, but requested that the appropriate to include the detail Claims Act is 31 U.S.C. 3729 et seq.
provision specifically address the recommended by the commenter when Accordingly, we proposed to correct the
reconciliation of inaccurate cost- it concerns as-yet-to-be developed CMS reference found under § 423.505 (h)(1)
sharing amounts withheld from reconciliation processes. by replacing 32 U.S.C. 3729 et seq. with
pharmacy payments by Part D plan Comment: Two commenters 31 U.S.C. 3729 et seq. (72 FR 29412). We
sponsors. expressed concern that the proposed received no comments regarding our
Response: We are pleased with the provision does not address the payment proposed correction. Therefore, the final
extent of the support expressed for the reconciliation process or adjustments rule adopts the revision to § 423.505
proposed changes. However, we believe for claims Part D plans receive after the (h)(1) set forth in our proposed rule.
the coordination of benefits (COB) coverage year. The commenters noted
3. Failure To Comply With the
provisions at section 1860D–24 of the that this non-point-of-sale claims
Dissemination of Information
Act do not permit expanding § 423.464 volume is not insignificant and
Requirements Grounds for Contract
to address the reconciliation of therefore recommended that CMS
Termination (§ 423.509(a)(9))
inaccurate cost sharing withheld from extend the periods of time for
pharmacy payments. The reconciliation submission of claims and data reporting In § 423.509(a)(9), we indicate that
process provision is specific to other so that these claims may be included in CMS may terminate a plan’s contract if
entities providing prescription drug the payment reconciliation process. the plan substantially fails to comply
coverage and the inclusion of Response: The established deadlines with the Part D marketing requirements
pharmacies would be inconsistent with for submission of claims and data (70 FR 4559). This provision cites the
section 1860D–24(b) of the Act. reporting are necessary in order to marketing requirements at § 423.128,
Paragraph (5) of this section of the Act ensure a timely payment reconciliation which is an incorrect citation. Section
extends the COB requirements to ‘‘other process. However, we understand and 423.128 deals with the dissemination of
health benefit plans or programs that appreciate the concern that some claims Part D plan information, not with plans’
provide coverage or financial assistance will not be available for submission marketing requirements, per se.
for the purchase or provision’’ of drugs; until after these deadlines, and Therefore, we proposed to revise the
it does not apply to providers holding therefore, will not be included in the regulation text, consistent with our
accounts receivables resulting from payment reconciliation process. Per original intent, to reflect that a plan
incorrect cost sharing or otherwise. § 423.346, we have discretion to reopen contract may be terminated if a plan
Further, the requested extension of and revise initial or reconsidered final sponsor substantially fails to comply
the reconciliation process to include Part D payment determinations. One of with the marketing requirements in
pharmacies cannot be construed as a the grounds for finding good cause to § 423.50 or the dissemination of Part D
logical extension of the proposed rule reopen a final payment determination is plan information requirements in
and therefore its inclusion would the furnishing of new and material § 423.128. (72 FR 29412). We received
violate the requirements of the evidence that was not readily available no comments regarding our proposed
Administrative Procedures Act at the time the final determination was correction. Therefore, the final rule
concerning adequate public notice. made. Thus, in cases where claims data adopts the revision to § 423.509(a)(9) as
Although we are not extending the becomes available after the submission proposed without change.
provision as requested, existing CMS deadlines which would have a material H. Subpart M—Grievances, Coverage
policy requires Part D plan sponsors to impact on the final Part D payments, we Determinations, and Appeals
pay for covered Part D drugs provided will determine whether a reopening of
during the retroactive enrollment the final Part D payments is appropriate. 1. Definitions (§ 423.560)
periods. We have clarified in our policy G. Subpart K—Application Procedures We proposed to make technical
issuances that this requirement includes and Contracts With Part D Plan changes to the definitions of ‘‘appointed
both out-of-network pharmacies holding Sponsors representative’’ and ‘‘projected value,’’
receivable balances for covered Part D and to add language to the definition of
drug costs, and network pharmacies 1. General Provisions (§ 423.504)— appointed representative indicating that
holding receivable balances for covered Submission of Bids an enrollee’s appointed representative
Part D drug claims incurred during a In § 423.504, we inadvertently made may request a grievance on the
beneficiary’s period of retroactive Part D reference to § 423.265(a)(1) rather than enrollee’s behalf. We also proposed to
enrollment. § 423.265. Section 423.265(a) gives only revise the definition of projected value
in § 423.560 to be consistent with the 2. Expediting Certain Coverage request for an expedited
definition of projected value provided Determinations (§ 423.570) redetermination. We did not receive any
in the preamble of the January 2005 We proposed to amend the regulation comments on the proposed change to
final rule (70 FR 4360) and in the text of § 423.570(d)(3) by requiring a § 423.584(b) and therefore adopt this
regulation text at § 423.610(b). Part D sponsor to deliver written notice change as final without modification.
Comment: We received a comment to an enrollee within 3 calendar days 4. Right to an ALJ Hearing (§ 423.610)
suggesting that we grant appointed after it denies a request to expedite a
representative status to long-term care We proposed revising the regulation
coverage determination. text of § 423.610(c)(2) by numbering the
(LTC) facility staff. Comment: We received one comment
Response: We agree with the three requirements listed under
suggesting that we require plans to § 423.610(c)(2) with (i), (ii), and (iii). We
commenter that LTC caregivers should deliver notice of a decision not to
be able to represent resident enrollees in did not receive any comments on the
expedite a coverage determination to a proposed change to § 423.610(c)(2) and
the Part D appeals process. However, dispensing pharmacy when an enrollee
the decision to have a representative is therefore adopt this change as final
is a resident of a LTC facility. without modification.
left with the enrollee, and we neither Response: We disagree with the
encourage nor discourage commenter. Section 423.570(d)(2) of the I. Subpart P—Premium and Cost-
representation. If a Part D enrollee regulations requires plan sponsors to Sharing Subsidies for Low-Income
chooses to appoint an LTC caregiver as deliver oral notice of a decision not to Individuals
his or her representative in the Part D expedite a coverage determination to the 1. Premium Subsidy Amount (§ 423.780)
appeals process, the current regulations enrollee (or the enrollee’s appointed
allow the enrollee to do so. representative) and the enrollee’s a. Low-Income Benchmark Premium
Comment: Another commenter asked prescribing physician. Section Amount
that the appointed representative policy 423.570(d)(3) requires the plan sponsor Section 1860D–14 of the Act requires
operate consistent with State family and to send an equivalent written notice, but us to subsidize the monthly beneficiary
surrogate laws. it does not indicate if the notice must be premium and cost-sharing amounts
Response: We agree with the sent to the enrollee (or the enrollee’s incurred under Part D by Part D eligible
commenter’s recommendation and appointed representative), the individuals with income and resources
believe that the regulations already prescribing physician, or both. Our below certain thresholds. Our rules
address the commenter’s suggestion. proposal simply corrects this omission. mirror the statute’s structure, which
Section 423.560 defines appointed The commenter’s recommendation to divides low-income subsidy eligible
representative as any person properly add a new party to the list of recipients individuals into two different groups,
appointed by an enrollee, or any person would create a new regulatory based on income and resources: (1) Full
authorized to act as an enrollee’s requirement that is not directly related subsidy eligible individuals (as defined
representative under a State or other to our proposed clarification. However, at § 423.772); and (2) other low-income
applicable law. Thus, both individuals it is worth noting that an employee of subsidy eligible individuals (as defined
appointed by enrollees and individuals a pharmacy could receive this and other at § 423.772). The different groups are
authorized under State or other notices if he or she were an enrollee’s entitled to different amounts of
applicable law may act on behalf of Part appointed representative. premium assistance and reductions in
D enrollees in obtaining coverage Comment: Another commenter cost sharing.
determinations or in dealing with any of recommended requiring plans to deliver As stated in the May 2007 proposed
the levels of the appeals process, subject notice of a decision not to expedite a rule, we became aware that certain
to the rules described in part 423, coverage determination both to the sections of part 423 subpart P need to
subpart M. enrollee and to his or her appointed be corrected to accurately reflect the
Comment: We received one comment representative, if one is on record. statutory language in section 1860D–14
recommending that we modify the Response: We do not agree with the of the Act. Specifically, in the January
definition of projected value in commenter’s suggestion. We require 2005 final rule (70 FR 4574) there is an
§ 423.610(b) to comply with the notices to be delivered to an enrollee or error in § 423.780(b), which sets forth
definition in § 423.560 instead of an enrollee’s appointed representative, the methodology for determining the
revising the definition of projected but not to both. If a representative is premium subsidy amount. In
value in § 423.560 to comply with the acting on behalf of an enrollee in the accordance with section 1860D–14(b)(1)
definition in § 423.610(b). Part D appeals process, he or she is of the Act, § 423.780(b)(1) of the
Response: We disagree with the standing in the shoes of the enrollee and regulation provides that the premium
commenter. As noted in the May 2007 must inform the enrollee of the status of subsidy amount for a full low-income
proposed rule, the definition of a coverage determination or appeal and subsidy eligible individual is equal to
projected value in § 423.560 is not the results of any actions taken on the lesser of— (1) the portion of his or
consistent with the definitions of behalf of the enrollee. It could be her plan’s monthly beneficiary premium
projected value in the January 2005 final confusing for an enrollee to receive a attributable to basic coverage; or (2) the
rule (70 FR 4360) and in § 423.610(b) of notice that is also sent to his or her greater of the low-income benchmark
the regulations. Both of those appointed representative since the premium amount or the lowest monthly
definitions limit projected value to enrollee is relying on that person to beneficiary premium for a PDP offering
benefits incurred within a plan year. resolve any issues related to his or her basic prescription drug coverage in the
Limiting projected value to benefits Part D appeal. PDP region where the individual
incurred within a plan year is consistent resides. The low-income benchmark

