[Federal Register: April 1, 2004 (Volume 69, Number 63)]
[Rules and Regulations]
[Page 17035-17052]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01ap04-4]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
Office of the Secretary
32 CFR Part 199
RIN 0720-AA63
Civilian Health and Medical Program of the Uniformed Services
(CHAMPUS)/TRICARE: Implementation of the Pharmacy Benefits Program
AGENCY: Office of the Secretary, DoD.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule implements section 701 of the National Defense
Authorization Act for Fiscal Year 2000. The rule establishes procedures
for the inclusion of pharmaceutical agents on a uniform formulary based
upon relative clinical effectiveness and cost effectiveness;
establishes the cost-sharing requirements including a tiered co-payment
structure for pharmaceutical agents based on their designation as a
generic, formulary or non-formulary pharmaceutical agent; establishes
procedures to assure the availability of pharmaceutical agents not
included on the uniform formulary to eligible beneficiaries at the non-
formulary tier; establishes procedures to receive pharmaceutical agents
not included on the uniform formulary, but considered clinically
necessary, under the same terms and conditions as an agent on the
uniform formulary; establishes procedures to assure the availability of
clinically appropriate non-formulary pharmaceutical agents to members
of the uniformed services; establishes procedures for prior
authorization when required; and establishes a Department of Defense
Pharmacy and Therapeutics Committee (DoD P&TC) and a uniform formulary
Beneficiary Advisory Panel. Other administrative amendments are also
made to clarify specific policies that relate to the program.
DATES: This final rule is effective May 3, 2004.
ADDRESSES: Pharmacy Benefits Division, TRICARE Management Activity,
Skyline Five, 5111 Leesburg Pike, Falls Church, VA 22041.
FOR FURTHER INFORMATION CONTACT: COLONEL William Davies, Director,
Pharmacy Benefits Division, TRICARE Management Activity, Office of the
Assistant Secretary of Defense (Health Affairs), telephone (703) 681-
0039.
SUPPLEMENTARY INFORMATION:
I. Background and Legislative Changes
Section 701 of the National Defense Authorization Act for Fiscal
Year 2000 (Public Law 106-65), codified at Title 10, United States
Code, Section 1074g, directs the Department to establish an effective,
efficient, integrated pharmacy benefits program. The current
prescription drug benefit under TRICARE includes the U.S. Food and Drug
Administration (FDA) approved drugs and medicines that by United States
law require a physician's or other authorized individual professional
provider's prescription (acting within the scope of their license) that
has been ordered or prescribed by them. The pharmacy benefits program
does not include prescription drugs which are used in medical
treatments or
[[Page 17036]]
procedures that are expressly excluded from the TRICARE benefit by
statute or regulation.
II. Scope of the Program
The pharmacy benefits program will include a uniform formulary of
pharmaceutical agents that will assure the availability of
pharmaceutical agents in the complete range of therapeutic classes
authorized under the current TRICARE prescription drug benefit. A
therapeutic class is defined as a group of drugs that are similar in
chemical structure, pharmacological effect, or clinical use.
Pharmaceutical agents in each therapeutic class shall be selected for
inclusion on the uniform formulary based upon the relative clinical
effectiveness and cost effectiveness of the agents in such class. If a
pharmaceutical agent in a therapeutic class is determined not to have a
significant, clinically meaningful therapeutic advantage in terms of
safety, effectiveness, or clinical outcome compared to other drugs
included on the uniform formulary, it may be classified as a non-
formulary agent. If a pharmaceutical agent in a therapeutic class is
not cost effective relative to other pharmaceutical agents in that
therapeutic class, it may be classified as a non-formulary agent.
The pharmacy benefits program, which includes the uniform formulary
and its associated tiered co-payment structure, is applicable to all of
the uniformed services. Its geographical applicability is all 50 states
and the District of Columbia, Guam, Puerto Rico, and the Virgin
Islands. In addition, if authorized by the Assistant Secretary of
Defense (Health Affairs), the pharmacy benefits program may be
implemented in areas outside the 50 states and the District of
Columbia, Guam, Puerto Rico, and the Virgin Islands. In such case, the
Assistant Secretary of Defense (Health Affairs) may also authorize
modifications to the pharmacy benefits program rules as may be
appropriate to the areas involved.
III. Public Comments
The proposed rule was published in the Federal Register on Friday,
April 12, 2002, (67 FR 17948) in which DoD proposed to implement its
pharmacy benefits program and uniform formulary. Interested persons
were invited to submit comments on DoD's proposed rule by June 11,
2002. We received more than 3,000 public comments with the majority
concentrated in five general areas: the proposed non-formulary co-
payment of $22; assurance that the uniform formulary will include a
broad range of medications most often prescribed in each therapeutic
class; procedures for documenting and approving clinical necessity for
doctors should be streamlined; ``grandfathering'' at current co-
payments for patients already receiving a medication that may become
non-formulary; and ensuring that providers have adequate educational
materials and access to formulary lists.
In addition, other comments were received from organizations
representing various medical fields or corporate entities regarding
specific aspects of the proposed rule. A discussion of the more
significant comments concerning DoD's proposed rule, and our responses
to these comments, are set forth below.
A. Point of Clarification Concerning Availability of Non-Formulary
Drugs
Public comments revealed the perception that ``non-formulary''
drugs would not be available under the uniform formulary. That
perception is incorrect. As stated in the proposed rule and as required
by 10 U.S.C. 1074g(a)(5), we emphasize that drugs categorized as ``non-
formulary'' must be made available through at least one of our
pharmaceutical venues. DoD will make non-formulary drugs available
through the TRICARE Mail Order Pharmacy and retail pharmacies at the
non-formulary co-payment.
B. Co-Payments
The most frequent public comment concerned the proposed $22 co-
payment for the non-formulary tier of the uniform formulary. It was
generally stated that ``the jump from $9 to $22 for non-formulary drugs
is excessively high and presents an undue financial burden upon all
classes of beneficiaries.''
DoD was directed by 10 U.S.C. 1074g to establish an effective,
efficient, and integrated pharmacy benefits program, to include a
uniform formulary of pharmaceutical agents based upon relative clinical
and cost effectiveness. DoD is authorized under 10 U.S.C. 1074g(a)(6)
to establish cost-sharing requirements for generic, formulary, and non-
formulary agents. The latitude given DoD in establishing non-formulary
co-payments is limited by this section which states in pertinent part,
``For non-formulary agents, cost-sharing shall be consistent with
common industry practice and not in excess of amounts generally
comparable to 20 percent for beneficiaries covered by section 1079 of
this title or 25 percent for beneficiaries covered by section 1086 of
this title.'' (emphasis added). Common industry practice is to either
deny payment completely for non-formulary agents, or as in multi-tiered
plans, have a difference in the cost-share between formulary and non-
formulary agents that is enough to influence beneficiaries to select
equally effective, less expensive medications. At the time the proposed
rule was drafted, common industry practice was to establish a $12 to
$15 differential between the non-formulary and formulary cost-shares.
The proposed $22 co-payment creates a $13 differential and is within
the 20% maximum cost-share limit established by law, based upon the
average aggregate cost to the government for pharmaceutical agents that
may be designated as non-formulary. The $22 co-payment is also
significantly lower than commercial non-formulary co-payments that
average $29 in retail pharmacies, and $34 to $57 in mail order
pharmacies. (Source: Novartis Pharmacy Benefit Report: 2001 Facts and
Figures). Within the TRICARE Mail Order Pharmacy, the proposed $22 co-
payment for a 90 day supply of a non-formulary medication is even less
than the formulary rate in the retail pharmacy network for a comparable
90 day supply (3 prescriptions at a $9 cost-share per prescription=$27
total) and is intended to influence beneficiary choice for mail order.
Thus, the $22 non-formulary co-payment is in line with the commercial
best practice business model, influencing beneficiary choice, while
maintaining access to a broad range of pharmaceutical agents.
C. Formulary Range
The second most frequent comment concerned reassurance that the
uniform formulary will include a broad range of frequently prescribed
medications that offer a spectrum of choices within each therapeutic
class, recognizing that the ``lowest common denominator'' drug is not
adequate to meet the health care needs of numerous beneficiaries. The
Department is directed by 10 U.S.C. 1074g(a)(2)(A) to establish a
``uniform formulary, which shall assure the availability of
pharmaceutical agents in the complete range of therapeutic classes.''
The selection for inclusion on the uniform formulary of particular
pharmaceutical agents in each therapeutic class shall be based on the
relative clinical and cost effectiveness of the agents in such class.
In considering the relative clinical effectiveness of pharmaceutical
agents, the Director, TRICARE Management Activity, is required by 10
U.S.C. 1074g(a)(2)(B) to presume inclusion in a therapeutic class of a
pharmaceutical agent, unless the DoD Pharmacy and Therapeutics
Committee finds that a pharmaceutical
[[Page 17037]]
agent does not have a significant, clinically meaningful therapeutic
advantage in terms of safety, effectiveness, or clinical outcome over
the other drugs included on the uniform formulary. The DoD Pharmacy and
Therapeutics Committee, comprised of physicians and pharmacists with
clinical expertise, will conduct in-depth clinical and cost-effective
analysis of medications within a therapeutic class. The DoD Pharmacy
and Therapeutics Committee will recommend that an agent have a non-
formulary status based on clinical effectiveness, only if the agent
does not have a significant, clinically meaningful therapeutic
advantage in terms of safety, effectiveness, or clinical outcome over
other drugs included on the uniform formulary. The Committee's
recommendations shall be commented upon by the Beneficiary Advisory
Panel, and the final decision will be made by the Director, TRICARE
Management Activity (TMA). Those medications designated non-formulary
will still be accessible through the mail order pharmacy and retail
pharmacies at the non-formulary cost-share, and at the formulary cost-
share for conditions of medical necessity.
D. Streamlining Medical Necessity Procedures
The third most frequent comment concerned assurances that
procedures for documenting and determining ``clinical necessity'' will
be streamlined, without imposing unnecessary administrative procedures
upon providers, patients, and pharmacists. Under both the TRICARE Mail
Order Pharmacy program and the Request for Proposals for the TRICARE
Retail Pharmacy contract, we have established streamlined processes
that efficiently and accurately identify instances where it is
clinically necessary for a beneficiary to use a non-formulary drug. We
re-emphasized that beneficiaries may obtain non-formulary drugs without
delay because the clinical necessity determination will, in most cases,
be a retrospective review completed after the medication is dispensed.
Under the TRICARE Mail Order Pharmacy Program, beneficiaries have the
option of submitting evidence to support clinical necessity
concurrently with their prescriptions. Under the pharmacy benefits
program, clinical necessity establishes only the co-payment of a non-
formulary medication for a beneficiary and does not impact access to
medications.
E. Grandfathering Co-Payments
The fourth most frequent comment concerned the concept of
``grandfathering'' co-pays at current levels for patients already
receiving maintenance medications which subsequently may be designated
as non-formulary when the uniform formulary is implemented.
Under 10 U.S.C. 1074g(a)(8), the``Secretary shall ensure that en
eligible covered beneficiary may continue to receive coverage for any
maintenance pharmaceutical that is not on the uniform formulary and
that was prescribed for the beneficiary before'' October 5, 1999 [the
date of enactment of section 1074g] ``and stabilized the medical
condition of the beneficiary.'' Compliance with this directive is
achieved in that access to pharmaceuticals designated as ``non-
formulary'' is preserved under this rule, though at the non-formulary
tier. Where there is clinical necessity for the use of a non-formulary
agent that is not otherwise excluded as a covered benefit, the drug or
medicine will be provided at the same co-payment as a formulary agent.
Clinical necessity for use of a non-formulary agent is established
when: Use of the formulary agent is contraindicated; the patient is
likely to experience or has experienced significant adverse effects
from formulary agents; formulary agents result in therapeutic failure;
the patient previously responded to a non-formulary agent and changing
to a formulary agent would incur unacceptable clinical risk; or, there
is no alternative formulary agent.
The government will apply the commercial business practice of
establishing a transition period during which the formulary co-payment
will apply to pharmaceuticals that were prescribed for a beneficiary
prior to that pharmaceutical agent being designated as ``non-
formulary''. Transition periods shall be determined by the DoD Pharmacy
and Therapeutics Committee and included with any recommendation of a
pharmaceutical for ``non-formulary'' status. The intent of this
transition period is to allow sufficient time for education and
communication of this formulary status change, enabling coordination
between beneficiaries and providers on whether to submit documentation
of clinical necessity, continue therapy at the non-formulary tier, or
modify therapy. With these considerations, transition periods may vary
by drug; however, will not be longer than 180 days from the final
decision date but may be less.
F. Provider Education and Formulary Access
The fifth most frequent public comments stated that DoD must ensure
doctors have educational materials on the program, uncomplicated and
immediate access to formulary lists, and the ability to identify and
fulfill clinical necessity documentation requirements in real time via
the Internet. The Department will incorporate the communication of
formulary information into TMA's extensive marketing and education
program that employs both electronic and print media. Dissemination of
information to beneficiaries, beneficiary advisory groups, providers,
and TRICARE contractors will be coordinated through TMA's
Communications and Customer Services Directorate.
