[Federal Register: August 29, 2003 (Volume 68, Number 168)]
[Rules and Regulations]
[Page 51912-51917]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29au03-10]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 447
[CMS-2175-FC]
RIN 0938-AM20
Medicaid Program; Time Limitation on Price Recalculations and
Recordkeeping Requirements Under the Drug Rebate Program
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule with comment period.
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SUMMARY: On September 19, 1995, we published a proposed rule in the
Federal Register that introduced requirements for States and
manufacturers pertaining to the Medicaid drug rebate program. We
received several comments from States and manufacturers regarding
recordkeeping requirements and drug price recalculations. This final
rule with comment period finalizes separately, in an accelerated
timeframe, two specific provisions of the September 1995 proposed rule.
It establishes new recordkeeping requirements for drug manufacturers
under the Medicaid drug rebate program. It also sets forth a 3-year
time limitation during which manufacturers must report changes to
average manufacturer price and best price for purposes of reporting
data to us. In addition, it announces the pressing need for
codification of fundamental recordkeeping requirements. Furthermore, it
announces our intention to continue to work on finalizing the complete
drug rebate regulation for the Medicaid drug rebate program.
DATES: Effective Date: October 1, 2003.
Comment Date: Comments will be considered if we receive them at the
appropriate address, as provided below, no later than 5 p.m. on October
28, 2003.
ADDRESSES: In commenting, please refer to file code CMS-2175-FC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission or e-mail. Mail written comments (one
original and three copies) to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-2175-FC, PO Box 8016, Baltimore, MD 21244-8016.
Please allow sufficient time for mailed comments to be timely
received in the event of delivery delays.
If you prefer, you may deliver (by hand or courier) your written
comments (one original and three copies) to one of the following
addresses:
Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201, or
Room C5-14-03, 7500 Security Boulevard, Baltimore, MD 21244-1850.
(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for commenters wishing to retain a proof of filing by
stamping in and retaining an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and could be considered late.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Marge Watchorn, (410) 786-4361.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: Comments received timely will be
available for public inspection as they are received, generally
beginning approximately 3 weeks after publication of a document, at the
headquarters of the Centers for Medicare & Medicaid Services, 7500
Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of
each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view
public comments, call telephone number: (410) 786-7195.
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.
I. Background
A. Overview
We are publishing this final rule with comment period to address
the issues of manufacturer recordkeeping requirements and price
recalculations under the Medicaid drug rebate program. We decided to
issue a final rule with comment period rather than a final rule to give
interested parties an additional opportunity to provide comments on
these provisions. We believe the additional comment period is
appropriate given the time that has elapsed between the publication of
the September 19, 1995 proposed rule (60 FR 48442) and the publication
of this rule.
We are publishing this rule to address concerns regarding the
administration of the Medicaid drug rebate program for manufacturers
and States. In the absence of a regulatory recordkeeping requirement,
manufacturers are in effect required to retain pricing data for an
indefinite period. The 3-year recordkeeping requirement will enable
manufacturers to close their books within a reasonable timeframe. This
recordkeeping requirement will mirror the 3-year timeframe established
for States to retain records at 42 CFR 433.32.
We believe establishing a timeframe for manufacturers to submit
revised pricing data to us also streamlines the administration of the
Medicaid drug rebate program. Due to recalculations involving hundreds
of millions of State and Federal Medicaid dollars and over 10 years of
paperwork, we believe it is essential that a standard timeframe be
established within which manufacturers and CMS, or States, are
permitted to submit revised drug prices. This timeframe will also
assist States that would otherwise be required to retain their drug
utilization data indefinitely to verify changes in rebate amounts
resulting from retroactive manufacturer recalculations. Therefore, as
of the effective date of this rule, manufacturers will have 12 quarters
from the quarter in which the data were originally due to submit
revised pricing data to us. This timeframe is described in further
detail in section IV of the preamble, ``Provisions of the Final Rule.''