with sections of the regulation that limit 3. Expediting Certain Redeterminations premium amount, as defined in the
exception approvals to a plan year and (§ 423.584) statute at section 1860D–14 of the Act,
permit enrollees to switch plans at the We proposed to revise the regulation specifically describes how to calculate
beginning of each plan year. (See text of § 423.584(b) to include the the low-income subsidy for regions with
§ 423.38 and § 423.578(c).) procedures for filing and withdrawing a only one PDP sponsor. At section
1860D–14(b)(2)(A)(i) of the Act, the regions included multiple PDP an omission in the regulation text at
statute indicates that ‘‘the term ‘low- sponsors. § 423.780(e) related to the subsidy of
income benchmark premium amount’ We also proposed revisions to any late enrollment penalty imposed on
means, with respect to a PDP region in § 423.780(b)(2)(i)(B). Our proposed other low-income subsidy individuals.
which all prescription drug plans are change would make clear that in In this paragraph, we omitted a
offered by the same PDP sponsor, the multiple-PDP sponsor regions, the MA– provision from the statute at section
weighted average of the amounts PD plans included in the calculation of 1860D–14(a)(2)(A) of the Act, which
described in subparagraph (B)(i) for the low income benchmark weighted provides for a subsidy or any late
such plans.’’ However, while average are coordinated care plans, as enrollment penalty imposed on other
§ 423.780(b)(2)(i) accurately describes defined at § 422.4(a)(1)(iii). We did not low-income subsidy eligible
the low-income benchmark premium receive any comments on the proposed
individuals. Accordingly, we proposed
amount calculation for PDP regions with changes § 423.780(b)(1) and (2)(i).
multiple PDP sponsors, it omits the to revise § 423.780(e) to accurately
Therefore, we are adopting the changes
methodology for determining the low- reflect the statute. We proposed that this
to § 423.780(b)(1) as final without
income benchmark premium amount in modification. However, we are not subsidy would be based on a linear
a PDP region with any number of MA– finalizing the changes to sliding scale, with a higher subsidy
PD plans but only one PDP sponsor § 423.780(b)(2)(i) in this final rule; available to other low income subsidy
(although the preamble of the January rather, we have revised this provision in eligible individuals with incomes at or
2005 final rule correctly describes this the Modification to the Weighting below 135 percent of the Federal
methodology). We proposed to correct Methodology Used to Calculate the poverty line (FPL), and the lowest level
this error in the current rule to comport Low-income Benchmark Amount final subsidy available to other low income
with the statute and our intent as rule that published in the April 3, 2008 subsidy eligible individuals with
outlined in the preamble of the January Federal Register (73 FR 18176). incomes below 150 percent of the FPL.
2005 final rule by adding a new The table below illustrates the penalty
subparagraph (A) to § 423.780(b)(2)(i) to b. Premium Subsidy for Late Enrollment
Penalty subsidy available to other low income
correctly reflect the methodology for subsidy individuals.
situations where there is only one PDP We indicated in the May 2007
sponsor. We note that in 2006, all PDP proposed rule that we needed to correct
Percent of penalty Percent of penalty

subsidized during the subsidized after the
Income level first 60 months first 60 months
individual is subject to individual is subject to
penalty penalty
≤135% FPL ...................................................................................................................................... 80 100