G. Financial Responsibility
A managed care support contractor of the TRICARE program inquired
as to the status of the requirement under 10 U.S.C. 1074g(d) that in
the operation of the pharmacy benefits program the Secretary of Defense
assure through management and new contractual arrangements that
financial resources are aligned such that the cost of prescriptions is
borne by the organization that is financially responsible for the
health care of the eligible covered beneficiary.
TRICARE, in its next generation of contracts, has announced that it
is carving out from the managed care support contracts the requirement
to provide retail pharmacy services. Managed care support contractors
have had no requirement to provide mail order pharmacy services. Mail
order pharmacy services were provided under a single, separate
contract, the TRICARE National Mail Order Pharmacy Program, and are
being provided now under a similar arrangement with the TRICARE Mail
Order Pharmacy Program. The TRICARE Retail Pharmacy solicitation is
structured so that the Government, with overall fiscal responsibility
for the health care of eligible beneficiaries, bears its share of the
cost of prescriptions as a Federal procurement.
H. Clinical Effectiveness and Cost Effectiveness
As explained in the preamble to the proposed rule, it is presumed
that pharmaceutical agents should be included on the uniform formulary
unless the Pharmacy and Therapeutics Committee finds by a majority vote
that a pharmaceutical agent does not have a significant, clinically
meaningful therapeutic advantage in terms of safety,
[[Page 17038]]
effectiveness, or clinical outcome over other pharmaceutical agents
included on the uniform formulary. The DoD Pharmacy and Therapeutics
Committee will exercise collective professional judgment by considering
pertinent information from a variety of sources. The Committee will
evaluate the relative clinical effectiveness of pharmaceutical agents
within a therapeutic class by considering information about their
safety, effectiveness, and clinical outcome. Information considered by
the committee may include but is not limited to: FDA approved and other
studied indications; pharmacology; pharmacokinetics; contraindications:
warnings/precautions; incidence and severity of adverse effects; drug
to drug, drug to food, and drug to disease interactions; availability,
dosing, and method of administration; epidemiology and relevant risk
factors for diseases/conditions in which the drugs are used; and
concomitant therapies; results of safety and efficacy studies; results
of effectiveness/clinical outcomes studies; and results of meta-
analyses.
In considering the relative cost effectiveness of pharmaceutical
agents in a therapeutic class authorized under the TRICARE pharmacy
benefit, the DoD Pharmacy and Therapeutics Committee shall evaluate the
costs of the agent in relation to the safety, effectiveness, and
clinical outcomes of other agents in the class. Information considered
by the Committee concerning the relative cost effectiveness of the
pharmaceutical agent may include but is not limited to: cost of the
drug to the Government; impact on overall medical resource utilization
and costs, cost-efficacy studies; cost-effectiveness studies; cross-
sectional or retrospective economic evaluations; pharmacoeconomic
models; patent expiration dates; clinical practice guideline
recommendations; and existence of existing blanket purchase agreements,
incentive price agreements, or contracts. Based on its assessment of
the relative clinical and cost effectiveness of agents within a
therapeutic class, the DoD Pharmacy and Therapeutics Committee will
recommend that an agent either be included on the uniform formulary or
designated as non-formulary. The DoD Pharmacy and Therapeutics
Committee's recommendation will be determined by a majority vote.
A pharmaceutical company stated its belief that the broadly drafted
definition of a ``therapeutic class'' in the rule would make it
difficult for beneficiaries to obtain access to their varied
pharmaceutical needs because the uniform formulary may cover a limited
number of drugs per therapeutic class. Therapeutic class is defined as
a group of drugs that are similar in chemical structure,
pharmacological effect, or clinical use. The pharmaceutical company
suggested the following definition: ``a group of covered outpatient
drugs used to treat the same spectrum of disorders with similar patient
outcomes, similar effects on all relevant drug receptors or other
biological targets, and similar tolerability throughout their
clinically accepted dosing ranges across all relevant patient
populations.'' The narrow definition proposed by the pharmaceutical
company would result in an extremely large number of therapeutic
classes. Many of the classes would contain a single drug, or at most,
very few drugs. This definition would obviously minimize the number of
drugs that could possibly be designated as non-formulary. The
definition in the rule is consistent with commonly accepted definitions
of a therapeutic class. We are confident that, given the definition of
a therapeutic class in the rule, the uniform formulary will include a
sufficient number of pharmaceuticals to meet the clinical needs of DoD
beneficiaries.
A pharmacy association suggested adding ``and/or clinical use'' to
the definition of therapeutic class. We concur with that recommendation
and have made that change.
Comments were received from a pharmaceutical manufacturer
concerning the date that new drugs approved by the Food and Drug
Administration (FDA) will become available to beneficiaries under the
pharmacy benefits program. The manufacturer recommended all new drugs
be automatically included on the uniform formulary if it is in a
therapeutic class that has not been reviewed; or if a new drug is in a
class that has already been reviewed, the new agent shall be evaluated
within six months of the market date. Currently, new drugs approved by
the FDA are available immediately to our beneficiaries in retail
pharmacies. Their availability in the TRICARE Mail Order Program is
contingent upon a decision by the DoD Pharmacy and Therapeutics
Committee. Their availability in military medical treatment facilities
(MTFs) is contingent upon either the individual MTF placing them on its
formulary or the DoD Pharmacy and Therapeutics Committee placing them
on the Basic Core Formulary, thus mandating their inclusion on every
MTF formulary.
Under 10 U.S.C. 1074g, DoD has the option of making a new drug
available immediately in retail pharmacies at the formulary cost-share
tier, or delay its availability until it is evaluated by the Pharmacy
and Therapeutics Committee for placement in either the formulary or
non-formulary cost-share tier. However, for any drugs newly approved by
the Food and Drug Administration, the Pharmacy and Therapeutics
Committee is required under 10 U.S.C. 1074g(b)(2) to consider their
inclusion on the uniform formulary. Under 10 U.S.C. 1074g(a)(2)(B), it
is presumed that pharmaceutical agents should be included on the
uniform formulary unless the Pharmacy and Therapeutics Committee finds
by a majority vote that a pharmaceutical agent does not have
significant, clinically meaningful therapeutic advantage in terms of
safety, effectiveness, or clinical outcome over other pharmaceutical
agents included on the uniform formulary. The department will continue
with its current policy, and except for drugs for excluded benefits,
new drugs approved by the FDA will automatically be included on the
uniform formulary at the formulary cost-share tier. Newly approved FDA
drugs will normally by reviewed at the next scheduled Pharmacy and
Therapeutics Committee meeting for evaluation of the drug's clinical
and cost effectiveness in comparison to other drugs in the therapeutic
class.
A pharmaceutical company stated its belief that the rule should
require the Pharmacy and Therapeutics Committee to consider certain
acknowledged sources of reliable clinical information when evaluating
drugs within a therapeutic class (e.g., clinical studies used for FDA
approval, drug compendia information and peer-reviewed literature). The
pharmaceutical company also stated that the rule should require the
Committee to consult with independent medical specialists. The rule
allows the Committee to consider all the sources of clinical
information--including independent medical specialists--suggested by
the pharmaceutical company. Rather than having the rule dictate the
specific information sources that must be used in all circumstances, we
believe it is more appropriate, as well as consistent with the statute
and industry practice, to rely on the collective professional judgment
of the Committee members to determine which information sources need to
be used in order to most effectively evaluate the clinical and cost
effectiveness.
A pharmaceutical company noted that the rule does not make any
reference to the impact on quality of life when making formulary
decisions. A pharmaceutical manufacturer
[[Page 17039]]
association stated its opinion that in determining clinical
effectiveness, the Secretary must add ``quality of life'' and
``compliance'' as factors to consider when determining the therapeutic
advantage of one drug over another. In 32 CFR 199.21(e)(1)(iii) it
states that the Pharmacy and Therapeutics Committee will evaluate the
relative clinical effectiveness of drugs within a therapeutic class by
considering information about their safety, effectiveness, and clinical
outcome. In 32 CFR 199.21(e)(1)(iv) it goes on to list various factors
that the Committee may consider, but is not limited to considering.
Clinical effectiveness is a composite of many factors. It is not our
intent to include in the rule an exhaustive list of all factors that
could potentially affect the clinical effectiveness of pharmaceutical
agents. Although quality of life and compliance are not explicitly
identified in the rule, the rule does not preclude or require the
Committee to consider such information in evaluating the relative
clinical effectiveness of pharmaceutical agents in a therapeutic class.
We will rely on the collective professional judgment of the Committee
to determine if relevant information on quality of life and compliance
are available and useful for evaluating the relative clinical
effectiveness of particular pharmaceutical agents.
A pharmaceutical manufacturer association stated that in
determining ``cost effectiveness'' the rule must include detailed
information as to how the Pharmacy and Therapeutics Committee will
factor in the value of saved lives and improved quality of life. In 32
CFR 199.21(e)(2)(ii) it lists information the Committee may consider,
but is not limited to considering in evaluating the relative cost
effectiveness of drugs in a therapeutic class. Although the value of
saved lives and improved quality of life are not explicitly identified
in the rule, the rule does not preclude the Committee from considering
such information in evaluating the relative cost effectiveness of
pharmaceutical agents in a therapeutic class. We will rely on the
collective professional judgment of the Committee to determine if
relevant information on the value of lives saved and improved quality
of life are available and useful for evaluating the relative cost
effectiveness of pharmaceutical agents. However, significant
differences in clinical outcomes will obviously be a major focus of the
Committee's actions.
A pharmaceutical company questioned how relative price is weighed
against relative effectiveness. The rule states that the Committee will
evaluate the costs of pharmaceutical agents in relation to the safety,
effectiveness, and clinical outcomes of the agents in the therapeutic
class.
A pharmaceutical company commented that the rule should be
clarified to allow for cost effectiveness consideration only after the
Pharmacy and Therapeutics Committee has determined clinical
effectiveness is firmly established. Under 10 U.S.C. 1074g(a)(2)(A),
the selection for inclusion on the uniform formulary of particular
pharmaceutical agents in each therapeutic class shall be based on the
relative clinical and cost effectiveness of the agents in such class.
Like the statute, (10 U.S.C. 1074g(a)(2)(B) for clinical effectiveness
and 1074g(a)(2)C) for cost effectiveness), the rule (32 CFR
199.21(a)(3)(ii)) specifies a two-step process that will evaluate
clinical effectiveness first, then cost effectiveness second, and base
a formulary status recommendation based upon both. Before making a
recommendation that a therapeutic agent be classified as a non-
formulary agent, both clinical effectiveness and cost effectiveness
will be evaluated. However, in making the recommendation, a
determination that an agent is either not as clinically effective or
not as cost effective as other agents in the class, will be sufficient
to support the recommendation that the agent will not be added to the
uniform formulary.
A professional organization stated an opinion that Sec.
199.21(a)(3)(ii) of the proposed rule, setting forth the standard for
designating a pharmaceutical agent as non-formulary is unclear and
potentially inconsistent with section 1074g(a)(2)(A) of the governing
statute, which provides that the decision as to whether an agent in a
particular therapeutic class is included on the uniform formulary will
be based on ``the relative clinical and cost effectiveness of the
agents in the class.'' We disagree that the standard in the rule is
either unclear or inconsistent with the statute. We concur with the
commenter that the statutory provision envisions a test that takes into
account both clinical effectiveness and cost. In 32 CFR
199.21(a)(3)(ii), it states: ``If a pharmaceutical agent in a
therapeutic class is determined by the Pharmacy and Therapeutics
Committee not to have a significant, clinically meaningful therapeutic
advantage in terms of safety, effectiveness, or clinical outcome over
other pharmaceutical agents included on the uniform formulary, it may
be classified as a non-formulary agent. In addition, if the evaluation
of the Pharmacy and Therapeutic Committee concludes that a
pharmaceutical agent in a therapeutic class is not cost effective
relative to other pharmaceutical agents in a therapeutic class,
considering costs, safety, effectiveness, and clinical outcomes, it may
be classified as a non-formulary agent.'' The rule is simply stating,
in accordance with section 1074g(a)(2)(A) that ``selection for
inclusion on the uniform formulary . . . shall be based on the relative
clinical and cost effectiveness of the agents in such [therapeutic]
class.'' If it is either not relatively as clinically effective or cost
effective as other agents in such class, the agent will not be
considered as clinically effective and cost effective as other agents
in such class.