[[Page 51913]]
In this rule, we intend the terms ``manufacturer,'' ``average
manufacturer price (AMP),'' and ``best price (BP)'' to have the same
meaning as described and set forth in the national drug rebate
agreements signed by manufacturers and the Secretary (on behalf of
States). We also have used these terms in guidance documents that we
have issued over the years pertaining to the Medicaid drug rebate
program. We do not intend to alter these definitions in this rule.
Rather, the primary purpose of this rule is to establish procedural
requirements pertaining to manufacturer recordkeeping and pricing
changes. We will set forth regulatory definitions of these terms in a
subsequent document we will publish in the Federal Register.
B. 1995 Proposed Rule
On September 19, 1995, we published a proposed rule (60 FR 48442)
in the Federal Register that specified requirements for State Medicaid
agencies and conditions under which Federal payments would be made
under the Medicaid program for covered outpatient drugs. The rule also
specified the conditions for approval and renewal of rebate agreements
with drug manufacturers participating in the Medicaid program.
In the September 1995 proposed rule, we also discussed prior period
adjustments and pricing changes. A prior period adjustment is a change
in the unit rebate amount based on a manufacturer's revised AMP or BP
data for a prior rebate period after that rebate period's pricing data
have been submitted to us. The prior period adjustments generally
consist of a manufacturer's changes to pricing data resulting from
sales data not being available before pricing submissions to us or
changes in the methodology used to establish AMP or BP. We use the
manufacturer's pricing data to generate the unit rebate amount for each
9-digit national drug code, which States use to calculate rebate
amounts due from manufacturers. Any changes to a manufacturer's AMP or
BP result in changes to the unit rebate amount and rebates due from the
manufacturer. Thus, the prior period adjustments are necessary to
correct rebate amounts that are owed by manufacturers or credits due to
manufacturers.
Since the publication of the September 1995 proposed rule, States
have expressed concerns regarding pricing changes and recalculations
under the Medicaid drug rebate program. We have received requests for
pricing recalculations for drug prices submitted as far back as 1991.
The statute does not specifically provide for such recalculations;
however, we have permitted the recalculations where revisions were made
to conform to the statute or rebate agreement. Unfortunately, there is
a significant burden on States and manufacturers to maintain pricing
data and supporting documentation for timeframes dating back to 1991.
We have seen a recent increase in the number of these requests and the
dollar value of the recalculations. In addition, manufacturers have
expressed concerns regarding recordkeeping burdens. In response to
these concerns, we are finalizing the recordkeeping requirements and
the time limit on pricing recalculations proposed in the September 1995
rule. We will address the remaining provisions of the September 1995
rule in a subsequent rule we will publish in the Federal Register.
C. Legislative History
Section 1927 of the Social Security Act (the Act) authorizes the
Medicaid drug rebate program. Section 1927 of the Act was amended by
section 4401 of the Omnibus Budget Reconciliation Act of 1990 (OBRA
`90) and section 13602 of the Omnibus Budget Reconciliation Act of 1993
(OBRA `93). Under section 1927 of the Act, manufacturers that have
entered into a national rebate agreement must provide each State
Medicaid program with rebate period payments (or other periodic rebate
payments, as determined by the Secretary).
D. Requirements for Manufacturer's Data
Section 1927(b) of the Act gives the Secretary the authority to
publish regulations that establish manufacturer recordkeeping
requirements and the time limit for manufacturer pricing changes. To
implement these provisions, we will require that a manufacturer must
retain pricing data for 3 years from the date the manufacturer reports
that period's data to us. Although the statute sets forth requirements
on data reported to us by manufacturers, it does not provide
recordkeeping requirements for manufacturer data. In the national drug
rebate agreement, we did not establish a timeframe during which records
must be maintained. The 3-year time period comports with the
requirements for the maintenance of records on State Medicaid
expenditures imposed on States. Section 433.32 requires that States
retain records for 3 years from the date of submission of a final
expenditure report for Federal financial participation.
E. Manufacturer's Pricing Data
Section 1927(b)(3)(A)(i) requires that manufacturers submit pricing
information no later than 30 days after the end of each quarter.