>135% and ≤140% FPL .................................................................................................................. 60 75
>140% and ≤145% FPL .................................................................................................................. 40 50
>145% and <150% FPL .................................................................................................................. 20 25
≥150% FPL ...................................................................................................................................... 0 0
Comment: Commenters supported the Act) to implement the Medicare J. Subpart R—Payments to Sponsors of
proposed changes to calculation of the payment demonstration entitled Retiree Prescription Drug Plans
low-income premium subsidies for ‘‘Elimination of 2006 Late Enrollment
other low income subsidy eligible 1. Requirements for Qualified Retiree
Penalty.’’ Under this demonstration, as Prescription Drug Plans (§ 423.884)
individuals. However, they also amended in 2007, we will not collect
indicated that other low-income subsidy the late enrollment penalty from a. Application Timing
beneficiaries subject to the late individuals who receive a low-income
enrollment penalty are still burdened Section 423.884(c) sets forth the
subsidy and enroll in the Medicare application requirements for the retiree
with paying 20 percent of such penalty Prescription Drug Program in 2006,
for the first 60 months during which the drug subsidy (RDS). Section
2007, or 2008. As long as these 423.884(c)(5)(i) requires a plan sponsor
penalty is imposed, and that this burden
individuals remain continuously to file an application for the subsidy by
serves as a disincentive for low-income
beneficiaries to enroll in Medicare Part enrolled in Medicare Part D, they will no later than 90 days before the
D. not be assessed a late enrollment beginning of its plan year, unless we
Response: While we recognize the penalty. This demonstration is of grant the sponsor’s request for an
concern of the commenters for the needs limited duration and is only applicable extension (for example, the deadline for
of low-income beneficiaries, section to low-income subsidy eligible 2007 calendar year plans under the
1860D–14(a)(1)(A) of the Act requires individuals who enroll in Medicare Part regulation was October 2, 2006). As we
late enrollment penalties for the low- D in 2006, 2007, or 2008. Following an stated in the proposed rule, we believe
income subsidy population. Therefore, evaluation of this Medicare payment that an end-of-month deadline would be
we are adopting these proposed demonstration, we will review the administratively simpler for both plan
revisions in the final rule. Please note, results of the evaluation and may sponsors and CMS to track.
however, that we have used the consider recommending that Congress Accordingly, we proposed to replace the
Secretary’s authority under section eliminate the late enrollment penalty for 90-day requirement with the phrase ‘‘by
402(a)(1)(A) of the Social Security individuals who receive the low-income a date specified by CMS in published
Amendments of 1967, 42 U.S.C. 1395b– subsidy. guidance’’ to allow us the discretion to
1(a)(1)(A) (expressly made applicable to specify an end-of-month deadline in the
Part D in section 1860D–42(b) of the future through guidance. We noted that
this would give us the flexibility to take of defined standard prescription drug based on the current calendar year
into account operational systems coverage under Part D. Supplemental initial coverage limit, cost sharing
changes in determining the RDS coverage for this purpose means drug amounts, and annual out-of-pocket
application deadline, while providing coverage over and above defined threshold when, after doing their
adequate advance notice to plan standard prescription drug coverage calculations but prior to submission of
sponsors and their advisers. We did not under Part D for those retirees that the RDS application, we publish the
receive any comments on the proposed enroll in Part D coverage. As stated in coverage limits for defined standard
change to § 423.884(c)(5)(i) and the preamble to the May 2007 proposed drug coverage for the upcoming
therefore adopt this change as final rule, our intent, which we clarified in calendar year.
without modification. operational guidance to plan sponsors, As we stated in the proposed rule,
was that a sponsor must actually plan sponsors’ actuaries have indicated
b. Data Match provide employer or union-sponsored to us that they believe they should have
In accordance with section 1860D– supplemental retiree drug coverage to the flexibility for non-calendar year
22(a)(1), employer and union sponsors its retirees who enroll in Part D in order plans to use the initial coverage limit,
of qualified retiree prescription drug to qualify for the Medicare cost-sharing amounts, and annual out-
plans may receive the RDS only for their supplemental adjustment. Therefore, we of-pocket threshold for defined standard
enrollees who are eligible for, but not proposed to revise drug coverage for the upcoming plan
enrolled in, a Part D plan. In order to § 423.884(d)(5)(iii)(B)(2) to indicate that year, provided it does not impact their
properly administer this requirement, plan sponsors must actually provide ability to meet the application deadline.
we compare the retiree enrollment data supplemental drug coverage for their We agreed that actuaries should have
that a plan sponsor submits to us with retirees that elect Part D in order to take this flexibility, and proposed to amend
CMS enrollment records to ensure that advantage of the Medicare supplemental § 423.884(d)(5)(iii)(C) to permit a
sponsors are only receiving retiree drug adjustment provided for in noncalendar year plan’s actuary to use
subsidies for qualifying covered retirees, § 423.884(d)(5)(iii)(B)(2). We view this either the current or subsequent year’s
as defined in § 423.882. In revision as merely incorporating coverage limits for defined standard
§ 423.884(c)(7)(i), we specifically previously issued guidance, and not as prescription drug coverage when the
referenced the Medicare Beneficiary a new policy proposal. We did not attestation is submitted within 60 days
Database (MBD) as the system of record receive any comments on the proposed of the publication of the following year’s
for this data match (70 FR 4578). While change to § 423.884(d)(5)(iii)(B)(2) and cost limits. We also proposed to make
the MBD is currently the system we use therefore adopt this change as final corresponding changes to
to verify retirees’ Part D eligibility and without modification. § 423.884(d)(5)(iii)(D). We did not
enrollment status, we also may use receive any comments on the proposed
(2) Noncalendar Year Plans change to §§ 423.884(d)(5)(iii)(C) and
other systems of record for purposes of
the data match. Accordingly, we Section 1860D–22(a)(2)(A) of the Act (D), and therefore are finalizing this
proposed to modify § 423.884(c)(7)(i) by requires a plan sponsor claiming the change without modification.
substituting a general reference to ‘‘CMS RDS to provide an attestation that its
qualified retiree prescription drug plan (3) Benefit Options
database(s)’’ for the ‘‘Medicare
is actuarially equivalent to the Medicare Employment-based retiree health
Beneficiary Database (MBD).’’ We did
defined standard prescription drug coverage often has different plan design
not receive any comments on the
coverage. The actuarial equivalence test features or benefit options that apply to
proposed change to § 423.884(c)(7)(i)
requires that the actuarial value of the specific groups of retirees. Section
and therefore are finalizing this change 423.882 defines a benefit option as a
plan sponsor’s retiree drug coverage
without modification. particular benefit design, category of
under its qualified retiree prescription
c. Actuarial Equivalence drug plan be compared to the actuarial benefits, or cost sharing arrangement
value of the Medicare defined standard offered within a group health plan.
(1) Medicare Supplemental Adjustment
prescription drug coverage had the Section 423.884(d)(5)(iv) states that a
Section 1860D–22(a)(2)(A) of the Act sponsor’s Part D eligible individuals plan with more than one benefit option
requires that a plan sponsor claiming taken that coverage. must pass the gross test separately on a
the RDS provide an attestation that its Sections 423.884(d)(5)(iii)(C) and (D) disaggregated basis for each option, but
qualified retiree prescription drug plan state that for purposes of comparing the that it may pass the net test on an
is actuarially equivalent to Medicare actuarial value of the retiree coverage aggregated or disaggregated basis. As we
standard prescription drug coverage. under the sponsor’s plan and the stated in the proposed rule and in
Section 423.884(d)(5) sets forth a two- Medicare defined standard prescription guidance published previous to that
prong test for determining the actuarial drug coverage, the actuarial valuation of rule, our intent was that a plan sponsor
value of the defined standard the latter is based on the initial coverage should also have the option of
prescription drug coverage under Part D limit, cost sharing amounts, and annual aggregating a subset of the benefit
against which the actuarial value of the out-of-pocket threshold in effect at the options in a group health plan for the
retiree prescription coverage under the start of the plan year. However, the actuarial equivalence net test in
qualified retiree prescription drug plans attestation must be submitted to us no addition to aggregating all of the options
is measured (70 FR 4578). The actuarial later than 60 days after the publication or evaluating each option individually.
equivalence test includes a ‘‘gross test’’ of these coverage limits for the If the sponsor combines two or more
and a ‘‘net test.’’ Section upcoming calendar year; otherwise, the benefit options, the sponsor may not
423.884(d)(5)(iii)(B)(2) states that the net valuation must be based on the initial claim the subsidy for those benefit
test includes a ‘‘Medicare supplemental coverage limit, cost sharing amounts, options excluded from the net value
adjustment’’ which allows a plan and annual out-of-pocket threshold for calculation, even if those options meet
sponsor that provides supplemental the upcoming plan year. The intent of the gross test (unless the excluded
coverage for its retirees that elect Part D this 60-day provision is to prevent benefit options each individually meet
coverage to reflect the impact of the actuaries from having to redo valuations the net test). We proposed to amend the
supplemental coverage on the net value for noncalendar year plans that were final rule to reflect this clarification of
our intent, which reflects policy that has actuarial equivalence standards set forth specified by CMS, identifying each full-
been applied consistently since the rule in the regulations. benefit dual eligible individual enrolled
was published. We did not receive any in the State Medicaid program for each
K. Subpart S—Special Rules for States