I. Evaluation of Pharmaceutical Agents for Determinations Regarding
Inclusion on the Uniform Formulary
As explained in the proposed rule, the DoD Pharmacy and
Therapeutics Committee will periodically evaluate or re-evaluate
individual drugs and/or drug classes for determinations regarding
inclusion or continuation on the uniform formulary. Evaluation or re-
evaluation of individual drugs or drug classes may be prompted by a
variety of circumstances that may include but are not limited to:
approval of a new drug by the FDA; approval of a new indication for an
existing drug; changes in the clinical use of existing drugs; new
information concerning the safety, effectiveness or clinical outcomes
of existing drugs; price changes; shifts in market share; scheduled
review of a therapeutic class; and requests from Pharmacy and
Therapeutics Committee members, military treatment facilities, or other
Military Health System officials.
A pharmaceutical company questioned how new Food and Drug
Administration (FDA) approved drugs will be evaluated. Under 10 U.S.C.
1074g(b)(2), the Committee is required to meet quarterly to consider
for inclusion on the uniform formulary any new drugs newly approved by
the FDA. The Committee will evaluate the clinical effectiveness and
cost effectiveness as outlined in the rule. Comments were received from
pharmaceutical manufacturers and pharmaceutical associations on
evaluation of pharmaceutical agents for determinations regarding
inclusion on the uniform formulary. Evaluation or revaluations may be
prompted by a variety of circumstances that may include but are not
limited to: approval of a new drug by the FDA; approval of a new
indication for an existing drug;
[[Page 17040]]
changes in the clinical use of existing drugs; new information
concerning the safety, effectiveness or clinical outcomes of existing
drugs; price changes; shift in market share; scheduled review of a
therapeutic class; and requests from Pharmacy and Therapeutics
Committee members, military treatment facilities, or other Military
Health System officials.
J. Uniform Formulary at Military Treatment Facilities (MTFs)
As discussed in the proposed rule, pharmaceutical agents included
on the uniform formulary shall be available through medical treatment
facilities of the uniformed services, consistent with the scope of
health care services offered in such facilities. The Basic Core
Formulary (BCF) is a subset of the uniform formulary and is a mandatory
component of all MTF pharmacy formularies. The BCF contains the minimum
set of drugs that each MTF pharmacy must have on its formulary to
support the primary care scope of practice for Primary Care Manager
enrollment sites. Additions to individual MTF formularies are
determined by local Pharmacy and Therapeutics Committees based upon the
scope of health care services provided. However, pharmaceutical agents
that are designated as non-formulary on the uniform formulary shall not
be included on an MTF pharmacy formulary. All drugs on the MTF
formulary must be available to all beneficiaries. There are no co-
payments or cost-shares for any beneficiaries utilizing MTF pharmacies.
A pharmaceutical association comments on the importance of
standardizing the formulary process within the military treatment
facilities (MTFs). Under 10 U.S.C. 1074g(a)(2)(E)(i), pharmaceutical
agents included on the uniform formulary shall be available to eligible
covered beneficiaries through facilities of the uniformed services,
consistent with the scope of health care services offered in such
facilities. Although the formulary process in the MTF Pharmacy and
Therapeutics Committees is similar to the process outlined in the
statute and the rule for the DoD Pharmacy and Therapeutics Committee,
neither govern the procedures of the MTF Pharmacy and Therapeutics
Committees. Each MTF must evaluate the scope of practice of the
facility and determine which drugs in addition to those on the Basic
Core Formulary, which is required for all MTFs, should be on that MTF's
formulary.
The same association commented that the rule does not outline the
steps an MTF must take to determine clinical necessity for non-
formulary items. There are three issues associated with this comment.
First, not all points of service or venues are required to have non-
formulary pharmaceutical agents available to beneficiaries. Under 10
U.S.C. 1074g(a)(5), non-formulary agents are required to be available
only through one of the venues described in 10 U.S.C. 1074g(a)(2)(E),
specifically, MTFs, retail pharmacies, or the TRICARE Mail Order
Pharmacy program. A higher cost-share is authorized for non-formulary
pharmaceutical agents in the venue where they are offered. DoD has
elected to make non-formulary pharmaceutical agents available at the
non-formulary tier cost-shares described in this rule in all venues,
except for the MTFs. Second, in those points of service or venues where
non-formulary tier pharmaceutical agents are offered, under 10 U.S.C.
1074g(a)(7), DoD is required to establish procedures for beneficiaries
to receive pharmaceutical agents at the formulary tier cost-share that
are not included on the uniform formulary (i.e., non-formulary), if the
beneficiary establishes that the non-formulary pharmaceutical agent, as
opposed to the formulary tier pharmaceutical agent, is clinically
necessary for the beneficiary. Procedures for establishing clinical
necessity for prescriptions presented at retail pharmacies and the
TRICARE Mail Order Program are described in 32 CFR 199.21(h)(3). If
clinical necessity is established, non-formulary tier pharmaceutical
agents are provided to the beneficiary at the formulary tier cost-
share. Third, non-formulary tier pharmaceutical agents will not be
routinely available in the MTFs like they are in the other venues.
These agents can be obtained in all other venues with payment of the
non-formulary tier cost-share, whereas if available in the MTFs, they
would be obtained without payment of the higher cost-share, because no
cost-shares are charged at the MTFs. Although these agents will not
routinely be available in the MTFs, DoD has decided to make non-
formulary tier pharmaceutical agents available in the MTFs when medical
necessity for the agent is established. Under 32 CFR 199.21(h)(3)(ii)
we now state, ``Although not a beneficiary entitlement, non-formulary
pharmaceutical agents may be made available to eligible covered
beneficiaries for prescriptions approved through the non-formulary
special order process of the MTFs that validates the medical necessity
for the use of the non-formulary pharmaceutical agent.''
A retiree association comments that beneficiaries should be
notified regarding changes to the MTFs' Basic Core Formulary. We will
include all formulary changes in the marketing/education efforts
described previously.
A retiree association commented that the rule should include a
statement regarding quantities of medications available from MTFs, just
as it does concerning the quantities available from the retail networks
and mail order pharmacy. Quantity limits in retail pharmacies and the
TRICARE Mail Order Program are discussed in Sec. 199.21(i)(2) under
the heading of ``Cost-sharing amounts.'' The purpose of this subsection
is to describe the cost-share required in each venue, and the maximum
quantity of a prescribed drug that may be obtained for that cost-share.
The rule clearly states that there is no cost-share for pharmaceutical
agents obtained from an MTF. Because there is no cost-share in the MTF,
regardless of the quantity dispensed, it is unnecessary to describe the
quantity limit that may apply at a MTF. Omitting any reference to
quantity limits at the MTF also allows appropriate flexibility to
change policies as necessary to meet operational requirements in the
MTFs, without having to revise the Code of Federal Regulations.
A beneficiary advocacy organization requested assurance that the
Basic Core Formulary at MTFs will be as robust as possible to provide a
cost-effective distribution channel for beneficiaries. MTF pharmacies
are the least costly point of service for the beneficiary. The Basic
Core Formulary as stated in 199.21(h)(2)(ii) ``contains the minimum set
of drugs that each MTF pharmacy must have on its formulary to support
the primary care scope of practice for the Primary Care Manager
enrollment sites.'' To the extent appropriate based on the scope of
practice at each MTF, the actual formulary in use at the MTF will
reflect the needs of the MTF's patients. We believe the result will be
reasonable access through MTF pharmacies to drugs needed by MTF
patients.
K. Prior Authorizations
As noted in the proposed rule, selected pharmaceutical agents may
be subject to prior authorization or utilization review requirements to
assure medical necessity, clinical appropriateness and/or cost
effectiveness. The Pharmacy and Therapeutics Committee will assess the
need to prior authorize a given agent by considering the relative
clinical and cost effectiveness of agents within a therapeutic class.
Agents that require
[[Page 17041]]
prior authorization will be identified by a majority vote of the
Pharmacy and Therapeutics Committee. The Pharmacy and Therapeutics
Committee will establish the prior authorization criteria for a given
agent.
A medical association stated its opinion that the rule should state
the time frame to turn around a prior authorization denial and that the
reasons for the denial must be documented. Similar to other sections of
Part 199, the rule specifies that the Director, TRICARE Management
Activity, may issue policies, procedures, instructions, guidelines,
standards and/or criteria to implement this requirement. Our goal is to
efficiently, accurately, and promptly process prior authorization
requests. Our mail order and retail pharmacy services contracts are
structured to meet these goals and ensure that beneficiaries are
advised of their right to appeal.
A medical association stated the opinion that pharmaceutical agents
can not be subject to prior authorization criteria that apply in all
circumstances. We disagree. There are similarities but also differences
between prior authorization and clinical necessity. Prior authorization
may be required under Sec. 199.21(k) when considering the relative
clinical and cost effectiveness of agents within a therapeutic class,
and will require the establishment of prior authorization criteria. For
example, some drugs should not be used as the first line of therapy. In
those circumstances, it may be appropriate to require prior
authorization to ensure medically appropriate care is being given by
use of the first line therapy before the second line is used.
A TRICARE managed care support contractor asked if a pharmaceutical
agent did not previously require prior authorization, but the DoD
Pharmacy and Therapeutics Committee makes a decision that it should,
will affected beneficiaries be notified in writing of the new
requirement? Also, will affected beneficiaries be ``grandfathered''
long enough for them to obtain a letter of medical necessity from the
prescribing physician? We intend to apply the commercial business
practice of providing an implementation time period that applies to
pharmaceuticals that were prescribed prior to that agent requiring a
prior authorization. Transition periods will be recommended by the DoD
Pharmacy and Therapeutics Committee and will be included with any
recommendation that a pharmaceutical require prior authorization. The
intent of the transition period is to allow sufficient time for
education and communication of this change enabling coordination
between beneficiaries and providers on whether to continue the therapy
or modify the therapy. We will use the same methods of education and
communication previously discussed.
A pharmaceutical company stated that the rule does not identify the
prior authorization criteria that will be established. The government
will rely on the collective professional judgment of the DoD Pharmacy
and Therapeutics Committee to identify both the pharmaceutical agents
that require prior authorization and the criteria that apply to any
particular agent.
L. Cost-Sharing Requirements
The proposed rule explained that active duty members do not pay a
cost-share for prescription drugs. Cost-sharing requirements for all
other beneficiaries will be based upon the pharmaceutical agent's
classification on the uniform formulary, that is, generic, formulary,
or non-formulary and the point of service, that is, MTF, retail network
pharmacy, retail non-network pharmacy, or the TRICARE Mail Order
Pharmacy (TMOP), from which the agent is acquired. TRICARE Prime point
of service charges still apply to the pharmacy benefits program.
There is no co-pay for pharmaceutical agents obtained from a
military treatment facility.
For pharmaceutical agents obtained from a retail network pharmacy
there is a $9.00 co-pay per prescription for up to a 30-day supply of a
formulary agent, a $3.00 co-pay per prescription for up to a 30-day
supply of a generic agent, and a $22.00 co-pay per prescription for up
to a 30-day supply of a non-formulary agent.
For formulary and generic pharmaceutical agents obtained from a
retail non-network pharmacy there is a 20 percent or $9.00 co-pay
(whichever is greater) per prescription for up to a 30-day supply of
the pharmaceutical agent.
For non-formulary pharmaceutical agents obtained from a retail non-
network pharmacy there is a 20 percent or $22.00 co-pay (whichever is
greater) per prescription for up to a 30-day supply of the
pharmaceutical agent.
For pharmaceutical agents obtained under the TMOP program there is
a $9.00 co-pay per prescription for up to a 90-day supply of a
formulary agent, a $3.00 co-pay per prescription for up to a 90-day
supply of a generic agent, and a $22.00 co-pay per prescription for up
to a 90-day supply of a non-formulary agent.
A point of service cost-share of 50 percent applies in lieu of the
20 percent co-pay for TRICARE Prime beneficiaries who obtain
prescriptions from retail non-network pharmacies.
Except as provided below, for prescription drugs acquired by
TRICARE Standard beneficiaries from retail non-network pharmacies,
beneficiaries are subject to the $150.00 per individual or $300.00
maximum per family annual fiscal year deductible.
Under TRICARE Standard, dependents of members of the uniformed
services whose pay grade is E-4 or below are subject to the $50.00 per
individual or $100.00 maximum per family annual fiscal year deductible.
The TRICARE catastrophic loss limits apply to pharmacy benefits.
For dependents of active duty members, the maximum family liability is
$1,000 for cost-shares and deductibles based on allowable charges for
TRICARE Basic Program services and supplies received in a fiscal year.
For all other categories of beneficiary families, the maximum family
liability is $3,000 in a fiscal year.
A comment was received from a pharmaceutical association stating it
does not support incentives to encourage populations to obtain their
pharmacy services from mail order over retail pharmacy, and that there
is little evidence to suggest mail order saves money. The DoD co-
payment structure is established to encourage use of the most
economical venue to the Department. Prescriptions filled under the
TRICARE Mail Order Pharmacy Program are currently a more cost effective
venue then a retail pharmacy for the Department. As the Department
implements the national retail pharmacy contract, the Department may
re-evaluate this policy.