However, it does not establish a time limitation regarding pricing
changes. While we recognize the need to permit manufacturers to submit
revised prices within a timeframe, States and manufacturers should be
protected from potential liabilities resulting from no time limit. We
will require that manufacturers submit changes to AMP or BP within 3
years from the date that period's data are due. The timeframe for
pricing changes set forth in this final rule is more fully described in
section IV of the preamble, ``Provisions of the Final Rule.''
II. Provisions of the Proposed Rule
In the September 19, 1995 proposed rule, we solicited comments on
proposed requirements for State Medicaid agencies, the conditions under
which Federal payments would be made under the Medicaid program for
covered outpatient drugs, and the conditions for approval and renewal
of rebate agreements with drug manufacturers. In this final rule with
comment period, we are finalizing two of the provisions of the
September 1995 proposed rule. We will address the remaining provisions
of the September 1995 proposed rule and will publish a subsequent rule
in the Federal Register.
In the September 1995 proposed rule, we proposed to add to part 447
a new subpart I entitled ``Payment for Outpatient Prescription Drugs
Under Drug Rebate Agreements.'' Within that subpart, we proposed a new
Sec. 447.534(g) to establish a 3-year recordkeeping requirement for
manufacturer data pertaining to AMP and BP calculations. We also
proposed a new Sec. 447.534(h) to establish a 3-year time limit for
manufacturers to report revised AMP or BP to us.
III. Analysis of and Response to Public Comments on the September 19,
1995 Proposed Rule
We received 19 timely comments in response to the September 19,
1995 proposed rule. We received comments from State government
officials and representatives of the pharmaceutical industry including
manufacturers, pharmacists, attorneys, and consultants. Although we
received comments on a variety of topics pertaining to the proposed
rule, we are addressing only the comments that pertain to the
manufacturer recordkeeping requirements and the 3-year limitation
[[Page 51914]]
on price recalculations set forth in this final rule with comment
period. These comments and our responses are summarized below:
A. Manufacturer Recordkeeping Requirements
Comment: One commenter noted that the 3-year records retention
standard will provide a useful records management timeframe.
Response: We agree; therefore, we are issuing this final rule with
comment period to establish the 3-year recordkeeping requirements for
manufacturers.
B. Time Limitation on Manufacturer Price Recalculations
Comment: One commenter expressed the opinion that the burden for
calculating the amount of rebate adjustments should rest with the
manufacturer when the adjustment results from changes to AMP or BP,
rather than the State.
Response: The State has never been responsible for calculating the
amount of rebate adjustments. The manufacturer is responsible for
recalculating the amount of rebate adjustments.
Comment: One commenter noted the need to clarify the 3-year
timeframe as it applies to prior period adjustments.
Response: We concur with the need to provide clarification. We
define the 3-year limitation as equivalent to 12 quarters because the
Medicaid drug rebate program operates on a quarterly basis. Pricing
information is exchanged and processed on a quarterly basis and rebates
are due and paid on a quarterly basis. Therefore, wherever we refer in
this document to a 3-year timeframe for recalculations and pricing
changes, we interpret it as 12 quarters from the quarter in which the
data were due.
Comment: One commenter noted that 3 years is too long a timeframe
for applying retroactive prior period adjustments and recommended that
the allowed retroactive period not exceed 24 months.
Response: We recognize the potential burden for States and
manufacturers to apply prior period adjustments during a 3-year
retroactive timeframe, as opposed to a 24-month timeframe.
Nevertheless, as we discussed earlier in the ``Background'' section of
this preamble, we continue to believe that a 3-year timeframe is
reasonable because it comports with requirements for maintenance of
records on State Medicaid expenditures. Furthermore, it is consistent
with the manufacturer's recordkeeping requirements set forth in this
document.
Comment: One commenter noted that the 3-year prior period
adjustment standard will provide a useful records management timeframe.
Other commenters expressed appreciation for the 3-year time limitation,
saying that it is essential to enable a manufacturer to close its books
for a fiscal year.