comments on the proposed change to month. For States that do not submit an
Eligibility
§ 423.884(d)(5)(iv) and therefore are acceptable file by the end of the month,
finalizing this change without 1. General Payment Provisions— the phased down State contribution for
modification. Coordination With Medicare that month is based on data deemed
Prescription Drug Benefits (§ 423.906) appropriate by CMS.
(4) Submission of Actuarial Attestation In § 423.910(b)(1) of the Medicare
Upon Material Change Section 1935(d) of the Act contains
specific provisions regarding Medicaid Prescription Drug Benefit final rule,
Section 1860D–22(a)(2)(A) of the Act coordination with Medicare section 423.910(b)(1) specified that
requires that a plan sponsor submit an prescription drug benefits. In the case of ‘‘[f]or States that do not meet the
actuarial attestation annually or at a full benefit dual eligible individual, quarterly reporting requirement for the
another time as the Secretary may Federal Financial Participation (FFP) in monthly enrollment reporting.’’ The text
require. Section 423.884(d)(6)(ii) State Medicaid expenditures is not should have read ‘‘For States that do not
requires submission of an attestation no available for Medicaid covered drugs meet the monthly reporting requirement
later than 90 days before the that could be covered under Part D or for the monthly enrollment reporting,’’
implementation of a material change to for cost sharing related to these drugs. since there is no State quarterly
the coverage. While the term ‘‘material We proposed correcting § 423.906(b) reporting requirement referred to in
change’’ can be construed broadly to and (c) to make clear that, in accordance either the statute or regulation when
include any change to the value of a with the statutory requirement in calculating the phased-down State
sponsor’s plan, we indicated in the section 1935(d)(2) of the Act, only drugs contribution. Accordingly, we proposed
proposed rule that ‘‘[w]e would not specifically excluded from the to revise the text to be consistent with
require submission of an attestation definition of Part D drugs may be the statute. We did not receive
under § 423.884(d)(6)(ii) where a plan covered by medical assistance. The comments regarding our proposed
sponsor still meets the actuarial effect of these changes is to make clear changes. Therefore, the final rule adopts
equivalence test after the change, and that FFP is not available to States for the proposed revisions to § 423.910(b)(1)
there are no benefit options being coverage of drugs that would be Part D without modification.
added’’ (72 FR 29416). We did not covered drugs except that they are not L. Out-of-Scope Comments
receive any comments on this on a plan’s formulary. We also proposed
clarification of our policy. However, as We received a number of comments
adding a definition of ‘‘noncovered that were beyond the scope of the
has always been the intent of the drugs’’ to § 423.902. We did not receive
regulations, an attestation must be clarifications in the proposed rule but,
comments regarding our proposed rather, addressed other policy areas or
submitted only when coverage satisfies changes. Therefore, the final rule adopts
the actuarial equivalence standards in sought new clarifications that we did
the revisions to § 423.906(b) and (c) and not propose to clarify in this final rule.
the regulations, and should not and § 423.902 set forth in the proposed rule.
must not be submitted when coverage Specifically, we received public
fails to satisfy those standards. 2. States’ Contribution to Drug Benefit comments recommending that we—
Costs Assumed by Medicare (§ 423.910) • Implement rules providing for
Therefore, in the text of the final
consistency in utilization management
regulation, we are articulating the Section 1935(b) of the Act, as
requirements across Part D sponsors;
clarification in the proposed regulation amended by the MMA, requires States
• Establish rules requiring a universal
in a way that makes this distinction. and the District of Columbia to be
prescription drug card;
Specifically, § 423.884(d)(6)(ii) in the responsible for making monthly • Eliminate proposed rules removing
final regulation states that an attestation payments to the Federal government the e-prescribing facsimile exemption;
must be provided no later than 90 days beginning in January 2006 to defray a • Address beneficiary related
before the implementation of a material portion of the Medicare drug concerns with the coverage gap or Part
change to the sponsor’s drug coverage, expenditures for full-benefit dual D drug coverage in general;
and that the term ‘‘material change’’ eligible individuals. The statute further • Codify the six classes of clinical
means the addition of a benefit option defines full benefit dual eligible concern;
that does not have the impact of causing individuals to mean ‘‘for a State for a • Add cancer treatments to the six
the actuarial value of the retiree month an individual who has coverage classes of clinical concern;
prescription drug coverage to fail the for the month for covered part D drugs • Change the cut-off date for the six
actuarial equivalence standards set forth under a prescription drug plan under classes of clinical concern to January 1,
in the regulations. (Regardless of part D of title XVIII, or under an MA– 2008;
whether there has been such an impact, PD plan under part C of such title and • Limit expansion of the parameters
a plan sponsor, upon deleting a benefit is determined eligible by the State for for Agency Record Searches;
option for RDS purposes, must provide medical assistance for full benefits • Allow tiering exceptions for
an update to CMS of its list of under this title * * *’’ In the January specialty tier drugs;
individuals for whom it is claiming 2005 final rule, we explained the • Address lags in the transfer of
RDS. (See § 423.884(c)(6)). The final calculation of the monthly State phased- information, particularly regarding
regulation also adds § 423.884(d)(7), down contributions. The calculation of beneficiary Medicaid eligibility, and
which states that a sponsor must notify the monthly state contribution is Part D plan sponsor unwillingness to
CMS, in a form and manner specified by dependent upon the State’s reporting of accept documentation of Medicaid as
CMS, no later than 90 days before the the total number of full-benefit dual proof of a beneficiary’s dual status;
implementation of a change to the drug eligible individuals for the State in the • Address cases of retroactive
coverage that does have the impact of applicable month. States are required, in Medicaid eligibility and Part D
causing the actuarial value of the retiree accordance with the § 423.910(d), to enrollment and direct Part D plan
prescription drug coverage to fail the submit an electronic file, in a manner sponsors to not deny claims incurred
during the period of retroactive IV. Regulatory Impact Analysis regulatory approaches that maximize
eligibility; net benefits (including potential
• Direct Part D sponsors to provide A. Overall Impact
economic, environmental, public health
disclosure instructions for the filing of We examined the impacts of our May and safety effects, distributive impacts,
claims incurred during periods of 2007 proposed rule as required by and equity). A regulatory impact
retroactive Part D enrollment; Executive Order 12866 (September analysis (RIA) must be prepared for
• Act on MedPAC recommendations 1993, Regulatory Planning and Review), major rules with economically
on vaccine reimbursement; the Regulatory Flexibility Act (RFA)
• Withdraw the Medicare Marketing significant effects ($100 million or more
(September 19, 1980, Pub. L. 96–354), in any 1 year). The RFA requires
Guidelines or, at a minimum, eliminate section 1102(b) of the Social Security
or loosen current restrictions contained agencies to analyze options for
Act, the Unfunded Mandates Reform
in the Medicare Marketing Guidelines regulatory relief of small businesses. For
Act of 1995 (Pub. L. 104–4), and
on provider marketing activities— purposes of the RFA, small entities
Executive Order 13132. We received
particularly when providers are acting include small businesses, nonprofit
only one comment with regard to our
independently of Part D plans or when impact analysis concerning the organizations, and small governmental
there is no direct financial conflict of definition of negotiated prices, which is jurisdictions. Most hospitals and most
interest under the Federal anti-kickback not addressed in this final rule. As a other providers and suppliers are small
statute. result, we restate that impact analysis entities, either by nonprofit status or by
• Expand the definition of a long- below. having revenues of $6 million or less to
term care facility under § 423.100 to With the exception of the statutory $29 million in any 1 year. Individuals
include assisted living facilities; change addressing the payment of and States are not included in the
• Revise our policies to require Part D definition of a small entity.
vaccine administration under Part D
coverage of the professional services,
beginning in 2008 for covered Part D We estimate that the coverage of
supplies, and equipment associated
with home infusion of Part D drugs; vaccines, the impact of the policy vaccine administration under Part D to
• Direct that appeals overturned by clarifications in this final rule were have a net impact to the FY 2008 budget
an administrative law judge are effective addressed as part of a prior final rule in the amount of $100 million and an
for a period of 12 months, not just the and do not require further analysis. impact for FY 2008 through 2017 in the
remainder of the plan year. Specifically, we performed a full amount of $340 million. Given this
Because these comments are beyond regulatory impact analysis (RIA) for the estimated net impact of vaccine
the scope of the proposed rule, we are January 2005 final rule (70 FR 4454) administration coverage under Part D
not responding to them in this final implementing the Part D provisions of
beginning in FY 2008, the final rule
rule. the Medicare Prescription Drug
meets the threshold of being
Improvement and Modernization Act of
III. Collection of Information 2003. Many of the provisions in this ‘‘economically significant’’ and is
Requirements final rule are simply clarifications of consequently a major rule. Therefore,
This document does not impose provisions in the January 2005 final the RFA requires us to conduct a
additional information collection and rule. regulatory flexibility analysis with
recordkeeping requirements. Executive Order 12866 (as amended regard to the implementation of vaccine
Consequently, it need not be reviewed by Executive Order 13258) directs administration coverage under Part D.
by the Office of Management and agencies to assess all costs and benefits Table I provides the costs associated
Budget under the authority of the of available regulatory alternatives and, with vaccine administration for FYs
Paperwork Reduction Act of 1995. if regulation is necessary, to select 2008 through 2017.
TABLE 1.—VACCINE ADMINISTRATION COSTS FOR FY 2008–FY 2017