A comment was received from a commercial group recommending that
the enrollment year deductible for outpatient claims of $300 per
individual; $600 per family under TRICARE Prime be included with the
statement that ``a point of service cost-share of 50 percent (50%)
applies in lieu of the 20 percent (20%) co-payment for TRICARE Prime
beneficiaries who obtain prescriptions from retail non-network
pharmacies.'' This clarification of deductibles under TRICARE Prime has
been included in the final rule.
A question was received from a commercial group regarding
pharmaceutical agents obtained under the TMOP program where there is a:
``$22.00 co-payment for up to a 90-day supply of a non-formulary
pharmaceutical agent.'' The question was that in the event the
Government has a contract for a preferred agent within the therapeutic
class, will the non-preferred agent be designated as
[[Page 17042]]
non-formulary and would it be available from the TMOP with the $22.00
co-pay for up to a 90-day supply? Whether the non-contracted, non-
preferred agent is designated as a formulary or non-formulary agent
will be based upon the relative clinical and cost effectiveness of the
agent in comparison to other agents in the class. Non-formulary agents
will be available through the TRICARE Mail Order Pharmacy Program at
the $22.00 co-payment for up to a 90 day supply.
A question was received from a commercial group asking to which
tier will compounded prescriptions be assigned. Compounded
prescriptions will be subject to the same process of evaluation as
other pharmaceutical agents under the uniform formulary. They will fall
under the non-formulary tier only as determined by the DoD Pharmacy and
Therapeutics Committee.
A military association submitted a comment stating that until a
national retail pharmacy contract is implemented, beneficiaries who are
under the age of 65 and who need to purchase drugs while traveling out
of their region must pay non-network prices even when using a retail
network pharmacy. The association asserted that procedures need to be
in place between the implementation of the uniform formulary and the
implementation of the new retail pharmacy contract that will allow
beneficiaries obtaining prescriptions out of region to be able to pay
network prices when using a network pharmacy. The national retail
pharmacy contract will assure portability, in that a network pharmacy
will be a part of a national, as opposed to regional, pharmacy network.
Implementation of the uniform formulary has nothing to do with
portability of the pharmacy benefit.
A comment was received from a military association stating
provisions should be spelled out to allow nursing home patients to pay
retail network rates even when the nursing home's pharmaceutical
supplier is not a network provider. Beneficiary cost-shares are based
on point of service and formulary status of the pharmaceutical agent,
and not on unique categories of beneficiaries of their residence. The
Department has not made any changes based on this comment.
A foundation stated its opinion that brand names should be in the
lowest co-payment tier. A primary objective of tiered co-pays is to
encourage beneficiaries to use the most cost-effective pharmaceutical
agents that will satisfy their clinical needs. Generic drugs are placed
in the lowest co-pay tier because they are generally much less
expensive than brand name drugs. It would be contrary to the underlying
premise of a three tier formulary to place more expensive brand name
drugs in the lowest co-pay tier.
M. Determination of Generic Drug Classification Under the Pharmacy
Benefits Program
As explained in the proposed rule, the designation of a drug as a
generic for the purpose of applying cost-shares at the generic rate,
will be determined through the use of standard pharmaceutical
references as part of commercial best business practices. In
considering the relative cost effectiveness of pharmaceutical agents in
a therapeutic class, the Pharmacy and Therapeutics Committee may
consider the existence of blanket purchase agreements, incentive price
agreements, or contracts. The existence of these agreements or
contracts may result in situations where a brand drug is the most cost
effective pharmaceutical agent for the Government to purchase, even
more cost effective than generic agents. When this circumstance occurs,
the Pharmacy and Therapeutics Committee may designate that the branded
drug cost-share be the same as the lower generic drug cost-share when
the branded drug is selected as the preferred agent over generic drugs
because it is more cost effective for the Government. This will assure
that the beneficiary is not penalized when brand products are competed
and selected as the formula pharmaceutical agent over generic products
following a contracting initiative.
Retiree groups commented that beneficiaries should be notified if a
brand-name drug is the ``preferred agent'' even when a generic exists
and the brand-name can be obtained at the lower $3 co-payment. The
Department will incorporate the communication of formulary and co-pay
information into TMA's extensive marketing and education program that
employs both electronic and print media. Dissemination of information
to beneficiaries, beneficiary advisory groups, providers, and TRICARE
contractors will be coordinated through TMA's Communications and
Customer Services Directorate.
Comments received from a current managed care support contractor
recommended that brand-name products made available at the generic co-
payment rate apply only to TMOP since government pricing is available
at TMOP. Likewise, the contractor commented that currently the
government is not at risk for the retail benefit and should not make
decisions based on prices that do not apply in the retail sector. This
comment is counter to the government's intent to implement a uniform,
consistent, and equitable benefit. Overall cost effectiveness
evaluations will include price considerations for all venues, since the
Government if financially responsible for the retail benefit with the
carve-out of the TRICARE retail pharmacy benefit from the managed care
support contracts.
A comment was received asking for confirmation that ``all multi-
source'' brand prescription drugs that have a generic equivalent will
be classified as non-formulary with a $22 co-payment. This final rule
re-instates the mandatory generic substitution policy in situations
where a generic equivalent is available. Therefore, in the situation
described above, the branded product would not be covered unless
medical necessity is validated, and then the formulary cost-share would
apply. Additionally, as stated in Sec. 199.21(j)(3), the Pharmacy and
Therapeutics Committee may consider the existence of blanket purchase
agreements, incentive price agreements, or contracts when considering
the relative cost effectiveness of pharmaceutical agents. The existence
of these agreements or contracts may result in situations where a brand
drug is the most cost effective pharmaceutical agent for the Government
to purchase, even more cost effective than generic equivalents. When
this circumstance occurs, the Pharmacy and Therapeutics Committee may
designate that the brand drug cost-share be the same as the lower
generic cost-share. This will assure that the beneficiary is not
penalized when brand products are competed and selected as the
formulary pharmaceutical agent over generic products.
A managed care support contractor of the TRICARE program asked for
confirmation that all generic drugs listed with an ``A'' rating in the
current Approved Drug Products with Therapeutic Equivalence Evaluations
(Orange Book), published by the FDA, and generic equivalents of
grandfather or Drug Efficacy Study Implementation (DESI) category drugs
(with the exception of prescription drugs for medical conditions that
are expressly excluded from the TRICARE benefit by statute or
regulation) are included in the uniform formulary and subject to the
$3.00 co-payment per prescription for up to a 30-day supply from retail
network pharmacies and $3.00 co-payment per prescription for up to a
90-day supply from the TMOP (except active duty members of the
uniformed services do not pay cost-shares for TRICARE covered
pharmaceutical
[[Page 17043]]
agents). Under the proposed rule it is presumed that pharmaceutical
agents should be included on the uniform formulary unless the Pharmacy
and Therapeutics Committee determines that an agent does not have a
significant, clinically meaningful therapeutic advantage in terms of
safety, effectiveness, or clinical outcome over other pharmaceutical
agents included on the uniform formulary. This is consistent with 10
U.S.C. 1074g(a)(2)(D) which states: ``no pharmaceutical agent may be
excluded from the uniform formulary except upon the recommendation of
the Pharmacy and Therapeutics Committee.'' Generic pharmaceutical
agents that are included on the uniform formulary will be subject to
the $3.00 co-payment. Generic agents that are categorized as ``non-
formulary'' would be subject to the $22 non-formulary co-payment.
N. Availability of Clinically Appropriate Non-Formulary Pharmaceutical
Agents to Members of the Uniformed Services
The proposed rule noted that the Pharmacy Benefits Program is
required to assure the availability of clinically appropriate
pharmaceutical agents to members of the uniformed services, including
where appropriate, agents not included on the uniform formulary. MTFs
shall establish procedures to evaluate the clinical appropriateness of
prescriptions written for members of the uniformed services for
pharmaceutical agents not included on the uniform formulary. If it is
determined that the prescription is clinically appropriate, the MTF
will provide the pharmaceutical agent to the member. TRICARE will
conduct an evaluation for clinical appropriateness when a member
presents a prescription for a non-formulary pharmaceutical agent to a
network or non-network pharmacy or the TMOP.
A commerical group recommended the statement that ``TRICARE will
conduct an evaluation for clincal appropriateness when a member
presents a prescription for a non-formulary pharmaceutical agent to a
network or non-network pharmacy'' be changed to read: ``The TRICARE
contractor (or servicing TRICARE contractor) will conduct an evaluation
for clinical appropriateness when a member presents a perscription for
a non-formulary pharmaceutical agent to a network or non-network
pharmacy.'' Under 10 U.S.C. 1074g(a)(7), the Department bears the
responsibility for establishing procedures for beneficiaries to receive
pharmaceutical agents that are not included on the uniform formulary
(i.e., non-formulary agents), when clinical necessity is established.
The rule reflects this fact, and although the Department may choose to
implement this through the use of a contractor, the rule should not
require the Department to use one. Therefore, the Department does not
concur with the suggestion.
O. Availability of Non-Formulary Pharmaceutical Agents to Eligible
Covered Beneficiaries
As explained in the proposed rule, non-formulary pharmaceutical
agents will be available to eligible beneficiaries through the retail
network pharmacies and the TMOP at the non-formulary co-payment of
$22.00 per prescription.
Non-formulary pharmaceutical agents will be available to eligible
beneficiaries through the retail non-network pharmacies at the non-
formulary co-payment of 20 percent or $22.00, whichever is greater, per
prescription.
Non-formulary pharmaceutical agents will be available to eligible
covered beneficiaries through the MTF pharmacies only for prescriptions
approved through the non-formulary special order process that validates
the clinical necessity for use of the non-formulary pharmaceutical
agent.
Comments from pharmaceutical industry members and a current managed
care contractor asked for clarification concerning ``grandfathering''
certain medications. Where there is clinical necessity for the use of a
non-formulary agent that is not otherwise excluded as a covered
benefit, the drug or medicine will be provided at the same co-payment
as a formulary agent. clinical necessity for use of a non-formulary
agent is established when: Use of the formulary agent is
contraindicated; the patient experiences or is likely to experience
significant adverse effects from formulary agents; formulary agents
result in therapeutic failure; the patient previously responded to a
non-formulary agent and changing to a formulary agent would incur
unacceptable clinical risk; or, there is no alternative formulary
agent. As previously discussed, the rule requires a specific transition
period be recommended by the DoD Pharmacy and Therapeutics Committee
for any pharmaceutical agent (including maintenance medications) that
was previously a formulary, as opposed to non-formulary drug.
P. Reduction of Co-Payment for Cases of Clinical Necessity
As explained in the proposed rule, non-formulary pharmaceutical
agents will be available to eligible covered beneficiaries through the
retail network and non-network pharmacies at the same co-payment as a
formulary pharmaceutical agent in situations of documented clinical
necessity. In the proposed rule it stated a clinical necessity to use a
non-formulary drug may exist when either: The use of formulary agents
is contraindicated; the patient experiences significant adverse effects
from formulary agents; formulary agents result in therapeutic failure;
the patient previously responded to a non-formulary agent and changing
to a formulary agent would incur unacceptable clinical risk; or there
is no alternative agent on the formulary. A voluntary organization for
a specific disease proposed that Sec. 199.21(i)(3)(ii)(B) be amended
as follows: ``The patient experiences or is likely to experience
significant adverse effects from formulary agents. This would expressly
allow the view and professional judgment of the prescribing clinician
to be considered.'' The commenter also propose Sec.
199.21(i)(3)(ii)(C) be amended to read, ``Formulary agents result in
therapeutic failure or in the reasonable judgment of the clinician
would be expected to result in therapeutic failure.'' We concur that
the likelihood of adverse events or therapeutic failure, with
appropriate documentation, could be considered when establishing
medical necessity. Although we have not used the exact wording
suggested by the voluntary organization, the rule has been modified to
convey the intent.
For prescriptions submitted to the TMOP, information to justify the
clinical necessity for use of a non-formulary agent should be submitted
with the prescription. The beneficiary may also submit information to
justify the clinical necessity for use of a non-formulary agent to the
TMOP after the prescription has been filled. If clinical necessity for
use of a non-formulary agent is validated, then the patient will
receive a refund for the co-payment differential. For prescriptions
submitted to a retail network pharmacy, the beneficiary will submit
information to justify the clinical necessity for use of a non-
formulary agent to the servicing TRICARE contractor and request a
refund for the difference in the co-payment between the formulary and
non-formulary pharmaceutical agent. Determinations of the clinical
necessity for use of a non-formulary agent will undergo a peer review.
If the request for the difference is denied, either the beneficiary
or provider may appeal the decision to the extent allowed and
consistent with the procedures under Sec. 199.10.