Response: As discussed earlier in the ``Background'' section of
this preamble, we agree.
IV. Provisions of the Final Rule
This final rule with comment period incorporates two of the
provisions in the proposed rule issued on September 19, 1995. We will
address the remaining provisions of the September 1995 proposed rule in
a subsequent document we will publish in the Federal Register. This
rule adopts the following provisions in the September 1995 proposed
rule:
Under part 447, ``Payments for Services,'' we are adding a new
subpart I, entitled ``Payment for Outpatient Prescription Drugs Under
Drug Rebate Agreements.'' We are reserving Sec. 447.500 through Sec.
447.532 and Sec. 447.536 through Sec. 447.550.
Under Sec. 447.534, ``Manufacturer reporting requirements,'' we
are reserving paragraphs (a) through (f). We are redesignating
paragraph (g) in the September 1995 proposed rule as paragraph (h) and
are reserving the newly redesignated paragraph (g). We are also
redesignating paragraph (h) as paragraph (i). We are revising newly
redesignated paragraphs (h) and (i).
Under Sec. 447.534(h), we are establishing a requirement that
manufacturers must retain for 3 years from the date the manufacturer
reports that rebate period's data to us, all records (written or
electronic) of these data, and any other materials from which the
calculations of the AMP and BP were derived. A manufacturer must retain
records beyond the 3-year period if one or more of the following
circumstances exist:
[sbull] The records are the subject of an audit or of a government
investigation of which the manufacturer is aware related to average
manufacturer price or best price.
[sbull] The audit findings or investigation related to the AMP and
BP have not been resolved.
If the audit findings or investigation have been resolved,
manufacturers are not required to retain historical pricing data that
fall outside the 3-year recordkeeping requirement. We want to clarify
that Sec. 447.534(h) was not designed to address recordkeeping
requirements when a manufacturer is the subject of an audit or
government investigation by the Office of Inspector General (OIG) or
any other government entity. In the September 1995 proposed rule, we
proposed requiring manufacturers to retain data beyond the 3-year
timeframe if the records are the subject of an audit. Because we did
not specifically address OIG investigations in the September 1995
proposed rule, we want to clarify this point in this final rule.
Therefore, we are revising Sec. 447.534(h) from the language in the
September 1995 proposed rule to specify that manufacturers must retain
data beyond 3 years if the records are the subject of an audit or a
government investigation.
Under Sec. 447.534(i), we are establishing a 3-year time
limitation for a manufacturer to submit drug pricing changes. We define
the 3-year period as 12 quarters. Therefore, we require that the
manufacturer report to us changes to AMP or BP for a period not to
exceed 12 quarters from the quarter in which the data were due.
The terms of the Medicaid Drug Rebate Agreement require
manufacturers to submit pricing data for each calendar quarter no later
than 30 days after the end of that quarter. For example, for data
pertaining to the second quarter of 2003 (April 1, 2003 through June
30, 2003), the due date for submitting pricing data is July 30, 2003,
which falls during the third quarter of 2003.
For purposes of implementing the 3-year timeframe for reporting
pricing changes to us, we define 3 years as 12 quarters from the
quarter in which the data were due. For example, data from the second
quarter of the year 2000 (April 1, 2000 through June 30, 2000) were due
July 30, 2000 (the third quarter of 2000). Twelve quarters from the
third quarter of 2000 (the quarter in which the data were due) is the
third quarter of 2003. Based on the due date for submitting pricing
data, data submitted during the third quarter of 2003 were due on July
30, 2003. Therefore, pricing changes pertaining to data from the second
quarter of 2000 were due to us no later than July 30, 2003.
As with all pricing data submitted under the Medicaid drug rebate
program, if CMS, the Office of Inspector General, or another authorized
government agency reviews a manufacturer's pricing data and determines
that adjustments or revisions are necessary, irrespective of the
quarter, the manufacturer is bound under the Medicaid Drug Rebate
Agreement to comply with that determination.