FYs
FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 2008–
2017
Vaccine Administration
Costs (in millions) ... $100 $80 $40 $20 $20 $20 $10 $10 $20 $20 $340
In the proposed rule we made a establishments (NAICS code 44611). Of market and the nature of Part D coverage
technical error when we listed the Small these firms, 17,835 had revenues under of vaccines, only two small business
Business Administration’s consideration $6.5 million and operated a total of areas—retail pharmacy and physicians
of small business at $6 million and used 17,835 establishments. Because more in private practice—merit analysis.
an inappropriate census table. We have than 90 percent of retail pharmacy firms Given the real-time nature of the Part
corrected these errors in this final rule. are small businesses (as defined by the D benefit and the fact that—unlike
The corrected calculations did not have SBA size standards), we estimate that physician offices—pharmacies are
an impact on our analysis. The Small the inclusion of vaccine administration network providers that can bill Part D
Business Administration (SBA) within the statutory definition of a Part sponsors for vaccines and vaccine
considers pharmacies with firm D drug will have some effect on a administration costs at the point of sale,
revenues of less than $6.5 million to be substantial number of small retail we anticipate that Medicare
small businesses. The 2004 Business pharmacies. However, we estimate that, beneficiaries will consider receiving
Census (the latest available detailed overall, the revenue effect on the retail Part D vaccine immunization in a
data) indicates that there were about pharmacy industry, including small pharmacy setting in those States that
19,443 firms operating about 40,115 pharmacies, will be positive. Given the permit pharmacists to administer
retail pharmacies and drug store nature of immunization in the U.S. vaccinations (currently 46 of 50 States—
two more States since the publication of cost structure, as home infusion noncovered Part D drugs, and we expect
our May 2007 proposed rule). We expect pharmacies should already be meeting that most States complied with the
this trend to continue, when, beginning these performance standards. statute, as opposed to the Part D
in 2008, Part D plans’ network Section 1102(b) of the Act requires us regulation, we do not believe that this
pharmacies are able to seek to prepare a RIA if a rule may have a clarification will significantly affect
reimbursement for the administration of significant impact on the operations of States, local, or tribal governments.
Part D vaccines. While there may be a substantial number of small rural As stated above, many of the final
some additional cost associated with hospitals. This analysis must conform to rule’s provisions are either corrections
pharmacists’ time in administering the standards of section 604 of the RFA. to bring our regulations in line with
vaccines, these costs should be more For purposes of section 1102(b) of the statute or merely the formal
than offset by the reimbursement of Act, we define a small rural hospital as proclamation of existing policies that
vaccine administration costs. We note a hospital that is located outside of a are consistent with the statute. Although
that network pharmacies can negotiate Metropolitan Statistical Area and has there may be added costs for Part D
with Part D sponsors so that they do not fewer than 100 beds. Because sponsors associated with the broadening
administer vaccines if they believe that prescription drugs, including Part D of the definition of Part D drug to
the costs of administering vaccines vaccines, are dispensed to Medicare include ‘‘[s]upplies required to deliver
outweigh any potential benefits. outpatients in hospitals, the final rule’s insulin by inhalation[,]’’ sponsors are
Almost all physicians in private change to the definition of a Part D drug aware that new drugs and supplies
practice (or the practices of which they to include vaccine administration could come to market constantly and account
are members) are small businesses have an effect on small rural hospitals for these potential formulary changes in
because their annual revenues do not that administer Part D vaccines. Since a their bids. Furthermore, only those
meet the Small Business number of rural hospitals administer sponsors that choose to cover inhaled
Administration’s threshold for ’’small’’ vaccines on an outpatient basis, they too insulin will be affected by the change to
physician practices; therefore, they are would likely benefit from the ability to our final rule to broaden the definition
small entities. Since we expect that a collect a Part D vaccine administration of supplies associated with the delivery
substantial number of Part D vaccines fee. Rural hospitals should already have of insulin into the body encompassed
will continue to be administered in the the systems in place to handle, store, within the definition of a Part D drug.
physician office setting, we believe and administer vaccines. While some We expect the costs to the private sector
physicians will benefit from the rural hospital pharmacies may become resulting from this change will be less
inclusion of vaccine administration in Part D network pharmacies, we do not than the $130 million threshold.
the statutory definition of a Part D drug. expect the majority will do so. Executive Order 13132 establishes
Beginning in calendar year 2008, Consequently, small rural hospitals certain requirements that an agency
administering physicians will have a should only benefit from Part D must meet when it issues a final rule
new source of reimbursement for Part D sponsors’ coverage of Part D vaccine that imposes substantial direct
vaccine administration fees. As administration fees and should not requirement costs on State and local
physicians will likely bill beneficiaries incur new costs as a result of our final governments, preempts State law, or
directly for Part D vaccines and its rule. Additionally, the other policy otherwise has Federalism implications.
administration, we do not expect there clarifications in our final rule are related The changes and technical clarifications
will be any additional costs to the to the Medicare Part D drug benefit and in this final rule will not have a
physicians in private practice as a result not to prescription drug coverage under substantial effect on State or local
of this statutory change. Medicare Part A. Therefore, these governments. For example, our
The other technical corrections and additional proposals do not affect small clarification in the final rule concerning
substantive clarifications in this final rural hospitals. timing of State reporting for the
rule are not expected to affect small Section 202 of the Unfunded purposes of calculating State phase-
businesses in a significant manner, if at Mandates Reform Act of 1995 also down contributions is not expected to
all. For example, although the requires that agencies assess anticipated affect State governments, since monthly
clarification relating to the delivery of costs and benefits before issuing any reporting is consistent with the statute.
home infusion medications may result rule whose mandates require spending In addition, although there is a
in a slight increase to the cost of in any 1 year of $100 million in 1995 provision in this final rule clarification
delivering these medications for some dollars, updated annually for inflation. that relates to waivers of State plan
Part D sponsors given potential That threshold level is currently licensure, there are no anticipated
increased costs for sponsors that do not approximately $127 million. Many of Federalism implications because the
currently have timely delivery the final rule’s provisions are either clarification simply brings our
provisions in their contracts with home corrections to bring our regulations in regulations in line with existing statute.
infusion pharmacies, any such increase line with statute or merely the formal
will be accounted for in plan sponsors’ proclamation of existing policies that B. Anticipated Effects on Health Plans
bids. However, we expect any such are consistent with the statute and do and Pharmacy Benefit Managers (PBM)
increase to be minimal and to affect not exceed the $127 million dollar Part D plans will incur costs in
only some sponsors. The final rule’s threshold. For example, one implementing the reimbursement of Part
requirements regarding timely delivery clarification we made in our final rule D vaccine administration fees, since this
of home infusion pharmacies should to bring our regulations in line with is a new Part D benefit established by
have no cost impact on network home statute prohibits States from covering Congress in the Tax Relief and Health
infusion pharmacies. In our ongoing Part D drugs for Medicaid recipients. Care Act of 2006. However, since
communications with the home This provision may save States the Congress defined the Part D vaccine
infusion industry, we have learned that money they would have otherwise spent administration fee as a Part D drug cost,
these delivery timeframes are already an on these drugs, if they had chosen to the impact of this statutory change will
industry standard. Thus, incorporation cover the drugs at issue. Because the be no different than for any other new
of these new requirements does not statute only allows States to cover drug entering the market. Part D plans
place any new burdens on the pharmacy excluded drugs, as opposed to will need to factor Part D vaccine
administration into their benefit designs delivery of home infusion medications technical corrections to the January
and resulting bids. We estimate the net place any additional cost burden on Part 2005 final rule. In addition, we wished
cost of vaccine administration coverage D plans. We had initially estimated the to codify a few new clarifications for
for FY 2008 to be $100 million. This gross costs of inhaled insulin for Fiscal Part D plans as a result of our
estimate takes into account the offset Year 2008 would be $10 million. Given experience in implementing Part D.
associated with beneficiary cost sharing this product’s current status, we now Finally, we wanted to codify certain
and the Federal direct subsidy and risk- believe it will be substantially lower in changes made by Congress to the
sharing. costs. As discussed elsewhere in this statutory definition of a Part D drug
We believe that our other provisions analysis, our requirement for the timely since the publication of the January
of our final rule merely reflect existing delivery of home infusion drugs is 2005 final rule.
policy and have no cost impact on consistent with an existing standard
D. Accounting Statement
health plans and PBMs. For example, with which sponsors should be familiar.
the final rule’s changes associated with Consequently, we do not believe it will As required by OMB Circular A–4
plan-to-plan reconciliation reflect increase sponsors’ costs. (available at http://
current plan requirements. Even if this www.whitehouse.gov/omb/circulars/
C. Alternatives Considered
requirement were a new standard, we index.html), in Table D1 below, we have
believe that all parties involved in the We considered not issuing regulations prepared an accounting statement
reconciliation will benefit, since the to address the policy clarifications and showing the classification of the
reconciliation process will be simpler technical changes we proposed in our expenditures associated with the
than if pharmacies were required to May 2007 proposed rule. However, we provisions of this final rule. This table
reverse and re-adjudicate claims. believed that in order to ensure public provides our best estimate of the
We also do not believe our broadening awareness of our policies, as well as to increase in costs as a result of the
of the definition of medical supplies avoid potential confusion regarding changes presented in this final rule. All
associated with insulin administration those policies, we should codify our costs are classified as transfers by the
or our clarification relating to the timely clarifications as well as make certain Federal Government to Part D plans.
TABLE D1.—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES FOR POLICY AND TECHNICAL
CHANGES TO THE MEDICARE PRESCRIPTION DRUG BENEFIT, FINAL RULE
Transfers
Category ($ millions)
Vaccine Administration, FYs 2008–2017:

Undiscounted Annualized Monetized Transfers .................................................................... 340.
Annualized Monetized Transfers Using 7% Discount Rate .................................................. 387.
Annualized Monetized Transfers Using 3% Discount Rate .................................................. 360.
From Whom To Whom? ........................................................................................................ Federal Government To Part D Plans.
E. Conclusion and, as such, will not have an Subpart B—Eligibility and Enrollment
economically significant impact.
Given that we expect the cost of ■ 2. Section 423.50 is amended by
implementing vaccine administration In accordance with the provisions of
Executive Order 12866, this final rule revising paragraph (f)(1)(v) to read as
under Part D will exceed the $100 follows:
was reviewed by the Office of
million threshold in FY 2008, we
Management and Budget. § 423.50 Approval of marketing materials
conducted an economic impact analysis
with regard to those entities potentially List of Subjects in 42 CFR Part 423 and enrollment forms.
involved in administering Part D * * * * *
vaccines. As we stated previously, we Administrative practice and
(f) * * *
procedure, Emergency medical services,
expect that entities such as private (1) * * *
Health facilities, Health maintenance
physician practices and pharmacies will
organizations (HMO), Medicare, (v) Use providers, provider groups or
benefit from this change in FY 2008, pharmacies to distribute printed
Penalties, Privacy, Reporting and
whereas other entities, such as Part D recordkeeping. information comparing the benefits of
sponsors, will experience no or little different Part D plans unless providers,
difference in their costs as a result of the ■ For the reasons set forth in the
provider groups or pharmacies accept
implementation of this statutory change. preamble, the Centers for Medicare &
and display materials from all Part D
We conducted a full analysis of the Medicaid Services amends 42 CFR
plan sponsors with which the providers,
impact of this final rule’s technical chapter IV as set forth below:
provider groups or pharmacies contract.
corrections and substantive * * * * *
PART 423—MEDICARE PROGRAM;
clarifications for the final regulations
MEDICARE PRESCRIPTION DRUG ■ 3. Section § 423.56 is amended by
implementing the Part D provisions of
PROGRAM revising paragraph (b)(6) to read as
Medicare Prescription Drug
Improvement and Modernization Act of follows:
■ 1. The authority citation for part 423
2003, which were published on January continues to read as follows: § 423.56 Procedures to determine and
28, 2005. For reasons cited previously, document creditable status of prescription
Authority: Secs. 1102, 1860D–1 through
we believe that these additional drug coverage.
1860D–42, and 1871 of the Social Security
clarifications either do not require Act (42 U.S.C. 1302, 1395w–101 through * * * * *
further analysis or are in practice today 1395w–152, and 1395hh). (b) * * *
(6) Coverage under a Medicare ■ 5. Section 423.120 is amended by sponsor using any of the methods listed
supplemental policy (Medigap policy) revising paragraphs (a)(2) and (a)(4) to in § 422.262(f) of this chapter.
as defined at § 403.205 of this chapter. read as follows: * * * * *
* * * * * § 423.120 Access to covered Part D drugs. Subpart G—Payments to Part D Plan
Subpart C—Benefits and Beneficiary (a) * * * Sponsors for Qualified Prescription
Protections (2) Applicability of some non retail Drug Coverage
pharmacies to standards for convenient
■ 4. Section 423.100 is amended by access. Part D plans may count I/T/U ■ 7. In § 423.350 paragraph (b)(1) is
revising the definitions of ‘‘contracted pharmacies and pharmacies operated by revised to read as follows:
pharmacy network,’’ and ‘‘Part D drug’’ Federally Qualified Health Centers and
Rural Health Clinics toward the § 423.350 Payment appeals.
to read as follows:
standards for convenient access to (b) * * *
§ 423.100 Definitions. network pharmacies in paragraph (a)(1) (1) Time for filing a request. The
* * * * * of this section. request for reconsideration must be filed
Contracted pharmacy network means * * * * * within 15 days from the date of the final
licensed pharmacies, including retail, (4) Access to home infusion payment. For purposes of this
mail-order, and institutional pharmacies pharmacies. A Part D plan’s contracted paragraph, the date of final payment is
under contract with a Part D sponsor to pharmacy network must provide one of the following:
provide covered Part D drugs at adequate access to home infusion (i) For risk adjustment, the date of the
negotiated prices to Part D enrollees. pharmacies consistent with CMS final reconciled payment under
guidelines and instructions. A Part D § 423.343(b) of this subpart.
* * * * *
(ii) For reinsurance, the date of the
Part D drug means— plan must ensure that such network
final reconciled payment under
(1) Unless excluded under paragraph pharmacies, at a minimum—
(i) Are capable of delivering home- § 423.343(c) of this subpart; for low-
(2) of this definition, any of the income cost sharing subsidies, the date
following if used for a medically infused drugs in a form that can be
administered in a clinically appropriate of the final reconciled payment under
accepted indication (as defined in § 423.343(d) of this subpart.
section 1927(k)(6) of the Act): fashion;
(ii) Are capable of providing infusible (iii) For risk-sharing payments, the
(i) A drug that may be dispensed only date of the final payments under
upon a prescription and that is Part D drugs for both short-term acute
care and long-term chronic care § 423.336 of this subpart.
described in sections 1927(k)(2)(A)(i) * * * * *
through (iii) of the Act. therapies;
(iii) Ensure that the professional
(ii) A biological product described in Subpart I—Organizational Compliance
services and ancillary supplies
sections 1927(k)(2)(B)(i) through (iii) of With State Law and Preemption by
necessary for home infusion therapy are
the Act. Federal Law
in place before dispensing Part D home
(iii) Insulin described in section infusion drugs; and
1927(k)(2)(C) of the Act. ■ 8. Section 423.410 is amended by
(iv) Provide delivery of home infusion revising paragraph (d) to read as
(iv) Medical supplies associated with drugs within 24 hours of discharge from
the injection of insulin, including follows:
an acute care setting, or later if so
syringes, needles, alcohol swabs, and prescribed. § 423.410 Waiver of certain requirements
gauze. to expand choice.
* * * * *
(v) A vaccine licensed under section * * * * *
351 of the Public Health Service Act and Subpart F—Submission of Bids and (d) Special waiver for plan years
for vaccine administration on or after Monthly Beneficiary Premiums: Plan beginning before January 1, 2008. For
January 1, 2008, its administration. Approval plan years beginning before January 1,
(vi) Supplies that are directly 2008, if the State has a prescription drug
associated with delivering insulin into ■ 6. Section 423.293 is amended by plan or PDP sponsor licensing process
the body, such as an inhalation chamber revising paragraph (a) to read as follows: in effect, CMS grants a waiver upon a
used to deliver the insulin through demonstration that an applicant to
§ 423.293 Collection of monthly
inhalation. beneficiary premium. become a PDP sponsor has submitted a
(2) Does not include— (a) General rules. Part D sponsors substantially completed application for
(i) Drugs for which payment as so must— licensure to the State.
prescribed and dispensed or (1) Charge enrollees a consolidated * * * * *
administered to an individual is monthly Part D premium equal to the
available for that individual under Part sum of the Part D monthly premium for Subpart J—Coordination of Part D
A or Part B (even though a deductible basic prescription drug coverage (if any) Plans With Other Prescription Drug
may apply, or even though the and the premium for supplemental Coverage
individual is eligible for coverage under coverage (if any and if the beneficiary