[[Page 17044]]
A pharmaceutical manufacturer association suggested incorporation
of a sixth prong that would allow beneficiaries to demonstrate clinical
necessity by showing that ``a non-formulary agent is expected to have a
therapeutic advantage'' for a particular patient. Under 32 CFR
199.21(i)(3)(ii)(A)-(E) we list five circumstances that would
demonstrate a clinical necessity to use a non-formulary agent. For an
agent to become a non-formulary agent, the decision would have already
been made under 10 U.S.C. 1074g(a)(2)(B) that the agent ``does not have
a significant, clinically meaningful therapeutic advantage'' over
formulary agents. Based on this, a clinical opinion that a non-
formulary agent is ``expected'' to offer a therapeutic advantage,
without any showing of a probable problem with the formulary agent, is
not sufficient to establish clinical necessity. There has to be a
showing that use of a formulary agent in the therapeutic class is
problematic in some objective manner before clinical necessity for
purposes of obtaining the drug at the formulary cost-share is
established. If the suggested circumstance for establishing clinical
necessity were incorporated into the rule, a prescriber could simply
state such an expectation about any non-formulary drug, which would
essentially render the non-formulary category meaningless. We do not
believe this would be consistent with the statutory charge that DoD
``establish an effective, efficient, integrated pharmacy benefits
program.''
A pharmaceutical company suggested that the rule should state that
a beneficiary or provider be able to demonstrate the need for a non-
formulary drug without having to demonstrate a prior failure of a
formulary drug, i.e. should not have to have a ``fail first'' before
using a non-formulary drug. Therapeutic failure on a formulary drug is
but one of the five circumstances listed in the rule that may
demonstrate clinical necessity to use a non-formulary drug, and is not
required for any of the other four conditions to apply.
A military association stated its opinion that the term
``significant adverse effects'' must be better defined in the rule
since adverse side effects from a preferred drug can be a reason for
obtaining a non-formulary drug at a formulary price. The determination
that an adverse effect experienced by a particular patient is
``significant enough'' to justify the clinical necessity to use a non-
formulary drug is a medical judgment based on the specific
circumstances for a specific patient. It is impossible to spell out a
definition or set of criteria in a regulation that will lead to such a
determination.
A professional association expressed pleasure that DoD proposed
adoption of a three tiered cost-share design to make the patient and
the provider aware of the cost implications of their choice in drugs.
The association questions whether it is a wise move for DoD to allow
beneficiaries to obtain non-formulary tier drugs at the formulary tier
drug cost-share when clinical necessity has been established. DoD is
required by 10 U.S.C. 1074g(a)(7) to establish procedures for allowing
beneficiaries to receive agents that are not included on the uniform
formulary but that are considered clinically necessary. When clinical
justification is established, ``the pharmaceutical agent shall be
provided under the same terms and conditions as an agent on the uniform
formulary.''
A pharmaceutical professional association notes that 10 U.S.C.
1074g(a)(7) requires procedures for beneficiaries to receive
pharmaceutical agents that are not included on the uniform formulary
under the same terms and conditions as an agent on the uniform
formulary if those agents are considered clinically necessary for the
beneficiary. Section 1074g(a)(7) says in pertinent part, ``Such
procedures shall include peer review procedures'' under which the
determination of clinical necessity is made. The commenter presumes
that the peer review provisions of Sec. 199.15 will apply, and
requests that these provisions be applied to the Military Treatment
Facilities as well.
The rule has been modified to reflect that peer review provisions
comparable to those of Sec. 199.15 apply to clinical necessity
determinations for prescriptions submitted to the TMOP or retail
pharmacies. Although the time periods for peer review under Sec.
199.15 applicable to the pharmacy benefits program have not been
specifically modified in the rule, the retail pharmacy benefits program
have not been specifically modified in the rule, the retail pharmacy
Request for Proposals has a requirement that the goal is to complete
95% of the medical necessity reviews within two days, and 100% within 5
days. In initial determinations are subject to reconsideration, which
are subject to appeal, with the contract directing shorter time periods
than allowed under the Quality and Utilization Review Peer Review
Organization (PRO) Program provisions of Sec. 199.15. Information on
clinical necessity may be provided by beneficiaries, providers, and
pharmacies. The peer review provisions of Sec. 199.15 do not apply to
the Military Treatment Facilities, where there is no beneficiary
entitlement to non-formulary drugs. The Military Treatment Facilities,
however, will have procedures for evaluation of clinical necessity
determinations.
A professional association commented that the rule does not explain
patient appeal rights. The association recommended that the rule should
explicitly incorporate the existing appeal process found at Sec.
199.10 for all beneficiaries asserting they are entitled to a non-
formulary agent at the formulary cost-share because of clinical
necessity. An expeditious appeal process is required under 10 U.S.C.
1074g(a)(7). The rule has been modified to state that policies and
procedures comparable to those for appealing decisions under Sec.
199.15 and Sec. 199.10 shall apply to requests that non-formulary
agents be dispensed by retail pharmacies or TMOP at the formulary co-
pay tier. Appealable issues include medical or clinical necessity
denials, and denials based on factual coverage issues. Although the
rule has not been specifically modified with respect to appeal
timeframes, the retail pharmacy Request for Proposals has a requirement
that 75% of requests for reconsideration shall be processed to
completion within 10 working days after the date of receipt by the
contractor, and 100% within 25 working days.
A medical association submitted a comment recommending prescribing
decisions be made exclusively by a specialist provider who must be able
to override any formulary restriction. Under the uniform formulary the
medical necessity process allows medical providers to provide
documentation to justify provision of a non-formulary pharmaceutical
agent at the formulary cost-share. If clinical necessity is not
established, the pharmaceutical agents within the TRICARE pharmacy
benefit are still available to the beneficiary in both the TMOP and
retail pharmacies, but at the non-formulary cost-share.
A manufacturer's association notes that the process in the rule for
requesting a non-formulary prescription at the formulary cost-sharing
amount requires the beneficiary or his or her provider to submit
documentation supporting the claim of clinical necessity. The
association appreciates that the rule does not delay dispensing the
prescription pending a determination of clinical necessity, however
expresses an opinion that Congress did not intend the beneficiary to
incur a financial burden of paying the
[[Page 17045]]
non-formulary cost-share pending a decision on clinical necessity. The
association recommends the rule be changed so that whenever a
prescription for a non-formulary agent is accompanied by a request for
a finding of clinical necessity, that the prescription be dispensed at
the formulary cost-share. Instead of a beneficiary receiving a refund
when clinical necessity has been established by the beneficiary, the
government would have to attempt to collect the difference in cost-
shares if either the beneficiary was unsuccessful in supporting his
assertion of medical necessity, or the beneficiary submits no
information in support at all. In establishing a process to implement
the statutory policy, we have adopted a process that accomplishes the
legislative intent with minimal transaction costs. The process
suggested by this comment would have greater transaction costs, with a
need for a separate billing, accounting, and collection system, not
commensurate with any benefit associated with beneficiaries potentially
parting temporarily with the $13 co-pay differential per prescription.
Q. Department of Defense Pharmacy and Therapeutics Committee
In the proposed rule we explained that the Department of Defense
Pharmacy and Therapeutics Committee will develop the uniform formulary
of pharmaceutical agents. The committee will review the formulary on a
periodic basis, and make additional recommendations regarding the
formulary as the committee determines necessary and appropriate to the
Director, TRICARE Management Activity. Committee members will have
expertise in treating the medical needs of the populations served
through such entities and in the range of pharmaceutical and biological
medicines available for treating such populations.
The committee will identify therapeutic classes of pharmaceutical
agents. The committee will consider the clinical and cost effectiveness
of pharmaceutical agents relative to other agents in the class,
following the guidelines contained in this regulation. Therapeutic drug
class reviews will be conducted on a scheduled, periodic basis, as
determined by the committee.
A professional association asked what procedures will be used by
the Committee to obtain full information about the cost of
pharmaceutical agents. The Committee will obtain information on
existing process from the Federal Supply Schedule (FSS), temporary FSS
price reductions, national pharmaceutical contracts, blanket purchase
agreements, and incentive price agreements. The Committee will also
obtain information on prices that pharmaceutical companies may offer in
proposed blanket purchase agreements, proposed temporary FSS price
reductions, and proposed incentive agreements.
A pharmacy association stated that the approach used to make
formulary decisions is the antithesis of the approach used in the
private sector and recommends DoD follow that approach. The association
stated the private sector requires the value of a drug in terms of
clinical and/or cost effectiveness must be established before it is
added to the formulary, rather than having a presumption that a drug is
a formulary drug. This approach is unavailable to DoD because under 10
U.S.C. 1074g(a)(2)(B), ``the Secretary shall presume inclusion in a
therapeutic class of a pharmaceutical agent * * * unless the Pharmacy
and Therapeutics Committee * * * finds that a pharmaceutical agent does
not have a significant clinically meaningful therapeutic advantage in
terms of safety, effectiveness, or clinical outcome over the other
drugs included on the uniform formulary.''
A pharmacy association stated that the proposed rule does not
assure confidentiality regarding proprietary data considered by the
Pharmacy and Therapeutics Committee. Proprietary information submitted
is protected under the Freedom of Information Act, specifically 5
U.S.C. 552(b)(4), which protects trade secrets and commercial or
financial information obtained from a person that is privileged or
confidential.
Comments were received from a pharmaceutical association and
medical associations stating the proposed rule does not clearly define
the types of professionals that will be on the DoD Pharmacy and
Therapeutics Committee. Additional comments were received from a
medical association, and a pharmaceutical manufacturer recommending
specific types of physician membership on the Pharmacy and Therapeutics
committee. In Sec. 199.21(b)(2) we describe the composition of the
committee. Committee members will have expertise in treating the
medical needs of the populations served through such entities and in
the range of pharmaceutical and biological medicines available for
treating such populations. When such expertise is not available within
the committee regarding the review of specific pharmaceuticals or
therapeutic classes, the committee may request assistance from
consultants with expertise in those areas. The rule is consistent with
the statute regarding committee membership.
A comment was received by a medical association stating that
Pharmacy and Therapeutics Committee decisions must be well documented
and shared publicly with all concerned parties. The recommendations of
the Pharmacy and Therapeutics Committee, the comments of the
Beneficiary Advisory Panel, and the decisions of the Director, TRICARE
Management Activity will be made public through the TRICARE
Communications and Customer Service Directorate information systems
previously described, excluding those materials proprietary in nature.
Several questions were received from professional associations and
drug manufacturer's concerning the ethical and conflict of interest
restrictions, including non-disclosure restrictions that will apply to
members of the DoD Pharmacy and Therapeutics Committee, and whether the
Federal Advisory Committee Act (FACA), 5 U.S.C. App. 2, applies.
All members of the DoD Pharmacy and Therapeutics Committee are
governed by the DoD Standards of Conduct regulations. The Standards of
conduct cross-references are published in 32 CFR Part 40, hence, are
not repeated in the rule. DoD employees are governed by the Office of
Government Ethics (OGE) regulation, Standards of Ethical Conduct for
Employees of the Executive Branch, 5 CFR Part 2635, and the Department
of Defense regulation, DoD 5500.7-R, that supplements the OGE
regulation. With respect to the Federal Advisory Committee Act (FACA),
its applicability is dependent upon whether any members are not federal
employees. The National Defense Authorization Act for Fiscal Year 2004,
(Pub. L. 108-136), section 725, transferred certain members of the
Pharmacy and Therapeutics Committee to the Beneficiary Advisory Panel.
The result is that there will be no members of the Pharmacy and
Therapeutics Committee who are not federal employees, therefore the
requirements of FACA do not apply to this committee.
A professional organization suggests that TRICARE consider having
cost effectiveness recommendations made by a contracting officer, as
opposed to the DoD Pharmacy and Therapeutics Committee. Recommendations
concerning the cost effectiveness of pharmaceutical agents are required
to be made by the Pharmacy and Therapeutics Committee under 10 U.S.C.
1074g(a)(2)(C) which states: ``In considering the relative cost
[[Page 17046]]
effectiveness of agents under subparagraph (A), the Secretary shall
rely on the evaluation by the Pharmacy and Therapeutics Committee of
the costs of agents in a therapeutic class in relation to the safety,
effectiveness, and clinical outcomes of such agents.''
A drug manufacturer commented that DoD should require the Pharmacy
and Therapeutics Committee to document the rationale (e.g., the
clinical evidence) behind a decision to include or not include a drug
on the formulary. The Pharmacy and Therapeutics Committee will document
its rationale and recommendations, which will be forwarded to the
Beneficiary Advisory Panel. The Committee will apply the relevant
criteria listed in the regulation for determining clinical
effectiveness.
A drug manufacturer commented that the preamble to the proposed
rule provided that the decisions of the Pharmacy and Therapeutics
Committee will occur by majority vote, but the text of the rule is
silent on this issue. The commenter also recommends that a ``decision
to exclude a drug from the uniform formulary'' include a requirement
for two-thirds of the members concurring in the recommendation. The
rule has been amended to include in the text of the rule that
recommendations of the Committee will be by majority vote. DoD does not
believe that two-thirds of the members need to concur in a
recommendation that a particular pharmaceutical agent be a non-
formulary agent. First, the Committee makes a recommendation, and not a
final decision on the formulary classification of a pharmaceutical
agent. Second, any decision by the Director, TRICARE Management
Activity to classify an agent as non-formulary does not ``exclude'' the
agent from the list of allowable pharmaceutical agents. Non-formulary
agents will continue to be available in retail pharmacies and the TMOP,
only with a higher cost-share. The lower formulary cost-share will be
applied if it is determined that it is clinically necessary for the
beneficiary to have that particular agent, rather than a formulary
agent.