[[Page 51915]]
V. Response to Comments
Because of the large number of items of correspondence we normally
receive on Federal Register documents published for comment, we are not
able to acknowledge or respond to them individually. We will consider
all comments we receive by the date and time specified in the ``DATES''
section of this preamble, and, when we proceed with a subsequent
document, we will respond to the comments in the preamble to that
document.
VI. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
[sbull] The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
[sbull] The accuracy of our estimate of the information collection
burden.
[sbull] The quality, utility, and clarity of the information to be
collected.
[sbull] Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
Under paragraph (h) of Sec. 447.534, there are two recordkeeping
requirements:
(1) A manufacturer must retain records (written or electronic) for
3 years from the date the manufacturer reports that rebate period's
data to CMS. The records must include these data and any other
materials from which the calculations of the average manufacturer price
and best price are derived, including a record of any assumptions made
in the calculations.
(2) A manufacturer must retain records beyond the 3-year period if
one or more of the following circumstances exist: (A) The records are
the subject of an audit or of a government investigation of which the
manufacturer is aware related to average manufacturer price or best
price, and (B) The audit findings or investigation related to the
average manufacturer price and best price have not been resolved.
Under paragraph (i), there is a reporting requirement: A
manufacturer must report to CMS changes to average manufacturer price
or best price for a period not to exceed 12 quarters from the quarter
in which the data were due.
These information collection requirements already exist. The
recordkeeping requirements are in the contract between the drug
manufacturer and CMS and are in any event usual and customary business
practices. The regulation specifies timeframes; however, under the
contract, we did not establish a timeframe.
The reporting requirement is currently approved under OMB number
0938-0578. The regulation merely adds a time limit in which the
manufacturer must report changes; currently, there is none.
If you comment on these information collection and recordkeeping
requirements, please mail copies directly to the following:
Centers for Medicare & Medicaid Services, Office of Strategic
Operations and Regulatory Affairs, Regulations Development and
Issuances Groups, Attn.: Julie Brown, CMS-2175-FC, Room C5-14-03, 7500
Security Boulevard, Baltimore, MD 21244-1850; and
Office of Information and Regulatory Affairs, Office of Management and
Budget, Room 10235, New Executive Office Building, Washington, DC
20503, Attn.: Brenda Aguilar, CMS Desk Officer.
VII. Regulatory Impact Analysis
A. Overall Impact
We have examined the impacts of this rule as required by Executive
Order 12866 (September 1993, Regulatory Planning and Review), the
Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-354),
section 1102(b) of the Social Security Act, the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
Executive Order 12866 (as amended by Executive Order 13258, which
merely assigns responsibility of duties) directs agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). A
regulatory impact analysis (RIA) must be prepared for major rules with
economically significant effects ($100 million or more in any 1 year).
We believe this rule will have an economically significant effect. We
believe the rule will save $90 million annually over the next 5 years
($50 million Federal savings and $40 million State savings as shown in
the table below). This figure represents 0.4 percent of total Medicaid
drug expenditures in Federal fiscal year 2002. We consider this rule to
be a major rule.
State and Federal Savings Over 5 Years
----------------------------------------------------------------------------------------------------------------
FY 2004 2005 2006 2007 2008
----------------------------------------------------------------------------------------------------------------
State.......................................... *$40,000 $40,000 $40,000 $40,000 $40,000
Federal........................................ $50,000 $50,000 $50,000 $50,000 $50,000
----------------------------------------------------------------------------------------------------------------
*Note: Figures are in thousands.
The RFA requires agencies to analyze options for regulatory relief
of small businesses. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and government agencies.
Most hospitals and most other providers and suppliers are small
entities, either by nonprofit status or by having revenues of $6
million to $29 million or less in any 1 year. For purposes of the RFA,
pharmaceutical manufacturers with 750 or fewer employees are considered
small businesses according to the Small Business Administration's size
standards matched to North American Industry Classification System,
effective October 1, 2002, http://www.sba.gov/size/sizetable2002.html).