Part A or Part B but has declined to ■ 9. Section 423.458 is amended by
has enrolled in such supplemental revising paragraph (d)(2)(ii) to read as
enroll in Part A or Part B); and coverage).
(ii) Drugs or classes of drugs, or their follows:
(2) Permit payment of monthly Part D
medical uses, which may be excluded
premiums (if any) under the timing of § 423.458 Application of Part D rules to
from coverage or otherwise restricted payments established in § 422.262(e) of certain Part D plans on and after January
under Medicaid under sections this chapter; and 1, 2006.
1927(d)(2) or (d)(3) of the Act, except for (3) Permit each enrollee, at the * * * * *
smoking cessation agents. enrollee’s option, to make payment of (d) * * *
* * * * * premiums (if any) under this part to the (2) * * *
(ii) A waiver of a requirement under Subpart K—Application Procedures determination, or in dealing with any of
this part otherwise applicable to cost and Contracts With Part D Sponsors the levels of the appeals process, subject
plans or PACE organizations, if such to the rules described in part 422,
waiver improves coordination of ■ 11. Section 423.504 is amended by subpart M of this chapter.
benefits provided by the cost plan under revising paragraph (a) to read as follows:
* * * * *
section 1876 of the Act, or by the PACE
§ 423.504 General provisions. Projected value of a Part D drug or
organization under sections 1894 and
1934 of the Act, with the benefits under (a) General rule. Subject to the drugs includes any costs the enrollee
Part D. provisions at § 423.265 of this part could incur based on the number of
concerning submission of bids, to enroll refills prescribed for the drug(s) in
■ 10. Section 423.464 is amended by— beneficiaries in any Part D drug plan it dispute during the plan year. Projected
■ (A) Revising paragraphs (f)(1)(vii) and offers and be paid on behalf of Part D value includes enrollee co-payments, all
(f)(1)(viii). eligible individuals enrolled in those expenditures incurred after an enrollee’s
■ (B) Adding new paragraphs (f)(1)(ix), plans, a Part D plan sponsor must enter expenditures exceed the initial coverage
(f)(5), and (f)(6). into a contract with CMS. The contract limit, and expenditures paid by other
The revision and additions read as may cover more than one Part D plan. entities.
follows: * * * * * * * * * *
■ 12. Section 423.505 is amended by
§ 423.464 Coordination of benefits with revising paragraph (h)(1) to read as ■ 15. Section 423.570 is amended by
other providers of prescription drug revising paragraph (d)(3) to read as
coverage.
follows:
follows:
* * * * * § 423.505 Contract provisions.
* * * * * § 423.570 Expediting certain coverage
(f) * * *
determinations.
(1) * * * (h) * * *
(1) Federal laws and regulations * * * * *
(vii) Rural health clinics. Rural health
designed to prevent fraud, waste, and (d) * * *
clinics as defined under section
abuse, including, but not limited to
1861(aa)(2) of the Act. (3) Subsequently deliver to the
applicable provisions of Federal
(viii) Other Part D plans. enrollee, within 3 calendar days,
criminal law, the False Claims Act (31
(ix) Other prescription drug coverage. U.S.C. 3729 et seq.), and the anti- equivalent written notice.
Other health benefit plans or programs kickback statute (section 1128B(b) of the * * * * *
that provide coverage or financial Act). ■ 16. Section § 423.584 is amended by
assistance for the purchase or provision * * * * * adding a new paragraph (b)(3) as to read
of Part D drugs on behalf of Part D ■ 13. Section 423.509 is amended by as follows:
eligible individuals as CMS may revising paragraph (a)(9) to read as
specify. follows: § 423.584 Expediting certain
* * * * * redeterminations.
(5) Plan-to-plan liability. In the § 423.509 Termination of contract by CMS. * * * * *
process of coordinating benefits (a) * * *
(b) * * *
between Part D plans when a Part D (9) Substantially fails to comply with
plan from which a beneficiary has either of the following: (3) The provisions set forth in
transferred has incorrectly made (i) Marketing requirements in § 423.582(b), (c), and (d) of this subpart
payment for covered prescription drug § 423.50. also apply to expedited
costs incurred after the effective date of (ii) Information dissemination redeterminations.
the Part D enrollee’s enrollment in the requirements of § 423.128 of this part. * * * * *
new Part D plan of record, the new Part * * * * *
■ 17. Section § 423.610 is amended by
D plan of record must make the
Subpart M—Grievances, Coverage revising paragraph (c)(2) to read as
reconciling payments based on amounts
Determinations, and Appeals follows:
reported to it by CMS without regard to
the Part D plan’s own formulary or drug ■ 14. Section 423.560 is amended by § 423.610 Right to an ALJ hearing.
utilization review edits. revising the definitions of ‘‘appointed * * * * *
(6) Use of other reconciliation representative’’ and ‘‘projected value’’ to
processes. In the process of coordinating (c) * * *
read as follows:
benefits between the correct Part D plan (2) Multiple enrollees. Two or more
of record and another entity providing § 423.560 Definitions. appeals may be aggregated by multiple
prescription drug coverage when that * * * * * enrollees to meet the amount in
entity has incorrectly paid as primary Appointed representative means an controversy for an ALJ hearing if—
payer for a covered Part D drug on individual either appointed by an (i) The appeals have previously been
behalf of a Part D enrollee, the correct enrollee or authorized under State or reconsidered by an IRE;
Part D plan of record must achieve other applicable law to act on behalf of
timely reconciliation through working the enrollee in filing a grievance, (ii) The request for ALJ hearing lists
directly with the other entity that obtaining a coverage determination, or all of the appeals to be aggregated and
each aggregated appeal meets the filing
incorrectly paid as primary payer, in dealing with any of the levels of the
unless CMS has established appeals process. Unless otherwise stated requirement specified in § 423.612(b) of
reconciliation processes for payment in this subpart, the appointed this part; and
reconciliation, rather than requesting representative has all of the rights and (iii) The ALJ determines that the
pharmacy claims reversal and re- responsibilities of an enrollee in filing a appeals the enrollees seek to aggregate
adjudication. grievance, obtaining a coverage involve the same prescription drug.
Subpart P—Premiums and Cost (iii) For individuals with income valuation specified in this paragraph
Sharing Subsidies for Low-Income greater than 140 percent but at or below (d)(5)(iii)(B)(2).
Individuals 145 percent of the FPL applicable to the (C) The valuation of defined standard
family size, a premium subsidy equal to prescription drug coverage for a given
■ 18. Section 423.780 is amended by 40 percent of the late enrollment plan year is based on the initial
revising paragraphs (b)(1) and (e) to read penalty for the first 60 months during coverage limit, cost-sharing amounts,
as follows: which the penalty is imposed and 50 and out-of-pocket threshold for defined
percent of their late enrollment penalty standard prescription drug coverage
§ 423.780 Premium subsidy. under Part D in effect either at the start
thereafter.
* * * * * (iv) For individuals with income of the plan year or that is announced for
(b) * * * greater than 145 percent but below 150 the upcoming calendar year. In order to
(1) The premium subsidy amount is percent of the FPL applicable to the use the coverage limits in effect at the
equal to the lesser of— family size, a premium subsidy equal to beginning of the plan year, the
(i) Under the Part D plan selected by 20 percent of the late enrollment attestation must be submitted to CMS no
the beneficiary, the portion of the penalty for the first 60 months during later than 60 days after the publication
monthly beneficiary premium which the penalty is imposed and 25 of the Part D coverage limits for the
attributable to basic coverage (for percent of their late enrollment penalty upcoming calendar year; otherwise, the