The rule states that pharmaceutical agents that are used
exclusively for medical conditions that are expressly excluded from the
TRICARE benefit by statute or regulation will not be considered for
inclusion on the uniform formulary. A pharmaceutical industry
association expressed a belief that this is contrary to the
requirements of 10 U.S.C. 1074g(a)(2)(D) that ``no pharmaceutical agent
may be excluded from the uniform formulary except upon the
recommendation of the Pharmacy and Therapeutics Committee'' and 10
U.S.C. 1074g(b)(2) that the committee consider for inclusion ``any
drugs newly approved by the Food and Drug Administration.'' The
quotation of this language from the statute must be read in the context
of 10 U.S.C. 1074g(a)(1), which requires the establishment of ``an
effective, efficient, integrated pharmacy benefits program under this
chapter'' (emphasis added). This ``chapter'' is chapter 55 of title 10,
which established some boundaries on the DoD health program. Under 10
U.S.C. 1079(a)(13), CHAMPUS/TRICARE does not cover ``any service or
supply which is not medically or psychologically necessary to prevent,
diagnose, or treat a mental or physical illness, injury or bodily
malfunction.'' Additionally, certain therapies and treatments are
expressly prohibited under chapter 55. For example, under 10 U.S.C.
1079(a)(10), therapy or counseling for sexual dysfunctions or sexual
inadequacies may not be provided, and under 10 U.S.C. 1079(a)(11)
treatment of obesity may not be provided if obesity is the sole or
major condition treated. Only in these very limited types of
circumstances will the Committee not consider for inclusion on the
uniform formulary a new FDA approved drug. Except for these types of
limited circumstances, which are required by other statutes under
chapter 55 of title 10, United States Code, the Committee shall review
at each quarterly meeting ``drugs newly approved by the Food and Drug
Administration.'' No pharmaceutical agent on the uniform formulary
shall become a non-formulary agent unless recommended by the Committee,
referred to the Beneficiary Advisory Panel for comment, and acted upon
by the Director, TRICARE Management Activity.
A commercial group recommended that we make clear that excluded
pharmaceutical agents shall not be available as non-formulary agents,
nor will they be cost-shared under the TRICARE Pharmacy program. We
concur with that recommendation and have modified the rule.
R. Uniform Formulary Beneficiary Advisory Panel
The proposed rule stated that a Uniform Formulary Beneficiary
Advisory Panel will be established to review and comment on the
development of the uniform formulary. The panel will meet after each
Pharmacy and Therapeutics Committee quarterly meeting. The panel's
comments will be submitted to the Director, TRICARE Management
Activity. The Director will consider the comments before implementing
the uniform formulary or any recommendations for change made by the
Pharmacy and Therapeutics Committee.
Comments were received from a pharmaceutical association and
pharmaceutical manufacturer recommending the Beneficiary Advisory Panel
have a member on the DoD Pharmacy and Therapeutics Committee, and the
Beneficiary Advisory Panel should meet before the Pharmacy and
Therapeutics Committee meets to provide input to the Pharmacy and
Therapeutics Committee. The Department non-concurs on both suggestions
because they would be contrary to the statute. The rule as written is
consistent with 10 U.S.C. 1074g(c) on both the authorized membership of
the DoD Pharmacy and Therapeutics Committee and the role of the
Beneficiary Advisory Panel. Under 10 U.S.C. 1074g(b)(1), Congress has
defined the membership of the Pharmacy and Therapeutics Committee, and
we are in compliance with that statute. The purpose of the Beneficiary
Advisory Panel is to ``review and comment on development of the uniform
formulary'', while the role of the Pharmacy and Therapeutics committee
is to actually develop the formulary.
A comment was received from a military association recommending a
higher DoD authority than the Director, TRICARE Management Activity,
should have the responsibility of reviewing the Beneficiary Advisory
Panel concerns. Additionally, the association proposed that the rule
should direct the Beneficiary Advisory Panel when submitting comments
that are contrary to the recommendation of the Pharmacy and
Therapeutics Committee, to submit the comments to the Assistant
Secretary of Defense for Health Affairs, with a copy to the Under
Secretary of Defense for Personnel and Readiness, and the Assistant
Secretary of Defense for Health Affairs, or his designee, should be
responsible for responding to the panel's comments in writing prior to
the next meeting of the panel. The Department non-concurs with these
suggestions. The responsibilities and functions of the Assistant
Secretary of Defense for Health Affairs are described in DoD Directive
5136.1, and the responsibilities and functions of the Director, TRICARE
Management Activity are described in DoD Directive 5136.12. Operational
issues are the responsibility of the Director, TRICARE Management
Activity. The Director, TRICARE Management Activity is responsible for
serving as the program
[[Page 17047]]
manager for TRICARE health and medical resources, and supervising and
administering TRICARE programs. A recent reorganization of the TRICARE
Management Activity has the Assistant Secretary of Defense for Health
Affairs also serving in the role of Director, TRICARE Management
Activity. Feedback to the Beneficiary Advisory Panel will occur without
the need for a regulatory specification in the rule.
A drug manufacturer association suggested that the rule require the
Director, TRICARE Management Activity to respond to the comments and
recommendations of the Beneficiary Advisory Panel in writing to enable
the public to understand the reasoning and motivation that support his
decisions.
This suggestion is neither required by the statute nor consistent
with Department management. The TMA Director is accountable to senior
DoD leadership, as well as to Congressional oversight and for
compliance with all legal requirements. An advisory panel provides
input to the decision process, but is not the accountable entity for
the Department's decisions. Information on Department decisions and the
rationale for them will be a matter of public record, without the need
for regulatory specifications in the rule.
S. Mandatory Generic Substitution
As discussed in the proposed rule, mandatory substitution of
generic drugs listed with an ``A'' rating in the current Approved Drug
Products with Therapeutic Equivalence Evaluations (Orange Book) (or any
successor) published by the Food and Drug Administration and generic
equivalents of grandfather or Drug Efficacy Study Implementation (DESI)
category drugs is required for brand name drugs.
Brand name drugs will be available at the non-formulary tier when
dispensed in lieu of a generic equivalent if selection of the branded
product is based solely on the personal preference of the provider or
beneficiary. Section P, ``Reduction of Co-Payment for Cases of Clinical
Necessity'' of this preamble describes the process for obtaining non-
formulary drugs at the formulary tier in situations of clinical
necessity.
A medical association commented that mandatory substitution of one
product for another should be prohibited. Mandatory generic
substitution is a cost-effective method of providing FDA approved
equivalent pharmaceutical products to DoD beneficiaries. In those rare
situations when the brand name version of a generically available
product is needed to meet the unique clinical needs of a patient, it
will be available at the formulary tier with documented clinical
necessity.
Comments were received from commercial groups validating and
encouraging the Department's use of generic pharmaceuticals in place of
more costly brand-names whenever possible.
A comment challenged the proposed rule provision that brand name
drugs will be available at the non-formulary tier when dispensed in
lieu of a generic equivalent if based solely on the personal preference
of the provider or beneficiary. The rule has been changed to modify
mandatory generic substitution such that the formulary tier co-payment
applies only when clinical necessity is established. A brand name drug
that has a generic equivalent is not covered by TRICARE if clinical
necessity is not established.
A TRICARE managed care support contractor stated the following in
regard to Sec. 199.21(i)(2), now designated in the rule as
199.21(j)(2), on mandatory generic substitution: ``Currently, if a
pharmacy enters a DAW2 on a MAC-list drug, a 100% beneficiary cost-
share will be passed to the pharmacy. By changing the DAW indicator to
a DAW1, a $9 brand co-pay results on the same medication. Today,
different DAWs result in different co-pays/cost-shares. Is it correct
to assume that, with the new program, how the DAW field of the claim is
populated (i.e., DAW 0, 1, 2, or 4) will have no bearing on the
resulting co-pay?'' A DAW-1 (Dispense as Written 1--Medically necessary
as indicated by the physician on the prescription) designation by
itself is not sufficient to obtain coverage of a brand name drug at the
formulary co-payment. For the brand name drug to be covered by TRICARE,
clinical necessity must also be independently validated by TRICARE.
Prescriptions designated as DAW-2 (Dispense as Written per patient
request) and other DAW prescriptions are not covered.
A medical association stated its opinion that psychotropic drugs
cannot be substituted for each other. A foundation stated its opinion
that the formulary must include all anti-epileptic drugs regardless of
brand name or generic status. A voluntary organization for a specific
disease has requested that all drugs for treatment of this disease be
included in the uniform formulary and that these drugs be exempted from
the mandatory substitution requirements in the rule. We are not aware
of any clinical reason why psychotropic drugs or anti-epileptic drugs
or drugs for other specific diseases should be treated differently than
products in other therapeutic categories. Our three-tiered approach and
the generic substitution rule apply to all products.
IV. Preemption of State Laws
The rule was modified to clarify the preemption of State laws as
applicable to the TRICARE Pharmacy Benefits Program.
V. Fraud, Abuse, and Conflict of Interest
The rule was modified to clarify the fraud, abuse, and conflict of
interest requirements under the TRICARE pharmacy benefits program.
VI. Regulatory Procedures
Executive Order 12866 requires that a comprehensive regulatory
impact analysis be performed on any economically significant regulatory
action, defined as one that would result in an annual effect of $100
million or more on the national economy or which would have other
substantial impacts. The Regulatory Flexibility Act (RFA) requires that
each Federal agency prepare, and make available for public comment, a
regulatory flexibility analysis when the agency issues a regulation
which would have a significant impact on a substantial number of small
entities. The rule is not an economically significant regulatory
action. Cost-shares for generic and formulary pharmaceutical agents
were addressed in the implementation of the TRICARE Senior Pharmacy
benefit in 2001. Approximately 1.5 million persons are potential
beneficiaries of this program, and expected benefits per person are
approximately $2,000 per year. The rule includes the addition of a
third tier to the uniform formulary cost-share structure by adding non-
formulary pharmaceutical agents, which will have an impact of less than
$100 million. The rule, although not economically significant under
Executive Order 12866, is significant under Executive Order 12866, and
has been reviewed by the Office of Management and Budget.
The rule is not a major rule under the Congressional Review Act.
The rule does not require a regulatory flexibility analysis as it
would have no significant economic impact on a substantial number of
small entities.
The rule will not impose additional information collection
requirements on the public under the Paperwork Reduction Act of 1995
(44 U.S.C. 3501-3511).
List of Subjects in 32 CFR Part 199
Claims, Health care, Health insurance, Military personnel, Pharmacy
Benefits.
[[Page 17048]]
0
Accordingly, 32 CFR part 199 is amended as follows:
PART 199--[AMENDED]
0
1. The authority citation for Part 199 continues to read as follows:
Authority: 5 U.S.C. 301; 10 U.S.C. chapter 55.
0
2. Amend Sec. 199.2(b) by adding in alphabetical order a definition of
``Pharmaceutical Agent'' and adding a sentence at the end of the
current definition of ``Prescription drugs and medicines'' to read as
follows:
Sec. 199.2 Definitions.
* * * * *
(b) * * *
Pharmaceutical Agent. Drugs, biological products, and medical
devices under the regulatory authority of the Food and Drug
Administration.
* * * * *
Prescription drugs and medicines * * * Prescription drugs and
medicines may also be referred to as ``pharmaceutical agents''.
* * * * *
0
3. Revise Sec. 199.21 to read as follows:
Sec. 199.21 Pharmacy benefits program
(a) General--(1) Statutory authority. Title 10, U.S. Code, Section
1074g requires that the Department of Defense establish an effective,
efficient, integrated pharmacy benefits program for the Military Health
System. This law is independent of a number of sections of Title 10 and
other laws that affect the benefits, rules, and procedures of TRICARE,
resulting in changes to the rules otherwise applicable to TRICARE
Prime, Standard, and Extra.
(2) Pharmacy benefits program. The pharmacy benefits program, which
includes the uniform formulary and its associated tiered co-payment
structure, is applicable to all of the uniformed services. Its
geographical applicability is all 50 states and the District of
Columbia, Guam, Puerto Rico, and the Virgin Islands. In addition, if
authorized by the Assistant Secretary of Defense (Health Affairs), the
TRICARE program may be implemented in areas outside the 50 states and
the District of Columbia, Guam, Puerto Rico, and the Virgin Islands. In
such case, the Assistant Secretary of Defense (Health Affairs) may also
authorize modifications to the pharmacy benefits program rules as may
be appropriate to the areas involved.
(3) Uniform formulary. The pharmacy benefits program features a
uniform formulary of pharmaceutical agents as defined in Sec. 199.2.