Use of the Small Business Administration's size standards matched to
North American Industry Classification System is in compliance with the
Small Business Administration's regulation that set forth size
standards for health care industries at 65 FR 69432. Individuals and
States are not included in the definition of a small entity. This rule
will not have a significant impact on small businesses.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a
[[Page 51916]]
significant impact on the operations of a substantial number of small
rural hospitals. This analysis must conform to the provisions of
section 604 of the RFA. For purposes of section 1102(b) of the Act, we
define a small rural hospital as a hospital that is located outside of
a Metropolitan Statistical Area and has fewer than 100 beds. This rule
will not have a significant impact on small rural hospitals because the
provisions contained herein do not pertain to hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule that may result in expenditure in any 1 year by State,
local, or tribal governments, in the aggregate, or by the private
sector, of $110 million. We anticipate this rule will impact State
governments through increased Medicaid savings, in the aggregate, of
$40 million per year. We anticipate this rule will impact the private
sector, in the aggregate, by less than $110 million. We anticipate this
rule will cost drug manufacturers, in the aggregate, $90 million per
year.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications. We do not anticipate this rule will impose direct
requirement costs on State governments.
B. Anticipated Effects
1. Effects on Drug Manufacturers
We anticipate the rule will cost drug manufacturers $90 million in
the aggregate. To derive this estimate, we examined the rebate
adjustment data from several States for the four quarters from the
third quarter of 2001 through the second quarter of 2002. We separated
the data from adjustments for each quarter into two parts:
[sbull] Adjustments over the previous 12 quarters; and
[sbull] Adjustments beyond the previous 12 quarters. From those
data, we estimated the percentage of total rebate adjustments within 12
quarters nationally. We then projected what percentage of total
adjustments would not occur given the 12-quarter limit. Then we
estimated the national rebate adjustments by quarter by calculating the
adjustments as a percentage of total rebates by State and multiplying
that by the total national rebates. We then multiplied the projected
total national rebate adjustments by the projected percentage of
rebates that would not occur within 12 quarters to estimate the total
impact of the proposal. Over the four quarters of data (third quarter
of 2001 through the second quarter of 2002), we found that that
resulted in approximately $90 million.
The estimated number of drug manufacturers currently participating
in the Medicaid Drug Rebate Program is approximately 550. As previously
indicated, businesses with 750 employees or fewer are considered small
businesses. At this time, we are unable to determine how many of the
550 drug manufacturers have 750 or fewer employees. No single
manufacturer will be affected significantly by this rule. As a group,
the participating drug manufacturers will probably have a mixed
reaction to this rule. We anticipate that some drug manufacturers will
likely object to a narrowing of their window of opportunity to submit
pricing changes to us. We are unable to quantitatively address the
burden to manufacturers with respect to recordkeeping. Absent this
rule, manufacturers are in effect required to retain their pricing and
sales records indefinitely. Therefore, some of the manufacturers may be
relieved that we are setting forth clear guidelines for records
retention that closely mirror the industry standard for records
retention.
We do not anticipate that this rule will adversely affect a drug
manufacturer's participation in the Medicaid Drug Rebate program nor
impact the current level of access and availability of prescription
drugs for Medicaid beneficiaries. There is no impact to contractors or
providers.
2. Effects on the Medicaid Program
We anticipate the rule will result in $50 million in Federal
Medicaid savings and save State Medicaid programs $40 million in the
aggregate. This rule will have a positive effect on the State Medicaid
agencies. State Medicaid agencies are having difficulty fully funding
their Medicaid programs. They will likely be relieved that we are
setting forth a rule that will limit their fiscal vulnerability for
manufacturers implementing retroactive pricing changes that result in
greatly increased costs to their programs.
We are unable to quantitatively address the burden to States with
respect to recordkeeping. Absent this rule, States are in effect
required to retain drug utilization data indefinitely in order to
verify the revised or reduced rebates from manufacturers attributable
to retroactive pricing changes. Therefore, we expect that a majority of
the States will be relieved that we are setting forth clear guidelines
for manufacturer records retention.