enrollees in PDPs) or the portion of the thereafter. valuation is based on the upcoming
MA monthly prescription drug year’s initial coverage limit, cost-sharing
beneficiary premium attributable to Subpart R—Payments to Sponsors of amounts, and out-of-pocket threshold
basic prescription drug coverage (for Retiree Prescription Drug Plans for defined standard prescription drug
enrollees in MA–PD plans); or coverage under Part D.
(ii) The greater of the low-income ■ 19. Section § 423.884 is amended by— (D) Example: If a sponsor’s retiree
benchmark premium amount ■ A. Revising paragraphs (c)(5)(i), prescription drug plan operates under a
(determined under paragraph (b)(2) of (c)(7)(i). plan year that ends March 30, the
■ B. Revising paragraphs sponsor has a choice of basing the
this section) for the PDP region in which
the subsidy eligible individual resides (d)(5)(iii)(B)(2), (d)(5)(iii)(C), and attestation for the year April 1, 2007
or the lowest monthly beneficiary (d)(5)(iii)(D). through March 30, 2008 on either the
■ C. Revising the last sentence of initial coverage limit, cost-sharing
premium for a PDP that offers basic
prescription drug coverage in the PDP paragraph (d)(5)(iv). amounts, and out-of-pocket threshold
■ D. Revising paragraph (d)(6)(ii). amounts that apply to defined standard
region.
■ E. Adding a new paragraph (d)(7). prescription drug coverage under Part D
* * * * * The revisions and addition read as in CY 2007, or the amounts announced
(e) Premium subsidy for late follows: for CY 2008. However, in order to use
enrollment penalty. the amounts applicable in CY 2007, the
(1) Amount of premium subsidy for § 423.884 Requirements for qualified
retiree prescription drug plans. sponsor must submit the attestation
late enrollment penalty. Full subsidy within 60 days after the publication of
eligible individuals who are subject to * * * * *
the Part D coverage limits for CY 2008.
late enrollment penalties under § 423.46 (c) * * *
If the attestation is submitted more than
of this part are entitled to an additional (5) * * *
60 days after the 2008 coverage limits
premium subsidy equal to 80 percent of (i) General rule. An application for a
have been published, the CY 2008
the late enrollment penalty for the first given plan year must be submitted prior
coverage limits would apply.
60 months during which the penalty is to the beginning of the plan year by a
(iv) * * * For the assurance required
imposed and 100 percent of their late date specified by CMS in published
under paragraph (d)(1)(ii) of this
enrollment penalty thereafter. guidance, unless a request for an
section, the assurance may be provided
(2) Other low-income subsidy eligible extension has been filed and approved
either separately for each benefit option
individuals sliding scale premium under procedures set forth in such
for which the sponsor provided
subsidy for late enrollment penalty. guidance.
assurances under paragraph (d)(1)(i) of
Other low-income subsidy eligible * * * * * this section, or in the aggregate for all
individuals are entitled to a premium (7) * * * benefit options (or for a subset of the
subsidy based on a linear sliding scale (i) Matches the names and identifying benefit options).
as follows: information for the individuals (6) * * *
(i) For individuals with income at or submitted as qualifying covered retirees (ii) Submission following material
below 135 percent of the FPL applicable with a CMS database(s) to determine change. The attestation must be
to the family size, a premium subsidy which retirees are Part D eligible provided no later than 90 days before
equal to 80 percent of the late individuals who are not enrolled in a the implementation of a material change
enrollment for the first 60 months Part D plan. to the drug coverage of the sponsor’s
during which the penalty is imposed * * * * * retiree prescription drug plan. For
and 100 percent of their late enrollment (d) * * * purposes of this clause, the term
penalty thereafter. (5) * * * ‘‘material change’’ means the addition of
(ii) For individuals with income (iii) * * * a benefit option that does not impact the
greater than 135 percent but at or below (B) * * * actuarial value of the retiree
140 percent of the FPL applicable to the (2) An amount calculated to reflect prescription drug coverage under the
family size, a premium subsidy equal to the impact on the value of defined sponsor’s plan such that it no longer
60 percent of the late enrollment standard prescription drug coverage of meets the standards set forth in
penalty for the first 60 months during supplemental coverage actually paragraph (d)(1)(i) or (ii) of this section.
which the penalty is imposed and 75 provided by the sponsor. Sponsors may (7) Notice of failure to continue to
percent of their late enrollment penalty use other actuarial approaches specified satisfy the actuarial equivalence
thereafter. by CMS as an alternative to the actuarial standards. A sponsor must notify CMS,
in a form and manner specified by CMS, sections 1927(d)(2) or (d)(3) of the Act, CMS on a monthly basis, as indicated in
no later than 90 days before the except for smoking cessation agents. the following chart. For States that do
implementation of a change to the drug * * * * * not meet the monthly reporting
coverage that impacts the actuarial ■ 21. Section 423.906 is amended by requirement for the monthly enrollment
value of the retiree prescription drug revising paragraphs (b)(1), (b)(2), and (c) reporting, the State contribution
coverage under the sponsor’s plan such to read as follows: payment is calculated using a
that it no longer meets the standards set methodology determined by CMS.
§ 423.906 General payment provisions.
forth in paragraph (d)(1)(i) or (ii) of this * * * * *
section. * * * * *
(b) * * * (Catalog of Federal Domestic Assistance
* * * * * (1) Part D drugs; or Program No. 93.773, Medicare—Hospital
(2) Any cost-sharing obligations under Insurance; and Program No. 93.774,
Subpart S—Special Rules for States- Part D relating to Part D drugs. Medicare—Supplementary Medical
Eligibility Determinations for Subsidies * * * * * Insurance Program)
and General Payment Provisions (c) Noncovered drugs. States may Dated: November 19, 2007.
elect to provide coverage for outpatient
■ 20. Section 423.902 is amended by Kerry Weems,
drugs other than Part D drugs in the
adding the definition of ‘‘noncovered same manner as provided for non-full Acting Administrator, Centers for Medicare
drugs’’ in alphabetical order to read as benefit dual eligible individuals or & Medicaid Services.
follows: through an arrangement with a Approved: January 4, 2008.
prescription drug plan or a MA-PD plan. Michael O. Leavitt,
§ 423.902 Definitions.
■ 22. Section 423.910 is amended by Secretary.
* * * * * revising paragraph (b)(1) introductory
text to read as follows: Editorial Note: This document was
Noncovered drugs are those drugs
received at the Office of the Federal Register
specifically excluded from the § 423.910 Requirements. on April 9, 2008.
definition of Part D drug, which may be
(b) * * * [FR Doc. 08–1120 Filed 4–9–08; 11:45 am]
excluded from coverage or otherwise (1) Calculation of payment. The State
restricted under Medicaid under contribution payment is calculated by BILLING CODE 4120–01–P

Rule: Medicare Program: Policy and Technical Changes To The Medicare Presciption Drug Benefit

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Tuesday,

April 15, 2008

42 CFR Part 423

of the Social Security Act (the Act) and

or within 24 hours of the discharge, we infusion therapies, in order to facilitate

In addition, we proposed modifying

incurred within a plan year is consistent resides. The low-income benchmark

Percent of penalty Percent of penalty

≤135% FPL ...................................................................................................................................... 80 100

TABLE 1.—VACCINE ADMINISTRATION COSTS FOR FY 2008–FY 2017

Vaccine Administration, FYs 2008–2017:

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