(i) The uniform formulary will assure the availability of
pharmaceutical agents in the complete range of therapeutic classes
authorized as basic program benefits.
(ii) As required by 10 U.S.C. 1074g(a)(2) and implemented under the
procedures established by paragraphs (e) and (f) of this seciton,
pharmaceutical agents in each therapeutic class are selected for
inclusion on the uniform formulary based upon the relative clinical
effectiveness and cost effectiveness of the agents in such class. If a
pharmaceutical agent in a therapeutic class is determined by the
Department of Defense Pharmacy and Therapeutics Committee not to have a
significant, clinically meaningful therapeutic advantage in terms of
safety, effectiveness, or clinical outcome over other pharmaceutical
agents included on the uniform formulary, the Committee may recommend
it be classified as a non-formulary agent. In addition, if the
evaluation by the Pharmacy and Therapeutics Committee concludes that a
pharmaceutical agent in a therapeutic class is not cost effective
relative to other pharmaceutical agents in that therapeutic class,
considering costs, safety, effectiveness, and clinical outcomes, the
Committee may recommend it be classified as a non-formulary agent.
(iii) Pharmaceutical agents which are used exclusively in medical
treatments or procedures that are expressly excluded from the TRICARE
benefit by statute or regulation will not be considered for inculsion
on the uniform formulary. Excluded pharmaceutical agents shall not be
available as non-formulary agents, nor will they be cost-shared under
the TRICARE pharmacy benefits program.
(b) Definitions. For most definitions applicable to the provisions
of this section, refer to Sec. 199.2. The following definitions apply
only to this section:
(1) Clinically necessary. Also referred to as clinical necessity.
Sufficient evidence submitted by a beneficiary or provider on behalf of
the beneficiary that establishes that one or more of the following
conditions exist: The use of formulary pharmaceutical agents is
contraindicated; the patient experiences significant adverse effects
from formulary pharmaceutical agents in the therapeutic class, or is
likely to experience significant adverse effects from formulary
pharmaceutical agents in the therapeutic class; formulary
pharmaceutical agents result in therapeutic failure, or the formulary
pharmaceutical agent is likely to result in therapeutic failure; the
patient previously responded to a non-formulary pharmaceutical agent
and changing to a formulary pharmaceutical agent would incur an
unacceptable clinical risk; or there is no alternative pharmaceutical
agent on the formulary.
(2) Therapeutic class. A group of pharmaceutical agents that are
similar in chemical structure, pharmacological effect, and/or clinical
use.
(c) Department of Defense Pharmacy and Therapeutics Committee--(1)
Purpose. The Department of Defense Pharmacy and Therapeutics Committee
is established by 10 U.S.C. 1074g to assure that the selection of
pharmaceutical agents for the uniform formulary is based on broadly
representative professional expertise concerning relative clinical and
cost effectiveness of pharmaceutical agents and accomplishes an
effective, efficient, integrated pharmacy benefits program.
(2) Composition. As required by 10 U.S.C. 1074g(b), the committee
includes representatives of pharmacies of the uniformed services
facilities and representatives of providers in facilities of the
uniformed services. Committee members will have expertise in treating
the medical needs of the populations served through such entities and
in the range of pharmaceutical and biological medicines available for
treating such populations.
(3) Executive Council. The Pharmacy and Therapeutics Committee may
have an Executive Council, composed of those voting and non-voting
members of the Committee who are military or civilian employees of the
Department of Defense. The function of the Executive Council is to
review and analyze issues relating to the operation of the uniform
formulary, including issues of an inherently governmental nature,
procurement sensitive information, and matters affecting military
readiness. The Executive Council presents information to the Pharmacy
and Therapeutics Committee, but is not authorized to act for the
Committee.
(d) Uniform Formulary Beneficiary Advisory Panel. As required by 10
U.S.C. 1074g(c), a Uniform Formulary Beneficiary Advisory Panel reviews
and comments on the development of the uniform formulary. The Panel
includes members that represent non-governmental organizations and
associations that represent the views and interests of a large number
of eligible covered beneficiaries, contractors responsible for the
TRICARE retail pharmacy program, contractors responsible for the
TRICARE mail-order pharmacy program, and TRICARE network providers. The
panel will meet
[[Page 17049]]
after each Pharmacy and Therapeutics Committee quarterly meeting. The
Panel's comments will be submitted to the Director, TRICARE Management
Activity. The Director will consider the comments before implementing
the uniform formulary or any recommendations for change made by the
Pharmacy and Therapeutics Committee. The Panel will function in
accordance with the Federated Advisory Committee Act (5 U.S.C. App. 2).
(e) Determinations regarding relative clinical and cost
effectiveness for the selection of pharmaceutical agents for the
uniform formulary--(1) Clinical effectiveness. (i) It is presumed that
pharmaceutical agents in a therapeutic class are clinically effective
and should be included on the uniform formulary unless the Pharmacy and
Therapeutics Committee finds by a majority vote that a pharmaceutical
agent does not have a significant, clinically meaningful therapeutic
advantage in terms of safety, effectiveness, or clinical outcome over
the other pharmaceutical agents included on the uniform formulary in
that therapeutic class. This determination is based on the collective
professional judgment of the DoD Pharmacy and Therapeutics Committee
and consideration of pertinent information from a variety of sources
determined by the Committee to be relevant and reliable. The DoD
Pharmacy and Therapeutics Committee has discretion based on its
collective professional judgment in determining what sources should be
reviewed or relied upon in evaluating the clinical effectiveness of a
pharmaceutical agent in a therapeutic class.
(ii) Sources of information may include but are not limited to:
(A) Medical and pharmaceutical textbooks and reference books;
(B) Clinical literature;
(C) U.S. Food and Drug Administration determinations and
information;
(D) Information from pharmaceutical companies;
(E) Clinical practice guidelines, and
(F) Expert opinion.
(iii) The DoD Pharmacy and Therapeutics Committee will evaluate the
relative clinical effectiveness of pharmaceutical agents within a
therapeutic class by considering information about their safety,
effectiveness, and clinical outcome.
(iv) Information considered by the Committee may include but is not
limited to:
(A) U.S. Food and Drug Administration approved and other studied
indications;
(B) Pharmacology;
(C) Pharmacokinetics;
(D) Contraindications;
(E) Warnings/precautions;
(F) Incidence and severity of adverse effects;
(G) Drug to drug, drug to food, and drug to disease interactions;
(H) Availability, dosing, and method of administration;
(I) Epidemiology and relevant risk factors for diseases/conditions
in which the pharmaceutical agents are used;
(J) Concomitant therapies;
(K) Results of safety and efficacy studies;
(L) Results of effectiveness/clinical outcomes studies, and
(M) Results of meta-analyses.
(2) Cost effectiveness. (i) In considering the relative cost
effectiveness of pharmaceutical agents in a therapeutic class, the DoD
Pharmacy and Therapeutics Committee shall evaluate the costs of the
agents in relation to the safety, effectiveness, and clinical outcomes
of the other agents in the class.
(ii) Information considered by the Committee concerning the
relative cost effectiveness of pharmaceutical agents may include but is
not limited to:
(A) Cost of the pharmaceutical agent to the Government;
(B) Impact on overall medical resource utilization and costs;
(C) Cost-efficacy studies;
(D) Cost-effectiveness studies;
(E) Cross-sectional or retrospective economic evaluations;
(F) Pharmacoeconomic models;
(G) Patent expiration dates;
(H) Clinical practice guideline recommendations, and
(I) Existence of existing or proposed blanket purchase agreements,
incentive price agreements, or contracts.
(f) Evaluation of pharmaceutical agents for determinations
regarding inclusion on the uniform formulary. The DoD Pharmacy and
Therapeutics Committee will periodically evaluate or re-evaluate
individual pharmaceutical agents and therapeutic classes of
pharmaceutical agents for determinations regarding inclusion or
continuation on the uniform formulary. Such evaluation or re-evaluation
may be prompted by a variety of circumstances including, but not
limited to:
(1) Approval of a new pharmaceutical agent by the U.S. Food and
Drug Administration;
(2) Approval of a new indication for an existing pharmaceutical
agent;
(3) Changes in the clinical use of existing pharmaceutical agents;
(4) New information concerning the safety, effectiveness or
clinical outcomes of existing pharmaceutical agents;
(5) Price changes;
(6) Shifts in market share;
(7) Scheduled review of a therapeutic class; and
(8) Requests from Pharmacy and Therapeutics Committee members,
military treatment facilities, or other Military Health System
officials.
(g) Administrative procedures for establishing and maintaining the
uniform formulary--(1) Pharmacy and Therapeutics Committee
determinations. Determinations of the Pharmacy and Therapeutics
Committee are by majority vote and recorded in minutes of Committee
meetings. The minutes set forth the determinations of the committee
regarding the pharmaceutical agents selected for inclusion in the
uniform formulary and summarize the reasons for those determinations.
For any pharmaceutical agent (including maintenance medications) for
which a recommendation is made that the status of the agent be changed
from the formulary tier to the non-formulary tier of the uniform
formulary, or that the agent requires a pre-authorization, the
Committee shall also make a recommendation as to effective date of such
change that will not be longer than 180 days from the final decision
date but may be less. The minutes will include a record of the number
of members voting for and against the Committee's action.
(2) Beneficiary Advisory Panel. Comments and recommendations of the
Beneficiary Advisory Panel are recorded in minutes of Panel meetings.
The minutes set forth the comments and recommendations of the Panel and
summarize the reasons for those comments and recommendations. The
minutes will include a record of the number of members voting for or
against the Panel's comments and recommendations.
(3) Uniform formulary final decisions. The Director of the TRICARE
Management Activity makes the final DoD decisions regarding the uniform
formulary. Those decisions are based on the Director's review of the
final determinations of the Pharmacy and Therapeutics Committee and the
comments and recommendations of the Beneficiary Advisory Panel. No
pharmaceutical agent may be designated as non-formulary on the uniform
formulary unless it is preceded by such recommendation by the Pharmacy
and Therapeutics Committee. The decisions of the Director of the
TRICARE Management Activity are in writing and establish the effective
date(s) of the uniform formulary actions.
[[Page 17050]]
(h) Obtaining pharmacy services under the pharmacy benefits
program--(1) Points of service. There are four outpatient pharmacy
points of service:
(i) Military Treatment Facilities (MTFs);
(ii) Retail network pharmacies: Those are non-MTF pharmacies that
are a part of the network established for TRICARE retail pharmacy
services;
(iii) Retail non-network pharmacies: Those are non-MTF pharmacies
that are not part of the network established for TRICARE retail
pharmacy services, and
(iv) the TRICARE Mail Order Pharmacy (TMOP).
(2) Availability of formulary pharmaceutical agents--(i) General.
Subject to paragraph (h)(2)(ii) of this section, formulary
pharmaceutical agents are available under the Pharmacy Benefits Program
from all of the points of service identified in paragraph (h)(1) of
this section.
(ii) Availability of formulary pharmaceutical agents at military
treatment facilities. Pharmaceutical agents included on the uniform
formulary are available through MTFs, consistent with the scope of
health care services offered in such facilities. The Basic Core
Formulary (BCF) is a subset of the uniform formulary and is a mandatory
component of all MTF pharmacy formularies. The BCF contains the minimum
set of pharmaceutical agents that each MTF pharmacy must have on its
formulary to support the primary care scope of practice for Primary
Care Manager enrollment sites. Additions to individual MTF formularies
are determined by local Pharmacy and Therapeutics Committees based on
the scope of health care services provided at the respective MTFs. All
pharmaceutical agents on the local MTF formulary must be available to
all categories of beneficiaries.
(3) Availability of non-formulary pharmaceutical agents--(i)
General. Non-formulary pharmaceutical agents are generally available
under the pharmacy benefits program from the retail network pharmacies,
retail non-network pharmacies, and the TRICARE Mail Order Pharmacy
(TMOP) at the non-formulary cost-share.
(ii) Availability of non-formulary pharmaceutical agents at
military treatment facilities. Although not a beneficiary entitlement,
non-formulary pharmaceutical agents may be made available to eligible
covered beneficiaries through the MTF pharmacies for prescriptions
approved through the non-formulary special order process that validates
the medical necessity for use of the non-formulary pharmaceutical
agent.
(iii) Availability of clinically appropriate non-formulary
pharmaceutical agents to members of the Uniformed Services. The
pharmacy benefits program is required to assure the availability of
clinically appropriate pharmaceutical agents to members of the
uniformed services, including, where appropriate, agents not included
on the uniform formulary. Clinically appropriate pharmaceutical agents
will be made available to members of the Uniformed Services, including,
where medical necessity has been validated, agents not included on the
uniform formulary. MTFs shall establish procedures to evaluate the
clinical necessity of prescriptions written for members of the
uniformed services for pharmaceutical agents not included on the
uniform formulary. If it is determined that the prescription is
clinically necessary, the MTF will provide the pharmaceutical agent to
the member.