This rule will not adversely affect a State's ability to obtain
manufacturers rebates nor impact the current level of access and
availability of prescription drugs for Medicaid beneficiaries. There is
no impact to Medicaid providers or contractors.
C. Alternatives Considered
Delay Publication of This Final Rule
We considered not publishing this final rule. However, we believe
this rule is necessary to address the burden to States and
manufacturers with respect to recordkeeping in the Medicaid drug rebate
program. We chose to issue this rule given the concerns repeatedly
expressed by manufacturers and States regarding the recordkeeping
requirements and the time limit on pricing changes.
Establish a Different Time Limitation
Another alternative would be to establish a longer or a shorter
time limitation for recordkeeping and pricing changes. We did not
choose a longer recordkeeping timeframe because it would not relieve a
reasonable amount of the burden to manufacturers. In addition, a longer
time limit on pricing changes would not sufficiently alleviate States'
fiscal vulnerability with regard to retroactive pricing changes. We did
not choose a shorter recordkeeping timeframe because it would create a
disparity among Federal recordkeeping requirements. The 3-year
timeframe set forth for both requirements mirrors existing records
retention requirements for States. Furthermore, because the
recordkeeping and pricing change provisions are interrelated, we
believe the timeframes should be the same for these provisions.
D. Conclusion
For these reasons, we are not preparing analyses for either the RFA
or section 1102(b) of the Act because we have determined, and we
certify, that this rule will not have a significant economic impact on
a substantial number of small entities or a significant impact on the
operations of a substantial number of small rural hospitals.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
List of Subjects in 42 CFR Part 447
Accounting, Administrative practice and procedure, Drugs, Grant
programs-health, Health facilities, Health professions, Medicaid,
Reporting and
[[Page 51917]]
recordkeeping requirements, Rural areas.
0
For the reasons set forth in the preamble, the Centers for Medicare &
Medicaid Services amends 42 CFR chapter IV part 447 as set forth below:
PART 447--PAYMENTS FOR SERVICES
0
1. The authority citation for part 447 continues to read as follows:
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).
0
2. A new subpart I, consisting of Sec. 447.500 through Sec. 447.550,
is added to read as follows:
Subpart I--Payment for Outpatient Prescription Drugs Under Drug Rebate
Agreements
Sec.
447.500-447.532 [Reserved]
447.534 Manufacturer reporting requirements.
447.536-447.550 [Reserved]
Subpart I--Payment for Outpatient Prescription Drugs Under Drug
Rebate Agreements
Sec. Sec. 447.500-447.532 [Reserved]
Sec. 447.534 Manufacturer reporting requirements.
(a)-(g) [Reserved]
(h) Recordkeeping requirements. (1)(i) A manufacturer must retain
records (written or electronic) for 3 years from the date the
manufacturer reports that rebate period's data to CMS. The records must
include these data and any other materials from which the calculations
of the average manufacturer price and best price are derived, including
a record of any assumptions made in the calculations.
(ii) A manufacturer must retain records beyond the 3-year period if
one or more of the following circumstances exist:
(A) The records are the subject of an audit or of a government
investigation of which the manufacturer is aware related to average
manufacturer price or best price.
(B) The audit findings or investigation related to the average
manufacturer price and best price have not been resolved.
(2) [Reserved]
(i) Timeframe for reporting revised average manufacturer price or
best price. A manufacturer must report to CMS revisions to average
manufacturer price or best price for a period not to exceed 12 quarters
from the quarter in which the data were due.
(ii) [Reserved]
Sec. Sec. 447.536-447.550 [Reserved]
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical
Assistance Program)
Dated: January 16, 2003.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
Approved: April 29, 2003.
Tommy G. Thompson,
Secretary.
Editorial Note: This document was received in the Office of the
Federal Register on August 19, 2003.
[FR Doc. 03-21548 Filed 8-28-03; 8:45 am]
BILLING CODE 4120-01-P