(iv) Availability of clinically appropriate pharmaceutical agents
to other eligible beneficiaries at retail pharmacies or the TMOP.
Eligible beneficiaries will receive non-formulary pharmaceutical agents
at the formulary cost-share when medical necessity has been established
by the beneficiary and/or his/her provider. The peer review provisions
of Sec. 199.15 shall apply to the clinical necessity pre-authorization
determinations. TRICARE may require that the time for review be
expedited under the pharmacy benefits program.
(i) Cost-sharing requirements under the pharmacy benefits program--
(1) General. Under 10 U.S.C. 1074g(a)(6), cost-sharing requirements are
established in this section for the pharmacy benefits program
independent of those established under other provisions of this Part.
Cost-shares under this section partially defray government costs of
administering the pharmacy benefits program when collected by the
government for prescriptions dispensed through the retail network
pharmacies or the TRICARE Mail Order Pharmacy. The higher cost-share
paid for prescriptions dispensed by a non-network retail pharmacy is
established to encourage the use of the most economical venue to the
government. Cost-sharing requirements are based on the classification
of a pharmaceutical agent as generic, formulary, or non-formulary, in
conjunction with the point of service from which the agent is acquired.
(2) Cost-sharing amounts. Active duty members of the uniformed
services do not pay cost-shares. For other categories of beneficiaries,
cost-sharing amounts are as follows:
(i) For pharmaceutical agents obtained from a military treatment
facility, there is no co-payment.
(ii) For pharmaceutical agents obtained from a retail network
pharmacy there is a:
(A) $9.00 co-payment per prescription required for up to a 30-day
supply of a formularly pharmaceutical agent.
(B) $3.00 co-payment per prescription for up to a 30-day supply of
a generic pharmaceutical agent.
(C) $22.00 co-payment per prescription for up to a 30-day supply of
a non-formulary pharmaceutical agent.
(iii) For formulary and generic pharmaceutical agents obtained from
a retail non-network pharmacy there is a 20 percent or $9.00 co-payment
(whichever is greater) per prescription for up to a 30-day supply of
the pharmaceutical agent.
(iv) For non-formulary pharmaceutical agents obtained at a retail
non-network pharmacy there is a 20 percent or $22.00 co-payment
(whichever is greater) per prescription for up to a 30-day supply of
the pharmaceutical agent.
(v) For pharmaceutical agents obtained under the TMOP program there
is a:
(A) $9.00 co-payment per prescription for up to a 90-day supply of
a formulary pharmaceutical agent.
(B) $3.00 co-payment for up to a 90-day supply of a generic
pharmaceutical agent.
(C) $22.00 co-payment for up to a 90-day supply of a non-formulary
pharmaceutical agent.
(vi) For TRICARE Prime beneficiaries who obtain prescriptions from
retail non-network pharmacies, the enrollment year deductible for
outpatient claims is $300 per individual; $600 per family; and a point
of service cost-share of 50 percent thereafter applies in lieu of the
20 percent co-payment.
(vii) Except as provided in paragraph (h)(2)(viii) of this section,
for pharmaceutical agents acquired by TRICARE Standard beneficiaries
from retail non-network pharmacies, beneficiaries are subject to the
$150.00 per individual or $300.00 maximum per family annual fiscal year
deductible.
(viii) Under TRICARE Standard, dependents of members of the
uniformed services whose pay grade is E-4 or below are subject to the
$50.00 per indiviudal or $100.00 maximum per family annual fiscal year
deductible.
[[Page 17051]]
(ix) The TRICARE catastrophic cap limits apply to pharmacy benefits
program cost-sharing.
(x) The per prescription co-payments established in this paragraph
(i)(2) of this section may be adjusted periodically based on experience
with the uniform formulary, changes in economic circumstances, and
other appropriate factors. Any such adjustment may be made upon the
recommendation of the Pharmacy and Therapeutics Committee and approved
by the Assistant Secretary of Defense (Health Affairs). Any such
adjusted amount will maintain compliance with the requirements of 10
U.S.C. 1074g(a)(6).
(3) Special cost-sharing rule when there is a clinical necessity
for use of a non-formulary pharmaceutical agent. (i) When there is a
clinical necessity for the use of a non-formulary pharmaceutical agent
that is not otherwise excluded as a covered benefit, the pharmaceutical
agent will be provided at the same co-payment as a formulary
pharmaceutical agent can be obtained.
(ii) A clinical necessity for use of a non-formulary pharmaceutical
agent is established when the beneficiary or their provider submits
sufficient information to show that one or more of the following
conditions exist:
(A) The use of formualry pharmaceutical agents is contraindicated;
(B) The patient experiences significant adverse effects from
formulary pharmaceutical agents, or the provider shows that the patient
is likely to experience significant adverse effects from formulary
pharmaceutical agents;
(C) Formulary pharmaceutical agents result in therapeutic failure,
or the provider shows that the formulary pharmaceutical agent is likely
to result in therapeutic failure;
(D) The patient previously responded to a non-formulary
pharmaceutical agent and changing to a formulary pharmaceutical agent
would incur unacceptable clinical risk; or
(E) There is no alternative pharmaceutical agent on the formulary.
(iii) Information to establish clinical necessity for use of a non-
formulary pharmaceutical agent should be provided to TRICARE for
prescriptions submitted to a retail network pharmacy.
(iv) Information to establish clinical necessity for use of a non-
formulary pharmaceutical agent should be provided as part of the claims
processes for non-formulary pharmaceutical agents obtained through non-
network points of service, claims as a result of other health
insurance, or any other situations requiring the submission of a manual
claim.
(v) Information to establish clinical necessity for use of a non-
formulary pharmaceutical agent may be provided with the prescription
submitted to the TMOP contractor.
(vi) Information to establish clinical necessity for use of a non-
formulary pharmaceutical agent may also be provided at a later date,
but no later than sixty days from the dispensing date, as an appeal to
reduce the non-formulary co-payment to the same co-payment as a
formulary drug.
(vii) The process of establishing clinical necessity will not
unnecessarily delay the dispensing of a prescription. In situations
where clinical necessity cannot be determined in a timely manner, the
non-formulary pharmaceutical agent will be dispensed at the non-
formulary co-payment and a refund provided to the beneficiary should
clinical necessity be established.
(viii) Peer review and appeal and hearing procedures. All levels of
peer review, appeals, and grievances established by the Contractor for
internal review shall be exhausted prior to forwarding to TRICARE
Management Activity for a formal review. Procedures comparable to those
established under Sec. Sec. 199.15 and 199.10 of this part shall
apply. If it is determined that the prescription is clinically
necessary, the pharmaceutical agent will be provided to the beneficiary
at the formulary cost-share. TRICARE may require that the time periods
for peer review or for appeal and hearing be expedited under the
pharmacy benefits program. For purposes of meeting the amount in
dispute requirement of Sec. 199.10(a)(7), the relevant amount is the
difference between the cost shares of a formulary versus non-formulary
drug. The amount for each of multiple prescriptions involving the same
drug to treat the same medical condition and filled within a 12-month
period may be combined to meet the required amount in dispute.
(j) Use of generic drugs under the pharmacy benefits program. (1)
The designation of a drug as a generic, for the purpose of applying
cost-shares at the generic rate, will be determined through the use of
standard pharmaceutical references as part of commercial best business
practices. Pharmaceutical agents will be designated as generics when
listed with an ``A'' rating in the current Approved Drug Products with
Therapeutic Equivalence Evaluations (Orange Book) published by the Food
and Drug Administration, or any successor to such reference. Generics
are multisource products that must contain the same active ingredients,
are of the same dosage form, route of administration and are identical
in strength or concentration.
(2) The pharmacy benefits program generally requires mandatory
substitution of generic drugs listed with an ``A'' rating in the
current Approved Drug Products with Therapeutic Equivalence Evaluations
(Orange Book) published by the FDA and generic equivalents of
grandfather or Drug Efficacy Study Implementation (DESI) category drugs
for brand name drugs. In cases in which there is a clinical
justification for a brand name drug in lieu of a generic equivalent,
under the standards and procedures of paragraph (h)(3) of this section,
the generic substitution policy is waived.
(3) When a blanket purchase agreement, incentive price agreement,
Government contract, or other circumstances results in a brand
pharmaceutical agent being the most cost effective agent for purchase
by the Government, the Pharmacy and Therapeutics Committee may also
designate that the drug be cost-shared at the generic rate.
(k) Preauthorization of certain pharmaceutical agents. (1) Selected
pharmaceutical agents may be subject to prior authorization or
utilization review requirements to assure medical necessity, clinical
appropriateness and/or cost effectiveness.
(2) The Pharmacy and Therapeutics Committee will assess the need to
prior authorize a given agent by considering the relative clinical and
cost effectiveness of pharmaceutical agents within a therapeutic class.
Pharmaceutical agents that require prior authorization will be
identified by a majority vote of the Pharmacy and Therapeutics
Committee. The Pharmacy and Therapeutics Committee will establish the
prior authorization criteria for the pharamaceutical agent.
(3) Prescriptions for pharmaceutical agents for which prior
authorization criteria are not met will not be cost-shared under the
TRICARE pharmacy benefits program.
(4) The Director, TRICARE Management Activity, may issue policies,
procedures, instructions, guidelines, standards or criteria to
implement this paragraph (k).
(l) TRICARE Senior Pharmacy Program. Section 711 of the Floyd D.
Spence National Defense Authorization Act for Fiscal Year 2001 (Public
Law 106-398, 114 Stat. 1654A-175) established the TRICARE Senior
Pharmacy Program for Medicare eligible beneficiaries effective April 1,
2001.
[[Page 17052]]
These beneficiaries are required to meet the eligibility criteria as
prescribed in Sec. 199.3 of this part. The benefit under the TRICARE
Senior Pharmacy Program applies to prescription drugs and medicines
provided on or after April 1, 2001.
(m) Effect of other health insurance. The double coverage rules of
Sec. 199.8 of this part are applicable to services provided under the
pharmacy benefits program. For this purpose, to the extent they provide
a prescription drug benefit, Medicare supplemental insurance plans or
Medicare HMO plans are double coverage plans and will be the primary
payor. Beneficiaries who elect to use this pharmacy benefits shall
provide DoD with other health insurance information.
(n) Procedures. The Director, TRICARE Management Activity shall
establish procedures for the effective operation of the pharmacy
benefits program. Such procedures may include restrictions of the
quantity of pharmaceuticals to be included under the benefit,
encouragement of the use of generic drugs, implementation of quality
assurance and utilization management activities, and other appropriate
matters.
(o) Preemption of State laws. (1) Pursuant to 10 U.S.C. 1103, the
Department of Defense has determined that in the administration of 10
U.S.C. chapter 55, preemption of State and local laws relating to
health insurance, prepaid health plans, or other health care delivery
or financing methods is necessary to achieve important Federal
interests, including but not limited to the assurance of uniform
national health programs for military families and the operation of
such programs at the lowest possible cost to the Department of Defense,
that have a direct and substantial effect on the conduct of military
affairs and national security policy of the United States.
(2) Based on the determination set forth in paragraph (o)(1) of
this section, any State or local law relating to health insurance,
prepaid health plans, or other health care delivery or financing
methods is preempted and does not apply in connection with TRICARE
pharmacy contracts. Any such law, or regulation pursuant to such law,
is without any force or effect, and State or local governments have no
legal authority to enforce them in relation to the TRICARE pharmacy
contracts. However, the Department of Defense may by contract establish
legal obligations on the part of TRICARE contractors to conform with
requirements similar or identical to requirements of State or local
laws or regulations.
(3) The preemption of State and local laws set forth in paragraph
(o)(1) of this section includes State and local laws imposing premium
taxes on health or dental insurance carriers or underwriters or other
plan managers, or similar taxes on such entities. Such laws are laws
relating to health insurance, prepaid health plans, or other health
care delivery or financing methods, within the meaning of the statutes
identified in paragraph (o)(1) of this section. Preemption, however,
does not apply to taxes, fees, or other payments on net income or
profit realized by such entities in the conduct of business relating to
DoD pharmacy services contracts, if those taxes, fees or other payments
are applicable to a broad range of business activity. For purposes of
assessing the effect of Federal preemption of State and local taxes and
fees in connection with DoD pharmacy services contracts,
interpretations shall be consistent with those applicable to the
Federal Employees Health Benefits Program under 5 U.S.C. 8909(f).
(p) General fraud, abuse, and conflict of interest requirements
under TRICARE pharmacy benefits program. All fraud, abuse, and conflict
of interest requirements for the basic CHAMPUS program, as set forth in
this part 199 (see applicable provisions of Sec. 199.9 of this part)
are applicable to the TRICARE pharmacy benefits program. Some methods
and procedures for implementing and enforcing these requirements may
differ from the methods and procedures followed under the basic CHAMPUS
program.
Dated: March 25, 2004.
L.M. Bynum,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 04-7129 Filed 3-31-04; 8:45 am]
BILLING CODE 5001-06-M